213800Z6WDE14TNLVS18-2022-12-31-T01

The directors present their Strategic report for BOS (Shared Appreciation Mortgages) No. 3 plc (''the Company'') for the year

ended 31 December 2022.

Principal activities

The principal activity of the Company was to originate and finance mortgage lending. In 1998 the Company issued £46,600,000

fixed rate notes (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 agreement. The Company pays its entire share of the

appreciation to Note holders.

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'').

Please see note 8 for analysis of movements in the mortgage book.

Business structure

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

Group (“the Group”).

Business review and performance

No new mortgages were originated and no new notes were issued by the Company in the current or previous year.

The loss for the financial year amounted to £19,155 (2021: £180,323). Total equity at 31 December 2022 amounted to

£2,956,953 (2021: £2,976,108). The Company has recognised loss during the year mainly due to a change in the fair valuation,

which has been driven by the updated model assumptions, such as the discount factor that has increased with Bank of England

Base rate and a change in the forecast Halifax House Price Index (“HPI”).

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 13(a)).

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. The Notes are listed on the London Stock Exchange.

Litigation

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

subsidiary undertakings which had issued shared appreciation mortgage products, including the Company. The claim was

issued in the County Court and is brought under the unfair relationship provisions of the Consumer Credit Act 1974. The

claimants claim that the relationship between the Company and the mortgage customers was and is (as applicable) unfair to

the claimants. The claim value is unquantified at this stage. The Company has carried out an assessment of the likelihood that

the Company will be required to make a payment to settle the matter and has concluded that no provision is required against

that litigation on the basis that a payment to the claimants is not probable.

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 indicator used by management in assessing the performance of the Company are the monitoring of the

fair value movement and the redemptions during the year. 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 4 and details for the redemptions are in note 8

and 9.

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

ended 31 December 2022 and 31 December 2021.

Strategic report

For the year ended 31 December 2022


2	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

Key performance indicators (continued)


KPI	2022	2021	Analysis
Mortgage fair value movement (£)	(730,932)	1,693,842	Decrease in the fair value is expected due to the following factors: •Increase in base rate causing an increase in the discount factor •Increase in dilapidations rate
Mortgage redemptions (£)	(2,003,040)	(4,175,866)	Decrease in redemptions from 2021 is consistent with the expectation as the closed book ages, and the number of redemptions becomes fewer.

Risk management

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, liquidity risk and interest rate 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 13.

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 15.13% at 31 December 2022 (2021: 16.66%), 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 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 (see ''Liquidity

risk'' below). 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.

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

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 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, 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 in the event of movements in the prices of the market in which it

operates. The Company's market is the UK residential housing market.

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 market 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.

Strategic report (continued)

For the year ended 31 December 2022


3	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

Liquidity risk

The Company holds a reserve account of £1,400,102 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. The rating requirement under the

Programme Documentation for the Reserve Account to remain with Bank of Scotland is a short term rating with Standard and

Poor's (S&P) of A-1 (2021: S&P short-term rating: A-1). The Company has not drawn on this facility since inception.

In accordance with the Programme Documentation the Company is bound 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 has been appointed to act as account bank and servicer of the mortgage book on behalf of the Company. The

Company uses the 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.

During 2022, it was identified that the Company had not been fully compliant with listing requirements as it had not been

uploading financial statements to the London Stock Exchange’s National Storage Mechanism. This has been rectified and the

Company is now fully compliant. To mitigate this risk going forward the Company now undertakes systematic horizon scanning

to identify and ensure compliance with any future changes.

Streamlined energy and carbon reporting ("SECR")

The Company is out of scope of the SECR, as it does not meet the numerical thresholds in relation to turnover and number of

employees.

Section 172(1) of the Companies Act 2006

In accordance with the Companies Act 2006 (the "Act"), for the year ended 31 December 2022, 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, 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 Lloyds Banking

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 Lloyds Banking Group's strategy around Section 172(1) can be found in

the Lloyds Banking Group plc’s annual report and financial statements for 2022 on pages 22 - 23. Further details of how to

obtain access to the Lloyds Banking Group annual report and financial statements for 2022 can be found in note 18.

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.

In accordance with s.426B of the Companies Act 2006 the above paragraph is available at the following website address

https://www.lloydsbankinggroup.com/investors/financial-downloads.html.

Key stakeholders

The directors confirm that there has been regularly 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 Lloyds Banking 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 Lloyds

Banking Group, with the directors regularly reviewing customer complaints to understand areas where improvements can be

made. Lloyds Banking 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.

Strategic report (continued)

For the year ended 31 December 2022


4	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

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 Lloyds Banking 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. When a notable issue arose during the year such as the non-compliance with

listing rules noted above, the directors ensured prompt and open disclosure to regulators and appropriate follow up action to

mitigate impact.

The approach of Lloyds Banking Group plc, including that of the Company, to managing regulatory change is discussed further

on page 21 of the Lloyds Banking Group annual report and financial statements for 2022.

Society and the environment

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

Banking Group around the Company's impact on its society and the environment, through engagement with representatives of

the wider Lloyds Banking Group mortgages business. Further details can be found within the LBG annual report and financial

statements for 2022.

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

Johan Robin Charles Von Schmidt Auf Altenstadt

Director

DATE: 25 April 2023

Strategic report (continued)

For the year ended 31 December 2022


5	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

The directors present their annual report for the year ended 31 December 2022.

Employees

The Company had no employees during the year ended 31 December 2022 (2021: nil). None of the directors received any

emoluments from the Company in the current or previous year.

Dividends

The directors did not recommend the payment of a dividend during the year ended 31 December 2022 (2021: £nil).

Future developments

The Company's business will continue to unwind over the life of the mortgages issued as no further advances will be made.

Cash is received from mortgage redemptions and interest income. A review of the business can be found in the Strategic report.

The directors’ assessment suggests that performance of the mortgage portfolio should continue to be satisfactory. Inflationary

pressures and higher prices caused by sterling weakness may put pressure on household incomes, which may feed through to

further increases in mortgage arrears. The UK rate of inflation has seen a significant increase in 2022 and this has the potential

to impact mortgage holders’ ability to repay their loans. There has been no material impact on the Company as of the strategic

report date. The situation will be monitored and the Servicer, Bank of Scotland, will continue to adopt appropriate forbearance

measures on behalf of the Company.

Long-term impact of the United Kingdom's exit from the European Union

Uncertainties in respect of the medium to long-term implications of the United Kingdom's ("UK") exit from the European Union

("EU") on trade, regulation and employment continue to present risks. This includes impacts on supply chains, affordability of

goods and services and UK demographics and prosperity. The Directors believe that there will continue to be limited impact on

the Company.

Russian invasion of Ukraine

The Russian invasion of Ukraine, beginning in February 2022, has increased tensions between members of the North Atlantic

Treaty Organisation (NATO) and Russia and caused sanctions to be imposed. This could have significant adverse economic

effects on financial markets and on energy costs and may also result in increased cyber-attacks and an increase in costs

associated with such cyber-attacks, all of which could have a materially adverse effect on the Group’s results of operations,

financial condition, or prospects. The Group will monitor the situation and risks to the business. The Directors believe that there

will continue be limited impact on the Company.

Statement of going concern

As at 31 December 2022, the Company is showing a net assets position in the financial statements. The Company has

continued to perform in line with the Programme Documentation. The directors are satisfied that the financial statements have

been prepared on a going concern basis taking into account the following:

- There is a net asset position of (note 13). - 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 from its parent company.

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

During 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.

As discussed in Business review and performance a litigation claim has been commenced against the Company and is due to

go to trial in 2024. The directors are confident that the future viability of the Company and its principal activity will not be

severely impacted regardless of the outcome. As a result, the Company is considered to be a going concern.

Directors

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

Johan Robin Charles Von Schmidt Auf Altenstadt

Lavanya Menon

Company Secretary

Alyson Elizabeth Mulholland

Directors' report

For the year ended 31 December 2022


6	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

Risk management

Further details on the risks facing the Company and how these risks are managed are detailed in the Strategic report.

Directors’ indemnities

Lloyds Banking Group has granted to the directors of the Company, a deed of indemnity through deed poll which constituted

‘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. The deed for existing directors is available for

inspection at the registered office of Lloyds Banking Group, details of which can be found in note 18. The indemnity remains in

force for the duration of the directors’ period of office. The deed indemnifies the directors to the maximum extent permitted by

law. In addition Lloyds Banking Group has in place appropriate directors and officers liability insurance cover which was in place

throughout the financial year.

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, the Company’s ultimate controlling party. Therefore additional information may be found in

section ''Internal Control'' of the 2022 Annual Report of Lloyds Banking Group, which does not form part of this report. Details of

where to get access to the 2022 Annual Report of LBG can be found in note 18.

Statement of directors' responsibilities in respect of the financial statements

The directors are responsible for preparing the Annual report 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

elected to prepare the 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 the financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

•state whether the financial statements comply with 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;

•make judgements and accounting estimates that are reasonable and prudent; 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 included on the

Company's website.

Directors' report (continued)

For the year ended 31 December 2022


7	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

Directors' confirmations

Each of the directors are listed in the Directors’ report, confirm that to the best of their knowledge:

•the Company 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 Directors' 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.

This confirmation is given and should be interpreted in accordance with the provisions of section 418(2) of the Companies Act

2006.

Disclosure of information to auditors

Each of the persons who is a director at the date of approval of this report confirms that:

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

•they 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.

This confirmation is given and should be interpreted in accordance with the provisions of section 418(2) of the Companies Act

2006.

Independent auditor

The auditor, Deloitte LLP, has expressed its willingness to continue in office and pursuant to section 489 of the Companies Act

2006, a resolution will be proposed at the forthcoming annual general meeting for the re-appointment of Deloitte LLP as the

auditor of the Company.

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

Johan Robin Charles Von Schmidt Auf Altenstadt

Director

DATE: 25 April 2023

Directors' report (continued)

For the year ended 31 December 2022


8	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871


	Note	2022	2021
		£	£

Interest receivable and similar income	2	27,602	79
Net interest income on financial assets and liabilities at fair value through profit or loss	3	163,029	164,993
Net interest income		190,631	165,072

Net fair value movements on financial assets at fair value through profit or loss	4	(2,733,972)	(2,482,021)
Net fair value movements on financial liabilities at fair value through profit or loss	4	2,598,839	2,169,320
Other operating income		350	550
Operating expenses	5	(79,496)	(54,329)
Loss before tax		(23,648)	(201,408)

Taxation	6	4,493	21,085
Loss for the financial year, being total comprehensive expense		(19,155)	(180,323)

The loss shown above is derived from continuing operations. 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.

Statement of comprehensive income

For the year ended 31 December 2022


9	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871


	Note	2022	2021
		£	£
Assets
Cash and cash equivalents	7	2,466,618	2,109,322
Financial assets held at fair value through profit or loss	8	22,534,790	25,268,762
Current tax asset	6	-	26,814
Total assets		25,001,408	27,404,898

Liabilities
Bank overdraft	7	376	400
Trade and other payables	11	416,419	197,399
Financial liabilities designated at fair value through profit or loss	9	21,546,246	24,145,084
Deferred tax liability	10	74,453	85,907
Current tax liability	6	6,961	-
Total liabilities		22,044,455	24,428,790

Equity
Share capital	12	50,001	50,001
Retained earnings		2,906,952	2,926,107
Total equity		2,956,953	2,976,108
Total liabilities and equity		25,001,408	27,404,898

The accompanying notes are an integral part of the financial statements

The financial statements were approved by the board of directors on 25 April 2023 and were signed on behalf of the board by:

Johan Robin Charles Von Schmidt Auf Altenstadt

Director

25 April 2023

Balance sheet

As at 31 December 2022


10	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871


	Share capital	Retained earnings	Total equity
	£	£	£

Balance at 1 January 2022	50,001	2,926,107	2,976,108
Loss for the financial year, being total comprehensive expense	—	(19,155)	(19,155)
Balance at 31 December 2022	50,001	2,906,952	2,956,953


	Share capital	Retained earnings	Total equity
	£	£	£

Balance at 1 January 2021	50,001	3,106,430	3,156,431
Loss for the financial year, being total comprehensive expense	—	(180,323)	(180,323)
Balance at 31 December 2021	50,001	2,926,107	2,976,108

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

Statement of changes in equity

For the year ended 31 December 2022


11	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871


		2022	2021
	Note	£	£

Operating activities
BOS administration fees paid		(17,624)	(18,684)
Administration expenses paid		(32,376)	(20,527)
Tax received / (paid)		26,814	(101,662)
Net cash flows used in operating activities		(23,186)	(140,873)

Investing activities
Repayments on mortgage portfolio		564,171	1,778,272
Income earned on mortgage portfolio		542,997	560,454
Shared appreciation rights received		1,442,445	1,442,445
Bank interest received		27,602	79
Net cash flows generated from investing activities		2,577,215	3,781,250

Financing activities
Repayment of borrowings		(470,256)	(2,004,665)
Interest paid on borrowings		(432,086)	(439,340)
Shared appreciation rights paid to Note holders		(1,294,368)	(1,814,538)
Net cash flows used in investing financing activities		(2,196,710)	(4,258,543)

Net increase / (decrease) in Cash and cash equivalents		357,319	(618,166)
Cash and cash equivalents at start of year		2,108,922	2,727,088
Cash and cash equivalents at end of year		2,466,241	2,108,922

Cash and cash equivalents per Cash flow statement comprise:
Cash at bank		2,466,618	2,109,322
Bank overdraft		(376)	(400)
Cash and cash equivalents per Cash flow statement	7	2,466,242	2,108,922

The Cash flow statement is presented using the direct method.

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

Cash flow statement

For the year ended 31 December 2022


12	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

1.Significant accounting policies

The Company is a public limited liability company domiciled, registered and incorporated in England and Wales under the

Companies Act 2006.

The principal 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.

(a)Basis of preparation

The financial statements have been prepared in accordance with the Companies Act 2006 as applicable to companies

using international accounting standards and comply with the relevant provisions of Part 15 of the Companies Act 2006.

As at 31 December 2022, 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 and the limited recourse nature of the issued notes.

As discussed in Business review and performance a litigation claim has been commenced against the Company and is

due to go to trial in 2024. The directors are confident that the future viability of the Company and its principal activity will

not be severely impacted regardless of the outcome. As a result, the Company is considered to be a going concern.

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.

(b)Interest 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.

(c)Taxation

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

Comprehensive Income except to the extent that the tax arises from a transaction or event which is recognised, in the

same or a different period, outside the Statement of Comprehensive Income (either in other comprehensive income,

directly in equity, or through a business combination), in which case the tax appears in the same statement as the

transaction that gave rise to it.

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

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

enacted or substantively enacted at the balance sheet date.

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

examination of the uncertainty by His Majesty's Revenue and Customs (HMRC) or other relevant tax authority, it is more

likely than not that an economic outflow will occur. Provisions reflect management's best estimate of the ultimate liability

based on their interpretation of tax law, precedent and guidance, informed by external tax advice as necessary. Changes

in facts and circumstances underlying these provisions are reassessed at each balance sheet date, and the provisions

are re-measured as required to reflect current information.

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

carrying amounts in the balance sheet. Deferred tax is calculated using tax rates and laws that have been enacted or

substantively enacted at the balance sheet date, and which are expected to apply when the related deferred tax asset is

realised or the deferred tax liability is settled.

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

temporary differences arising on investments in subsidiaries, associates and joint arrangements where the reversal of the

temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future.

Notes to the financial statements

For the year ended 31 December 2022


13	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

(c)Taxation (continued)

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.

(d)Financial instruments

The Company's financial instruments comprise cash, 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 main purpose of these financial instrument is to originate the mortgage loans to retail customers and to finance such

origination either through the capital markets or by way of bilateral arrangements with third party institutions.

(d)(i)Lifetime Mortgage portfolio

The Company has a lifetime mortgage portfolio. The contract for these loans contain a No Negative Equity Guarantee

(‘NNEG’) clause where if the funds at the time of settlement of a mortgage are insufficient to cover all amounts owed in

respect of the mortgage and any portion of the loan amount remains outstanding, a provision will be made for such

outstanding amount, and the Company cannot pursue a borrower. Therefore, the lifetime mortgages meet the definition of

an insurance contract under IFRS 4 “Insurance contracts”. 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 NNEG and the

loan excluding NNEG) as one instrument and to recognise this at fair value on origination and subsequent

measurements.

(d)(ii)Cash and cash equivalents

The Company holds bank accounts with BOS, 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 is 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 and Bank overdrafts

comprise balances with less than three months’ maturity.

(d)(iii)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 for a number

of accounting estimates including HPI forecasts. Further details can be found in note 1(e)(ii).

Notes to the financial statements (continued)

For the year ended 31 December 2022


14	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

(e)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.

(e)(i)Critical accounting judgements

Litigation

In January 2021, a litigation claim was brought by, or on behalf of, a number of customers against BOS and its subsidiary

undertakings which had issued shared appreciation mortgage products, including the Company. The claim was issued in

the County Court and was brought under the unfair relationship provisions of the Consumer Credit Act 1974, further

details of which can be found in note 14. The directors have used their judgement and considered the wider implication of

this action on the Company by assessing the likelihood of various legal outcomes and the impact on the Company's

assets and liabilities, as discussed in more detail per note 1(e)(ii) below.

(e)(ii)Key sources of estimation uncertainty

Fair value of financial assets and financial liabilities

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

willing and knowledgeable counterparty.

The fair values of the embedded derivative and the host contract have 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 HPI growth using the Group's own economic growth assumptions, together with an estimated

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

value calculation also factors in mortality rates which are used by the Group's insurance division and sourced from

industry-wide metrics. The embedded derivative and the host contract are therefore 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 1(d)(i) and 1(d)(iii).

The NNEG clause within the lifetime mortgages has not been valued as it is deemed immaterial. There are no other

derivative financial instruments.

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 20.8% (2021: 20.1%):


	Favourable	Unfavourable	Favourable	Unfavourable
	2022	2022	2021	2021
	£	£	£	£

Financial assets held at fair value through profit or loss	265,223	(265,223)	292,541	(292,541)
Financial liabilities designated at fair value through profit or loss	(265,223)	265,223	(292,541)	292,541

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 HPI forecast rates by 1%:


	Favourable	Unfavourable	Favourable	Unfavourable
	2022	2022	2021	2021
	£	£	£	£

Financial assets held at fair value through profit or loss	1,563,767	(1,431,973)	1,750,219	(1,600,070)
Financial liabilities designated at fair value through profit or loss	(1,563,767)	1,431,973	(1,750,219)	1,600,070

Notes to the financial statements (continued)

For the year ended 31 December 2022


15	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

(e)(ii)Key sources of estimation uncertainty (continued)

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

('favourable') or decrease ('unfavourable') in the discount factor forecast rates by 1%:


	Favourable	Unfavourable	Favourable	Unfavourable
	2022	2022	2021	2021
	£	£	£	£

Financial assets held at fair value through profit or loss	1,670,120	(1,511,304)	1,914,521	(1,728,789)
Financial liabilities designated at fair value through profit or loss	(1,618,588)	1,463,718	(1,852,830)	1,675,020

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 rates by 1%:


	Favourable	Unfavourable	Favourable	Unfavourable
	2022	2022	2021	2021
	£	£	£	£

Financial assets held at fair value through profit or loss	112,634	(121,443)	101,263	(135,839)
Financial liabilities designated at fair value through profit or loss	(140,075)	150,494	(107,039)	143,763

Fair value assessment of litigation

The Company has considered the impact of the legal action, as discussed in note 1(e)(i) above, on the carrying amount

of the Company's mortgage assets which are measured at FVTPL. The Company has carried out a probability-based

assessment for a variety of potential legal outcomes. Based on this assessment, the Company has determined that the

fair value of these assets has a carrying amount of £22,534,790 at 31 December 2022 (2021: £25,268,762). The

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

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 notes has a carrying amount of £21,546,246 at 31 December 2022 (2021:

£24,145,084). This assessment had £nil impact on the Company’s result for the year (2021: £nil).

(f)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.

(g)Dividends

Dividends on ordinary shares are recognised in equity in the year in which they are paid.

(h)Trade and other payables

Trade and other payables are stated at amortised cost.

(i)Capital management

The Company is not subject to externally imposed capital requirements in the current and prior year. 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.

2.Interest receivable and similar income


	2022	2021
	£	£

Bank interest receivable	27,602	79

Notes to the financial statements (continued)

For the year ended 31 December 2022


16	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

3.Net interest income on financial assets and liabilities at fair value through profit or loss


	2022	2021
	£	£

Interest receivable on Financial assets at FVTPL	553,201	597,411
Interest payable on Financial liabilities FVTPL	(390,172)	(432,418)
	163,029	164,993

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


	2022	2021
	£	£

Fair value movement on Financial assets at FVTPL	(2,733,972)	(2,482,022)
Fair value movement on Financial liabilities at FVTPL	2,598,839	2,169,321
	(135,133)	(312,701)

Of the above, the fair value movement is a decrease of £730,932 (2021: increase of £1,693,842) towards the financial

assets held at fair value through profit or loss and decrease of £593,655 (2021: increase of £1,966,616) 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.

5.Operating expenses


	2022	2021
	£	£

Intercompany fees	17,624	18,683
Administration fees	32,376	20,526
Audit fees	29,496	15,120
	79,496	54,329

Audit fees relate to the statutory audit. Fees of £24,580 (2021: £12,600), net of VAT, are payable to Deloitte LLP. There

are no fees payable to the auditors and their associates for services other than the statutory audit (2021: none). The

Company has no employees (2021: none) and none of the directors received any emoluments from the Company in the

current or previous year.

6.Taxation

6(a)Analysis of credit/(charge) for the year


	2022	2021
	£	£
UK corporation tax
Current tax on taxable (loss)/profit for the year	(6,961)	26,814
Current tax (charge)/credit for the year	(6,961)	26,814

UK Deferred tax
Origination and reversal of timing differences	11,454	11,454
Impact of deferred tax rate change	—	(17,183)
Deferred tax (charge)/credit for the year	11,454	(5,729)
Total tax credit/(charge) for the year	4,493	21,085

Corporation tax is calculated at a rate of 19.00% (2021: 19.00%) of the taxable profit/(loss) for the year.

Corporation tax rate is increasing to 25% from April 2023.

Notes to the financial statements (continued)

For the year ended 31 December 2022


17	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

6(b)Factors affecting the tax (charge)/credit for the year

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

before tax to the actual tax charge for the year is given below:


	2022	2021
	£	£

Loss before tax	(23,648)	(201,408)
Tax credit thereon at UK corporation tax in the UK of 19.00% (2021: 19.00%)	4,493	38,268
Factors affecting credit/charge:
–Effect of change in tax rate and related impacts	—	(17,183)
Tax credit on loss on ordinary activities	4,493	21,085
Effective rate	-19.00%	-10.47%

7.Cash and cash equivalents


	2022	2021
	£	£

Cash at bank	2,466,618	2,109,322
Bank overdraft	(376)	(400)
Cash and cash equivalents per the Cash flow statement	2,466,242	2,108,922

The Company holds bank accounts with BOS. 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. The amounts are repayable on demand.

8.Financial assets held at fair value through profit or loss


	Note	2022	2021
		£	£

At 1 January		25,268,762	27,750,786
Principal mortgage redemptions during the year		(560,595)	(1,857,896)
Fair value adjustment		(730,932)	1,693,842
Shared appreciation receivable movements in the year		(1,442,445)	(2,317,970)
	4	(2,733,972)	(2,482,024)

At 31 December		22,534,790	25,268,762

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.

Notes to the financial statements (continued)

For the year ended 31 December 2022


18	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

9.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 13.


	Note	2022	2021
		£	£

At 1 January		24,145,084	26,314,406

Accrued interest		(2,143)	(6,921)
Principal note repayments during the year		(560,595)	(1,811,047)
Fair value adjustment		(593,655)	1,966,616
Shared appreciation payable movements in the year		(1,442,445)	(2,317,970)
	4	(2,598,838)	(2,169,322)
At 31 December		21,546,246	24,145,084


	2022	2021
	£	£

Non-current liabilities
Notes	7,356,847	8,698,461
Shared appreciation payable	14,157,680	15,412,761
	21,514,527	24,111,222
Current liabilities
Interest payable to Note holders	31,719	33,862
At 31 December	21,546,246	24,145,084

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+ (2021: 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.

10.Deferred tax liability


	2022	2021
	£	£

At 1 January	(85,907)	(80,178)
Credit/(charge) for the year	11,454	(5,729)
At 31 December	(74,453)	(85,907)
The deferred tax credit/(charge) in the year comprises the following temporary differences:
Other temporary differences	11,454	(5,729)
Deferred tax liability comprises:
Other temporary differences	(74,453)	(85,907)

Finance Act 2021, which received Royal Assent on 10 June 2021, increases the rate of corporation tax from 19% to 25%

with effect from 1 April 2023.

Notes to the financial statements (continued)

For the year ended 31 December 2022


19	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

11.Trade and other payables


	2022	2021
	£	£

Shared appreciation payable	148,283	205
Note redemption payable	90,806	467
Accruals and deferred income	177,330	196,727
	416,419	197,399

All amounts are due within 12 months of the Balance sheet date.

12.Share capital


	2022	2021
	£	£
Allotted, authorised and fully paid
50,000 (2021: 50,000) ordinary shares of £1 each	50,000	50,000
1 (2021: 1) deferred share of £1	1	1

The Company is a directly held subsidiary undertaking of BOS.

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

The holder of the ordinary shares is entitled to receive dividends as declared from time to time.

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.

13.Management of risk

The principal risks arising from the Company's financial instruments are credit risk, liquidity risk and interest rate risk.

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

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

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

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

clearly defined and documented.


31 December 2022		Carrying value
31 December 2022	Note	Financial assets		Financial liabilities
		FVTPL	Amortised cost	FVTPL	Amortised cost
Cash and cash equivalents	7		2,466,618
Financial assets held at fair value through profit or loss	8	22,534,790
Bank overdraft	7				376
Trade and other payables	11				416,419
Financial liabilities designated at fair value through profit or loss	9			21,546,246

Notes to the financial statements (continued)

For the year ended 31 December 2022


20	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

13.Management of risk


31 December 2021		Carrying value
31 December 2021	Note	Financial assets		Financial liabilities
		FVTPL	Amortised cost	FVTPL	Amortised cost
Cash and cash equivalents	7		2,109,322
Financial assets held at fair value through profit or loss	8	25,268,762
Bank overdraft	7				400
Trade and other payables	11				197,399
Financial liabilities designated at fair value through profit or loss	9			24,145,084

13(a)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 sell or death whichever is earlier and also considerations for interest receipts.

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 BOS (see ''Liquidity risk''). 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 BOS.

The terms of the mortgage portfolio agreement given by BOS in respect of the mortgages require BOS to repurchase any

mortgage which is found to be in breach of warranty. BOS 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 BOS,

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 terms of arrears management, the Company has engaged BOS 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 2022 was £131,350 (2021: £135,081). All accounts in the mortgage

portfolio had a maximum loan-to-value of 75.00% (2021: 75.00%) (2021: less than 40.00%). Credit risk is considered to

be low. There are no properties in possession or bad debts within the Company (2021: none).

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
		2022	2022	2021	2021
		£	£	£	£
Assets held at amortised cost:
Cash and cash equivalents	7	2,466,618	2,466,618	2,109,322	2,109,322

Assets held at fair value:
Financial assets held at fair value through profit or loss	8	22,534,790	22,534,790	25,268,762	25,268,762
Total Assets		25,001,408	25,001,408	27,378,084	27,378,084

Notes to the financial statements (continued)

For the year ended 31 December 2022


21	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

13(b)Market risk

Market risk is the risk of financial losses to the Company in the event of movements in the prices of the market in which it

operates. The Company's market is the UK residential housing market.

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.

However, the Company itself is not impacted by market 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.

13(c)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.

At 31 December 2022, if interest rates had been 100 basis points higher or lower with all other variables held constant,

the net effect on the Company's income statement would be insignificant. All items remain unaffected by interest rate

changes except for interest earned on bank accounts but a 100 basis points change would not give rise to a significant

impact on bank interest.

13(d)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 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 BOS.

The Company holds a reserve account of £1,400,102 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. The rating requirement

under the Programme Documentation for the Reserve Account to remain with Bank of Scotland is a short term rating with

Standard and Poor's (S&P) of A-1 (2021: S&P short-term rating: A-1). The Company has not drawn on this facility since

inception.

In accordance with the Programme Documentation the Company is bound 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.

The liquidity tables reflect the undiscounted cash payments which will fall due if the structure continues until the earliest

contractual maturity date as set out in the Programme Documentation. However, the actual Note repayment profile

mirrors the repayment of the mortgages and based on current modelling assumptions, which use mortality rates sourced

from industry wide metrics, it is anticipated that not all of the mortgages will have been settled by the earliest contractual

maturity date used for the maturity analysis in these tables.

Notes to the financial statements (continued)

For the year ended 31 December 2022


22	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

13(d)Liquidity risk (continued)


2022	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	21,514,527	21,514,527	-	-	-	-	21,514,527
Trade and other payables	416,419	416,419	-	416,419	-	-	-
Bank overdraft	376	400	400	-	-	-	-
Interest payable
Interest payable to Note holders	31,719	1,929,759	-	93,111	281,381	1,494,898	60,369
	21,963,041	23,861,105	400	509,530	281,381	1,494,898	21,574,896


2021	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	24,111,222	24,111,222	-	-	-	-	24,111,222
Trade and other payables	197,399	197,399	-	197,399	-	-	-
Interest payable
Interest payable to Note holders	33,862	2,592,067	-	99,401	300,387	1,595,874	596,405
	24,342,883	26,901,088	400	296,800	300,387	1,595,874	24,707,627

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.

13(e)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


	2022	2021
	£	£
	Level 3	Level 3

Financial assets held at fair value through profit or loss	22,534,790	25,268,762
Financial liabilities designated at fair value through profit or loss	(21,546,246)	(24,145,084)
	988,544	1,123,678

Notes to the financial statements (continued)

For the year ended 31 December 2022


23	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

13(e)Fair values (continued)

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 HPI growth using the Group's own

economic growth assumptions, together with an estimated dilapidation rate which has been determined based upon

actual impact to date from previous redemption activity. The fair value calculation also factors in mortality rates 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.

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.

14.Contingent liabilities

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 2013 HMRC informed the Group that its interpretation of the

UK rules means that the group relief is not available. In 2020, HMRC concluded their enquiry into the matter and issued a

closure notice. The Group's interpretation of the rules has not changed and hence it has appealed to the First Tier Tax

Tribunal, with a hearing expected in 2023. If the final determination of the matter by the judicial process is that HMRC's

position is correct, management estimate that this would result in an increase in current tax liabilities for the company of

approximately £130k (including interest). The Group, having taken appropriate advice, does not consider that this is a

case where additional tax will ultimately fall due.

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.

In January 2021, a litigation claim was brought by, or on behalf of, a number of customers against BOS and its subsidiary

undertakings which had issued shared appreciation mortgage products, including the Company. The claim was issued in

the County Court and is brought under the unfair relationship provisions of the Consumer Credit Act 1974. The claimants

claim that the relationship between the Company and the mortgage customers was and is (as applicable) unfair to the

claimants. The claim value is unquantified at this stage. The Company has carried out an assessment of the likelihood

that the Company will be required to make a payment to settle the matter and has concluded that no provision is required

against that litigation on the basis that a payment to the claimants is not probable and any eventual costs of settlement

will be borne by Bank of Scotland plc.

Notes to the financial statements (continued)

For the year ended 31 December 2022


24	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871

15.Related parties

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

The Company receives bank interest from BOS on its bank deposits. BOS administers the mortgage portfolio on behalf of

the Company, for which quarterly service fees are paid. No dividend was paid during the year (2021: £nil).

During the year the Company undertook the following transactions with companies in the Lloyds Banking group:


	Parent and its subsidiary undertakings	Parent and its subsidiary undertakings
	2022	2021
	£	£
Statement of comprehensive income
Interest receivable and similar income	27,602	79
Operating expenses	(17,624)	(18,683)

Balance sheet
Assets
Cash and cash equivalents	2,466,618	2,109,322

Liabilities
Bank overdraft	(376)	(400)
Trade and other payables	(87,816)	(58,320)

16.Future accounting pronouncements

The following pronouncement is not applicable for the year ended 31 December 2022 and has not been applied in

preparing these financial statements.

Minor amendments to other accounting standards

There have been a number of minor amendments to IFRSs effective 1 January 2023 and in later years (including IAS 37

provisions, Contingent Liabilities and Contingent Assets). These amendments are not expected to have a significant

impact on the Company.

17.Post balance sheet events

There are no post balance sheet events which require disclosure in the financial statements.

18.Parent undertaking and controlling party

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

The financial statements of the parent undertaking, which is the parent undertaking of the smallest group to consolidate

these financial statements is Bank of Scotland plc may be obtained from 25 Gresham Street, London EC2V 7HN.

The ultimate parent undertaking and controlling party is Lloyds Banking Group plc, which is the parent undertaking of the

largest group to consolidate these financial statements. Copies of the consolidated annual report and financial statements

of Lloyds Banking Group plc may be obtained from Lloyds Banking Group plc’s head office at 25 Gresham Street, London

EC2V 7HN or downloaded via www.lloydsbankinggroup.com.

Notes to the financial statements (continued)

For the year ended 31 December 2022


25	BOS (Shared Appreciation Mortgages) No. 3 plc Registered Number 03331871


ifrs-full:AddressOfRegisteredOfficeOfEntity	Trinity Road, Halifax, HX1 2RG
ifrs-full:CountryOfIncorporation	Scotland
ifrs-full:DomicileOfEntity	England and Wales
ifrs-full:LegalFormOfEntity	Public limited company
ifrs-full:NameOfParentEntity	Bank of Scotland plc
ifrs-full:NameOfUltimateParentOfGroup	Lloyds Banking Group plc
ifrs-full:PrincipalPlaceOfBusiness	Trinity Road, Halifax, HX1 2RG


	Page

Directors and company information	1
Strategic report	2
Directors' report	6
Statement of comprehensive income	9
Balance sheet	10
Statement of changes in equity	11
Cash flow statement	12
Notes to the financial statements	13
Independent auditor’s report to the members of BOS (Shared Appreciation Mortgages) No. 3 plc	26