213800Z6WDE14TNLVS18-2023-12-31-T01

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

31 December 2023.

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 notes have been issued by the Company since 1998.

The profit for the financial year amounted to £97,866 (2022: Loss of £19,155). Total equity at 31 December 2023 amounted to £3,054,819 (2022:

£2,956,953). The Company has recognised a profit during the year in contrast to a loss in prior year. The principal reasons for the

Company making a profit can be attributed to the increase in Bank of England base rates in the current year, to high of 5.25% in August

2023, which has resulted in the Company earning significantly more interest income on its cash at bank.

The Company has incurred decreased net fair value losses of £95,508 (2022: net losses of £135,133). The Company has recognised net fair

value losses during the year mainly due to a change in the fair valuation, which has been driven by updated model assumptions, such as

the discount factor, which 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 14.1).

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. 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 plc and some of its

subsidiary undertakings which had issued shared appreciation mortgages, 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. On 23 January 2024, the Claimants and

Bank of Scotland plc (and the other Defendants, including the Company) agreed a commercial settlement of this litigation, without any

admission of liability. The terms of the settlement agreement are confidential. There are no changes to the mortgages, or their terms and

conditions. Following the settlement in January 2024, as detailed in note 18, the Directors have concluded that no provision is required

against this claim in the Company’s financial statements as Bank of Scotland plc has borne the costs of this settlement and likely will

continue to do so for any further claims that may arise in the future.

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 5 and details for the redemptions are in note 9 and 10.

Strategic report

For the year ended 31 December 2023

1 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Key performance indicators (continued)

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

31 December 2023 and 31 December 2022.


KPI	2023	2022	Analysis
Mortgage fair value movement (£)	881,587	(730,932)	Increase in the fair value is in line with increases in forecast HPI at 31 December 2023 and was less severe than anticipated at 31 December 2022.
Mortgage redemptions (£)	(1,242,941)	(2,003,040)	Decrease in redemptions from 2022 is consistent with the expectation as the closed book ages, and the number of redemptions becomes fewer.

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 the loan advance.

Economic environment

The current financial year has been a year of change and economic uncertainty, with the cost of living crisis, rising geopolitical tensions

and an ongoing climate emergency.

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

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

increases in mortgage arrears.

The UK rate of inflation has seen a decrease in 2023 which should ease the burden on households with prices. However, interest rates

have remained at their highest level since 2008 which may still put household incomes under pressure. Despite this, it is expected that

there will be limited impact on mortgage holders’ ability to service their loans as mortgage loans bear a fixed rate of interest. 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 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, 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 14.

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 16.11% at 31 December 2023 (2022: 15.13%), 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 plc (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 principal,

the Note holders have no claim on the assets of Bank of Scotland plc.

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.

Strategic report (continued)

For the year ended 31 December 2023

2 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Principal risks and uncertainties (continued)

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.

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 £1,402,488 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

(2022: 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 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 2023, 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 the Lloyds Banking Group annual report and financial statements for 2023 on

pages 3 - 5. Further details of how to obtain access to the Lloyds Banking Group annual report and financial statements for 2023 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.

Strategic report (continued)

For the year ended 31 December 2023

3 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

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

Customers and clients

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

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

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

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

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

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

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

Regulators and government

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

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

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

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

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 the Group, including that of the Company, to managing regulatory change is discussed further on page 17 of the Lloyds

Banking Group annual report and financial statements for 2023.

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 the Lloyds Banking Group annual report and financial statements for 2023.

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

Johan Robin Charles Von Schmidt Auf Altenstadt

Director

DATE: 24 April 2024

Strategic report (continued)

For the year ended 31 December 2023

4 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

The Directors present their report for the year ended 31 December 2023.

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 2023 (2022: 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 2023 (2022: £nil).

Events after the reporting date

The Company had previously been subject to a claim issued in the County Court by a group of customers or their representatives,

brought under the unfair relationship provisions of the Consumer Credit Act 1974 against the Bank of Scotland plc and some of its

subsidiaries, including the Company, in relation to shared appreciation mortgages which the Company had issued between 1997 to 1998.

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

settlement of this litigation, without any admission of liability and no change to the mortgage terms.

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

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

2023 Annual Report of Lloyds Banking Group plc, which does not form part of this report. Details of where to get access to the 2023 Annual

Report of Lloyds Banking Group plc 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 4.

Directors' report

For the year ended 31 December 2023

5 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

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.

Directors

The current directors of the Company are shown below:

Johan Robin Charles Von Schmidt Auf Altenstadt

Lavanya Menon

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 (2022: none).

Directors’ Indemnities

The 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 plc, details of which can be found in note 20. 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 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 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 are required to

prepare the financial statements in accordance with international accounting standards in conformity with the requirements of the

Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they

give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

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

• select suitable accounting policies and then apply them consistently;

• 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 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 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.

Directors' report (continued)

For the year ended 31 December 2023

6 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Statement of disclosure of information to auditor

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: 24 April 2024

Directors' report (continued)

For the year ended 31 December 2023

7 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)


	Note	2023	2022
		£	£

Interest receivable and similar income		106,306	27,602
Net interest income on financial assets and liabilities at fair value through profit or loss	4	156,079	163,029
Net interest income		262,385	190,631

Net fair value movements on financial assets at fair value through profit or loss	5	(361,354)	(2,733,972)
Net fair value movements on financial liabilities at fair value through profit or loss	5	265,846	2,598,839
Other operating income		200	350
Operating expenses	6	(39,148)	(79,496)
Profit / (loss) before tax		127,929	(23,648)

Taxation	7	(30,063)	4,493
Profit / (loss) for the financial year, being total comprehensive income / (expense)		97,866	(19,155)

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 2023

8 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)


	Note	2023	2022
		£	£
Assets
Cash and cash equivalents	8	2,884,873	2,466,618
Financial assets held at fair value through profit or loss	9	22,173,436	22,534,790
Total assets		25,058,309	25,001,408

Liabilities
Bank overdraft	8	2,517	376
Trade and other payables	12	616,057	416,419
Financial liabilities designated at fair value through profit or loss	10	21,280,400	21,546,246
Deferred tax liability	11	60,286	74,453
Current tax liability		44,230	6,961
Total liabilities		22,003,490	22,044,455

Equity
Share capital	13	50,001	50,001
Retained earnings		3,004,818	2,906,952
Total equity		3,054,819	2,956,953
Total liabilities and equity		25,058,309	25,001,408

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

The financial statements were approved by the board of directors on 24 April 2024 and were signed on behalf of the board by:

Johan Robin Charles Von Schmidt Auf Altenstadt

Director

24 April 2024

Balance sheet

As at 31 December 2023

9 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)


	Share capital	Retained earnings	Total equity
	£	£	£

Balance at 1 January 2023	50,001	2,906,952	2,956,953
Profit for the year, being total comprehensive income	–	97,866	97,866
Balance at 31 December 2023	50,001	3,004,818	3,054,819


Share capital	Retained earnings	Total equity
£	£	£



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

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

Statement of changes in equity

For the year ended 31 December 2023

10 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)


			Re-presented
		2023	2022
	Note	£	£

Cash flows generated from operating activities
Profit/(loss) before tax		127,929	(23,648)

Adjustments for:
Interest receivable and similar income		(106,306)	(27,602)
Net interest income on financial assets at fair value through profit or loss	4	(156,079)	(163,029)
Net fair value movements on financial assets at fair value through profit or loss	9	(881,587)	730,932
Net fair value movements on financial liabilities at fair value through profit or loss	10	978,776	(593,656)
		(37,267)	(77,003)
Changes in operating assets and liabilities:
Net increase in Trade and other payables		199,637	219,020
Cash generated from operations		162,370	142,017
Tax (paid)/received		(6,961)	26,814
Net cash flows generated from operating activities		155,409	168,831

Cash flows generated from investing activities
Repayments on mortgage portfolio	9	439,750	560,595
Income earned on mortgage portfolio	4	527,577	553,201
Shared appreciation rights received	9	803,191	1,442,445
Bank interest received		104,626	25,460
Net cash flows generated from investing activities		1,875,144	2,581,701

Cash flows used in financing activities
Repayment of borrowings	10	(439,750)	(560,595)
Interest paid on borrowings		(371,498)	(390,172)
Shared appreciation rights paid to Note holders	10	(803,191)	(1,442,445)
Net cash flows used in financing activities		(1,614,439)	(2,393,212)

Net increase in Cash and cash equivalents		416,114	357,320
Cash and cash equivalents at start of year		2,466,242	2,108,922
Cash and cash equivalents at end of year		2,882,356	2,466,242

Cash and cash equivalents per Cash flow statement comprise:
Cash at bank		2,884,873	2,466,618
Bank overdraft		(2,517)	(376)
Cash and cash equivalents per Cash flow statement	8	2,882,356	2,466,242

The Cash flow statement has been presented using the indirect method, whereas in the previous year the Cash flow statement was

presented using the direct method. This has, resulted in the prior year comparatives being re-presented. Further details can be found in

note 19.

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

Cash flow statement

For the year ended 31 December 2023

11 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 1 Basis of preparation

The financial statements have been prepared in accordance with international accounting standards in conformity with the

requirements of the Companies Act 2006.

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

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

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

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

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

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

Following amendments to IAS 12 ‘Income Taxes’ by the IASB (international Tax Reform - Pillar Two Model Rules, issued in May 2023) entities

are not permitted to disclose information about deferred tax assets and liabilities related to the Organisation of Economic, Co-operation

and Development’s Pillar Two Model Rules, including any qualified domestic minimum top-up taxes. No changes arise in the Company’s

deferred tax assets or liabilities as a result of the Company having applied the relevant exception.

Details of those pronouncements which will be relevant to the Company but which were not effective at 31 December 2023 and which

have not been applied in preparing these financial statements are given in note 17.

As at 31 December 2023, 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.

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 £3,054,819 (2022: £2,956,953).

• 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.

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.

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.

Notes to the financial statements

For the year ended 31 December 2023

12 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

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 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.

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 for a number of accounting estimates. Further details can be found in note

3.2

Note 2.4Taxation

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

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

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

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

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

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

enacted at the balance sheet date.

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

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

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

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

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

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

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

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

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

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

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

Notes to the financial statements (continued)

For the year ended 31 December 2023

13 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 2 Material accounting policies (continued)

Note 2.4Taxation (continued)

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.

Note 2.5 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.

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

In January 2021, a litigation claim was brought by, or on behalf of, a number of customers against Bank of Scotland plc 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. On 23 January 2024, the Claimants and

Bank of Scotland plc (and the other Defendants, including the Company) agreed a commercial settlement of this litigation, without any

admission of liability. The terms of the settlement agreement are confidential. There are no changes to the mortgages, or their terms and

conditions. Following the settlement in January 2024, as detailed in note 18, the Directors have used their judgement and considered the

wider implication of the last claim by assessing the likelihood of various legal outcomes and the impact such would have on the

Company’s assets and liabilities, the outcome of which are discussed in more detail per note 3.2 below.

Note 3.2 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

2.3.2 and 2.3.3.

The shared appreciation clause within the lifetime mortgages has not been valued because it is not separated from the host contract.

There are no other derivative financial instruments.

Notes to the financial statements (continued)

For the year ended 31 December 2023

14 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

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

Note 3.2 Key sources of estimation uncertainty (continued)

Fair value of financial assets and financial liabilities (continued)

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 21.0% (2022: 20.8%):


	Favourable	Unfavourable	Favourable	Unfavourable
	2023	2023	2022	2022
	£	£	£	£

Financial assets held at fair value through profit or loss	258,474	(258,474)	265,223	(265,223)
Financial liabilities designated at fair value through profit or loss	(258,474)	258,474	(265,223)	265,223

The Company uses forecasts produced by the Group for the projected HPI 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. At 31 December 2023, the HPI forecast estimated a reduction of 4.4% in house prices in the first 12 months to 31 December

2024, followed by increases in house prices of between 1.1% and 4.3% over the estimated life of the mortgage loans and the Notes after

2025.

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% (2022: 1%):


	Favourable	Unfavourable	Favourable	Unfavourable
	2023	2023	2022	2022
	£	£	£	£

Financial assets held at fair value through profit or loss	1,401,952	(1,291,291)	1,563,767	(1,431,973)
Financial liabilities designated at fair value through profit or loss	(1,401,952)	1,291,291	(1,563,767)	1,431,973

The Company discounts the expected cash flows by using the Group’s economic forecast for the Bank of England base rate, and applies

the standard variable rate margin that Halifax branded mortgages add to any variable rate mortgage. The current Bank of England base

rate was 5.25% at 31 December 2023 and the forecast used had rates ranging from between 5.25% to 3.50%. The discount rate used,

including the margin, ranges from 8.74% 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% (2022: 1%):


	Favourable	Unfavourable	Favourable	Unfavourable
	2023	2023	2022	2022
	£	£	£	£

Financial assets held at fair value through profit or loss	1,546,584	(1,408,786)	1,670,120	(1,511,304)
Financial liabilities designated at fair value through profit or loss	(1,502,723)	1,368,065	(1,618,588)	1,463,718

The average age of the customers at 31 December 2023 was 86 years (2022: 85 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 average age by 1 year (2022: 1 year):


	Favourable	Unfavourable	Favourable	Unfavourable
	2023	2023	2022	2022
	£	£	£	£

Financial assets held at fair value through profit or loss	131,763	(137,312)	112,634	(121,443)
Financial liabilities designated at fair value through profit or loss	(145,813)	151,308	(140,075)	150,494

Notes to the financial statements (continued)

For the year ended 31 December 2023

15 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

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

Note 3.2 Key sources of estimation uncertainty (continued)

Fair value of financial assets and financial liabilities (continued)

As discussed in note 3.1, the Company 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% (2022: 1%) in the probability of there being a litigation claim in the future:


	Favourable	Unfavourable	Favourable	Unfavourable
	2023	2023	2022	2022
	£	£	£	£

Financial assets held at fair value through profit or loss	65,553	(65,553)	77,698	(77,698)
Financial liabilities designated at fair value through profit or loss	(65,553)	65,553	(77,698)	77,698

Fair value assessment of litigation

The Company has considered the impact of the recent legal action which the Company was subject to, as discussed in note 3.1 above, on

the carrying amounts of the Company’s mortgage assets which are classified as financial assets measured at FVTPL. 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 £22,173,436 at 31 December 2023 (2022: £22,534,790). 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 £21,280,400 at 31 December 2023 (2022: £21,546,246). This assessment has had £nil impact on the

Company’s result for either the current year or the previous year.

Note 4 Net interest income on financial assets and liabilities at fair value through profit or loss


	2023	2022
	£	£

Interest receivable on Financial assets at FVTPL	527,577	553,201
Interest payable on Financial liabilities FVTPL	(371,498)	(390,172)
	156,079	163,029

Note 5 Net fair value movements on financial assets and liabilities at fair value through profit or loss


	2023	2022
	£	£

Fair value movement on Financial assets at FVTPL	(361,354)	(2,733,972)
Fair value movement on Financial liabilities at FVTPL	265,846	2,598,839
	(95,508)	(135,133)

Included in the above fair value movement is an increase of £881,587 (2022: decrease of £730,932) towards the financial assets held at fair

value through profit or loss and an increase of £978,776 (2022: decrease of £593,655) 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.

Notes to the financial statements (continued)

For the year ended 31 December 2023

16 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 6 Operating expenses


	2023	2022
	£	£

Intercompany fees	13,753	17,624
Administration fees	27,095	32,376
Audit fees	37,636	29,496
Release of accrued liabilities	(39,336)	—
	39,148	79,496

Audit fees relate to the statutory audit. Fees of £31,363 (2022: £24,580), 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 (2022: none).

The release of accrued liabilities relates to fees accrued for the statutory audits relating to the financial years ended 31 December 2018, 31

December 2019 and 31 December 2020. The fees were paid on the Company’s behalf by an intermediate parent, Lloyds Bank plc. However,

Lloyds Bank plc has since confirmed there is no obligation to repay this balance.

The Company has no employees (2022: none). The Directors are employed by other companies within the Group and none of the

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

Note 7 Taxation

7.1 Analysis of tax (charge)/credit for the year


	2023	2022
	£	£
UK corporation tax
Current tax on taxable profit/(loss) for the year	(44,230)	(6,961)
Current tax charge for the year	(44,230)	(6,961)

UK Deferred tax
Origination and reversal of timing differences	14,167	11,454
Deferred tax credit for the year	14,167	11,454
Total tax (charge)/credit for the year	(30,063)	4,493

Corporation tax is calculated at a rate of 23.50% (2022: 19.00%) of the taxable profit/(loss) for the year.

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

7.2 Factors affecting the tax (charge)/credit for the year

A reconciliation of the (charge)/credit 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:


	2023	2022
	£	£

Profit / (loss) before tax	127,929	(23,648)
Tax (charge)/credit thereon at UK corporation tax in the UK of 23.50% (2022: 19.00%)	(30,063)	4,493
Tax (charge)/credit on loss on ordinary activities	(30,063)	4,493
Effective rate	23.50%	19.00%

Notes to the financial statements (continued)

For the year ended 31 December 2023

17 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 8 Cash and cash equivalents


	2023	2022
	£	£

Cash at bank	2,884,873	2,466,618
Bank overdraft	(2,517)	(376)
Cash and cash equivalents per the Cash flow statement	2,882,356	2,466,242

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.

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


	Note	2023	2022
		£	£

At 1 January		22,534,790	25,268,762
Principal mortgage redemptions during the year		(439,750)	(560,595)
Fair value adjustment		881,587	(730,932)
Shared appreciation receivable movements in the year		(803,191)	(1,442,445)
	5	(361,354)	(2,733,972)

At 31 December		22,173,436	22,534,790

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 2023

18 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 10 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 14.


	Note	2023	2022
		£	£

At 1 January		21,546,246	24,145,084

Accrued interest		(1,681)	(2,143)
Principal note repayments during the year		(439,750)	(560,595)
Fair value adjustment		978,776	(593,655)
Shared appreciation payable movements in the year		(803,191)	(1,442,445)
	5	(265,846)	(2,598,838)
At 31 December		21,280,400	21,546,246


	2023	2022
	£	£

Non-current liabilities
Notes	6,738,727	7,356,847
Shared appreciation payable	14,511,634	14,157,680
	21,250,361	21,514,527
Current liabilities
Interest payable to Note holders	30,039	31,719
At 31 December	21,280,400	21,546,246

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+ (2022: 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.

Note 11 Deferred tax liability


	2023	2022
	£	£

At 1 January	(74,453)	(85,907)
Credit for the year	14,167	11,454
At 31 December	(60,286)	(74,453)
The deferred tax credit in the year comprises the following temporary differences:
Other temporary differences	14,167	11,454
Deferred tax liability comprises:
Other temporary differences	(60,286)	(74,453)

Finance Act 2021, which received Royal Assent on 10 June 2021, increased 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 2023

19 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 12 Trade and other payables


	2023	2022
	£	£

Shared appreciation payable	308,946	148,283
Note redemption payable	237,228	90,806
Accruals	69,883	177,330
	616,057	416,419

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

Note 13 Share capital


	2023	2022
	£	£
Allotted, authorised and fully paid
50,000 (2022: 50,000) ordinary shares of £1 each	50,000	50,000
1 (2022: 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 14 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.

Notes to the financial statements (continued)

For the year ended 31 December 2023

20 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 14 Management of risk (continued)


31 December 2023		Carrying value
31 December 2023	Note	Financial assets		Financial liabilities
		FVTPL	Amortised cost	FVTPL	Amortised cost
Cash and cash equivalents	8		2,884,873
Financial assets held at fair value through profit or loss	9	22,173,436
Bank overdraft	8				2,517
Trade and other payables	12				616,057
Financial liabilities designated at fair value through profit or loss	10			21,280,400


31 December 2022		Carrying value
31 December 2022	Note	Financial assets		Financial liabilities
		FVTPL	Amortised cost	FVTPL	Amortised cost
Cash and cash equivalents	8		2,466,618
Financial assets held at fair value through profit or loss	9	22,534,790
Bank overdraft	8				376
Trade and other payables	12				416,419
Financial liabilities designated at fair value through profit or loss	10			21,546,246

Note 14.1 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 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 Bank of Scotland plc (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

Bank of Scotland plc.

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 2023 was £143,387 (2022: £131,350). 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 (2022: none). The current loan-to-value is

16.11% (2022: 15.13%).

Notes to the financial statements (continued)

For the year ended 31 December 2023

21 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 14 Management of risk (continued)

Note 14.1 Credit risk (continued)

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
		2023	2023	2022	2022
		£	£	£	£
Assets held at amortised cost:
Cash and cash equivalents	8	2,884,873	2,884,873	2,466,618	2,466,618

Assets held at fair value:
Financial assets held at fair value through profit or loss	9	22,173,436	22,173,436	22,534,790	22,534,790
Total Assets		25,058,309	25,058,309	25,001,408	25,001,408

Note 14.2 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.

Note 14.3 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 2023, if interest rates had been 100 basis points higher or lower with all other variables held constant, the net effect on the

Company's Statement of comprehensive income 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.

Note 14.4 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 Bank of Scotland plc.

The Company holds a reserve account of £1,402,488 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

(2022: S&P short-term rating: A+1). The Company has not drawn on this facility since inception.

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 2023

22 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 14 Management of risk (continued)

Note 14.4 Liquidity risk (continued)

In the event that a mortgage loan redeems earlier than the earliest contractual maturity date used in these tables, the related Notes

would be due for payment at the next quarterly waterfall cycle and paid earlier than these tables assume. The Company would also pay

less interest than these tables have assumed if the Notes are settled earlier than the contractual maturity date used in these tables.


2023	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	21,250,361	21,250,361	–	–	–	21,250,361	-
Trade and other payables	616,057	616,057	-	616,057	–	–	–
Bank overdraft	2,517	2,517	2,517	–	–	–	–
Interest payable
Interest payable to Note holders	30,039	1,502,898	–	87,937	265,743	1,149,218	-
	21,898,974	23,371,833	2,517	703,994	265,743	22,399,579	-


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

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 14.5 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).

Notes to the financial statements (continued)

For the year ended 31 December 2023

23 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 14 Management of risk (continued)

Note 14.5 Fair values (continued)

Financial assets and liabilities carried at fair value.


	2023	2022
	£	£
	Level 3	Level 3

Financial assets held at fair value through profit or loss	22,173,436	22,534,790
Financial liabilities designated at fair value through profit or loss	(21,280,400)	(21,546,246)

The management discusses the significant inputs to the valuation model on half-yearly 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 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.

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.

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 15 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 (2022: £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 16.

During the year the Company released accrued liabilities of £39,336 relating to fees accrued for the statutory audits of the financial years

ended 31 December 2018, 31 December 2019 and 31 December 2020. The fees were previously paid on the Company’s behalf by an

intermediate parent, Lloyds Bank plc. However, Lloyds Bank plc has since confirmed there is no obligation to repay this balance.

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


	Parent	Parent
	2023	2022
	£	£
Statement of comprehensive income
Interest receivable and similar income	106,306	27,602
Operating expenses	(13,753)	(17,624)

Notes to the financial statements (continued)

For the year ended 31 December 2023

24 BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871)

Note 15 Related parties (continued)


	Parent	Parent
	2023	2022
	£	£
Balance sheet
Assets
Cash and cash equivalents	2,884,873	2,466,618

Liabilities
Bank overdraft	(2,517)	(376)
Trade and other payables	-	(87,816)

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

Note 16 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 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 UK rules

has not changed and hence it appealed to the First Tier Tax Tribunal, with a hearing having taken place in May 2023. 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 current tax liabilities for the Company of approximately £135,000 (including interest). The Group, following conclusion of the

hearing and having taken appropriate advice, does not consider that this is a case where additional tax will ultimately fall due.

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.