BNS Split II : Semi-Annual Report to Shareholders

REPORT TO SHAREHOLDERS

The following presents the financial results of BNS Split Corp. II (the ''Company'') for the six months ended March 22, 2020.

Financial Performance

At March 22, 2020, the net assets attributable to holders of Capital Shares were $12.27 per Capital Share as compared to $23.20 per Capital Share at September 22, 2019, representing a 47.1% decrease over the six month period due to depreciation in the fair value of the Company's investment in common shares of The Bank of Nova Scotia (the ''BNS Shares''). The total fair value of the Company's investment in BNS Shares at March 22, 2020 was $18.2 million (September 22, 2019 - $27.3 million), reflecting unrealized appreciation of $0.3 million (September 22, 2019 - $9.3 million). As a result of the monthly retraction in December 2019, a total of 2,224 Units were retracted for cash with an aggregate value of $0.1 million (2019 - nil).

For the six months ended March 22, 2020, dividends and interest income less total operating expenses, excluding transaction costs, (''Net Investment Income'') was $0.5 million or $1.23 per Unit (2019 - $0.5 million or $1.20 per Unit), with a Unit consisting of two Capital Shares and one Preferred Share. The increase of $0.03 per Unit, or 2.5%, primarily reflects the effects of a dividend increase on the BNS Shares.

The Company's Capital Share distribution policy is to pay holders of Capital Shares quarterly dividends in an amount equal to the Net Investment Income minus the fixed quarterly distribution payable on the Preferred Shares provided the net asset value per Unit at the time of declaration, after giving effect to the dividend, would be greater than the original issue price of the Preferred Shares. Accordingly, during the six months ended March 22, 2020, the Company paid ordinary dividends of $0.4 million or $0.43 per Capital Share (2019 - $0.4 million or $0.395 per Capital Share), representing an annualized yield of 6.4% (2019 - 3.5%) based on the closing price of a Capital Share at March 22, 2020. Holders of Preferred Shares are entitled to receive quarterly fixed cumulative distributions equal to $0.1971 ($0.7884 per annum) per Preferred Share, representing a yield of 4.0% per annum on their $19.71 offering price. During the six months ended March 22, 2020, the Company paid dividends of $0.2 million or $0.3942 per Preferred Share (2019 - $0.2 million or $0.3942 per Preferred Share).

COVID-19

Novel coronavirus 19 (COVID-19), a respiratory virus that was first reported in China, has now affected major economic centres beyond China and increased volatility in financial markets through the first four months of 2020. The efforts underway to both contain the virus and minimize further spreading, along with the disruption to supply chains and sectors such as air travel, tourism and manufacturing, will likely have further economic impacts on the affected countries as well as their trading partners. Such disruptions may

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include disruptions to the trading exchanges where the Company's holdings are traded. We continue to monitor the situation and the effects on the Company.

Capital Share and Preferred Share Redemption

The Capital Shares and Preferred Shares are scheduled to be redeemed by the Company on September 22, 2020 (the ''Redemption Date'') in accordance with the redemption provisions of the shares. Notice of Redemption will be given by the Company at least 45 days prior to the Redemption Date.

This report, along with the accompanying financial statements of the Company, is respectfully submitted to you on behalf of the Board of Directors of BNS Split Corp. II.

Brian D. McChesney

President and Chief Executive Officer

Toronto, Canada

April 29, 2020

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INTERIM CONDENSED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

See accompanying notes to the interim condensed financial statements.

On behalf of the Board:

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INTERIM CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

For the Six Months Ended March 22

(Unaudited)

• Based upon the weighted average number of Capital Shares outstanding during the period.
  See accompanying notes to the interim condensed financial statements.

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INTERIM CONDENSED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 22

(Unaudited)

• Classified as operating activities

See accompanying notes to the interim condensed financial statements.

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INTERIM CONDENSED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE

TO HOLDERS OF CAPITAL SHARES

For the Six Months Ended March 22

(Unaudited)

See accompanying notes to the interim condensed financial statements.

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SCHEDULE OF INVESTMENT

As at

(Unaudited)

See accompanying notes to the interim condensed financial statements.

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NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS

March 22, 2020

(Unaudited)

1. GENERAL INFORMATION

BNS Split Corp. II (the ''Company'') is a mutual fund corporation incorporated under the laws of Ontario on February 28, 2005. The address of the Company's registered office is 150 King Street West, 18thFloor, Toronto, Ontario M5H 1J9. Scotia Managed Companies Administration Inc. (''SMCAI'' or the ''Administrator''), a wholly-owned subsidiary of Scotia Capital Inc. (''SCI'') which in turn is a wholly-owned subsidiary of The Bank of Nova Scotia (''BNS''), provides all administrative services for the Company. The Capital Shares and Preferred Shares are scheduled to be redeemed by the Company on September 22, 2020 (the ''Redemption Date'').

The Company holds a portfolio consisting of common shares of The Bank of Nova Scotia (the ''BNS Shares'') in order to generate income for the holders of the Company's preferred shares (the ''Preferred Shares'') and to enable the holders of the Company's capital shares (the ''Capital Shares'') to participate in any capital appreciation in the BNS Shares and to benefit from any increase in the dividends payable on the BNS Shares. The policy of the Company is to invest in BNS Shares and not engage in trading except in limited circumstances, including to fund retractions or redemptions of Capital Shares and Preferred Shares.

As a result of the Company's monthly retraction in December 2019, a total of 2,224 Units were retracted for cash with an aggregate value of $138,309 (2019 - nil). The retraction has been accounted for as a reduction of the Preferred Share issued capital in the amount of $43,835 (2019 - nil) and a reduction of the Capital Share issued capital in the amount of $94,474 (2019 - nil).

The Company's Capital Share distribution policy is to pay holders of Capital Shares quarterly dividends in an amount equal to the dividends received by the Company on the BNS Shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses provided the net asset value per Unit at the time of declaration, after giving effect to the dividend, would be greater than the $19.71 original issue price of the Preferred Shares.

2. BASIS OF PRESENTATION

Statement of Compliance

These interim condensed financial statements have been prepared in compliance with International Financial Reporting Standards (''IFRS'') including, IAS 34, Interim Financial Reportingas issued by the International Accounting Standards Board (''IASB''). Accordingly, certain information and footnote

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disclosure included in the annual financial statements prepared in accordance with IFRS, as issued by the IASB, have been omitted or condensed.

These financial statements were authorized for issuance by the Board of Directors of the Company (the ''Board'') on April 29, 2020.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These interim condensed financial statements have been prepared using the same accounting policies as the annual financial statements for the year ended September 22, 2019. The disclosure in these interim condensed financial statements does not include all requirements of IAS 1, Presentation of Financial Statements. Accordingly, the interim condensed financial statements should be read in conjunction with the audited financial statements for the year ended September 22, 2019.

4. REDEEMABLE SHARES

The Company is authorized to issue an unlimited number of Capital Shares, Preferred Shares, Class J shares and Class S shares. An unlimited number of Class B, C, D and E capital shares and Class B, C, D and E preferred shares are also issuable in series.

A summary of the Company's issued and outstanding shares is as follows:

The weighted average number of Preferred Shares and Capital Shares outstanding for the six months ended March 22, 2020 was 411,979 Preferred Shares and 823,958 Capital Shares (September 22, 2019 - 447,340 Preferred Shares and 894,700 Capital Shares).

The Company will ensure that two Capital Shares continue to be outstanding for every Preferred Share.

The Preferred Shares rank prior to the Capital Shares, Class J shares and Class S shares with respect to the payment of dividends, distributions upon a redemption, retraction or return of capital and distributions upon a dissolution, liquidation or wind-up of the Company.

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The market value of the Capital Shares on March 22, 2020 was $13.50 (September 22, 2019 - $22.48) per share and the market value of the Preferred Shares on March 22, 2020 was $18.90 (September 22, 2019 - $19.90) per share.

5. RELATED PARTY INFORMATION

For its services to the Company, which includes the provision of key management personnel, SMCAI is entitled to receive an administrative fee of 0.25% per annum of the market value of the BNS Shares. For the six month period ended March 22, 2020, total administrative fees paid to SMCAI were $37,640 (2019 - $40,395).

For the six month period ended March 22, 2020, total administrative and operating expenses of $149,640 (2019 - $137,505) were paid and satisfied by way of a dividend on the Company's Class S shares. During the period, transaction costs of $37 (2019 - nil) were paid to SCI in connection with portfolio transactions. At March 22, 2020, the Company had cash on deposit with SCI and BNS of $6,729 (September 22, 2019 - $10,852). At March 22, 2020, the Company held investments in The Bank of Nova Scotia common shares with an aggregate fair value of $18,177,300 (September 22, 2019 - $27,298,326).

SMCAI owns all of the issued and outstanding Class S shares of the Company. BNS Split II Holdings Corp. (''Holdings'') owns all of the issued and outstanding Class J shares of the Company. Holdings is owned equally by two independent directors and one former independent director of the Company.

6. CAPITAL MANAGEMENT

The Company's capital is represented by net assets attributable to holders of Capital Shares and Preferred Shares. The Administrator, with oversight from the Company's Board, is responsible for managing the Company's BNS Shares in line with its mandate and the business affairs of the Company, including receipt of income and the payment of distributions to shareholders. The Company pays fixed dividends on the Preferred Shares and should the net asset value per Unit at the date of each dividend declaration exceed the original issue price of the Preferred Shares after giving effect to the Capital Share dividend, the Company's policy is to pay dividends on the Capital Shares equal to the excess, if any, of dividends received by the Company on the BNS Shares less the fixed preferential dividend paid on the Preferred Shares and all administrative and operating expenses. Where the net asset value per Unit at the time of declaration, after giving effect to the Capital Share dividend, is less than or equal to the original issue price of the Preferred Shares, any excess cash will be reinvested in short-term money market instruments or BNS Shares.

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7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table outlines the fair value hierarchy of the financial instruments as at March 22, 2020 and September 22, 2019 as follows:

All fair value measurements are recurring. The carrying amounts of cash and accrued liabilities approximate their fair value because of the short-term nature of these items. Instruments are classified as Level 1 when the related security or derivative is actively traded and a quoted price is available. Instruments are classified as Level 2 when the related security or derivative has inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. If an instrument classified as Level 1 subsequently ceases to be actively traded, it is transferred out of Level 1. In such cases, instruments are reclassified into Level 2, unless the measurement of its fair value requires the use of significant unobservable inputs, in which case it is classified as Level 3. The Company's policy is to recognize transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances giving rise to the transfer. There were no transfers between levels during the current period and prior year presented.

8. FINANCIAL INSTRUMENT RISK MANAGEMENT

In the normal course of business, the Company is exposed to a variety of financial risks: market risk (including price risk, interest rate risk and currency risk), credit risk and liquidity risk. As it is the Company's mandate to be fully invested in BNS Shares and pay distributions from cash flows to the maximum extent possible, the Company's overall risk management program focuses on compliance and execution of the Company's investment objectives.

Price Risk

The value of the Capital Shares is dependent on the value of the BNS Shares. The value of the BNS Shares will be influenced by factors outside of the Company's control, including the financial performance of BNS, operational risks relating to the specific business activities of BNS, quality of assets owned by BNS, prices, exchange rates, interest rates, environmental risks, political risks, issues relating to government regulation and other financial market conditions. If the price of the BNS Shares increased or decreased by 5% as at March 22, 2020, all other variables held constant, the net assets attributable to holders of Capital Shares would have increased or decreased, respectively, by $1.11 (September 22, 2019 - $1.65) per Capital Share

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or 9.0% (September 22, 2019 - 7.1%) of which $0.49 (September 22, 2019 - $0.49) per Capital Share or 4.0% (September 22, 2019 - 2.1%) is the result of leverage to which holders of Capital Shares are exposed. In practice, the actual trading results may differ materially from this sensitivity analysis.

The value of the Preferred Shares is dependent on the prevailing level of market interest rates and on the level of downside protection on the Preferred Shares which is a function of the price of the BNS Shares. Downside protection is the percentage by which the net assets can decline and still cover the $19.71 redemption price of a Preferred Share. Downside protection on the Preferred Shares as at March 22, 2020 was 56% (September 22, 2019 - 70%).

Interest Rate Risk

Interest rate risk arises from changes in the prevailing levels of market interest rates resulting in fluctuations in the value of interest-bearing financial instruments. The majority of the Company's assets are non-interest bearing; however, the Company is indirectly exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its BNS Shares. Any excess cash is invested in short-term money market instruments or in a deposit account.

Currency Risk

The assets and liabilities are held in the functional currency of the Company which is the Canadian dollar. The Company is not exposed to direct significant foreign currency risks except to the extent that the business activities of BNS are subject to foreign currency fluctuations.

Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company maintains all its cash and cash equivalents at its custodian or in bankers' acceptances or term deposits with financial institutions having a minimum debt rating of ''A''. All transactions in listed securities are settled or paid for upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is made only when the Company has received payment. Payment is made on purchases once the securities have been received by the Company. Should either party not meet its obligation, the trade will fail.

Liquidity Risk

The Company is exposed to annual retractions and receives notification no later than seven business days prior to the Valuation Date. The BNS Shares are traded in an active market and can normally be readily disposed of. There can be no assurance that an adequate market for the BNS Shares will exist at all times,

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or that the prices at which the BNS Shares trade, accurately reflect their net asset values. Low trading volumes for the BNS Shares could make it difficult to liquidate holdings quickly.

The Company's redeemable Capital Shares and Preferred Shares represent a financial liability. The Capital Shares and Preferred Shares become payable when retracted by shareholders in accordance with the retraction rights described in the prospectus dated September 15, 2015 and ultimately on the Redemption Date. The Preferred Shares are redeemable on demand.

As at March 22, 2020, the maturity of the Company's financial liabilities, other than the redeemable shares, based on the remaining period between the financial statement date and the contractual maturity date was $0.01 million due greater than 1 year (September 22, 2019 - $0.01 million due greater than 1 year).

9. SUBSEQUENT EVENT

Subsequent to March 22, 2020, the novel coronavirus 19 (COVID-19) outbreak, which has been declared a pandemic by the World Health Organization, continued to spread and actions taken in response to the spread of COVID-19 have resulted in significant disruption to business operations around major economic centres, increased economic uncertainty and increased volatility in financial markets through the four months of 2020. The impact of the COVID-19 outbreak on the financial performance of the Company will depend on future developments, including the duration and spread of the outbreak and any related restrictions. The impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted, but could have a material adverse impact on the future results and returns of the Company.

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Corporate Information

Principal Office

150 King Street West, 18th Floor Toronto, Ontario

M5H 1J9

Telephone: (416) 863-7301

Facsimile: (416) 863-7425

E-mail: mc.bnssplit2@scotiabank.com

Web site: www.scotiamanagedcompanies.com

Directors & Officers

Brian D. McChesney

Director, President & Chief Executive Officer

Allan D. Rowe*

Director & Chairman of the Board

Massimo Ceschia

Director, Chief Financial Officer & Secretary

Patrick C. Lincoln*

Director & Chairman of the Audit Committee

Timothy G. Spark*

Director

Robert Hall

Director

• Audit Committee Member

Independent Review Committee

Timothy G. Spark (Chairman)

Allan D. Rowe

Patrick C. Lincoln

Mailing Address

P.O. Box 4085, Station ''A''

Toronto, Ontario

M5W 2X6

Registrar & Transfer Agent

Computershare Investor Services Inc.

100 University Avenue

Toronto, Ontario

M5J 2Y1

Legal Counsel

Osler, Hoskin & Harcourt LLP Toronto, Ontario

Auditor

PricewaterhouseCoopers LLP Toronto, Ontario

Stock Exchange Listing

The Toronto Stock Exchange (TSX)

Symbols

Capital Shares - BSC Preferred Shares - BSC.PR.C