ISA Guide

Tax-Free Savings with Scalable Capital.

Table of Contents
Our Mission 2

What Is an ISA and Why Should I Have One? 3

Which ISA Is Right for Me? 4

How Should I Decide Where to Invest? 5

The Scalable Capital ISA 6

How Do I Open an ISA With Scalable Capital? 7

Global Investment Universe 8

Dynamic Risk Management 9

Fees for the Scalable Capital Stocks & Shares ISA 11

Security for Your ISA 12

Risk Disclaimer and Notes 13


Our Mission
First-Class Investment Management with Groundbreaking Technology.
We provide the most convenient form of
investment for you, taking care of all
investment decisions, based on your risk
preference.
Using innovative technology, we continuously
measure and monitor the risks in your
Risk management
You decide how much risk you want to take.
We constantly monitor your portfolio with the
most innovative risk management technology.
Fees
Our all-in fee of 0.75% p.a. includes account
management, custody charges and all trading
costs. The cost of the ETFs currently used
averages 0.25% p.a.
Transparency
We provide full transparency at all times
and across all devices; whether you're at
home on your PC or using our mobile app
on the go.
2
portfolio. All portfolio adjustments are made
automatically. We do the hard work for
you.
Before Scalable Capital, this type of service
had been reserved for very wealthy or
institutional investors.
Diversification
We select the best from a universe of 1,500
ETFs to create your globally diversified ETF
portfolio, covering all major asset classes.
Independence
As an independent financial institution, we act
with your best interests at heart. This means
we select all ETFs independently and never
receive commissions from 3rd parties.
Security
We use a UK-based custodian bank to hold
your cash and your assets. We also maintain
the highest security standards for your
personal data.
 3
What Is an ISA and Why Should I Have
One?
Benefit from tax-free investment returns.

What is an ISA? ISA Subscriptions Have Increased Over Time as Limits

Have Gone Up
An ISA (Individual Savings
Average subscription per account opened (in )
Account) is a tax-efficient
account available to retail 7,000
investors, which can consist of
a broad range of investments.
Each tax year, the government 6,000
sets a maximum amount that
can be invested in the account,
which has been increasing 5,000
annually since the 1999/00 tax
year.
When setting up an ISA, you 4,000
can either choose a Cash ISA,
a Stocks & Shares ISA or an
Innovative Finance ISA, or split 3,000
up the ISA allowance between
the three options. Of each
option, you can have only one 2,000
per tax year.

What is this years ISA

allowance? 1,000

Investors can invest up to

15,240 in an ISA in the current 0
tax year (6th April 2016 5th
00

11
12
13
14
01
02
03
04
05
06
07
08
09
10

15
16
April 2017). Next year the ISA
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20

20
20

allowance will be increased to

20,000. Source: ISA Statistics, August 2016

What are the tax benefits of ISAs?

Investors do not pay any tax on any of the Outside of an ISA, individuals would be liable
income they receive from ISA savings and to pay tax on any dividends and capital gains
investments. Nor do they pay any tax on capital exceeding the tax-free allowance of 5,000
gains arising from ISA investments. (However, and 11,100, respectively. The tax rates on
losses on ISA investments cannot be offset any amounts exceeding the allowance are
for Capital Gains Tax purposes against capital dependent on individual income levels.1
gains outside an ISA).
1 This information is based on our interpretation of current tax rules and regulations. The relevance of these values depends on your
personal circumstances and may be subject to change over time. If you have any questions or concerns, it might be advisable to
gather additional information from a personal tax advisor.

Which ISA Is Right for Me?
You can invest into three types of ISAs with different risk/return profiles.
Cash vs. Stocks & Shares ISA
Whether a Cash ISA or a Stocks & Shares ISA is
right for you depends on your personal financial
objectives. Since you can hold both a Cash and
a Stocks & Shares ISA, you could allocate some
of your total allowance to both tax-wrappers.
Cash ISAs are typically used for short-term
savings, while Stocks & Shares ISAs are used for
long-term investments. You can typically
withdraw money from both Cash and Stocks &
Shares ISAs without any lock-in periods.
You should be aware that Cash and Stocks &
Shares ISAs have different risk and return
profiles. Over a period of 15 years or more, cash-
based savings have historically delivered lower
returns than investments in the capital markets
as illustrated in the charts below. So if your
primary objective is building wealth for
retirement, a Cash ISA might not be the right
choice. Also keep in mind that Cash ISAs are
Stocks & Shares ISAs Started in 99/00
Delivered Higher Growth Than Cash ISAs
Asset valuation, in billion
40
=5.0%
p.a.
30
=2.9%
20
p.a.
10
1999/00 2015/16 1999/00 2015/16
0 0
Cash ISAs Stocks & Shares ISAs
Source: 1999/00 and 2007/08 original assets invested based on ISA Statistics (as of August 2016), valuations as per 2015/16 end
of tax year based on own calculations (see p.13).
4
subject to changing interest rates. Stocks &
Shares ISAs, on the other hand, carry higher
risks, particularly over the short-term.
What Is an Innovative Finance ISA (IFISA)?
From April 6th 2016, the IFISA will allow
individuals to use their annual ISA investment
allowance to lend funds through the peer-to-
peer (P2P) lending market, whilst receiving tax-
free interest and capital gains. Lenders will be
able to set up an IFISA with individual platforms
once they have received the necessary
authorisation. The rates offered by IFISA
providers are typically double the rates offered
by Cash ISA providers, since they allow savers
to lend directly to borrowers, cutting out the
middleman. However, peer-to-peer lending is
not currently protected by the Financial
Services Compensation Scheme (FSCS). Also,
the counterparties you are lending to might
partially or entirely default on the loan.
Stocks & Shares ISAs Started in 07/08
Grew 6x Faster Than Cash ISAs
Asset valuation, in billion
40
=1.2%
30 p.a.
=7.3%
20 p.a.
10
2007/08 2015/16 2007/08 2015/16
Cash ISAs Stocks & Shares ISAs
 5
How Should I Decide Where to Invest?
Make sure you understand the differences between providers before you invest.

In order to make a well-rounded investment decision for your Stocks & Shares ISA, several criteria
should be considered. As the individual services differ widely, we recommend you to get an
understanding of each providers investment process, the fees they charge, the risk of your
investment and the transparency you will get.

The following is a list of what we believe are the most important questions you should ask as
you reach your decision where to invest.

Investment process Charges

Is the investment universe truly diversified
across geographies, asset classes (e.g.
stocks or bonds etc.), sectors and individual
securities?
Does the investment manager apply an
active management approach (i.e. picking
individual stocks or over-/underweighting
particular geographies or sectors based on a
belief about their future development) or
does he invest into passive products such as
Exchange Traded Funds to give you access
to the market in a more cost-efficient way? Is
this approach in line with your personal
belief about what works best in the long run?
Do they provide daily liquidity so that you
could exit your investment quickly?
Transparency
Do you get real-time access to your
investment so that you are able to see an up-
to-date valuation of your portfolio at any
time?
Do you get in-depth information about your
portfolio allocation, as well as all fees and
changes made to your portfolio allocation?
Can you monitor your investment on the go
with an app?
Is there an account setup fee or a charge for
closing/transferring your ISA?
Are there any costs for making a deposit or
withdrawing money?
What is the annual fee for the management
of your ISA and is it calculated based on the
year-end value of your account or based on
a daily average, which is typically more
favourable for you?
Are you certain that there are no other fees
beyond those stated in the Total Expense
Ratio (this could be trading fees or
performance fees)?
Risk
Can the investment manager tell you exactly
what risks you are taking, i.e. what kinds of
losses you could expect in a bad year?
What risk management, if any, is in place to
ensure your portfolio risk stays in line with
your expectations and therefore the risk you
are able to take?
Do you get a clear understanding of how
much additional return you can expect to get
in exchange for any additional unit of risk
you are taking?

To find out more about Scalable Capitals investment process, the associated fees and risk
management of your portfolio, please visit the following sections on our website: Investment
Universe, Our Fees, Dynamic Risk Management.
 6
The Scalable Capital ISA
A Stocks & Shares ISA that is in a class of its own.

At Scalable Capital we use technology at the 2. A smoother investment experience by using

core of all of our processes. We dont just use
technology to deliver a more accessible,
transparent and cost-efficient service. We
differentiate ourselves by using technology at
the very heart of what we do the way we
manage your money to give you the best possible
investment experience, based on the latest
empirical research results.
We use technology to deliver three benefits:
1. We clearly quantify an annual downside risk,
giving you an unprecedented degree of
transparency and the option to select exactly
the level of risk you feel comfortable with.
our technology to keep your portfolio risk as
stable over time as possible. This means
your portfolio valuation no longer simply
fluctuates in line with market movements.
3. Better risk-adjusted returns by avoiding
periods of excessive risk in each of the asset
classes we invest into. Using our dynamic risk
management technology to analyse and
react to changing market risk, we focus on
delivering the best return for every unit of risk
youre taking.

How Will My ISA Perform?

The planner below shows the forecasted performance of an investment of 15,240 (full ISA
allowance for the 2016/17 tax year) over a 20 year time horizon. Were comparing the forecasted
performance of a Stocks & Shares ISA with Scalable Capital with an investment into a Cash ISA.

A Stocks & Shares ISA Typically Provides Better Returns Over the Long-Run
Potential performance of 15,240 in a Stocks & Shares ISA in risk category 15%*

Good outcome (5% chance above this line) 150,000

Average outcome (median outcome)
Bad outcome (95% chance above this line)
Cash ISA
112,955
100,000

65,294

50,000
37,744

26,922

Today 5 10 15 20 Years
* We measure risk using value-at-risk (VaR). Scalable Capitals VaR is defined as an annual loss, which shouldnt be breached with a
probability of 95%. For a VaR of 15%, this means that in 19 of 20 years (95% likelihood) your portfolio value shouldnt decline by more
than 15%. Learn more on p. 9.
More information regarding our calculation method of the projected Cash and Stocks & Shares ISA performance can be found on p. 13.
 7
How Do I Open an ISA With Scalable
Capital?
Becoming a client is easy.

How do I open an ISA with Scalable How do I transfer my existing ISAs to

Capital? Scalable Capital?

You first need to open an account with us.
During the sign-up process we automatically
create a General Investment Account (GIA) for
you. This can be left unfunded if you want to
open an ISA only at this time, but we add it
free-of-charge to give you additional flexibility
on your investments. We will only start
charging fees on this account if you fund it
and we start building and managing a
portfolio for you.
If you already have an account with us you
simply need to log in and click on the Open
ISA button on the right hand side of your
account cockpit. You will then be given the
choice of opening a new ISA or transferring
existing ISAs.
Transferring your existing ISAs can be done
one of two ways depending on whether you
have an account with us already or not.
Opening a new account to transfer an
existing ISA: Click on Invest now to start the
sign-up process. At the end of the sign-up
process, we will ask you about any ISAs you
may want to transfer.
Transferring one or multiple ISAs as an
existing client: Log in to your account cockpit.
Click on the Open ISA button and we will
guide you through a short questionnaire to
understand which ISAs you wish to transfer.

Remember: You can only open one Stocks &

Shares ISA in each tax year. If you have
already opened one for this year you will need
to transfer it to have an ISA with Scalable
Capital.
 8
Global Investment Universe
We invest your Stocks & Shares ISA in globally diversified, cost-efficient ETFs.

Asia & Russia

up to 1,380 securities
Europe
up to 3,200 securities
Japan
up to 530 securities
North America &
The Caribbean The Middle East
up to 1,800 securities up to 80 securities
South East Asia
up to 340 securities

South America
up to 300 securities

Africa
up to 120 securities
Oceania
up to 220 securities

We invest into a globally diversified investment The ETFs currently used by Scalable Capital
universe covering all major asset classes: have a total expense ratio of 0.07% to 0.59%
Equities p.a. (0.25% p.a. on average), which corresponds
Government Bonds to a cost saving of over 75% compared to the
Corporate Bonds cost of conventional funds. (Source:
Commodities Investment Management Association, own
Real Estate calculation).
Money Market

The instruments we invest into when managing
your Stocks & Shares ISA are called Exchange
Traded Funds (ETFs). These ETFs cover all
the major asset classes listed above, with
approx. 8,000 individual securities spread
across more than 90 countries.
We use a multi-stage process to select
the best ETFs for your ISA from a universe
of more than 1,500 ETFs available to UK
investors.
Why Do We Exclusively Use ETFs?
ETFs are an ideal investment vehicle, as it is
possible in a single transaction to invest into a
whole region or asset class. ETFs are also
traded on exchanges and are therefore highly
liquid. This also offers a high degree of
transparency in terms of cost and
performance.

The most important quantitative and

qualitative criteria for this selection are:
Low Cost
High Liquidity
Low Tracking Error
Secure Replication Method
 9
Dynamic Risk Management
You decide exactly how much risk your Stocks & Shares ISA should have.

We do not use vague labels such as conservative", "moderate

or high" risk to describe our clients' portfolios, we instead use a What Is Value-at-Risk?
quantifiable risk measure called Value-at-Risk (VaR) to
accurately assess a portfolio's exposure to certain losses over a At Scalable Capital, Value-at-Risk
given time period. (VaR) assigns a specific loss level,
which should not be exceeded with
a probability of 95% on an annual
For example, a portfolio in our 12% risk category would, with a
basis. VaR is a measure widely
probability of 95%, not lose more than 12% of its current value in
used by insurance companies,
any given year. In other words, you would only expect to
banks and regulators.
experience a loss of 12% or more once in a period of 20 years.

Risk is the currency for investors to buy returns. This is a well- In order to keep your
accepted fact of investing in the capital markets. For the first risk level constant on
time, Scalable Capital are allowing you to specify exactly how your ISA investment, your
much risk you are willing to take for your Stocks & Shares ISA. portfolio is continuously
This can be low risk (for example, 5% VaR), with correspondingly and automatically monitored
limited return potential, or higher risk (for example, 20% VaR) and analysed in terms
with a greater potential return. of its exposure to risk
in the market. If there
is too much exposure
Projection Projection
to risk in your portfolio,
it will be adjusted, for
example, by reducing
Good
outcome Good exposure to equity ETFs
outcome
Average
Average and increasing exposure
outcome
outcome
Bad
to bond ETFs.
Bad
outcome outcome
Risk limit Risk limit

Conversely, during periods

of market calm where
your portfolio's risk exposure
Current Portfolio Weights Adjusted Portfolio Weights
is too low for your
Equities Equities specified risk category,
Government Bonds Government Bonds
a risk-enhancing portfolio
optimisation is carried
Corporate Bonds Corporate Bonds
out to bring your portfolio
Commodities Commodities back in line with your
Real Estate Real Estate
risk category.

Cash Cash

The following graphic illustrates how our
systematic model would have historically
adjusted the ETF allocations for a portfolio
with a Value-at-Risk of 20%. In times of
increased financial market risk, the proportion
of equity ETFs (dark blue in the graphic)
decreases as they are replaced by
government and corporate bond ETFs as well
as cash (light blue/green in the graphic).
10
One can see that during periods of market
turbulence, such as the 2007/2008 financial
crisis, the increased market volatility led
to an almost complete phase-out of global
stocks. Traditional portfolios invested in funds
with static weights for each asset class
would have remained exposed to equities
in this period of extreme market volatility,
leading to a sharp increase in portfolio risk.

Overview of the Hypothetical Portfolio Allocation of a 20% VaR Portfolio

Representing the percentage invested in different asset classes over time (2000-2016)
100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Cash Corporate Bonds Commodities

Government Bonds Real Estate Equities

Note: The graphic illustrates how dynamic portfolio adjustments would have been carried out based on a projected breach of the
defined VaR. It is based on backtesting data and does not show actual historical portfolio allocations, since Scalable Capital has
been managing client money only since the end of 2015 (in Germany, since May 2016 in the UK). Please read our notes on p. 13.

Our goal is to give you the optimal Stocks

& Shares ISA in all market conditions.
 11
Fees for the Scalable Capital Stocks &
Shares ISA
Full service at a fraction of the cost - because fees matter.

+
Our All-in Fee Cost of the ETFs

0.75 %
p.a. 0.25 %
p.a.

Our all-in fee includes: We do not charge:

Investment management Kickbacks or commissions

Account management Exit fees
Custodial charges Sales charges and other commissions
All trading costs Performance fees
Fees for deposits or withdrawals

Performance of two portfolios with an initial investment The comparison with traditional
amount of 10,000 and a (hypothetical) 6% annual investment managers highlights
the long-term cost saving.
return, but different fee structures.
Small differences in the
fees add up to a considerable
Scalable Capital sum of money in the long
Traditional Investment Manager run more than one would
expect at first glance. That
30,000 is why we have aligned
our entire business processes
to be able to offer our
investment service at the
20,000 lowest possible cost.

Difference between
Scalable Capital and a
10,000
traditional investment
manager:

3,981
Today 10 Years 20 Years

Please read the notes on calculation methods on p. 13.


Security for Your ISA
Security is our top priority.
We are committed to providing you with the
highest level of security available; for both
your account and your data.
12
When you register with us, we open up an
account for you at our UK-based custodian
bank, Winterflood Securities Limited.

Overview of the Relationship between Scalable Capital and Winterflood Securities

Limited.

UK-based Custodian Bank

We open up an account for you at Winterflood Securities Limited.

Your Bank Account Your Money Your Assets Scalable Capital

Withdrawals and In the unlikely event of
transfers to your bank insolvency, you may be
account can be done entitled to compensa-
exclusively through tion from the Financial
your linked account. Services Compensation
Your assets cannot be Scheme. Investments
transferred to other are covered to a limit of
accounts. 50,000.
The securities in your As a financial services
portfolio are kept institution, Scalable
separately from the Capital only manages
banks assets. The your assets for you.
bank never lends your Scalable Capital is not
assets to a third party authorised to hold
or mixes them with your assets.
with Scalable Capitals
own assets.

We use modern IT infrastructure in order to
ensure the safety of your data. Personal
information is always encrypted and stored
in multiple data centres in Dublin, Ireland.
Our websites, servers and apps are regularly
updated with the latest security technology.
Through the use of cloud infrastructure, with
multiple data centres in Dublin, we can ensure
continuous system availability even in the
event of natural disasters or extraordinary
peak loads.
 13
Risk Disclaimer and Notes
1. Risk Warning.
With investment comes risk. The value of your investment can go down as well as up and you may
get back less than you invest. Neither past performance nor performance projections are
indicative for actual future performance. Please note the risk warning on our website.

A Stocks and Shares ISA may not be right for everyone and tax rules may change in the future.

2. Notes on the graphics in this brochure.

Notes on the Cash and Stocks & Shares ISAs comparison on page 4.

Cash ISAs: Calculations of Cash ISA development are based on data from the Bank of England as
of 31/07/2016. In the timeframe of 2000-2012, the historical average is based on the monthly
interest rates of branch-only deposits. From 2012 on, the average is based on online sterling cash
ISA deposits excluding unconditional bonuses from households.

Stocks & Shares ISAs: Estimates of the current asset valuation are based on the performance of
the MSCI World stock market index and UK Gilts over the given timeframe, assuming the initial
subscription amounts had been invested 50% into the MSCI World and 50% into UK gilts.

Information on our calculation method of Cash and Stocks & Shares ISA performance on page 6.

Cash ISA returns: Calculations are based on data from the Bank of England as of 31/07/2016. For
the projection of Cash ISA rates, the historical average of monthly interest rates on sterling cash ISA
deposits from households has been used. In the timeframe of 2000-2012, the historical average is
based on the monthly interest rates of branch-only deposits. From 2012 on, the average is based on
online sterling cash ISA deposits excluding unconditional bonuses from households.

Stocks & Shares ISA returns: The ISA Planner uses historical returns of static portfolios comprised
of index funds and ETFs that match the characteristics of the corresponding investment strategy
as far as possible. The 5th, 50th and 95th percentile represent a poor, mean and good performance,
respectively. Realised performance below the 5th and above the 95th may occur with a
corresponding low probability and is represented by the light red and turquoise area, respectively,
outside of the cone (the 99th and 1st percentile constituting the outer bounds). Our total fee of
0.75% per year as well as an average expense ratio of 0.25% per year for the ETFs are taken into
account. For details refer to the Investment Planner Methodology in the Documentation section in
our website footer.

Notes on the historical ETF weights for a 20% VaR portfolio on page 10.

The information and images are purely for illustrative purposes and are not a reliable indicator of
future portfolio changes. The changes to your portfolio could differ from the illustration.

Notes on the cost comparison on page 11.

Fees of Scalable Capital including fees for the ETFs:

1% p.a. (0.75% p.a. all-in fee + 0.25% p.a. average expense ratio of the ETFs).
 14
Fees of traditional investment managers including fees for the conventional funds:
1.85% p.a., composed of the average charge paid to the wealth manager (1.37% p.a.), the average
cost of managed funds invested into (0.58% p.a.) and the average cost of ETFs/Investment Trusts
invested into (0.39% p.a.) under the assumption of a 50:50 split between ETFs and Investment
Trusts (so average fund charge of 0.48% p.a.).

Source: Numis Securities pricing model Feb-2015, own calculation for averages.

3. Frequently asked questions from our clients.

Is there a minimum investment?

Yes. The minimum investment is 10,000.

Is Scalable Capital a regulated company?

Yes. We are a financial services institution and we are authorised and regulated by the Financial
Conduct Authority. We have the regulatory permissions in order to manage your money with
discretion.

Can I sustain losses that are greater than my specified risk category?

Yes. A loss or temporary negative performance of your portfolio which goes beyond the chosen VaR
value is possible and can occur with a probability of 5%. For example, a portfolio with a VaR of 12%
should expect an annual loss of more than 12% with a probability of 5% (i.e. on average once in 20
years).