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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ________ to _________
Commission File Number 001-33034
FREEDOM HOLDING CORP.
(Exact name of registrant as specified in its charter)
Nevada30-0233726
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
“Esentai Tower” BC, Floor 7
77/7 Al Farabi Ave
Almaty, Kazakhstan
50040
(Address of principal executive offices)(Zip Code)
+7 727 311 10 64
(Registrant's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareFRHC
The Nasdaq Capital Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer o
Non-accelerated fileroSmaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes   No x
As of February 8, 2024, the registrant had 59,659,191 shares of common stock, par value $0.001, issued and outstanding.



FREEDOM HOLDING CORP.
FORM 10-Q
TABLE OF CONTENTS
Page
Condensed Consolidated Balance Sheets as of December 31, 2023, and March 31, 2023
 


2


FREEDOM HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
December 31, 2023
March 31, 2023
ASSETS
Cash and cash equivalents (including $ and $35,549 with related parties)
$561,883 $581,417 
Restricted cash (including $67,215 and $114,885 with related parties)
384,553 445,528 
Trading securities (including $16,220 and $556 with related parties)
3,680,453 2,412,556 
Available-for-sale securities, at fair value202,497 239,053 
Margin lending, brokerage and other receivables, net (including $43,241 and $295,611 due from related parties)
961,392 376,329 
Loans issued (including $144,289 and $121,316 to related parties)
1,346,005 826,258 
Fixed assets, net78,099 54,017 
Intangible assets, net46,771 17,615 
Goodwill52,238 14,192 
Right-of-use asset34,180 30,345 
Insurance contract assets12,728 13,785 
Other assets, net (including $533 and $16,102 with related parties)
88,244 73,463 
TOTAL ASSETS$7,449,043 $5,084,558 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities repurchase agreement obligations$2,889,173 $1,517,416 
Customer liabilities (including $112,701 and $130,210 to related parties)
2,248,042 1,925,247 
Margin lending and trade payables (including $474 and $3,721 to related parties)
145,804 122,900 
Liabilities from insurance activity242,179 182,502 
Current income tax liability27,711 4,547 
Debt securities issued266,310 60,025 
Lease liability34,614 30,320 
Liability arising from continuing involvement494,513 440,805 
Other liabilities (including $11,783 and $46 to related parties)
61,447 30,060 
TOTAL LIABILITIES $6,409,793 $4,313,822 
Commitments and Contingent Liabilities (Note 23)
  
SHAREHOLDERS’ EQUITY
Preferred stock - $0.001 par value; 20,000,000 shares authorized, no shares issued or outstanding
  
Common stock - $0.001 par value; 500,000,000 shares authorized; 59,659,191 and 59,659,191 shares issued and outstanding as of December 31, 2023, and March 31, 2023, respectively
59 59 
Additional paid in capital167,465 164,162 
Retained earnings903,517 647,064 
Accumulated other comprehensive loss(34,845)(34,000)
TOTAL FRHC SHAREHOLDERS’ EQUITY$1,036,196 $777,285 
Non-controlling interest3,054 (6,549)
TOTAL SHAREHOLDERS’ EQUITY$1,039,250 $770,736 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$7,449,043 $5,084,558 
The accompanying notes are an integral part of these condensed consolidated financial statements

3


FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Revenue:
Fee and commission income (including $30,112 and $44,590 from related parties)
$120,159 $80,883 $330,565 $253,486 
Net (loss)/gain on trading securities
(5,089)25,456 77,498 38,894 
Interest income (including $7,566 and $10,796 from related parties)
226,445 80,255 588,857 187,817 
Insurance underwriting income79,017 28,557 181,882 78,998 
Net gain on foreign exchange operations
38,825 20,866 54,430 30,014 
Net loss on derivative
(42,568)(21,469)$(71,795)(22,523)
Other income/(expense)
1,845 (570)8,988 (79)
TOTAL REVENUE, NET418,634 213,978 1,170,425 566,607 
Expense:
Fee and commission expense (including $55 and $2,304 from related parties)
42,818 18,314 103,116 60,068 
Interest expense131,223 52,037 365,650 132,971 
Insurance claims incurred, net of reinsurance40,989 17,419 96,491 51,586 
Payroll and bonuses45,083 21,610 116,711 55,252 
Professional services6,217 5,901 24,793 14,174 
Stock compensation expense1,039 2,939 3,303 6,519 
Advertising expense11,066 3,730 27,805 9,479 
General and administrative expense (including $1,502 and $600 from related parties)
32,106 16,428 86,211 40,943 
(Recovery)/Allowance for expected credit losses
(3,526)24,140 15,462 30,294 
TOTAL EXPENSE307,015 162,518 839,542 401,286 
INCOME BEFORE INCOME TAX111,619 51,460 330,883 165,321 
Income tax expense(15,544)(5,069)(51,408)(26,567)
INCOME FROM CONTINUING OPERATIONS96,075 46,391 279,475 138,754 
Income before income tax expense of discontinued operations
 13,667  14,467 
Income tax benefit/(expense) of discontinued operations
 2,342  (4,538)
Income from discontinued operations 16,009  9,929 
NET INCOME96,075 62,400 279,475 148,683 
Less: Net loss attributable to non-controlling interest in subsidiary
(293)(464)(842)(1,508)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$96,368 $62,864 $280,317 $150,191 
OTHER COMPREHENSIVE INCOME
Change in unrealized gain/(loss) on investments available-for-sale, net of tax effect
1,486 (54)5,893 2,309 
4


FREEDOM HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS OF OTHER COMPREHENSIVE INCOME (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Reclassification adjustment for net realized (loss)/gain on available-for-sale investments disposed of in the period, net of tax effect
(1,881)320 (3,145)197 
Foreign currency translation adjustments28,100 (5,611)(3,593)(301)
OTHER COMPREHENSIVE INCOME/(LOSS)
27,705 (5,345)(845)2,205 
COMPREHENSIVE INCOME BEFORE NON-CONTROLLING INTERESTS$123,780 $57,055 $278,630 $150,888 
Less: Comprehensive loss attributable to non-controlling interest in subsidiary
(293)(464)(842)(1,508)
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS$124,073 $57,519 $279,472 $152,396 
EARNINGS PER COMMON SHARE (In U.S. dollars):
Earnings from continuing operations per common share - basic1.65 0.79 4.79 2.37 
Earnings from continuing operations per common share - diluted1.63 0.78 4.73 2.33 
Earnings from discontinued operations per common share - basic (Restated)
 0.27  0.17 
Earnings from discontinued operations per common share - diluted (Restated)
 0.27  0.17 
Earnings per common share - basic (Restated)
1.65 1.06 4.79 2.54 
Earnings per common share - diluted (Restated)
1.63 1.05 4.73 2.50 
Weighted average number of shares (basic)58,578,691 58,678,730 58,557,577 58,642,637 
Weighted average number of shares (diluted)59,289,256 59,522,701 59,287,086 59,527,743 
    

Please see Note 2 for further information regarding the restatement.

The accompanying notes are an integral part of these condensed consolidated financial statements.


5


FREEDOM HOLDING CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
For the Nine Months Ended December 31,
20232022
Cash Flows From Operating Activities
Net income$279,475 $148,683 
Net income/(loss) from discontinued operations$ $9,929 
Net income from continued operations$279,475 $138,754 
Adjustments to reconcile net income used in operating activities:
Depreciation and amortization11,089 3,502 
Amortization of deferred acquisition costs66,023 14,061 
Noncash lease expense6,536 3,453 
Change in deferred taxes3,051 (3,392)
Stock compensation expense3,303 6,520 
Unrealized gain on trading securities
(16,222)(65,684)
Unrealized gain on derivatives
(886) 
Net realized gain on available-for-sale securities
(3,145) 
Net change in accrued interest(108,129)(35,984)
Revaluation of purchase price previously held interest in Arbuz
(1,040) 
Change in insurance reserves58,118 42,236 
Change in unused vacation reserves5,538  
Allowance for expected credit losses
15,462 30,294 
Changes in operating assets and liabilities:
Trading securities(1,149,192)(630,879)
Margin lending, brokerage and other receivables (including $251,744 and $(53,490) changes from related parties)
(603,701)(270,725)
Insurance contract assets1,508 6,460 
Other assets(83,169)(25,119)
Securities sold, not yet purchased – at fair value (13,865)
Brokerage customer liabilities (including $(17,509) and $25,236 changes from related parties)
71,982 240,362 
Current income tax liability23,149 (14,556)
Margin lending and trade payables (including $(2,765) and $(34,382) changes from related parties)
30,593 92,225 
Lease liabilities(6,458)(3,470)
Liabilities from insurance activity1,879 (22,581)
Other liabilities20,881 10,432 
Net cash flows used in operating activities from continuing operations(1,373,355)(497,956)
Net cash flows from operating activities from discontinued operations
 32,165 
Net cash flows used in operating activities(1,373,355)(465,791)
Cash Flows Used In Investing Activities
Purchase of fixed assets(36,270)(27,345)
Net change in loans issued to customers(547,754)(564,759)
Purchase of available-for-sale securities, at fair value(169,653)(205,781)
Proceeds from sale of available-for-sale securities, at fair value211,390 196,799 
Investment in London Almaty (16,343)
Consideration paid for acquisition of Freedom Life (13,630)
Consideration paid for Internet Tourism
(1,028) 
Consideration paid for Aviata
(16,098) 
Consideration paid for Arbuz
(13,281) 
Consideration paid for Ticketon
(3,003) 
Prepayment on acquisition(17,810) 
6


FREEDOM HOLDING CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
Cash, cash equivalents and restricted cash disposed as a result of deconsolidation of Freedom UA(1,987) 
Cash, cash equivalents and restricted cash received from acquisitions2,461 11,385 
Net cash flows used in investing activities from continuing operations(593,033)(619,674)
Net cash flows used in investing activities from discontinued operations (21,647)
Net cash flows used in investing activities(593,033)(641,321)
Cash Flows From Financing Activities
Proceeds from securities repurchase agreement obligations1,370,587 388,675 
Proceeds from issuance of debt securities206,371 23,861 
Repurchase of debt securities (23,387)
Repurchase of mortgage loans under the State Program(30,317)(7,117)
Funds received under state program for financing of mortgage loans75,817 318,330 
Net change in bank customer deposits271,572 779,044 
Purchase of non-controlling interest in Arbuz
(3,228) 
Capital contributions 677 
Proceeds from loans received1,526  
Net cash flows from financing activities from continuing operations1,892,328 1,480,083 
Net cash flows from financing activities from discontinued operations 26,105 
Net cash flows from financing activities1,892,328 1,506,188 
Effect of changes in foreign exchange rates on cash and cash equivalents from continued operations(6,449)23,591 
Effect of changes in foreign exchange rates on cash and cash equivalents from discontinued operations 61,473 
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(80,509)484,140 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD FROM CONTINUED OPERATIONS1,026,945 773,414 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD FROM DISCONTINUED OPERATIONS 456,886 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD1,026,945 1,230,300 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD FROM CONTINUED OPERATIONS$946,436 $1,114,074 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD FROM DISCONTINUED OPERATIONS$ $600,366 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$946,436 $1,714,440 

7


FREEDOM HOLDING CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(All amounts in thousands of United States dollars, unless otherwise stated)
For The Nine Months Ended December 31,
20232022
Supplemental disclosure of cash flow information:
Cash paid for interest$350,106 $133,286 
Income tax paid$23,652 $47,262 
Supplemental non-cash disclosures:
Operating lease right-of-use assets obtained/disposed of in exchange for operating lease obligations during the period, net$9,426 $19,089 
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:
December 31, 2023
December 31, 2022
Cash and cash equivalents$561,883 $664,095 
Restricted cash384,553 449,979 
Total cash, cash equivalents and restricted cash shown as in the statement of cash flows$946,436 $1,114,074 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


FREEDOM HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Common StockAdditional
paid
in capital
Retained
earnings
Accumulated
other
comprehensive
loss
Total equity attributable to the shareholders'
Non-
controlling
interest
Total
SharesAmount
At September 30, 2023
59,659,191 $59 $166,426 $807,149 $(62,550)$911,084 $3,347 $914,431 
Stock based compensation— — 1,039 — — 1,039 — 1,039 
Foreign currency translation adjustments, net of tax effect— — — — 28,100 28,100 — 28,100 
Other comprehensive loss
— — — — (395)(395)— (395)
Net income/(loss)— — — 96,368 — 96,368 (293)96,075 
At December 31, 202359,659,191 $59 $167,465 $903,517 $(34,845)$1,036,196 $3,054 $1,039,250 
At March 31, 202359,659,191 $59 $164,162 $647,064 $(34,000)$777,285 $(6,549)$770,736 
Cumulative adjustment from adoption of ASC 326— — — (22,772)— (22,772)— (22,772)
Stock based compensation— — 3,303 — 3,303 — 3,303 
Disposal of FF Ukraine— — — (6,549)— (6,549)6,549  
Purchase of Arbuz shares— — — 5,457 — 5,457 3,640 9,097 
Purchase of ReKassa shares— — — —  256 256 
Foreign currency translation adjustments, net of tax effect— — — (3,593)(3,593)— (3,593)
Other comprehensive income
— — — — 2,748 2,748 — 2,748 
Net income/(loss)— — — 280,317 — 280,317 (842)279,475 
At December 31, 202359,659,191 $59 $167,465 $903,517 $(34,845)$1,036,196 $3,054 $1,039,250 
The accompanying notes are an integral part of these condensed consolidated financial statements.




9


FREEDOM HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)


Common StockAdditional
paid
in capital
Retained
earnings
Accumulated
other
comprehensive
loss
Total equity attributable to the shareholders'Non-
controlling
interest
Total
SharesAmount
Balance As At September 30, 202259,542,212 $59 $155,635 $529,251 $(55,575)$629,370 $(8,039)$621,331 
Stock based compensation — $3,945 — — 3,945 — 3,945 
Foreign currency translation adjustments, net of tax effect— — — — (5,611)(5,611)— (5,611)
Other comprehensive income— — — — 266 266 — 266 
Net income— — — 62,864 — 62,864 (464)62,400 
Balance As At December 31, 202259,542,212 $59 $159,580 $592,115 $(60,920)$690,834 $(8,503)$682,331 
Balance As At March 31, 202259,542,212 $59 $174,745 $441,924 $(63,125)$553,603 $(6,995)$546,608 
Stock based compensation— — $10,746 — — 10,746 — 10,746 
Contribution of shareholder— — 677 — — 677 — 677 
Acquisition of insurance companies— — (26,588)— — (26,588)— (26,588)
Foreign currency translation adjustments, net of tax effect— — — — (301)(301)— (301)
Other comprehensive income— — — — 2,506 2,506 — 2,506 
Net income/(loss)— — — 150,191 — 150,191 (1,508)148,683 
Balance As At December 31, 202259,542,212 $59 $159,580 $592,115 $(60,920)$690,834 $(8,503)$682,331 
10


FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

NOTE 1 – DESCRIPTION OF BUSINESS
Overview
Freedom Holding Corp. (the "Company" or "FRHC" and, together with its subsidiaries, the "Group") is a corporation organized in the United States under the laws of the State of Nevada that through its operating subsidiaries provides financial services including retail securities brokerage, research, investment counseling, securities trading, market making, retail banking, corporate investment banking, underwriting services, commercial banking, insurance products, a payment platform, a conference platform and an online ticket sale platform. The Company is headquartered in Almaty, Kazakhstan, with supporting administrative office locations in Cyprus and the United States. The Group has a presence in Kazakhstan, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, United States, Greece, Spain, France, Poland, Armenia, Azerbaijan, Turkey and United Arab Emirates. The Company also has subsidiaries in the United States which include a broker-dealer that is registered with the United States Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA"). The Company's common stock trades on the Nasdaq Capital Market, the Kazakhstan Stock Exchange ("KASE") and the Astana International Exchange ("AIX").
As of December 31, 2023, the Company owned directly, or through subsidiaries, the following companies:
11


FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Name of subsidiary
Jurisdiction of Incorporation
Number of subsidiaries
Business Area
Freedom Finance JSC ("Freedom KZ")
Kazakhstan
3
Securities broker-dealer
Freedom Finance Global PLC ("Freedom Global")
Kazakhstan
Securities broker-dealer
Bank Freedom Finance Kazakhstan JSC ("Freedom Bank KZ")
Kazakhstan1
Commercial bank
Freedom Finance Life JSC ("Freedom Life")
Kazakhstan
Life/health insurance
Freedom Finance Insurance JSC ("Freedom Insurance")
Kazakhstan
General insurance
Ticketon Events LLP ("Ticketon")
Kazakhstan3
Online ticket sales
Freedom Finance Special Purpose Company LTD ("Freedom SPC")
Kazakhstan
Issuance and placement of debt securities
Freedom Finance Commercial LLP
Kazakhstan
Sales consulting
ITS Tech Limited
Kazakhstan
IT support
Freedom Technologies LLP ("Paybox")
Kazakhstan5
Payment services
Aviata LLP ("Aviata")
Kazakhstan
Online travel ticket aggregator
Internet-Tourism LLP ("Internet Tourism)
Kazakhstan
Online travel ticket aggregator
Arbuz Group LLP ("Arbuz")
Kazakhstan3
Online retail trade and e-commerce
Comrun LLP ("ReKassa")
Kazakhstan
Mobile and web application
Freedom Telecom Holding Limited ("Freedom Telecom")
Kazakhstan2
Telecommunications
Freedom Kazakhstan PC Ltd
Kazakhstan
6
Non-financial
Freedom Advertising Ltd
Kazakhstan
Advertising
Freedom Shapagat Corporate Fund
Kazakhstan
Non-profit
FRHC Fractional SPC LTD
Kazakhstan
Issuance and placement of debt securities
Foreign Enterprise LLC Freedom Finance
Uzbekistan
Securities broker-dealer
Freedom Finance Armenia LLC ("Freedom AR")
Armenia
Securities broker-dealer
Freedom Finance Azerbaijan LLC
Azerbaijan
Financial educational center
Freedom Finance FZE.
UAE
Office of international organization
Freedom Management Ltd.
UAE
Consulting
Freedom Finance Turkey LLC
Turkey
Financial consulting
Freedom Finance Europe Limited ("Freedom EU")
Cyprus
2
Securities broker-dealer
Freedom Finance Technologies Ltd
Cyprus
IT development
Freedom Property Ltd
Cyprus
Asset management
Freedom Finance Germany GmbH
Germany
Tied agent of Freedom EU
Freedom Prime UK Limited ("Prime UK")
UK
Management consulting
Freedom Structured Products PLC
Cyprus
Financial services
Prime Executions, Inc. ("PrimeEx")
USA
Securities broker-dealer and investment banking
FFIN Securities, Inc.
USA
Dormant
Freedom U.S. Market LLC
USA
1
Management company
LD Micro ("LD Micro")
USA
Event platform
12


FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

As at December 31, 2023 the Company owns a 9% interest in Freedom Finance Ukraine LLC, a Kiev, Ukraine-based broker-dealer ("Freedom UA"). The remaining 91% interest in Freedom UA is controlled by Askar Tashtitov, the Company's president. The Company entered into a series of contractual arrangements with Freedom UA and Mr. Tashtitov, including a consulting services agreement, an operating agreement and an option agreement.
On October 19, 2022, Freedom UA's brokerage license was suspended for a period of five years and its assets were frozen by the Ukrainian authorities following its inclusion on a sanctions list of the Ukrainian government. Given the ongoing uncertainty surrounding the situation in Ukraine, the management of the Company believes that as of December 31, 2023 the Company does not maintain effective control over Freedom UA.
Through its subsidiaries, the Company is a professional participant, with a license to provide one or more types of services, on a number of stock exchanges, including the Kazakhstan Stock Exchange (KASE), the Astana International Stock Exchange (AIX), the Republican Stock Exchange of Tashkent (UZSE) and the Uzbek Republican Currency Exchange (UZCE) and is a member of the New York Stock Exchange (NYSE) and the Nasdaq Stock Exchange (Nasdaq). The Company also owns a 24.3% interest in the Ukrainian Exchange (UX). Freedom EU provides the Company's clients with operational support and access to investment opportunities in the United States and European securities markets.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting principles
The Company's accounting policies and accompanying consolidated financial statements conform to accounting principles generally accepted in the United States of America (U.S. GAAP).
Basis of presentation and principles of consolidation
The consolidated financial statements present the consolidated accounts of FRHC and its consolidated subsidiaries. All inter-company balances and transactions have been eliminated from the consolidated financial statements.
Consolidation of variable interest entities
In accordance with accounting standards regarding consolidation of variable interest entities ("VIEs"), VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. VIEs must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. As of December 31, 2023 there are no VIEs in respect of the Company. As at March 31, 2023 and for the years ended March 31, 2023, 2022 and 2021, the only VIE in respect of the Company was Freedom UA.
The carrying amounts of Freedom UA’s consolidated assets and liabilities were as follows as of March 31, 2023:
13


FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
March 31, 2023
Cash and cash equivalents26 
Restricted cash1,936 
Trading securities4,010 
Margin lending, brokerage and other receivables, net1,616 
Fixed assets, net782 
Intangible assets, net131 
Right-of-use asset135 
Other assets56 
Total assets8,692 
Customer liabilities5,837 
Securities repurchase agreement obligations12 
Trade payables25 
Lease liability159 
Other liabilities298 
Total liabilities6,331 
Loss of control of Freedom UA
Amidst the Russia-Ukraine conflict and subsequent economic sanctions, Freedom UA was added to the Ukrainian government's sanctioned entities and individuals list, resulting in restrictive measures being imposed on it by the Ukrainian authorities, including suspension of its brokerage license. Effective April 1, 2023, the Company removed its equity interest in Freedom UA from its consolidated financial statements and recognized a loss of control of such company. The Company accounted for the deconsolidation of Freedom UA by recognizing loss in net income attributable to the Company as the difference between net liabilities of Freedom UA as of April 1, 2023 (date of loss of control) and net liabilities as of December 31, 2023.
Non-Consolidation of Freedom Securities Trading Inc.
The Company has assessed whether it should consolidate Freedom Securities Trading Inc. (formerly known as FFIN Brokerage Services, Inc.) ("FST Belize") under the variable interest entity (“VIE”) accounting method or the voting interest method ("VOE"). In July 2014, prior to the Company's reverse acquisition transaction, Timur Turlov founded FST Belize, a Belize-based broker dealer. FST Belize is solely owned by Mr. Turlov and was not acquired by the Company as part of the reverse acquisition transaction. Although FRHC and FST Belize are common control entities, under the control of an individual, there is no indication that FRHC should consolidate FST Belize given that:
(1) FST Belize is not a VIE and is not subject to further VIE analysis due to the fact it has sufficient equity at risk to finance its activities without additional financial support and the control over its significant activities is held by its sole shareholder, Mr. Turlov who is also FRHC's controlling shareholder, chairman and chief executive officer; and
(2) Mr. Turlov has a controlling interest in FST Belize such that under the VOE model FRHC is not required to consolidate FST Belize.

FST Belize is a corporation and Mr. Turlov is the sole owner of FST Belize, holding 100% of the ownership interest in it. There are no other shareholders or parties with participating rights or the ability to remove Mr. Turlov from his ownership position. Mr.Turlov has the ability to make all decisions in respect of FST Belize. FRHC's management has also assessed the relationship between FRHC (through its subsidiary Freedom EU) and FST Belize. Other than the tariff rates stipulated in the Variation Agreement dated February 25, 2020 entered into between Freedom EU and FST Belize, including the General Terms and Conditions of Business, which sets out the specific terms and conditions of the relationship between Freedom EU and FST Belize, there are no other contractual agreements or other implicit arrangements between the two
14


FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
parties that provide FRHC the power to control the operations of FST Belize. In December 2022 the Company changed its treatment of certain interest income so that it applies from the settlement date whereas previously it applied from the trade date. As a result of that change, the Company's management has continued to assess for any modifications or reconsideration events.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing the Company's financial statements are reasonable and prudent. Actual results could differ from those estimates.
Revenue and expense recognition
Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services promised to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. A significant portion of the Group's revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans and investment securities, as these activities are subject to other U.S. GAAP guidance discussed elsewhere within these disclosures. Descriptions of the Group's revenue-generating activities that are within the scope of ASC Topic 606, which are presented in the Consolidated Statements of Operations and Statements of Other Comprehensive Income as components of total revenue, net are as follows:
• Commissions on brokerage services;
• Commissions on banking services (money transfers, foreign exchange operations and other);
• Commissions on agency fees (the Company earns commissions on agency fees through its facilitation of transactions between clients);
• Commissions on payment processing; and
• Commissions on investment banking services (underwriting, market making, and bondholders' representation services).

Gross versus net revenue

ASC 606 provides guidance on proper recognition of principal versus agent considerations which is used to determine gross versus net revenue recognition. Under ASC 606, the core objective of the guidance on gross versus net revenue recognition is to help determine whether the Group is a principal or an agent in a transaction. In general, the primary difference between these two is the performance obligation being satisfied. The principal has a performance obligation to provide the desired goods or services to the end customer, whereas the agent arranges for the principal to provide the desired goods or services. Additionally, a fundamental characteristic of a principal in a transaction is control. A principal substantively controls the goods and services before they are transferred to the customer as well as controls the price of the good or service being provided. An agent normally receives a commission or fee for these activities. In addition to control, the level at which the Group controls the price of the good or service being transferred determines principal versus agent status. The more discretion over setting price a Group has in providing the good or service, the more likely they are considered a principal rather than an agent.

In certain cases, other parties are involved with providing products and services to Freedom's customers. If Freedom is principal in the transaction (providing goods or services itself), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in non interest expense. If Freedom is an agent in the transaction (arranging for another party to provide goods or services), the Group reports its net fee or commission retained as revenue.

Interest income

Interest income on margin loans, loans issued, trading securities, available-for-sale securities, and reverse repurchase agreement obligations are recognized based on the contractual provisions of the underlying arrangements.
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FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)

Loan premiums and discounts are deferred and generally amortized into interest income as yield adjustments over the contractual life and/or commitment period using the effective interest method.

Interest income is recognized by the Group and continue to be accrued for the loans which meet the impairment criteria.

Unamortized premiums, discounts and other basis adjustments on trading securities are generally recognized in interest income over the contractual lives of the securities using the effective interest method.

Loans

The Group's loan portfolio is divided into: mortgages, uncollateralized bank customer loans, collateralized bank customer loans, car loans, loans issued to policyholders, right of claim for purchased retail loans and subordinated loans. Mortgage loans consist of loans provided to individuals to purchase residential properties, which is used as collateral for the loan. Uncollateralized bank customer loans consist of loans provided through credit cards to individuals, individual entrepreneurs and retail unsecured banking loans provided to individuals. Collateralized bank customer loans consist of retail collateralized loans provided to individuals. Subordinated loans consist of uncollateralized loans provided to the legal entities to support their businesses, that ranks below other, more senior loans or securities with respect to claims on assets or earnings. Margin loans are not classified as part of the Group's loan portfolio and are instead recorded on the Consolidated Balance Sheets under Margin lending, brokerage and other receivables, net. Loans to policyholders are represented by loans issued by insurer to its policyholders under an accumulative insurance contract. Policy loans are provided within the redemption amount, which is a security for the return of the received loan and covers the loans amount and interest. Car loans consists of loans provided to individuals to purchase new or used car. Right of claim for purchased retail loans represented by microfinance organization Freedom Finance Credit (“FFIN Credit") loans.

A loan becomes delinquent when the borrower doesn't fulfill its obligations to the Group to repay the loan on time according to the agreement.
Write-off

Loans are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to expected credit loss expense.

The loan or part of the loan can be fully or partially written off in the following cases:
death of the borrower;
bankruptcy of the borrower;
entry into force of a court decision on refusal or partial satisfaction of the Group's claims for debt collection;
conversion of the pledged property into the ownership of the Group;
assignment by the Group of its rights of claim to third parties.

Modifications

Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions.

The Group derecognizes loan when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognized as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. When assessing whether or not to derecognize a loan to a customer, amongst others, the Group considers the following factors: change in currency of the loan, change in counterparty and modifications.

Allowance for credit losses

The Group maintains an allowance for credit losses (ACL) for financial assets measured at amortized cost. The ACL mainly consists of the allowance for loan losses, and the allowance for credit losses for available-for-sale securities. The
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FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
estimate of expected credit losses under the current expected credit losses (CECL) methodology adopted on April 1, 2023 is based on relevant information about the past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

Allowance for credit losses - Loans

On April 1, 2023, the Group adopted new accounting guidance which requires entities to estimate and recognize an allowance for lifetime expected credit losses for loans. Previously, an allowance for credit losses for loans was recognized based on probable incurred losses.

The ACL is a valuation account that is deducted from the amortized cost of total loans to present the net amount expected to be collected on the loans.

Under CECL, the Group's methodology to establish the allowance for loan losses has two basic components: (1) a collective CECL component for estimated expected credit losses for pools of loans that share common risk characteristics and (2) an individual CECL component for loans that do not share risk characteristics.

Management estimates the allowance balance using relevant and available information from internal and external sources, relating to past events, including historical trends in loan delinquencies and charge offs, current conditions, and reasonable and supportable forecasts.

Allowance for credit losses for loans that share common risk characteristics

Pooling loans with common risk characteristics for estimating allowance for credit losses is primarily based on the segmentation by product type and the type of collateral provided. The Group estimates current expected credit loss for loans with common risk characteristics using the PD/LGD methodology, which is based on relevant information about historical experience, current conditions, as well as reasonable forecasts that allow estimating the Group's potential losses on the loan portfolio.

In assessing the Probability of Default (PD) for loans with common risk characteristics, the Group uses average monthly loan balance flowing across delinquency buckets over a period of five years or more. Based on the weighted average maturity of loans with common risk characteristics, using the Markov chain method, the proportion of possible loan agreements with overdue debts over 90 days for individuals and individual entrepreneurs and over 60 days for legal entities is determined, which are used to determine the PD for a pool of loans. If there are no own statistics, then the calculation of PD is carried out on the basis of statistics of State Credit Bureau JSC on past events for a period of five or more years. The resulting PD indicator is adjusted for qualitative or internal and external environmental factors not considered within the model, but which are relevant in estimating the expected credit losses within the loan portfolio. The macroeconomic indicators impacting the expected risk of loss within the loan portfolios may include the following: GDP, Brent oil price and the consumer price index. These macroeconomic indicators are recalculated once per year and used throughout the year. Also, they are used for all loan types. For defaulted loans, PD 100% is applied, for non-impaired loans PD for the average life of the pool is recognized at inception. As of the reporting date, the Company apply statistics for State Credit Bureau JSC.
To estimate the loss from default (LGD) for loans with common risk characteristics, the Group uses for collateralized loans - returns through the sale of collateral and for uncollateralized loans - through repayment of debt in cash.
When calculating LGD from the sale of collateral for collateralized loans, the Group takes into account the latest market value of the collateral on the calculation date. First, liquidity ratios are applied to market values based on the type of collateral, after which the value of the collateral is discounted at the original effective interest rate of the loan agreement for the risk periods corresponding to the types of collateral. The calculation methodology is the same for both non-impaired and defaulted loans.
In calculating LGD from cash repayments of uncollateralized loans, the Group uses the average monthly share of repayments of defaulted loans over the past 5 years, assuming that they are discounted at the weighted average effective interest rate.

The described above PD/LGD approach apply for all type of loans, as well as non-impaired and defaulted.

Allowance for credit losses for loans that that do not share common risk characteristics

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FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools. Loans that are individually evaluated for collectability are reviewed based on an assessment of the financial condition of the borrower, taking into account the most possible debt repayment scenarios: due to expected cash flows from operating activities, cash available from guarantors, founders, shareholders, investors, related companies, other confirmed cash flows, restructuring of the borrower's obligations and the sale of collateral. Depending on the loan maturity date, the expected cash flows are discounted at the original effective interest rate and allowance for credit losses are calculated as the difference between the discounted expected cash flows and outstanding balance of the loan. If repayment of the debt is deemed impossible, based on the expected cash flows, the Group accrues allowance for credit losses in the amount of 100% of the loan balance.

Loan portfolio risk elements and credit risk management

Credit risk management. When implementing credit risk management processes, the Group is guided by internal policies and procedures, which define the main goals, objectives, principles, priority areas for the formation of an internal effective credit risk management system that corresponds to the current market situation and the Group's development strategy, and ensures effective identification, measurement, monitoring and control of the Group's credit risk. In order to minimize credit risk, the Group has developed procedures for managing internal risk appetite limits for currencies, countries, sectors of the economy, business categories and products, types of collateral, concentration of risk on the top 20 borrowers, debts of a group of related borrowers, etc. Control over the level of limits on credit risk is carried out by the Group's risk division through the preparation of monthly management reports, which include, but are not limited to, information on the quality of the loan portfolio, its classification in accordance with the requirements of reporting standards, on the amount of exposure to credit risk, including a group of related borrowers, on the concentration of credit risk of the largest borrowers and borrowers as related parties to the Group, on the internal rating of borrowers, etc. When analyzing a borrower, the Group uses the following information to assess creditworthiness: the borrower's existing loans, the presence of overdue debt, income, age, work experience and dynamics of credit behavior.

Mortgage loans. The Group provides mortgage loans for the purchase of real estate in both the primary and secondary markets. This is done through the Group's own and government lending programs, relevant lending products as described in the Group's internal normative documents. The main share of the Group's loan portfolio is represented by mortgage loans issued within the framework of state support programs, funded from the funds of quasi-state organizations. Valuation of real estate collateral is carried out directly by independent appraisal companies with subsequent confirmation by the Group's collateral service. The collateral policy and methodology of the process for working with collateral comply with the regulatory requirements of the regulator and the banking legislation of the country. In the process of making decisions on the solvency and creditworthiness of borrowers, an automatic check is carried out through external and internal databases. To do this, the results of both the Group's own and third-party credit scoring models are taken into account. The Group does not use third party loan underwriting services. Residential mortgages include only fixed rate loans secured by real estate purchases. When making a decision to issue a mortgage on housing, the Group takes into account the qualifications of the borrower, as well as the value of the underlying property.

Car loans. When making decisions on car loans, the Group uses both evaluation and scoring systems. The Group provides loans for the purchase of motor vehicles both under the C2C scheme and under the B2C scheme with the participation of car dealerships. The decision-making process includes the use of data from credit bureaus, government databases and other sources of information. This allows not only to assess the financial capacity of a potential borrower, but also to evaluate the purchased vehicle. Machine learning models have also been introduced that analyze data about the cars themselves and sellers. This allows to automatically screen out applications with high potential credit risk.

Right of claim for purchased retail loans. The Group regularly acquires receivables on consumer credit products from other financial institutions through assignment agreements (cessions). This pool of the Group's loan portfolio is low-risk due to the presence of a condition for the repurchase of loans by a microfinance organization in the event of an overdue debt on these loans for more than 20 calendar days in accordance with the agreement between the Group and the microfinance organization.
To confirm the solvency of a financial institution, an analysis is made of its financial position and the ability to fulfill obligations under an agreement on the repurchase of loans in case of default in payment terms for 20 or more days.

Uncollateralized bank customer loans. The Group primarily offers unsecured loans for individual entrepreneurs, constituting the majority of its uncollateralized bank customer loans. Several scoring models are used to make decisions about this product to determine the risk segment for each customer. The income of the client and the class of the borrower are also estimated based on his property status. The Group uses data from official sources to determine the payment fund for an individual entrepreneur and turnover through an online cash register, which helps to assess the solvency of customers.
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FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
In the loan portfolio of individuals, a part is represented by loans issued without collateral for consumer purposes. The main condition for issuing loans to potential borrowers is compliance with the regulator's requirement that the amount of monthly loan payments does not exceed 50% of the borrower's income after a credit analysis. In case of violation of this condition, the Group rejects the loan request.

The final decision to grant a limit depends on the risk segment and income class of the borrower. Loans are issued both within the framework of their own programs and under government programs with subsidized interest rates in the portfolio.

Collateralized bank customer loans. The Group provides loans secured by guarantees issued by the quasi-governmental company's and by highly liquid financial assets. Due to the presence of collateral, the maximum loan amount significantly exceeds those provided for unsecured loans. At the loan issuance date, the collateral value fully covers the loan amount.
Derivative financial instruments
In the normal course of business, the Group invests in various derivative financial contracts. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative.
Functional currency
Management has adopted ASC 830, Foreign Currency Translation Matters as it pertains to its foreign currency translation. The Company's functional currencies are the Kazakhstan tenge, the euro, the U.S. dollar, the Uzbekistani som, the Kyrgyzstani som, the Azerbaijani manat, the British pound sterling, the Armenian dram, the United Arab Emirates dirham and the Turkish lira, and its reporting currency is the U.S. dollar. For financial reporting purposes, foreign currencies are translated into U.S. dollars as the reporting currency. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average quarterly rates are used to translate revenues and expenses. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of shareholders' equity as "Accumulated other comprehensive loss". The Group uses exchange rates from the National Bank of the Republic of Kazakhstan for foreign currency translation purposes.
Cash and cash equivalents
Cash and cash equivalents are generally comprised of cash and certain highly liquid investments with original maturities of three months or less at the date of purchase. Cash and cash equivalents include reverse repurchase agreements with a maturity of less than 90 days and where the credit risk of the counterparty is low, which are recorded at the amounts at which the securities were acquired plus accrued interest.
Securities reverse repurchase and repurchase agreements
A reverse repurchase agreement is a transaction in which the Group purchases financial instruments from a seller, typically in exchange for cash, and simultaneously enters into an agreement to resell the same or substantially the same financial instruments to the seller for an amount equal to the cash or other consideration exchanged plus interest at a future date. Securities purchased under reverse repurchase agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be resold, including accrued interest. Financial instruments purchased under reverse repurchase agreements are recorded in the financial statements as cash placed on deposit collateralized by securities and classified as cash and cash equivalents in the Consolidated Balance Sheets.
A repurchase agreement is a transaction in which the Group sells financial instruments to another party, typically in exchange for cash, and simultaneously enters into an agreement to reacquire the same or substantially the same financial instruments from the buyer for an amount equal to the cash or other consideration exchanged plus interest at a future date. These agreements are accounted for as collateralized financing transactions. The Group retains the financial instruments sold under repurchase agreements and classifies them as trading securities in the Consolidated Balance Sheets. The
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FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
consideration received under repurchase agreements is classified as securities repurchase agreement obligations in the Consolidated Balance Sheets.
The Group enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to leverage and grow its proprietary trading portfolio, cover short positions and settle other securities obligations, to accommodate customers' needs and to finance its inventory positions. The Group enters into these transactions in accordance with normal market practice. Under standard terms for repurchase transactions, the recipient of collateral has the right to sell or repledge the collateral, subject to returning equivalent securities on settlement of the transaction.
Restricted cash
Restricted cash consists of cash and cash equivalents that are held for specific reasons and not available for immediate use. Certain subsidiaries of the Group are obligated by rules and regulations mandated by their primary regulators to segregate or set aside certain customer cash in the interests of protecting customer assets. Restricted cash is mainly represented by customer cash and guaranty deposits, which are restricted in use by the Group for more than three months.
Available-for-sale securities
Financial assets categorized as available-for-sale ("AFS") are non-derivatives that are either designated as available-for-sale or not classified as (a) loans and receivables, (b) held to maturity investments or (c) trading securities.
Gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in the Accumulated other comprehensive loss, with the exception of other-than-temporary impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses are recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the accumulated other comprehensive (loss)/income is then reclassified to net realized gain/(loss) on investments available-for-sale in the Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Trading securities
Financial assets are classified as trading securities if the financial asset has been acquired principally for the purpose of selling it in the near term.
Trading securities are stated at fair value, with any gains or losses arising on remeasurement recognized in revenue. Changes in fair value are recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income and included in net gain/(loss) on trading securities. Interest earned and dividend income are recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income and included in interest income and other income, respectively, according to the terms of the contract and when the right to receive the payment has been established.
Investments in nonconsolidated managed funds are accounted for at fair value based on the net asset value of the funds provided by the fund managers with gains or losses included in net gain/(loss) on trading securities in the Consolidated Statements of Operations and Statements of Other Comprehensive Income.
Debt securities issued
Debt securities issued are initially recognized at the fair value of the consideration received, less directly attributable transaction costs. Subsequently, amounts due are stated at amortized cost and any difference between net proceeds and the redemption value is recognized over the period of the borrowings using the effective interest method. If the Group purchases its own debt it is removed from the Consolidated Balance Sheets and the difference between the carrying amount of the liability and the consideration paid is recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income.
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FREEDOM HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All amounts in thousands of United States dollars, except share data, unless otherwise stated)
Margin lending, brokerage and other receivables
The Group engages in securities financing transactions with and for clients through margin lending. In margin lending, the Group's customers borrow funds from the Group or sell securities the customer does not own against the value of their qualifying securities held in custody by the Group. Under these agreements, the Group is permitted to sell or repledge securities received as collateral. Furthermore, the contractual arrangements establish that the Group can use the pledged collateral by the customers for repurchase agreement operations, securities lending transactions or delivery to other counterparties to cover short positions.
Margin lending, brokerage and other receivables comprise margin lending receivables, brokerage commissions and other receivables related to the securities brokerage and banking activity of the Group. At initial recognition, margin lending, brokerage and other receivables are recognized at fair value. Subsequently, margin lending, brokerage and other receivables are carried at cost net of any allowance for credit losses.
For both individual and institutional brokerage clients, the Group may enter into arrangements for securities financing transactions in respect of financial instruments held by the Group on behalf of the client or may use such financial instruments for its own account or the account of another client. The Group maintains omnibus brokerage accounts for certain institutional brokerage clients, in which transactions of the underlying clients of such institutional clients are combined in a single account with us. As noted above, the Group may use the assets within the omnibus accounts to finance, lend, provide credit or provide debt financing or otherwise use and direct the order or manner of assets for financing of other clients of ours.
As of December 31, 2023 and March 31, 2023, the margin lending receivables balance from FST Belize was fully collateralized by its customer-owned cash and market securities held by the Group, including $193.7 thousands and $37.1 thousands of margin lending receivables collateralized by FRHC securities, respectively. Customers’ required margin levels and established credit limits are monitored continuously by the Group's risk management staff. Pursuant to the Group’s policy, customers are required to deposit additional collateral or reduce positions, when necessary, to avoid liquidation of their positions.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial asset or a part of a group of similar financial assets) is derecognized where all of the following conditions are met:
The transferred financial assets have been isolated from the Group - put presumptively beyond the reach of the Group and its creditors, even in bankruptcy or other receivership.
The transferee has rights to pledge or exchange financial assets.
The Group or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets.
Where the Group has not met the asset derecognition conditions above, it continues to recognize the asset to the extent of its continuing involvement.
Impairment of long-lived assets
In