Freedom Holding Corp. (FRHC) FY 2023 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, our consolidated financial statements and the related notes thereto contained in Part II Item 8 of this annual report as well as the information set forth in Part I Item 1 "Business" of this annual report. This discussion contains certain forward-

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looking statements that involve known and unknown risks, uncertainties, and other factors as described under the heading "Special Note About Forward-Looking Information" in this annual report. Actual results could differ materially from those projected in any forward-looking statements. For additional information regarding these risks and uncertainties, see the disclosure under the heading "Risk Factors" in Part I Item 1A of this annual report.

This discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources for fiscal 2023, 2022 and 2021.

OVERVIEW

Freedom Holding Corp. is organized under the laws of the State of Nevada and acts as a holding company for all of our operating subsidiaries. Our subsidiaries engage in a broad range of activities in the securities industry, including retail securities brokerage, securities dealing, market making, investment research, investment counseling, investment banking and underwriting services. Additionally, we own a bank and two insurance companies operating in Kazakhstan as well as several ancillary businesses which complement our core financial services businesses.

Our business was founded in order to provide access to the international capital markets for retail brokerage clients in our core markets, to date the most important of which have been Kazakhstan and Russia. Our business has grown rapidly in recent years. We are pursuing a strategy to become a leader in the financial services industry, serving individuals and institutions desiring enhanced market access to international capital markets using state of the art technology platforms for their brokerage and banking needs.

Our principal executive office is in Almaty, Kazakhstan. We have a presence in Kazakhstan, Ukraine, Uzbekistan, Kyrgyzstan, Cyprus, Germany, the United Kingdom, Greece, Spain, France, Poland, the United States, Turkey, Armenia, Azerbaijan, and the United Arab Emirates. We divested our Russian subsidiaries in February 2023. Our subsidiaries in the United States include an SEC- and FINRA-registered broker dealer. As of March 31, 2023, we had 3,689 employees, 126 offices (of which 61 offered brokerage services, 45 offered insurance services offices, 13 offered banking services and seven offered other financial and non-financial services) and 370,000 brokerage customer accounts.

Exclusion of Russian Subsidiaries Presented as Discontinued Operations

This "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this annual report focuses exclusively on the continuing operations of the Company in accordance with U.S. GAAP. The financial results, operating performance, and liquidity discussed herein explicitly exclude our former Russian subsidiaries, which were divested in February 2023 and have been classified as discontinued operations for fiscal 2023. The prior periods discussed in this annual report have also been recasted for discontinued operations. For a comprehensive understanding of the Company's overall financial position, results, and the impact of the discontinued operations, we encourage you to refer to the accompanying financial statements and relevant notes.

Inclusion of insurance companies under the pooling of interest method due to being under common control

As of May 17, 2022, the Company's financials include the acquisition of two insurance companies in Kazakhstan: Freedom Life, a life insurance company, and Freedom Insurance, a direct insurance carrier excluding life, health, and medical coverage. These entities have been considered under common control with the Company since 2018. Prior to the Company's acquisition of these companies, each was wholly owned by the Company's controlling shareholder, chairman and chief executive officer, Timur Turlov, who had previously acquired Freedom Life and Freedom Insurance from a non-related party on February 28, 2018, and August 22, 2018, respectively. The two companies are under common control with the Company since the dates when they were acquired by Timur Turlov. The financial results, operating performance, and liquidity discussed herein explicitly include two insurance companies abovementioned and prior periods have been recasted accordingly.

Summary of Results of Operations

The key highlights of our consolidated results for fiscal 2023 were as follows:

•We had total revenues, net of $795.7 million for fiscal 2023, as compared to $689.8 million and $346.9 million for fiscal 2022 and fiscal 2021, respectively. The change between fiscal 2022 and 2023 was mainly attributable to the increase of interest income.

•Our fee and commission income for fiscal 2023 was $327.2 million, a decrease of $8.0 million, or 2%, as compared to fee and commission income of $335.2 million for fiscal 2022. The decrease was mainly attributed to the decrease in the fee and commission income from brokerage services.

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•Our interest income for fiscal 2023 was $294.7 million, representing an increase of $173.1 million, or 142%, compared to fiscal 2022. The increase in interest income was primarily attributable to an increase in interest income from trading securities, which was the result of an increase in the total size of our trading portfolio between the two fiscal years and an increase in the amount of bonds we held as a percentage of our total trading portfolio between the two fiscal years. In addition, we had an increase in interest income on loans to customers between the two fiscal years, which was mainly attributable to an increase in the amount of mortgage loans issued and the purchase of uncollateralized bank customer loans from our affiliate microfinance organization Freedom Finance Credit ("FFIN Credit").

•We had net gain on trading securities in fiscal 2023 of $71.1 million as compared to $155.3 million for fiscal 2022. The decrease was attributed to a net realized loss from sale of shares in SPB Exchange.

•We had net income of $205.6 million for fiscal 2023, as compared to $220.9 million and $150.3 million for the fiscal years ended March 31, 2022 and 2021, respectively. The decrease was mainly attributable to an increase of total expenses. Total expenses increased due to the increase of provisions for impairment losses, which in turn had increased due to the growth of Bank KZ loan portfolio.

•Our total assets increased to $5.1 billion as of March 31, 2023 from $3.2 billion as of March 31, 2022. The increase is attributable to Company's overall rapid growth.

•Our number of total brokerage customer accounts increased to approximately 370,000 as of March 31, 2023 from approximately 250,000 as of March 31, 2022 and approximately 170,000 as of March 31, 2021. As of March 31, 2023, more than 56% of those client accounts carried positive cash or asset account balances. Internally, we designate “active accounts” for a period as those in which at least one transaction has occurred in each quarter of the relevant period. For the fiscal year ended March 31, 2023, we had approximately 52,000 active accounts.

The operating results for any period are not necessarily indicative of the results that may be expected for any future period.

Key Factors Affecting Our Results of Operations

Our operations have been, and may continue to be, affected by certain key factors as well as certain historical events and actions. The key factors affecting our business and the results of operations include, in particular: the effects of the Russia-Ukraine conflict, market and economic conditions, the growth of retail brokerage activity in our key markets, acquisitions and divestitures, our transactions with our affiliate FST Belize, governmental policies and the impact of Covid-19. Each of these factors is discussed in more detail below.

Russia-Ukraine Conflict

In February 2022, Russia launched a military offensive against Ukraine, which has resulted in a protracted conflict. The war is ongoing, and it is difficult to predict how long it will last. The economies of Russia, Ukraine and the surrounding region, the global economy generally and the Company specifically have been adversely affected by the conflict.

In response to the Russia-Ukraine conflict, numerous governments, including those of the U.S., the UE and the United Kingdom have imposed an extensive range of additional economic sanctions on Russia, certain financial institutions, business enterprises, and key persons in Russia or deemed to be enabling the Russia-Ukraine conflict. The imposed sanctions significantly expand the sanctions first imposed on Russia following the 2014 Russian invasion of Ukraine and its annexation of the Crimea region of Ukraine. In addition, many businesses are adopting a cautious approach to sanctions and export compliance matters, implementing internal policies that are more restrictive than strictly required by the applicable rules. The Russian government has issued countersanctions as a defensive measure targeted at "unfriendly states" which include the U.S. and most countries that have imposed sanctions on Russia, as well as imposed restrictions on currency transactions of its own citizens.

After careful consideration of the needs of our employees, customers and shareholders and the best interests of our company, shortly after the onset of the Russia-Ukraine conflict we decided to divest our Russian subsidiaries, Freedom RU and Freedom Bank RU. Prior to the divestiture of our Russian subsidiaries, our subsidiary Freedom RU owned approximately 90% of our Kazakhstan securities brokerage company, Freedom KZ, with the remaining interest in Freedom KZ being owned by us directly. In 2022, we decided to undertake a corporate restructuring as a result of which Freedom KZ (together with its wholly owned subsidiaries Freedom Bank KZ, Freedom Life and Freedom Insurance) became wholly owned by us directly. The transfer of ownership from Freedom RU to our direct ownership required approval by the Kazakhstan financial sector regulator, which was received on November 11, 2022. On October 17, 2022, we entered into

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an agreement with Maxim Povalishin for the divestiture of 100% of the share capital of our two Russian subsidiaries. Maxim Povalishin, the purchaser, was at the time of the transaction the Deputy General Director and a member of the Board of Directors of Freedom RU. The divestiture of our Russian subsidiaries was approved by the Central Bank of the Russian Federation on February 10, 2023, and was completed on February 28, 2023.

Historically, a large portion of our trading volume has been derived from individuals and institutions in Russia, through accounts at our Russian subsidiaries and through non-Russian accounts, including indirectly through accounts held with FST Belize. Although we have divested our Russian subsidiaries, we continue to generate fee and commission income from trading activity engaged in by Russian persons (including former clients of our former Russian subsidiaries) who are not subject to any sanctions prohibitions or other legal restrictions through their accounts at our non-Russian subsidiaries or indirectly through accounts held with FST Belize. As of the date of this annual report, the Russia-related economic sanctions that have been imposed do not target our Russian clients, most of whom are members of the emerging Russian middle class population. Even before the Russia-Ukraine conflict began in February 2022, our clients were required to conform to strict anti-money laundering regulations and to undergo regular sanctions screening to assure us that they were subject to U.S., EU or UK sanctions that would restrict our ability to do business with them or require us to take regulatory compliance actions in response to their activities. However, the evolving sanctions and countersanctions in connection with the Russia-Ukraine conflict expose us to heightened risks and challenges. The Russia-Ukraine conflict has also exposed us to a range of other heightened risks stemming from our actual or perceived connections with Russia, including risks related to our business relationships with counterparties outside of Russia, including commercial banks, settlement banks, stock exchanges and regulators.

The sanctions imposed in relation to the Russia-Ukraine conflict have had a significant impact on the global economy. They have led to an increase in the prices of hydrocarbons and agricultural products produced by both Russia and Ukraine, which has further fueled inflationary pressures in Europe and elsewhere. The sanctions have also had an indirect impact on consumer confidence and spending, which could potentially harm financial markets and businesses worldwide. The Russia-Ukraine conflict and responses to it have materially and adversely impacted the macroeconomic climate in Russia and the surrounding region, resulting in significant economic uncertainty, currency exchange rate volatility, the imposition of currency controls, capital flight, materially increased interest rates and inflation, and the withdrawal of or reduction of business by a number of Western businesses from the Russian market. The fluid and evolving nature of the current Russia-related sanctions gives rise to continuing political, economic and business risks for the Russian government, its economy, and its citizens, which may lead to reduced investment confidence and investment spending by affected Russians.

In addition, there is a risk that new international sanctions and new countersanctions measures may curtail the ability of our brokerage customers who are Russian persons to trade through non-Russian accounts or in non-Russian securities, or our ability to facilitate any trading through our non-Russian subsidiaries or indirectly via FST Belize. If investment activity by Russian holders of foreign trading accounts is restricted, it could result in material reductions in our revenues.

The Russia-Ukraine conflict has also had, and may continue to have, adverse effects on our results of operations related to proprietary trading. For example, we sold 7,500,000 shares in the SPB Exchange that we owned and realized a loss from the divestiture in the amount of $73.4 million during the year ended March 31, 2023. We attribute this loss to a combination of factors, including the heightened market uncertainty and increased volatility caused by the Russia-Ukraine conflict and its geopolitical consequences.

On October 19, 2022, the President of Ukraine signed a decree enacting a decision of the National Security and Defense Council of Ukraine (NSDC) on the application of personal special economic and other restrictive measures (sanctions) against more than 1,300 companies and more than 2,500 individuals. Freedom UA's brokerage license was suspended for a period of five years and its assets frozen by the Ukrainian authorities following its inclusion on the sanctions list. The lists of companies and individuals sanctioned included both Freedom UA and Timur Turlov, in his personal capacity. In addition, the list included two former Russian subsidiaries, which have since been divested. We believe that Freedom UA and Mr. Turlov were placed on this sanction list due to an error. We note that all persons on the Russian list of Forbes entrepreneurs for 2021 were included. In 2021 Timur Turlov was on this list and still had Russian citizenship (in the appendix to the presidential decree there is a reference to Timur Turlov’s Russian citizenship. We note that, prior to June 2022, Timur Turlov was a Russian citizen. As from June 2022, Mr. Turlov renounced his Russian citizenship and is now a citizen of Kazakhstan. We have been in continuous negotiations with the presidential administration of Ukraine seeking to have Freedom UA and Mr. Turlov removed from the sanctions list. In addition, we have contributed approximately $11.7 million to humanitarian relief efforts in Ukraine through charitable funds. We are confident that there will be a favorable outcome and that they will ultimately be removed from the sanctions list. Our

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Freedom UA subsidiary is not material in the context of our overall group, although we have a significant number of Ukrainian brokerage customers that are served by our non-Ukrainian subsidiaries.

Other than the Ukrainian sanctions described above, none of FRHC, nor our group companies, nor any of our current directors or senior management, is a target of sanctions imposed by the United States, the European Union or the United Kingdom. Nevertheless, we are indirectly impacted by the designation of numerous parties in Russia as sanctioned parties and the restrictions placed on international businesses in Russia as a result. The sanctions imposed on Russia in 2014 as well as the sanctions imposed beginning in 2022 make Russia a high-risk jurisdiction for potential sanctions. As a result, when doing business with Russian persons and legal entities it is necessary for us to conduct enhanced due diligence to ensure that no persons designated on any applicable sanctions lists conduct prohibited transactions with us or through our facilities, and to ensure that neither we nor any of our executive officers facilitate any prohibited business as defined under the laws and regulations to which we are subject.

As of March 31, 2022, our Russian subsidiaries had 43 offices and branches and 1,717 employees. These offices and employees were divested by us as of February 2023. Despite the divestiture of these subsidiaries, the scale of our overall business has increased from fiscal 2022 to fiscal 2023. As of March 31, 2022, our total number of employees was 1,704 and our total number of offices was 66. As of March 31, 2023, the number of employees increased to 3,689 and the number of offices increased to 126. The increase in the scale of our operations between the two fiscal years, despite the divestment of our Russian subsidiaries, is attributable to our growth during fiscal 2023 through several acquisitions. For more information on our acquisitions in fiscal 2023, see Note 29 "Acquisitions of Subsidiaries" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report. In addition, in connection with divestment of our Russia subsidiaries, 19 analysts, 21 investment consultants, 18 Tradernet specialists and 13 public relations specialists moved from our Russian subsidiaries to our Freedom Global subsidiary, and certain customers of our former Russian subsidiaries opened accounts at our non-Russian subsidiaries.

As of the date of this annual report, the Russia-Ukraine conflict is ongoing and its effects on us continue to evolve. As such, we expect there will be further impacts and unknown risks related to our business, the substance and reach of which we cannot fully anticipate.

Market and Economic Conditions

Performance in the financial services industry is heavily influenced by the overall strength of economic conditions and financial market activity, which generally have a direct and material impact on our results of operations and financial condition. These conditions are a product of many factors, which are mostly unpredictable and beyond our control, and may affect the decisions made by financial market participants.

Changes in economic and political conditions, including economic output levels, interest and inflation rates, employment levels, prices of commodities including oil and gas, exogenous market events, consumer confidence levels, and fiscal and monetary policy can affect market conditions. While many global financial markets have shown signs of improvement in recent years, uncertainty remains. A period of sustained downturns and/or volatility in the securities markets, and/or prolonged levels of increasing interest rates, could lead to a return to increased credit market dislocations, reductions in the value of real estate, and other negative market factors which could significantly impair our revenues and profitability.

Financial markets may also be impacted by political and civil unrest occurring in the Middle East, Eastern Europe, Russia, South America and Asia. Hostilities between Russia and Ukraine have created uncertainties around the spread of the conflict, the use of nuclear weapons as well as its impact on global supply chains impacting energy supplies and food supplies throughout the world. These issues could have unforeseen and negative impacts upon the financial markets and our company and its operations.

Growth of Retail Brokerage Activity in Our Key Markets

The retail brokerage markets in Kazakhstan and Russia are key markets for our business. We estimate that, as of March 31, 2023, we had approximately 155,000 retail brokerage customers who were Kazakhstan persons, or approximately 44% of our total number of customers, and we had approximately 35,000 retail brokerage customers who were Russian persons, or approximately 10% of our total number of customers. In addition, we serve Kazakhstan and Russian customers indirectly through their accounts with FST Belize. The Kazakhstan and Russia markets have grown rapidly in recent years. For example, according to data from the KASE, the number of active accounts of retail investors on the KASE equity market increased to approximately 675,900 as at March 31, 2023, from approximately 218,300, 150,180, 119,361, 118,537 and 110,201 as at March 31, 2022, 2021, 2020, 2019 and 2018, respectively. This growth has had a significant positive effect on our results of operations in recent periods. There can be no assurance that such growth rates will continue in future periods.

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Acquisitions and Divestitures

Historically we have been active in pursuing non-organic growth through mergers and acquisitions. We expect this trend to continue in the future. Acquisitions and divestitures may have a material effect on our business and financial results. For additional information see Note 1 "Description of Business" and Note 32 "Segment Information" in the notes to our consolidated financial statements contained in Part II Item 8 and "Business" in Part I Item 1 of this annual report.

Acquisition of Insurance Companies

During the fiscal year ended March 31, 2023, we concluded the acquisition of two insurance companies operating in Kazakhstan. For additional information see Note 3 "Recast" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.

Divestiture of Russian Subsidiaries

Historically, a large portion of our trading volume has been derived from individuals and qualifying institutions in Russia, through accounts at our Russian subsidiaries and through non-Russian accounts, including indirectly through accounts held with FST Belize. During the fiscal year ended March 31, 2023, we concluded the divestiture of our Russian subsidiaries. The divestiture of our Russian subsidiaries, which was completed on February 28, 2023 has had an impact on our business and results of operations. We have classified our Russian subsidiaries as discontinued operations for the fiscal years ended March 31, 2023, 2022 and 2021, because the subsidiaries met the held for sale criteria as of March 31, 2023. Although we have divested our Russian subsidiaries, we continue to generate fee and commission income from trading activity engaged in by Russian persons (including former clients of our former Russian subsidiaries) who are not subject to any sanctions prohibitions or other legal restrictions through their accounts at our non-Russian subsidiaries. For more information see "Russia-Ukraine conflict" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II Item 7 of this annual report.

Acquisition of Paybox Technologies LLP

On February 10, 2023, we completed the acquisition of Kazakhstan payment services company Paybox Technologies LLP and its subsidiaries, in order to expand our activities in the field of financial technologies. The purchase price for the acquisition was $11.7 million.

Signing of Agreement to Acquire Maxim Group

On February 16, 2023, we signed an agreement to acquire Maxim Group LLC and its registered investment advisory affiliate Maxim Financial Advisors LLC (together “Maxim Group”), for a combination of cash and common stock. Including deferred payments and retention bonuses, the total consideration for the acquisition will be approximately $400 million. This planned acquisition is a continuation of our strategy of acquisitions following our 2020 acquisition of PrimeEx. Maxim Group is a leading full-service investment bank headquartered in New York, that caters to emerging growth companies globally. Its business lines include investment banking, equity capital markets and institutional sales, equity research, merchant capital, and corporate and wealth management services. Maxim Group's corporate and institutional reach into Asia, Greece, Israel, and most of Western Europe and is expected to complement our brokerage and global distribution network. Completion of the transaction is subject to certain conditions and the receipt of required regulatory approvals.

Related Party Transactions with FST Belize

During the fiscal years ended March 31, 2023, 2022 and 2021, the Company engaged in various related party transactions, a substantial amount of which were conducted with Freedom Securities Trading Inc. (formerly known as FFIN Brokerage Services, Inc.) (“FST Belize”), a corporation registered in and licensed as a broker dealer in Belize. FST Belize was formed in 2014 and is 100% owned by the Company's controlling shareholder, chairman and chief executive officer, Timur Turlov. FST Belize is not part of our group of companies.

FST Belize has its own brokerage customers, which include individuals and market-maker institutions. A large portion of our fee and commission income is derived from the customer relationship between Freedom EU and FST Belize. FST Belize has several omnibus brokerage accounts with Freedom EU. The majority of the order flow from FST Belize to Freedom EU represents transactions of customers of FST Belize, which are executed by FST Belize through its omnibus accounts at Freedom EU. Our margin lending receivables from FST Belize are related to FST Belize client margin trading and are fully collateralized by securities funds. Our relationship with FST Belize has provided us and our customers with a substantial liquidity pool for trading. Our cross border omnibus brokerage agreement with FST Belize requires FST Belize

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to conduct AML/CTF and sanctions screening on its individual and business entity customers whose trades are processed through its omnibus accounts at Freedom EU.

Our transactions with FST Belize are performed in the ordinary course of our brokerage and banking businesses and such transactions are made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with similarly situated unaffiliated third parties. In accordance with our Audit Committee Charter, our audit committee, all members of which are independent, is responsible for reviewing, approving and overseeing any transaction between the Company, including its subsidiaries, and any related person and any other potential conflict of interest situations on an ongoing basis.

Our omnibus brokerage arrangement with FST Belize dates from the time of the establishment of our company, and we intend to reduce the volume of business we conduct involving FST Belize over time and to ultimately eliminate such omnibus brokerage arrangement. Fee and commission income generated from FST Belize accounted for approximately 60% of our total fee and commission income for the year ended March 31, 2023, as compared to approximately 82% of our total fee and commission income for the year ended March 31, 2022, and 31% of our total fee and commission income for the year ended March 31, 2021. For the three month periods ended June 30, 2022, September 30, 2022, December 31, 2022 and March 31, 2023, our fee and commission income generated from FST Belize was 84%, 73%, 54% and 23%, respectively, of our total fee and commission income. Interest income generated from FST Belize accounted for approximately 8%, 8% and 6% of our total interest income for the years ended March 31, 2023, 2022 and 2021, respectively. For additional information regarding our transactions with FST Belize, see Note 25 "Related Party Transactions" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.

Governmental Policies

Our earnings are and will be affected by the monetary, fiscal and foreign policies of the governments of the jurisdictions in which we operate, in particular Kazakhstan, the European Union and the United States. The monetary policies of these countries may have a significant effect upon our operating results. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.

Impact of Covid-19

We believe that the interventions from banks and governments in response to the Covid-19 and the increase in the amount of time people spent at home during the pandemic led to an increases in the opening of investment accounts and investing in securities worldwide. The increased levels of customer activity combined with greater market volatility led to significant growth in our customer accounts, trading volume, fee and commission income, gains in our proprietary trading and net income during the fiscal year ended March 31, 2022 and 2021. During the fiscal year ended March 31, 2023, our operations remained largely unaffected by Covid-19, resulting in no significant impact on our financial performance. While the overall impact of Covid-19 was positive for our business during the fiscal years ended March 31, 2022 and 2021, following the end of the critical Covid-19 period, including during the fiscal year ended March 31, 2023, we believe that the levels of customer interest in investing have largely stabilized.

Key Income Statement Line Items

Revenue

We derive revenue primarily from fee and commission income earned from our retail brokerage and banking customers, fee and commission income from investment banking services, interest income and our proprietary trading activities.

Fee and Commission Income

Fee and commission income consists principally of brokerage fees from customer trading, related banking services, and fees for underwriting, market making and consulting services. A substantial portion of our revenue is derived from commissions from customers through accounts with transaction-based pricing. Brokerage commissions are charged on investment products in accordance with a schedule we have formulated that aligns with local practices. Fees received for banking services consist primarily of wire transfer fees, commissions for payment processing and commissions for currency exchange operations. Fee and commission income as a percentage of our total revenue was 41%, 49% and 62% in the fiscal years ended March 31, 2023, 2022 and 2021, respectively. Retail brokerage service fee and commission income as a percentage of our total fee and commission income was 88%, 95% and 95% in the fiscal years ended March 31, 2023, 2022 and 2021, respectively.

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Interest Income

We earn interest income from trading securities, margin lending, reverse repurchase transactions, and loans to customers. Interest income on trading securities consists of interest earned from investments in debt securities and dividends earned on equity securities held in our proprietary trading account.

Net Gain/(Loss) on Trading Securities

Net gain/(loss) on trading securities reflects the change in value of the securities held in our proprietary trading portfolio during the relevant period. A net gain or loss is comprised of both realized and unrealized gains and losses during the period. Realized gains or losses are recognized when we close an open position in a security and recognize a gain or a loss on that position. U.S. GAAP requires that we also reflect in our financial statements any unrealized gain or loss on each open securities positions as of the end of each period based on whether the value of the open position is higher or lower at the period end than it was at either: (i) the beginning of the period, if the position was held for the full period; or (ii) at the time the position was opened, if the position was opened during the period. Fluctuations in unrealized gains or losses from one period to another can occur as a result of factors beyond our control, such as fluctuations in the market prices of the open securities positions we hold resulting from market and economic uncertainty arising from global or local events that cause significant market volatility, or even halting of trading in certain markets, all of which occurred as a result of the Russia Ukraine conflict. Fluctuations might also result from factors within our control, such as when we elect to close an open securities position, which would have the effect of reducing our open positions and, thereby potentially reducing or increasing the amount of unrealized gains or losses in a period. These fluctuations can adversely affect the ultimate value we realize from our proprietary trading activities. Unrealized gains or losses in a particular period may or may not be indicative of the gain or loss we will ultimately realize on a securities position when the position is closed. As a result, we might realize significant swings in net gains and losses realized on our trading securities year-over-year and quarter-to-quarter.

Insurance Underwriting Income

Life insurance premiums are recognized as revenue when due; accident and health insurance premiums are recognized as revenue over the premium paying period and property; and casualty insurance premiums are recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided.

Net Gain on Foreign Exchange Operations

Net gain on foreign exchange operations reflects the net gain from: (i) the change in value resulting from currency fluctuations of monetary assets and liabilities denominated in any currency other than the functional currency of the entity holding such asset or liability; and (ii) purchases and sales of foreign currency. Under U.S. GAAP, we are required to revalue assets and liabilities denominated in foreign currencies into our reporting currency, the U.S. dollar, which can result in gains or losses on foreign exchange operations. Fluctuations in foreign currency exchange rates are beyond the Company's control, and the Company may suffer losses as a result of such fluctuations.

Net (Loss)/Gain on Derivatives

The Company enters into various derivative financial instruments, including forwards and swaps, in the foreign exchange markets. These financial instruments are held for trading and are initially recognized at fair value. Fair value is determined based on quoted market prices or valuation models that consider the current market and contractual values of the relevant underlying instruments, along with other factors. Derivative financial instruments with a positive fair value are recorded as assets, while those with a negative fair value are recorded as liabilities. Gains and losses on these instruments are recognized in the Consolidated Statements of Operations and Statements of Other Comprehensive Income as net (loss)/gain on derivatives.

Fee and Commission Expense

We incur fee and commission expense in our brokerage, banking, and insurance activities. Fee and commission expense consists of expenses related to brokerage, banking, stock exchange, clearing, depository and agent services. Generally, we expect fee and commission expense from brokerage and banking activities to increase and decrease corresponding to increases and decreases in fee and commission income. For our insurance operations, fee and commission expense arises from the deferral and subsequent amortization of the costs of acquiring business, which are referred to as “deferred acquisition costs” (principally commissions, and other incremental direct costs of issuing policies). Deferred acquisition costs (“DAC”) for traditional life insurance and long-duration health insurance are amortized over the estimated

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premium-paying period of the related policies. DAC for property insurance, accident insurance and health insurance is amortized over the effective period of the related insurance policies.

Interest Expense

Interest expense includes the expenses associated with our short-term and long-term financing, which consist of interest on securities repurchase agreement obligations, customer accounts and deposits, debt securities issued, and loans received.

Payroll and bonuses

Payroll and bonuses represent the costs incurred by a company in compensating its employees for their services and providing performance-based incentives.

Professional services

Professional services represents the costs associated with engaging external experts and consultants.

Stock compensation expense

Stock compensation expense represents the cost associated with issuing stock grants to employees and executives as part of their compensation packages.

Advertising expense

Advertising expense represents a component of operating expenses. It signifies the investments made to promote products, services, or the overall brand to a targeted audience, ultimately driving customer acquisition and revenue growth.

General and administrative expense

General and administrative expense includes lease cost, depreciation and amortization, communication services, software support, representative expenses, business trip expenses, utilities, charity, and other expenses.

Insurance Claims Incurred, Net of Reinsurance

Insurance claims incurred are expenses directly associated with our insurance activity, and represent actual amounts paid or to be paid to policyholders when insurable events occur, less any amounts we receive from reinsurers related to the insurable event. This amount is adjusted for changes in loss reserves, including claims reported but not settled (RBNS), claims incurred but not reported (IBNR) and not incurred claims reserve (NIC).

Foreign Currency Translation Adjustments, Net of Tax

The functional currencies of our operating subsidiaries are the Kazakhstan tenge, the euro, the U.S. dollar, the Ukrainian hryvnia, the Uzbekistan som, Kyrgyzstani som, the Azerbaijani manat, the Armenian dram, the British pound sterling and the United Arab Emirates dirham. Our reporting currency is the U.S. dollar. Pursuant to U.S. GAAP we are required to revalue our assets from our functional currencies to our reporting currency for financial reporting purposes.

Net Income/(Loss) Attributable to Non-controlling Interest

We own a 9% interest in Freedom UA. The remaining 91% interest is owned by Askar Tashtitov, the president of our Company. Due to a series of agreements we have entered into with Freedom UA that obligate us to guarantee the performance of all Freedom UA obligations, provide Freedom UA adequate funding to cover its operating losses and net capital requirements, provide the management competence and operational support and ongoing access to our significant assets, technology resources and expertise in exchange for 90% of all net profits of Freedom UA after tax, we have determined that Freedom UA is a variable interest entity. We reflect Askar Tashtitov's ownership of Freedom UA as a non-controlling interest in our Consolidated Statements of Financial Condition, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows. As from October 19, 2022, Freedom UA's operations were suspended following its inclusion on the Ukrainian sanctions list. We are in the process of appealing its inclusion on the sanctions list and the suspension of its operations.

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RESULTS OF OPERATIONS

Comparison of Fiscal Years Ended March 31, 2023, 2022 and 2021

The following comparison of our financial results for the fiscal years ended March 31, 2023, 2022 and 2021, is not necessarily indicative of future results. Prior period presentations and disclosures were reclassified to provide comparability with current period classifications. The prior periods were recasted for the presentation of discontinued operations and the consolidation of insurance entities under common control acquired in 2022. See Note 30 "Assets and Liabilities Held For Sale" and Note 3 "Recast" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.

Revenue

The following table sets out information regarding our total revenue, net for the fiscal years presented.

The following table sets out the components of our revenue as a percentage of total revenue, net for the fiscal years presented.

For fiscal 2023, we realized total net revenue of $795.7 million, a 15% increase compared to fiscal 2022. Revenue for fiscal 2023 increased compared to fiscal 2022 primarily due to increased interest income, net gain on foreign exchange operations and insurance underwriting income, which increases were partially offset by a decrease in net gain on trading securities and by a net loss on derivatives.

For fiscal 2022 we realized total net revenue of $689.8 million, a 99% increase compared to fiscal 2021. Revenue for fiscal 2022 was significantly higher than fiscal 2021 due to increases in all revenue categories except foreign exchange operations as between the two fiscal years.

Fee and commission income

The following table sets forth information regarding our fee and commission income for the fiscal years presented.

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The following table sets out the components of our fee and commission income as a percentage of total fee and commission income, net for the fiscal years presented.

For fiscal 2023 fee and commission income was $327.2 million, a decrease of $8.0 million, or 2%, as compared to fee and commission income of $335.2 million for fiscal 2022. The decrease in fee and commission income was primarily attributable to a $32.0 million decrease in fee and commission income from brokerage services, which was offset in part by an increase in fees and commission income from bank services of $11.2 million and an increase in fees from underwriting and market-making services. The decrease in fee and commission income from brokerage services was primarily driven by a decrease in volume resulting from lower number of transactions mainly driven by deteriorating stock exchange market conditions and macro-economic uncertainty. By implementing strategic measures and staying attuned to market trends, we remain confident in our ability to navigate these challenges and pursue long-term growth in fee and commission income. We believe that this decrease is not indicative of a broader trend and is instead largely attributable to the high volatility on the capital markets and the geopolitical and economic situation in the world over the relevant periods. The increase in fees from underwriting and market-making services from fiscal 2022 to fiscal 2023 was driven mainly by increases in the volume and size of debt capital market transactions arranged by us and the unique market opportunities created by the Covid-19 pandemic.

For fiscal 2022 fee and commission income increased by $119.2 million, a 55% increase compared to fiscal 2021. This increase was the result of a $114.5 million increase in fee and commission income from brokerage services primarily as a result of an increase in the number of client accounts resulting from non-organic and organic efforts including expansion of our retail financial adviser network, an increase in the volume of analysts' reports made available to our customer base, and significantly increased trading volume and client activity stemming from government and bank interventions and other events in response to the Covid-19 pandemic and the resulting increased market volatility and economic uncertainty. We also realized a $6.2 million increase in related banking service fees in fiscal 2022 as compared to fiscal 2021.

Net gain on trading securities

The following table sets forth information regarding our net gains and losses on trading securities for fiscal 2023, 2022 and 2021:

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Net gain on trading securities was $71.1 million for fiscal 2023 as compared to $155.3 million for fiscal 2022. For fiscal 2023, we sold securities for a realized net gain of $37.2 million. This realized gain was offset by a realized net loss of $73.4 million, which was attributable to shares in the SPB Exchange that we sold in fiscal 2023, resulting in realized net loss of $36.2 million. Similarly, securities positions we continued to hold as of March 31, 2023, had appreciated by $56.5 million as compared to March 31, 2022. In addition to this unrealized gain, an unrealized loss of $50.8 million on SPB Exchange shares which was recognized during previous periods was reclassified to realized net loss during fiscal 2023, resulting in an unrealized net gain of $107.3 million for such fiscal year.

The main contributing factors to the increase in realized net gain on trading securities during fiscal 2022, as compared to fiscal 2021, was the sale of those SPB Exchange ETF units and other SPB Exchange shares we held. During fiscal 2022 we exchanged approximately 12.5 million shares in the SPB Exchange we held in our proprietary trading account for units in the SPB Exchange ETF. As a result, in fiscal 2022 we recognized realized net gain on trading securities sold of $206.2 million. Largely as a result of the Russia-Ukraine conflict and its impacts on the securities markets we had unrealized net losses on open trading positions of $51.0 million. As a result of the foregoing, during fiscal 2022 we recognized a net gain on trading securities of $155.3 million.

Interest income

The following table sets forth information regarding our revenue from interest income for the fiscal years presented:

The following table sets out the components of our interest income as a percentage of total interest income, net for the fiscal years presented:

For fiscal 2023, interest income was $294.7 million, representing an increase of $173.1 million, or 142%, compared to fiscal 2022. The increase in interest income was primarily attributable to an increase in interest income from trading securities of $99.96 million, or 128%, which was in turn the result of an increase in the total size of our trading portfolio between the two fiscal years and an increase in the amount of bonds we held as a percentage of our total trading

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portfolio between the two fiscal years. We had trading securities of $2.4 billion as at March 31, 2023, as compared to $1.2 billion as at March 31, 2022. In addition, we had an increase of $38.9 million, or 842%, in interest income on loans to customers between the two fiscal years, which was mainly attributable to an increase in the amount of mortgage loans issued and the purchase of uncollateralized bank customer loans from our affiliate FFIN Credit. Our loans issued increased by $733.8 million or 794%, from $92.4 million as of March 31, 2022 to $826.3 million as of March 31, 2023. In addition, we had a $20.4 million, or 144%, increase in interest income on margin loans to customers, resulting from a higher usage of margin loans for trades by our clients, including our affiliate FST Belize, between the two fiscal years. Moreover, this increase was caused by the increase in loan volumes and interest rate.

For fiscal 2022 we had a $83.1 million, or 216% increase in interest income as compared to fiscal 2021. This increase in interest income was the result of an increase in the total size of our trading portfolio and an increase in the amount of bonds we held as a percentage of our total trading portfolio. During fiscal 2022 we shifted more of our portfolio from equities to debt to take advantage of a profitable bond market. In addition, we recognized a $4.2 million or 1,102% increase in interest income from new loans issued to customers of Freedom Bank KZ. We also realized a $11.0 million, or 348%, increase in interest income on margin loans to customers, resulting from a higher usage of margin loans for trades by our clients, including our affiliate FST Belize, between the two fiscal years.

Net gain/(loss) on foreign exchange operations

For the fiscal year ended March 31, 2023, we realized a net gain on foreign exchange operations of $52.2 million compared to a net gain of $3.8 million for the fiscal year ended March 31, 2022. The change was primarily due to a net gain of $45.7 million by our subsidiary Freedom Bank KZ in the fiscal year ended March 31, 2023 from the purchase and sale of foreign currency, as the volume of currency transactions conducted by such subsidiary increased by 701% in the fiscal year ended March 31, 2023 as compared to the fiscal year ended March 31, 2022. This net gain was primarily the result of the appreciation of the Kazakhstan tenge relative to the Russian ruble by approximately 16% over the course of fiscal 2023.

For the fiscal year ended March 31, 2022, we realized a net gain on foreign exchange operations of $3.8 million compared to a net gain of $557.0 thousand during the year ended March 31, 2021. The primary reason for the net gain in fiscal 2022 was a 9.4% decrease in the value of the Kazakhstan tenge against the U.S. dollar. Due to large amounts of U.S. dollar-denominated net liabilities held in our subsidiary Freedom Bank KZ, we recognized a net loss on foreign exchange operations of $3.7 million in fiscal 2022 out of a total $5.9 million loss. Further, we realized a net gain on foreign exchange operations affected by the purchase and sale of foreign currency of $7.8 million as a result of higher volume of currency exchange transactions.

Net loss on derivatives

For the fiscal year ended March 31, 2023, we realized net loss on derivatives of $64.8 million compared to a realized net gain of $946 thousand and $86 thousand for the fiscal years ended March 31, 2022 and 2021. The change was primarily attributable to our subsidiary, Freedom Bank KZ, which realized net loss of $65 million for the fiscal year ended March 31, 2023. Freedom Bank KZ entered into currency swaps mainly through KASE and MOEX to diversify its funding sources. The changes for fiscal years ended March 31, 2022 and 2021 were attributable to our subsidiaries, Freedom Bank KZ and Freedom KZ.

Insurance underwriting income

For the fiscal year ended March 31, 2023, we had insurance underwriting income of $115.4 million, an increase of $42.4 million, or 58%, as compared to the fiscal year ended March 31, 2022. The increase was primarily attributable to a $60.2 million, or 78%, increase in insurance underwriting income from written insurance premiums from fiscal 2022 to fiscal 2023, due to the expansion of our insurance operations between the two fiscal years. As such, the active insurance contracts increased and as of March 31, 2023 comprised 681,667, as compared to 558,530 as of March 31, 2022. Moreover, on September 1, 2022, we acquired London-Almaty. This increase in income from written insurance premiums was partially offset by a $14.0 million, or 376%, increase in the negative change in unearned premium reserve and a $3.8 million, or 905%, increase in the change in reinsurance premiums ceded, in each case from fiscal 2022 to fiscal 2023 also due to expansion of operation, which is reflected by increase in number of active contracts and acquisition of London-Almaty.

For the fiscal year ended March 31, 2022, we had insurance underwriting income of $73.0 million, an increase of $10.0 million, or 16%, as compared to the fiscal year ended March 31, 2021. The increase was primarily attributable to a

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$5.4 million, or 8%, increase in insurance underwriting income from written insurance premiums from fiscal 2021 to fiscal 2022, due to the expansion of our insurance operations between the two fiscal years, including an increase in the number of active insurance contracts to 558,530 as of March 31, 2022 from 376,676 as of March 31, 2021. The increase in insurance underwriting income was also due to a $3.6 million, or 49%, decrease in reinsurance premiums ceded and a $989 thousand, or 70% decrease in the negative change in unearned premium reserve, net. The following table sets out information on our insurance underwriting income for the fiscal years presented.

Expense

The following table sets forth information regarding our total expense for the periods presented.

The following table sets out the components of our expense as a percentage of total expense for the fiscal years presented.

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For fiscal 2023 we incurred total expense of $559.8 million, a 72% increase as compared to total expense of $326.1 million for fiscal 2022. The increase was due to an increase in interest expense and the growth of our business generally, primarily in connection with increases in administrative costs and fees from the growth in our revenue generating activities and integrating our acquisition targets.

For fiscal 2022 we incurred total expense of $326.1 million, a 67% increase compared to fiscal 2021. Expenses increased with the growth of our business generally during fiscal 2022 primarily in connection with corresponding administrative costs and fees from the growth in our revenue generating activities and integrating our acquisition targets.

Fee and commission expense

Fee and commission expense decreased by $20.2 million, or 24%, for fiscal 2023 as compared to fiscal 2022. There were increases in fee and commission expense from bank services of $3.8 million and agency fees expenses of $11.1 million, which were offset by a decrease in brokerage commissions expense by $34.2 million due to using a new prime broker in fiscal 2023, as a result of which we had a different composition of order flow transactions, which were charged at lower rates than in fiscal 2022. The decrease in brokerage commissions expense was also attributable to a decrease in the volume of transactions executed by our brokerage customers between the two fiscal years. Generally, we expect fee and commission expense to increase and decrease in correspondence with increases and decreases in fee and commission income.

Fee and commission expense increased by $15.4 million, or 22% for fiscal 2022 compared to fiscal 2021. The increase was due to an increase in agency fees expense of $12.4 million and an increase in fee and commission expense from bank services of $6.3 million, which increases were offset in part by a decrease in brokerage commissions of $6.9 million. The increase in agency fees expense was primarily due to our launch in fiscal year 2022 of a new loan insurance product which led to increase in agency commission expense.

Interest expense

For fiscal 2023, we had a $132 million, or 172%, increase in interest expense as compared to fiscal 2022. The increase in interest expense was primarily attributable to a $100.4 million, or 172%, increase in interest expense on short-term financing through securities repurchase agreements due to an increase in the volume of such financing conducted by us in fiscal 2023, and a $24 million, or 147%, increase in interest on customer deposits. In fiscal 2023, we increased the volume of our short-term financing through securities repurchase agreements primarily in order to fund our investment portfolio. The increase in interest on customer deposits was a result of growth of our banking client base due to the expansion of the operations of Freedom Bank KZ between the two fiscal years. As of March 31, 2023 and March 31, 2022, banking customer liabilities of Freedom Bank KZ were $1.3 billion and $246.3 million, respectively.

For fiscal 2022 we had a $54.5 million, or 243% increase in interest expense as compared to fiscal 2021. The increase in interest expense is primarily attributable to a $47.3 million, or 433% increase in the volume of short-term financing through securities repurchase agreements, and a $9.0 million increase in interest on customer deposits. During fiscal 2022 we increased our volume of short-term financing through securities repurchase agreements primarily in order to fund our investment portfolio. The increase in interest on customer deposits was a result of the growth of customer deposit accounts.

Insurance claims incurred, net of reinsurance

For fiscal 2023, we had a $22.9 million, or 42%, increase in insurance claims incurred, net of reinsurance, as compared to the fiscal year ended March 31, 2022. The increase was primarily attributable to a $17.2 million or 128%, increase in other insurance expenses, which are mainly represented by redemption amounts under the pension annuity upon termination of the contract, a $9.3 million, or 82%, increase in expenses for claims for the year ended March 31, 2023, and a $570 thousand, or 59% increase in claims paid, reinsurers share as compared to the year ended March 31, 2022, in each case due to the expansion of our insurance operations between the two periods. The increases were offset in part by a $4.2 million, or 14%, decrease in expenses for insurance reserve between the two fiscal years.

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For fiscal 2022, we had a $2.0 million, or 4%, increase in insurance claims incurred, net of reinsurance, as compared to the fiscal year ended March 31, 2021. The increase was primarily attributable to a $11.3 million or 541%, increase in other insurance expenses, which are mainly represented by redemption amounts under the pension annuity upon termination of the contract, and a $6.3 million, or 125%, increase in expenses for claims for the year ended March 31, 2022, as compared to the year ended March 31, 2021, in each case due to the expansion of our insurance operations between the two periods. The increases were offset in part by a $14.8 million, or 33%, decrease in expenses for insurance reserve between the two fiscal years.

Payroll and bonuses

In the fiscal year 2023, the Company had payroll and bonuses expense of $81.8 million, representing an increase of $35.5 million or 77% compared to payroll and bonuses expense of $46.3 million in fiscal 2022. The increase can be attributed to the expansion of our operations generally and in turn expansion of our workforce through hiring and acquisitions.

For fiscal 2022, we had a payroll and bonuses expense of $46.3 million, representing an increase of $22.9 million or 98% compared to payroll and bonuses expense of $23.4 million in fiscal 2021. The increase was due to the expansion of our workforce through hiring in fiscal 2022.

Professional services

For fiscal 2023, our professional services expense was $17.0 million, representing an increase by $4.3 million or 34% compared to $12.7 million for fiscal 2022. The increase was attributable to consulting services provided in connection with the acquisition of new companies and general expansion of our business and operations.

In fiscal 2022, we had professional services expense of $12.7 million, an increase of $8.3 million or 186%, compared to professional services expense of $4.4 million for fiscal 2021. This increase can be attributed to the general expansion of our business and operations between the two fiscal years.

Stock compensation expense

In fiscal 2023, our stock compensation expense was $9.3 million, representing an increase of $1.4 million or 18% compared to stock compensation expense of $7.9 million for fiscal 2022. The increase can be attributed to the relocation of multiple employees of our former Russian subsidiaries to our Kazakhstan subsidiaries during fiscal 2023. These employees held a total of 195,000 shares, which contributed to the increase in stock compensation expense.

For fiscal year 2022, we had stock compensation expense of $7.9 million, an increase of $7.7 million or 6794% compared to stock compensation expense of $114 thousand for fiscal 2021. This increase was primarily due to FRHC awarding in May 2021 restricted stock grants totaling 1,031,500 shares of its common stock to 56 of our employees and consultants, including two of our executive officers.

Advertising expense

Advertising expense for fiscal 2023 w $14.1 million, representing an increase of $2.1 million or 18% compared to advertising expense of $11.9 million for fiscal 2022. The primary reason for this increase was increased advertising expenditure of Bank KZ, which was primarily attributable to the introduction of new loan products such as the digital mortgage and digital car loan products. Additionally, the implementation of the “7-20-25” state mortgage program led to increased expense on advertising campaigns.

For fiscal 2022, advertising expense was $11.9 million, representing an increase of $4.9 million or 71% compared to advertising expense of $7.0 million for fiscal 2021. The increase was mainly attributable to growth of the customer base of Freedom EU, which consequently led to an increase of the use of online-marketing service providers.

General and administrative expense

General and administrative expense for fiscal 2023 amounted to $60.0 million, representing an increase of $36.4 million or 155% compared to general and administrative expense of $23.5 million for fiscal 2022. The increase was attributable to a $12.9 million increase in charity and sponsorship expenses due to humanitarian aid we provided to a Ukraine-based charitable fund in connection with the Russia-Ukraine conflict, a $2.4 million increase in software support expenses due to the expansion of our software infrastructure and the implementation of systems to support our operations, a $2.8 million increase in fines, penalties, forfeit primarily due to penalties imposed on a subsidiary of the Company by a local regulator for regulatory noncompliance, a $2.6 million increase in communication services due to the implementation

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of SMS-informing services for banking operations by Bank KZ, a $1.7 million increase in depreciation and amortization due to business expansion and acquisition of new tangible assets and a $3.6 million increase in other operating expenses attributable to our general organic growth.

General and administrative expense for fiscal 2022 amounted to $23.5 million, representing an increase of $12.4 million or 112% compared to general and administrative expense of $11.1 million for fiscal 2021. The increase was attributable to a $0.7 million increase in depreciation and amortization due to acquisition of new tangible assets, a $1.6 million in software support expenses primarily due to the implementation of new software licenses, a $1.0 million increase in communication services and a $4.2 million increase in other operating expenses attributable to our general organic growth.

Provision for impairment losses

We recognized provision for impairment losses in the amount of $29.1 million for fiscal 2023, as compared to provision for impairment losses of $2.5 million for fiscal 2022. The increase was primarily attributable to growth of the loan portfolio of Freedom Bank KZ, as the majority of provisions is accrued on loan products. In addition, in fiscal 2023 we accrued a one-off provision expense for restricted brokerage customers' cash, cash and cash equivalents and loans issued which was held with a Ukrainian bank due to the Russia-Ukraine conflict.

Other (income)/expense, net

For fiscal 2023, we had other expense, net of $3.4 million, representing a decrease of $7.5 million or 186% as compared to other income, net of $4.0 million in fiscal 2022. This decrease was primarily driven by a $5.4 million net realized loss on the revaluation of available-for-sale securities from Freedom Finance Life in fiscal 2023. The heightened market volatility resulting from the geopolitical situation and global economic slowdown prompted the revaluation of our available-for-sale securities for fiscal 2023.

For fiscal 2022, other expense, net increased by 97% as compared to fiscal 2021. This increase was due to economic uncertainty during fiscal 2022 stemming from the Russia-Ukraine conflict, which began in the fourth quarter of fiscal 2022, as a result of which we recognized impairment loss on goodwill in respect of Freedom UA. As a result of the conflict, Freedom UA incurred significant losses and it was not able continue to generate enough income to cover all of such losses.

Income tax expense

We had net income before income tax of $235.9 million, $363.7 million and $151.8 million for fiscal 2023, 2022 and 2021, respectively. Our effective tax rate for fiscal 2023 increased to 18.1%, from 10.6% during fiscal 2022 as a result of changes in the composition of the revenues we realized from our operating activities and the tax treatment of those revenues in the various jurisdictions where our subsidiaries operate along with the incremental U.S. tax on GILTI. Despite decrease in our net income before income tax by $127.8 million, as a result of the increase in our effective tax rate, our income tax expense increased by $4.2 million for fiscal 2023.

Net income from continuing operations

As a result of the foregoing factors, for the years ended March 31, 2023, March 31, 2022 and March 31, 2021, we recognized net income from continuing operations of $193.2 million, $325.1 million and $128.5 million, respectively.

Net income/(loss) from discontinued operations

Net income/(loss) from discontinued operations represents the net income or loss from our former subsidiaries in Russia, which are classified as discontinued operations. Net income from discontinued operations was $12.4 million for the fiscal year ended March 31, 2023, as compared to net loss from discontinued operations of $104.2 million for the fiscal year ended March 31, 2022 and net income from discontinued operations of $21.8 million for the fiscal year ended March 31, 2021.

The positive change in the amount of $116.6 million from fiscal 2022 to fiscal 2023 up to February 28, 2023 (the disposal date) was primarily due to increase in net gain on trading securities in the amount of $100.7 million as a result of a positive revaluation of securities held in our proprietary account during the eleven months ended February 28, 2023. In addition, net gain on foreign exchange operations increased by $85.5 million as a result of Russian ruble appreciation by 11% against the U.S. dollar during the eleven months ended February 28, 2023. Interest income increased by $25.0 million due to increased interest income generated on margin loans to customers, resulting from an increase in usage of margin

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loans for trades by clients. These changes were offset in part by an increase in payroll and bonuses expenses by $19.9 million as a result of an increase in the average number of employees and a loss generated from the divestiture of Russia segment in the amount of $51.5 million (which includes a cumulative translation adjustment in the amount of $25.4 million, reclassified from Accumulated Other Comprehensive Loss within the Consolidated Balance Sheet as of the date of disposal).

Net income

As a result of the foregoing factors, for fiscal 2023 we had net income of $205.6 million as compared to $220.9 million for fiscal 2022, a decrease of 7%, and for fiscal 2022 we had net income of $220.9 million as compared to $150.3 million for fiscal 2021, an increase of 47%.

Non-controlling interest

We reflect Askar Tashtitov's 91% ownership of Freedom UA as a non-controlling interest in our Consolidated Statements of Financial Condition, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows, and we have determined that Freedom UA is a variable interest entity (VIE). For financial information regarding the VIE, see "Consolidation of variable interest entities" in Note 2 "Summary of significant accounting policies" in Part II Item 8 of this annual report. We recognized income attributable to non-controlling interest of $446.0 thousand for fiscal 2023 as compared to a net loss attributable to non-controlling interest of $6.6 million for fiscal 2022. The change was largely a result of the acute situation in the Russia-Ukraine conflict in fiscal 2022 and its impact on the securities markets where Freedom UA held most of its open securities positions, as a result of which we recognized an unrealized net loss on open trading positions in fiscal 2022, whereas the relevant securities markets gradually improved in fiscal 2023.

Foreign currency translation adjustments, net of tax

Due to the appreciation of the Russian ruble by 5% against the U.S. dollar and appreciation of the Kazakhstan tenge by 4.4% against the U.S. dollar at fiscal 2023 year-end as compared to fiscal 2022 year-end, we realized a foreign currency translation loss of $5.2 million for fiscal year 2023, as compared to a foreign currency translation loss of $20.6 million for fiscal year 2022. For fiscal 2021, we realized a foreign currency translation gain of $2.8 million as a result of the appreciation of the Russian ruble by 2.6% and the Kazakhstan tenge by 4.8% against the U.S. dollar.

Segment Results of Operations

We have historically operated as a single operating segment. With the restructuring of our operations and the divestiture of our Russian subsidiaries, coupled with our continued expansion, during the fourth quarter of fiscal 2022 we elected to reorganize our operations geographically into five regional segments: Central Asia and Eastern Europe (formerly referred to as Central Asia), Europe,excluding Eastern Europe, United States, Russia and Middle East/Caucasus. As a result of the divestiture of our Russian subsidiaries, which was completed in February 2023, we now have four regional segments. These operating segments are based on how our CODM will be making decisions about allocating resources and assessing performance. The total revenue, net associated with our segments is summarized in the following table:

During fiscal 2023, total revenue, net increased across each of our regional operating segments, except Europe, as compared to fiscal 2022. During fiscal 2022, total revenue, net increased across each of our regional operating segments as compared to fiscal 2021. The changes in total revenue, net for fiscal 2023 compared to fiscal 2022, and fiscal 2022 compared to fiscal 2021, were driven by the following:

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•Total revenue, net in our Central Asia and Eastern Europe segment increased by $343.1 million, or 154%, to $566.1 million for fiscal 2023, as compared to $223.0 million for fiscal 2022. The increase was mainly attributable to an increase in interest income, which was primarily due to interest received on securities held in our trading portfolio and interest accrued on bank loans to customers. In addition, the increase was driven by an increase in net gain on trading securities as well as in fee and commission income, as a result of growth of our trading portfolio and of brokerage activity in the Central Asia and Eastern Europe segment. The increase was also attributable to an increase in net gain on foreign exchange operations, which was mainly driven by an increase in foreign exchange dealing operations in this segment. These increases were offset in part by a net loss on derivative in fiscal 2023, whereas there was a net gain on derivative in fiscal 2022.

Total revenue, net in our Central Asia and Eastern Europe segment increased by $82.8 million, or 59%, to $223.0 million for fiscal 2022, as compared to $140.1 million for fiscal 2021. The increase was primarily attributable to an increase in interest income, as a result of an increase in interest received on securities held in our trading portfolio and an increase in interest accrued on bank loans to customers. In addition, the increase was attributable to an increase in income from insurance activities due to the expansion of our insurance business between the two fiscal years. Fee and commission income in this segment increased by approximately $3.1 million from fiscal 2021 to fiscal 2022.

•Total revenue, net in our Europe, excluding Eastern Europe segment decreased by $241.1 million, or 53%, to $216.5 million for fiscal 2023, as compared to $457.7 million for fiscal 2022. The decrease was primarily attributable to a decrease in fee and commission income due to a decrease in the number of active brokerage clients in this segment and a decrease in the volume of transactions per client, in each case primarily related to transactions by FST Belize. The decrease in revenue was also due to a decrease in net gain on trading securities as a result of relatively lower trading activity in this segment during fiscal 2023 compared to fiscal 2022, and due to a revaluation of our proprietary investment portfolio in fiscal 2023, as a result of which the value of our proprietary investment portfolio decreased significantly . The decrease in total revenue, net in this segment can also be attributed to the exceptionally large gain we obtained from selling SPB Exchange ETF units and SPB Exchange shares in fiscal 2022.

Total revenue, net in our Europe, excluding Eastern Europe segment increased by $260.0 million, or 132%, to $457.7 million for fiscal 2022, as compared to $197.7 million during fiscal 2021. This growth was driven by an increase in fee and commission income in fiscal 2022 due to an increase in the size of our client base in this segment and the volume of transactions per client. The increase in total revenue, net was also attributable to a net gain on trading securities in fiscal 2022 as a result of a realized gain from the sale of SPB Exchange ETF units and SPB Exchange shares in our proprietary investment portfolio.

•Total revenue, net in our U.S. segment increased by $3.9 million or 43% for fiscal 2023 as compared to fiscal 2022. Total revenue, net in this segment also increased due to growth in interest income received on securities held in our trading portfolio attributable to this segment. The increase was also partially offset by a net loss on foreign exchange operations in this segment in fiscal 2023.

For fiscal 2022, total revenue, net in our U.S. segment was $9.1 million as compared to $9.1 million for fiscal 2021, an increase by $53.0 thousand or 1%.

•We had total revenue, net in the Middle East/Caucus segment of $43.0 thousand for fiscal 2023. This revenue was attributable to interest income and net gain on foreign exchange operations. We did not recognize revenue in our Middle East/Caucasus segment during fiscal 2022 or fiscal 2021, as we started the process of forming our Azerbaijani and Armenian subsidiaries and establishing their operations in fiscal 2023. We did not form our UAE subsidiary until April 2022 and are still in process of establishing its operations.

The total expenses associated with our segments is summarized in the following table:

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For fiscal 2023, total expense, net increased in each of our segments as compared to fiscal 2022. The changes in total expenses for fiscal 2023 compared to fiscal 2022, and fiscal 2022 compared to fiscal 2021, were driven by the following:

•Total expense, net in our Central Asia and Eastern Europe segment increased by $192.6 million, or 93%, to $400.2 million for fiscal 2023, as compared to $207.6 million for fiscal 2022. The increase was primarily attributable to an increase in interest expense, mainly interest paid on securities repurchase agreements and customer deposits. In addition, the increase in total expenses, net in this segment was attributable to an increase in payroll and bonuses, general and administrative expenses, and advertising expenses. In addition, fee and commission expenses in this segment increased primarily due to an increase in commission expenses on currency exchange services transactions due to increase of activity of clients.

Total expense, net in our Central Asia and Eastern Europe segment increased by $98.9 million, or 91%, to $ 207.6 million for fiscal 2022, as compared to $108.7 million during fiscal 2021. This increase was primarily attributable to an increase in interest expense, which was caused by increased interest paid on securities repurchase agreements and customer deposits. In addition, payroll and bonuses, general and administrative expenses in this segment increased due to increases in payroll and bonuses and administrative expenses.

•Total expense, net in our Europe, excluding Eastern Europe segment increased by $17.0 million, or 17%, to $118.1 million for fiscal 2023 as compared to $101.1 million for fiscal 2022. The increase was attributable to an increase in general and administrative expenses, and provision for impairment loss. There was also an increase in interest expense due to interest paid to clients on positive cash balances.

Total expense, net in our Europe, excluding Eastern Europe region increased by $22.8 million, or 29%, to $101.1 million for fiscal 2022 as compared to $78.3 million for fiscal 2021. The increase was attributable to an increase in professional services, payroll and bonuses, and general and administrative expenses.

•Total expense, net in our U.S. segment increased by $22.3 million, or 130%, to $39.5 million for fiscal 2023 as compared to $17.2 million during fiscal 2022. This increase was primarily attributable to an increase in interest expense on securities repurchase agreement obligations. In addition, there were increases in stock-based compensation expense, payroll and bonuses and professional services.

Total expense, net in our U.S. segment increased by $9.1 million or 114%, to $17.2 million for fiscal 2022 compared to $8.0 million during fiscal 2021 primarily due to an increase in stock-based compensation expenses, payroll and bonuses and professional services.

•Total expense, net in our Middle East/Caucasus segment increased by $1.8 million, or 627%, to $2.0 million for fiscal 2023, as compared to $280.0 thousand for fiscal 2022. The increase was attributable to an increase in payroll and bonuses, general and administrative expenses, professional services and advertising expenses. For fiscal 2022 and fiscal 2021, total expense, net in our Middle East/Caucasus segment were insignificant and mainly were represented by payroll and bonuses.

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Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet our potential cash requirements for general business purposes. During the periods covered in this report our operations were primarily funded through a combination of existing cash on hand, cash generated from operations, returns generated from our proprietary trading and proceeds from the sale of bonds and other borrowings.

We regularly monitor and manage our leverage and liquidity risk through various committees and processes we have established to maintain compliance with net capital and capital adequacy requirements imposed on securities brokerages and banks in jurisdictions where we do business. We assess our leverage and liquidity risk based on considerations and assumptions of market factors, as well as other factors, including the amount of available liquid capital (i.e., the amount of cash and cash equivalents not invested in our operating business). While we are confident in the risk management monitoring and processes we have in place, a significant portion of our trading securities and cash and cash equivalents are subject to collateralization agreements. This significantly enhances our risk of loss in the event financial markets move against our positions. When this occurs our liquidity, capitalization and business can be negatively impacted. Certain market conditions can impact the liquidity of our assets, potentially requiring us to hold positions longer than anticipated. Our liquidity, capitalization, projected return on investment and results of operations can be significantly impacted by market events over which we have no control, and which can result in disruptions to our investment strategy for our assets.

We maintain a majority of our tangible assets in cash and securities that are readily convertible to cash, including governmental and quasi-governmental debt and highly liquid corporate equities and debt. Our financial instruments and other inventory positions are stated at fair value and should generally be readily marketable in most market conditions. The following sets out certain information regarding our assets as of the dates presented:

(1)Of the $581.4 million in cash and cash equivalents we held at March 31, 2023, $29.8 million, or approximately 5%, were subject to reverse repurchase agreements. By comparison, at March 31, 2022, we had cash and cash equivalents of $225.5 million, of which $19.9 million, or 9%, were subject to reverse repurchase agreements.

The amount of cash and cash equivalents we hold is subject to minimum levels set by regulatory bodies to comply with required rules and regulations, including adequate capital and liquidity levels for each entity.

(2)Consists of cash and cash equivalents, trading securities, and margin lending, brokerage and other receivables, net of securities repurchase agreement obligations. It includes liquid assets possessed after deducting securities repurchase agreement obligations.

As at March 31, 2023 and 2022, we had total liabilities of $4.3 billion and $2.7 billion, respectively, including customer liabilities of $1.9 billion and $765.6 million, respectively.

We finance our assets primarily from revenue-generating activities and short-term and long-term financing arrangements.

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Cash Flows

The following table presents our cash flows for fiscal 2023, 2022 and 2021:

Net Cash Flows (Used In)/From Operating Activities

During fiscal 2023 we had net cash used in operating activities of $951.7 million compared to net cash used in operating activities of $406.4 million during fiscal 2022 and net cash generated from operating activities of $529.4 million during fiscal 2021. Net cash used in operating activities during fiscal 2023 resulted primarily from changes in operating assets and liabilities. Such changes included those set out in the following table:

(1)Resulted from an increase in the amount of securities held in our proprietary account.

(2)Resulted from increased funds in brokerage accounts from new and existing customers.

(3)Resulted from an increase in volume of margin lending receivables.

The net cash used in operating activities in fiscal 2023 was primarily attributable to net cash outflows attributable to increases in trading securities and increases in margin lending, brokerage and other receivables, which increases were offset in part by an increase in brokerage customer liabilities over that period, which resulted from the increase in the number of customer accounts at our Freedom Global subsidiary.

Net Cash Flows (Used In)/From Investing Activities

During fiscal 2023 we had net cash used in investing activities of $1.5 billion compared to net cash used in investing activities of $146.3 million during fiscal 2022 and net cash generated from investing activities of $6.3 million during fiscal 2021. During fiscal 2023, cash used in investing activities was used for the issuance of loans, net of repayment by customers, in the amount of $715.0 million, the purchase of fixed assets in the amount of $38.5 million, considerations paid for acquisitions of London-Almaty, Freedom Life, Freedom Insurance, LD Micro and Paybox in the amount of $55.9 million, and for the purchase of available for sale securities, net of sales, in the amount of $69.5 million. Net cash used in investing activities was partially offset by cash and cash equivalents received as part of the acquisitions of London-Almaty, Ticketon and Paybox in the aggregate amount of $16.3 million, and cash received from the divestiture of our Russian subsidiaries in the amount of $51.5 million.

Net Cash Flows From Financing Activities

Net cash from financing activities for fiscal year 2023, consisted principally of bank customer deposits in the amount of $1.0 billion due to the growth of banking activity in the Central Asia and Eastern Europe segment, proceeds from securities repurchase agreement obligations in the amount of $637.4 million, mortgage loans sold to JSC Kazakhstan Sustainability Fund as the Program Operator, net of repurchase, under the state mortgage program "7-20-25" in the amount

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of $420.9 million, proceeds from the issuance, net of repurchase, of debt securities in the amount of $22.6 million, and proceeds from capital contributions of $677.0 thousand.

CAPITAL EXPENDITURES

After the end of fiscal 2023, on May 10, 2023, our subsidiary Freedom EU signed a contract for the construction of Elysium Tower, a building in Limassol, Cyprus. The contract implies approximate capital expenditures in the amount of $9.7 million and $5.9 million for the 2023 and 2024 calendar years, respectively. The funding for this construction project will primarily come from our own funds. The building is planned to be a new office building for our Freedom EU subsidiary.

DIVIDENDS

Any payment of cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual and legal restrictions and other factors deemed relevant by our Board of Directors. We currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

INDEBTEDNESS

Short-term

Securities Repurchase Arrangements. Our short-term financing is primarily obtained through securities repurchase arrangements conducted through stock exchanges. We use repurchase arrangements, among other things, to finance our inventory positions. As of March 31, 2023, $1.5 billion, or 63% of the trading securities held in our proprietary trading account were subject to securities repurchase obligations compared to $834.8 million, or 72% as of March 31, 2022. The securities we pledge as collateral under repurchase agreements are liquid trading securities with market quotes and significant trading volume. For additional information regarding our securities repurchase agreement obligations see Note 13 "Securities Repurchase Agreement Obligations" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.

Long-term

Freedom SPC Bonds. On November 16, 2021, Freedom SPC commenced an offering of up to $66 million aggregate principal amount of its 5.5% U.S. dollar denominated bonds due October 21, 2026 (the "Freedom SPC Bonds"), which are listed on the AIX. As of March 31, 2023, there were $58.6 million in principal amount of the Freedom SPC Bonds outstanding. The Freedom SPC Bonds are guaranteed by FRHC and the proceeds from the issuance of the Freedom SPC Bonds are transferred to FRHC pursuant to an intercompany loan agreement that bears interest at a rate of 5.5% per annum.

NET CAPITAL AND CAPITAL REQUIREMENTS

A number of our subsidiaries are required to satisfy minimum net capital and capital adequacy requirements to conduct their brokerage, banking and insurance operations in the jurisdictions in which they operate. This is partially maintained by retaining cash and cash equivalent investments in those subsidiaries or jurisdictions. As a result, such subsidiaries may be restricted in their ability to transfer cash between different jurisdictions and to FRHC. Additionally, transfers of cash between international jurisdictions may have adverse tax consequences that could discourage such transfers.

These minimum net capital and capital adequacy requirements range from approximately $2 thousand to $22 million and fluctuate depending on various factors. At March 31, 2023, the aggregate net capital requirements of our subsidiaries was $61.6 million. Each of our subsidiaries that is subject to net capital or capital adequacy requirements exceeded the minimum required amount at March 31, 2023. Although we operate with levels of net capital and capital adequacy substantially greater than the minimum established thresholds, in the event we were to fail to maintain minimum net capital or capital adequacy levels, we may be subject to fines and penalties, suspension of operations, revocation of licensure and disqualification of our management from working in the industry. Our subsidiaries are also subject to other various rules and regulations, including liquidity and capital adequacy ratios. Our operations that require the intensive use of capital would be limited to the extent necessary to meet all our regulatory requirements.

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Over the past several years, we have pursued an aggressive growth strategy both through acquisitions and organic growth efforts. During fiscal 2024, we anticipate continuing efforts to expand the footprint of our business on a scale similar to fiscal 2023. While our active growth strategy has led to revenue growth it also results in increased expenses and greater need for capital resources. Additional growth and expansion may require greater capital resources than we currently possess, which could require us to pursue additional equity or debt financing from outside sources. There can be no assurance that such financing will be available to us on acceptable terms, or at all, at the time it is needed.

We believe that our current cash and cash equivalents, cash expected to be generated from operating activities, and forecasted returns from our proprietary trading, combined with our ability to raise additional capital will be sufficient to meet our present and anticipated financing needs.

Critical Accounting Policies and 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Following are the accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results.

Allowance for accounts receivable

Allowance for accounts receivable is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the collectability of an account receivable balance is doubtful. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past accounts receivable loss experience, the nature and volume, information about specific counterparties situation and estimated collateral values, economic conditions, and other factors.

Allocations of the allowance may be made for specific accounts receivable, but the entire allowance is available for any accounts receivable that in management's judgment should be charged off.

The allowance consists of specific and general components, the specific component relates to accounts receivable that are individually classified as impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the agreement. The general component is based on historical loss experience adjusted for current factors. The historical loss experience is based on the actual loss history we have experienced over the most recent period of time, mostly 3-5 years, which management reviews periodically.

Goodwill

We have accounted for our acquisitions using the acquisition method of accounting. The acquisition method requires us to make significant estimates and assumptions, especially at the acquisition date as we allocate the purchase price to the estimated fair values of acquired tangible and intangible assets and the liabilities assumed. We also use our best estimates to determine the useful lives of the tangible and definite-lived intangible assets, which impact the periods over which depreciation and amortization of those assets are recognized. These best estimates and assumptions are inherently uncertain as they pertain to forward looking views of our businesses, customer behavior, and market conditions. In our acquisitions, we have also recognized goodwill at the amount by which the purchase price paid exceeds the fair value of the net assets acquired.

Our ongoing accounting for goodwill and the tangible and intangible assets acquired requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment. Our processes and accounting policies for evaluating impairments are further described in Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements contained in Part II Item 8 of our annual report. As of March 31, 2023, the Company had goodwill of $14.2 million.

Income taxes

We are subject to income taxes in both the United States and numerous non-U.S. jurisdictions. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant governmental taxing authorities. Significant judgement is required in determining the provision for income tax. There are many transactions and

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calculations for which the ultimate tax determination is uncertain. As a result, actual future tax consequences relating to uncertain tax positions may be materially different than our determinations or estimates.

We recognize deferred tax liabilities and assets based on the difference between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Income taxes are determined in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We account for income taxes using the asset and liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years based on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable to the differences that are expected to affect taxable income.

We periodically evaluate the likelihood of tax assessments based on current and prior years' examinations, and unrecognized tax benefits related to potential losses that may arise from tax audits are established in accordance with the relevant accounting guidance. Once established, unrecognized tax benefits are adjusted when there is more information available or when an event occurs requiring a change.

Legal contingencies

We review outstanding legal matters at each reporting date, in order to assess the need for provisions and disclosures in our financial statements. Among the factors considered in making decisions on provisions are the nature of the matter, the legal process and potential legal exposure in the relevant jurisdiction, the progress of the matter (including the progress after the date of the financial statements but before those statements are issued), the opinions or views of our legal advisers, experiences on similar cases and any decision of our management as to how we will respond to the matter.

Consolidation of Freedom Securities Trading Inc.

We have assessed whether we should consolidate FST Belize under the variable interest entity (“VIE”) accounting method or the voting interest method ("VOE"). In July 2014, prior to our 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 our 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 parties that provide FRHC the power to control the operations of FST Belize. On December 2022 there was a change in the treatment of margin interest income from settlement to trade. As the result, management has continued to assess for any modifications or reconsideration events.

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Recent Accounting Pronouncements

For details of applicable new accounting standards, see "Recent accounting pronouncements" in Note 2 "Summary of Significant Accounting Policies" in the notes to our consolidated financial statements contained in Part II Item 8 of this annual report.