|
Freedom Holding Corp.
|
Freedom Bank KZ IFRS
|
IFRS to US GAAP Adjustments
|
Notes
|
Pro Forma Adjustments
|
Notes
|
Pro Forma Combined
|
|
Note A
|
Note B
|
|
|
|
|
|
Revenue:
|
|||||||
|
|
|
|
|
|||
Fee and commission
income
|
$97,616
|
$2,246
|
$-
|
|
$-
|
|
$99,862
|
Net gain on trading
securities
|
17,386
|
-
|
-
|
|
-
|
|
17,386
|
Interest income
|
9,197
|
14,537
|
-
|
|
2,075
|
(c)
|
25,809
|
Net gain on foreign exchange
operations
|
2,772
|
1,243
|
-
|
|
-
|
|
4,015
|
Net loss on
derivatives
|
(846)
|
(120)
|
-
|
|
-
|
|
(966)
|
|
|
|
|
|
|
|
|
TOTAL REVENUE,
NET
|
126,125
|
17,906
|
-
|
|
2,075
|
|
146,106
|
|
|
|
|
|
|
|
|
Expense:
|
|
|
|
|
|
|
|
Interest
expense
|
8,443
|
7,148
|
-
|
|
5,905
|
(c),
(d)
|
21,496
|
Fee and commission
expense
|
29,790
|
1,248
|
-
|
|
-
|
|
31,038
|
Operating
expense
|
30,293
|
4,739
|
(17)
|
(a)
|
(605)
|
(e),
(f)
|
34,410
|
Provision for impairment
losses
|
666
|
1,333
|
(439)
|
(b)
|
(904)
|
(g)
|
656
|
Other (income)/expense,
net
|
(95)
|
53
|
-
|
|
-
|
|
(42)
|
|
|
|
|
|
|
|
|
TOTAL
EXPENSE
|
69,097
|
14,521
|
(456)
|
|
4,396
|
|
87,558
|
NET INCOME BEFORE INCOME
TAX
|
57,028
|
3,385
|
456
|
|
(2,321)
|
|
58,548
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(9,189)
|
(717)
|
-
|
|
464
|
(h)
|
(9,442)
|
|
|
|
|
|
|
|
|
NET
INCOME
|
$47,839
|
$2,668
|
$456
|
|
$(1,857)
|
|
$49,106
|
|
|
|
|
|
|
|
|
Less: Net income attributable to
noncontrolling interest in subsidiary
|
296
|
-
|
-
|
|
-
|
|
296
|
NET INCOME
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$47,543
|
$2,668
|
$456
|
|
$(1,857)
|
|
$48,810
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
LOSS
|
|
|
|
|
|
|
|
Change in unrealized loss on
available-for-sale securities, net of tax
effect
|
$-
|
$(3)
|
$-
|
|
$-
|
|
$(3)
|
Reclassification adjustment
relating to available-for-sale securities disposed of in the
period, net of tax effect
|
71
|
-
|
-
|
|
-
|
|
71
|
Foreign currency translation
adjustments, net of tax effect
|
(2,286)
|
(2,396)
|
-
|
|
-
|
|
(4,682)
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME BEFORE NONCONTROLLING INTERESTS
|
$45,624
|
$269
|
$808
|
|
$(1,857)
|
|
$44,492
|
|
|
|
|
|
|
|
|
Less: Comprehensive income
attributable to noncontrolling interest in
subsidiary
|
296
|
-
|
-
|
|
-
|
|
296
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$45,328
|
$269
|
$808
|
|
$(1,857)
|
|
$44,196
|
BASIC NET INCOME PER COMMON
SHARE
|
$0.82
|
|
|
|
|
|
$0.84
|
DILUTED NET INCOME PER COMMON
SHARE
|
$0.82
|
|
|
|
|
|
$0.84
|
Weighted average number of shares
(basic)
|
58,358,212
|
|
|
|
|
|
58,358,212
|
Weighted average number of shares
(diluted)
|
58,460,058
|
|
|
|
|
|
58,460,058
|
|
Freedom Holding Corp.
|
Freedom Bank KZ IFRS
|
IFRS to US GAAP Adjustments
|
Notes
|
Pro Forma Adjustments
|
Notes
|
Pro Forma Combined
|
|
Note A
|
Note B
|
|
|
|
|
|
Revenue:
|
|||||||
|
|
|
|
|
|||
Fee and commission
income
|
$92,668
|
$6,510
|
$-
|
|
$-
|
|
$99,178
|
Net gain on trading
securities
|
14,923
|
-
|
-
|
|
-
|
|
14,923
|
Interest income
|
12,134
|
35,980
|
-
|
|
(918)
|
(c)
|
47,196
|
Net gain on foreign exchange
operations
|
2,315
|
1,360
|
-
|
|
-
|
|
3,675
|
Net gain/(loss) on
derivatives
|
(138)
|
184
|
-
|
|
-
|
|
46
|
|
|
|
|
|
|
|
|
TOTAL REVENUE,
NET
|
121,902
|
44,034
|
-
|
|
(918)
|
|
165,018
|
|
|
|
|
|
|
|
|
Expense:
|
|
|
|
|
|
|
|
Interest
expense
|
12,399
|
19,087
|
-
|
|
10,659
|
(c),
(d)
|
42,145
|
Fee and commission
expense
|
21,936
|
2,851
|
-
|
|
-
|
|
24,787
|
Operating
expense
|
59,990
|
11,315
|
(37)
|
(a)
|
(1,281)
|
(e),
(f)
|
69,987
|
Provision/(recovery) for impairment
losses
|
(1,164)
|
4,248
|
(206)
|
(b)
|
(3,967)
|
(g)
|
(1,089)
|
Other expense/(income),
net
|
609
|
(141)
|
-
|
|
-
|
|
468
|
|
|
|
|
|
|
|
|
TOTAL
EXPENSE
|
93,770
|
37,360
|
(243)
|
|
5,411
|
|
136,298
|
NET INCOME BEFORE INCOME
TAX
|
28,132
|
6,674
|
243
|
|
(6,329)
|
|
28,720
|
|
|
|
|
|
|
|
|
Income tax
expense
|
(6,002)
|
(1,454)
|
-
|
|
1,266
|
(h)
|
(6,190)
|
|
|
|
|
|
|
|
|
NET
INCOME
|
$22,130
|
$5,220
|
$243
|
|
$(5,063)
|
|
$22,530
|
|
|
|
|
|
|
|
|
Less: Net loss attributable to
noncontrolling interest in subsidiary
|
(2,707)
|
-
|
-
|
|
-
|
|
(2,707)
|
NET INCOME
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$24,837
|
$5,220
|
$243
|
|
$(5,063)
|
|
$25,237
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME/(LOSS)
|
|
|
|
|
|
|
|
Change in unrealized (loss)/gain on
available-for-sale securities, net of tax
effect
|
$(71)
|
$6
|
$-
|
|
$-
|
|
$(65)
|
Foreign currency translation
adjustments, net of tax effect
|
(14,851)
|
378
|
-
|
|
-
|
|
(14,473)
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME BEFORE NONCONTROLLING INTERESTS
|
$7,208
|
$5,604
|
$810
|
|
$(5,063)
|
|
$7,992
|
|
|
|
|
|
|
|
|
Less: Comprehensive loss
attributable to noncontrolling interest in
subsidiary
|
(2,707)
|
-
|
-
|
|
-
|
|
(2,707)
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$9,915
|
$5,604
|
$810
|
|
$(5,063)
|
|
$10,699
|
BASIC NET INCOME PER COMMON
SHARE
|
$0.38
|
|
|
|
|
|
$0.39
|
DILUTED NET INCOME PER COMMON
SHARE
|
$0.38
|
|
|
|
|
|
$0.39
|
Weighted average number of shares
(basic)
|
58,163,691
|
|
|
|
|
|
58,163,691
|
Weighted average number of shares
(diluted)
|
58,251,588
|
|
|
|
|
|
58,251,588
|
|
Freedom
Bank KZ
|
Exchange
Rate
|
Freedom
Bank KZ
|
|
Thousands
of KZT
|
405.83
|
USD
|
Revenue:
|
|
|
|
|
|
|
|
Fee and commission
income
|
911,619
|
|
$2,246
|
Interest
income
|
5,899,439
|
|
14,537
|
Net gain on foreign
exchange operations
|
504,545
|
|
1,243
|
Net loss on
derivatives
|
(48,881)
|
|
(120)
|
|
|
|
|
TOTAL
REVENUE, NET
|
7,266,722
|
17,906
|
|
|
|
|
|
Expense:
|
|
|
|
Interest
expense
|
2,900,765
|
7,148
|
|
Fee and commission
expense
|
506,533
|
1,248
|
|
Operating
expense
|
1,923,214
|
4,739
|
|
Provision for
impairment losses
|
541,096
|
1,333
|
|
Other expense,
net
|
21,587
|
53
|
|
|
|
|
|
TOTAL
EXPENSE
|
5,893,195
|
14,521
|
|
NET INCOME BEFORE
INCOME TAX
|
1,373,527
|
3,385
|
|
|
|
|
|
Income tax
expense
|
(291,179)
|
|
(717)
|
|
|
|
|
NET
INCOME
|
1,082,348
|
|
$2,668
|
|
Freedom Bank KZ
|
Exchange Rate
|
Freedom Bank KZ
|
|
Thousands of KZT
|
USD
|
|
Revenue:
|
|
|
|
|
|
|
|
Fee and commission
income
|
2,497,395
|
|
$6,510
|
Interest
income
|
13,802,072
|
35,980
|
|
Net gain on foreign
exchange operations
|
521,506
|
1,360
|
|
Net gain on
derivatives
|
70,612
|
184
|
|
|
|
|
|
TOTAL
REVENUE, NET
|
16,891,585
|
44,034
|
|
|
|
|
|
Expense:
|
|
|
|
Interest
expense
|
7,321,798
|
19,087
|
|
Fee and commission
expense
|
1,093,527
|
|
2,851
|
Operating
expense
|
4,340,419
|
|
11,315
|
Provision for
impairment losses
|
1,629,260
|
|
4,248
|
Other income,
net
|
(54,157)
|
|
(141)
|
|
|
|
|
TOTAL
EXPENSE
|
14,330,847
|
|
37,360
|
NET INCOME BEFORE
INCOME TAX
|
2,560,738
|
|
6,674
|
|
|
|
|
Income tax
expense
|
(557,942)
|
|
(1,454)
|
|
|
|
|
NET
INCOME
|
2,002,796
|
|
$5,220
|
|
Purchase price allocation
|
|
As of December 25, 2020
|
Assets:
|
|
Cash
and cash equivalents
|
$129,185
|
Trading
securities
|
50,684
|
Brokerage
and other receivables
|
2,601
|
Fixed
assets
|
10,987
|
Intangible
assets
|
2,769
|
Right-of-use
asset
|
338
|
Loans
issued
|
1,023
|
Other
assets
|
2,360
|
Total
assets
|
$199,947
|
|
|
Liabilities:
|
|
Customer
liabilities
|
$117,195
|
Current income tax
liability
|
415
|
Trade
payables
|
104
|
Securities
repurchase agreement obligation
|
28,500
|
Lease
liability
|
338
|
Other
liabilities
|
827
|
Deferred income tax
liabilities
|
1,399
|
Total
liabilities
|
$148,778
|
|
|
Net
Assets Acquired
|
$51,169
|
|
|
Goodwill
|
1,928
|
|
|
Consideration paid
for common shares
|
40,984
|
Consideration paid
for preferred shares
|
2,478
|
Consideration paid
for subordinated loans
|
9,635
|
Total
purchase price
|
$53,097
|
|
(a)
|
These adjustments are related to the change in accounting for fixed
assets. Under IFRS, the Bank uses the revaluation method of
accounting for its fixed assets. Under US GAAP, all fixed assets
are accounted for using the historical cost model, which stipulates
that non-current assets are initially recognized at cost and are
subsequently carried at cost less accumulated depreciation and
cumulative impairment losses. Reverse of this revaluation directly
affects depreciation expenses.
|
|
(b)
|
To adjust amounts of credit losses estimated under IFRS 9 to
conform to US GAAP.
|
|
(c)
|
As a
condition to closing the Transaction, the Seller was required to
purchase the Bank’s loan portfolio, with the exception of the
outstanding debt on customer’s credit cards, loans
collateralized by cash, and several other immaterial obligations of
the Bank, prior to the date of the Transaction. The Bank used the
proceeds from the sale of its loan portfolio to purchase of trading
securities. Also, the Bank purchased trading securities through
direct repo, as well as used proceeds from released cash reserves
for deposits. These adjustments reflect the continuing effect of
the Transaction on the interest income and interest expense of the
Bank.
|
|
(d)
|
Prior
to the completion of the Transaction, the Bank held customer
deposits and had outstanding subordinated loans and preferred
shares of the Bank. As a condition to closing the Transaction and
the Company’s decision to discontinue most of the
Bank’s commercial lending activities, together with loan
portfolio, the Bank transferred a significant portion of its
customers’ deposits to the Seller and the Company purchased
the outstanding subordinated loans and preferred shares of the
Bank. These adjustments reflect the continuing effect of the
Transaction on the interest expense of the Bank.
|
|
(e)
|
As a
condition to closing the Transaction, the Seller was required to
purchase certain buildings which were reflected on the balance
sheet of the Bank. These adjustments reflects the continuing effect
on depreciation expense in the amount of $16 and $34, for six
months ended September 30, 2020, and 12 months ended March 31,
2020, respectively.
|
|
(f)
|
The
sale of a majority of the loan portfolio of the Bank resulted in a
decrease in lending-related employees of the Bank and a
corresponding decrease in payroll. This adjustment reflects the
continuing effect on payroll expenses, in the amount of $589 and
$1,247, for six months ended September 30, 2020, and 12 months
ended March 31, 2020, respectively.
|
|
(g)
|
The
sale of a majority of the loan portfolio of the Bank resulted in a
decrease in Provision for impairment losses of the Bank. These
adjustments represent the continuing effect on Provision for
impairment losses of the Bank.
|
|
(h)
|
This
adjustment represents the tax effect on above stated
adjustments.
|