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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
    Washington, D.C.
    20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2010

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to___________

Commission file number: 000-31203

NET 1 UEPS TECHNOLOGIES,
  INC.(Exact name of registrant as specified in its
  charter)

|Florida                           | 98-0171860         
|--------------------------------- | -------------------
|(State or other jurisdiction      | (I.R.S. Employer   
|of incorporation or organization) | Identification No.)

President Place, 4thFloor, Cnr. Jan
  Smuts Avenue and Bolton Road Rosebank, Johannesburg 2196, South
    Africa(Address of principal executive offices)

Registrants telephone number, including area code: 27-11-343-2000

Securities registered pursuant to section 12(b) of the Act:

|Title of Each Class        | Name of Each Exchange on
      Which Registered
|-------------------------- | -----------------------------------------------
|Common Stock,              |                                                
|par value $0.001 per share | NASDAQ Global Select Market                    

Securities registered pursuant to section 12(g) of the
  Act:None

Indicate by check mark if the registrant is a well-known
  seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No
    [X]

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Indicate by check mark if the registrant is not required to file
  reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No
    [X]

Indicate by check mark whether the registrant (1) has filed all
  reports required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period that the
  registrant was required to file such reports), and (2) has been subject to such
  filings requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted
  electronically and posted on its corporate Web site, if any, every Interactive
  Data File required to be submitted and posted pursuant to Rule 405 of Regulation
  S-T (§232.405 of this chapter) during the preceding 12 months (or for such
  shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent filers
  pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and
  will not be contained, to the best of registrant's knowledge, in definitive
  proxy or information statements incorporated by reference in Part III of this
  Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large
  accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
  reporting company. See the definitions of large accelerated filer,
  accelerated filer, and smaller reporting company in Rule 12b-2 of the
  Exchange Act (Check one):

|[X] | Large accelerated filer                       | [ ] | Accelerated filer        
|--- | --------------------------------------------- | --- | -------------------------
|    |                                               |     |                          
|[ ] | Non-accelerated filer                         | [ ] | Smaller reporting company
|    | (Do not check if a smaller reporting company) |     |                          

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of the registrant's common stock held
  by non-affiliates of the registrant as of December 31, 2009 (the last business
  day of the registrants most recently completed second fiscal quarter), based
  upon the closing price of the common stock as reported by The Nasdaq Global
  Select Market on such date, was $ 734,410,823. This calculation does not reflect
  a determination that persons are affiliates for any other purposes.

As of August 27, 2009, 45,378,397 shares of the registrants
  common stock, par value $0.001 per share were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the definitive Proxy Statement to be
  delivered to shareholders in connection with the 2010 Annual Meeting of
  Shareholders are incorporated by reference into Part III of this Form 10-K.

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NET 1 UEPS TECHNOLOGIES, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K 
  Year Ended June 30,
  2010

|                                                                                                                     | Page
|-------------------------------------------------------------------------------------------------------------------- | ----
|PART I                                                                                                               |     
|Item
      1. Business                                                                                               | 2   
|Item
      1A. Risk Factors                                                                                          | 20  
|Item
      1B. Unresolved Staff Comments                                                                             | 34  
|Item
      2. Properties                                                                                             | 35  
|Item
      3. Legal Proceedings                                                                                      | 35  
|Item
      4. Reserved                                                                                               | 35  
|                                                                                                                     |     
|PART II                                                                                                              |     
|Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 36  
|Item
      6. Selected Financial Data                                                                                | 38  
|Item
      7. Managements Discussion and Analysis of Financial Condition and Results
      of Operations            | 40  
|Item
      7A. Quantitative and Qualitative Disclosures About Market Risk                                            | 65  
|Item
      8. Financial Statements and Supplementary Data                                                            | 66  
|Item
      9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure             | 66  
|Item
      9A. Controls and Procedures                                                                               | 67  
|Item
      9B. Other Information                                                                                     | 69  
|                                                                                                                     |     
|PART III                                                                                                             |     
|Item
      10. Directors, Executive Officers and Corporate Governance                                                | 70  
|Item
      11. Executive Compensation                                                                                | 70  
|Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters  | 70  
|Item
      13. Certain Relationships and Related Transactions, and Director
      Independence                       | 70  
|Item
      14. Principal Accountant Fees and Services                                                                | 70  
|                                                                                                                     |     
|PART IV                                                                                                              |     
|Item
      15. Exhibits and Financial Statement Schedules                                                            | 71  
|                                                                                                                     |     
|Signatures                                                                                                           | 75  
|Financial
      Statements                                                                                           | F-1 

1

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PART I

FORWARD LOOKING STATEMENTS

In addition to historical
  information, this Annual Report on Form 10-K contains forward-looking statements
  that involve risks and uncertainties that could cause our actual results to
  differ materially from those projected, anticipated or implied in the
  forward-looking statements. Factors that might cause or contribute to such
  differences include, but are not limited to, those discussed in Item 1A. Risk
  Factors. In some cases, you can identify forward-looking statements by
  terminology such as may, will, should, could, would, expects,
  plans, intends, anticipates, believes, estimates, predicts,
  potential or continue or the negative of such terms and other comparable
  terminology. You should not place undue reliance on these forward-looking
  statements, which reflect our opinions only as of the date of this Annual
  Report. We undertake no obligation to release publicly any revisions to the
  forward-looking statements after the date of this Annual Report. You should
  carefully review the risk factors described in other documents we file from time
  to time with the Securities and Exchange Commission, including the Quarterly
  Reports on Form 10-Q to be filed by us in our 2011 fiscal year, which runs from
  July 1, 2010 to June 30, 2011.

ITEM 1. BUSINESS

Overview

We provide a smart-card based
  alternative payment system for the unbanked and underbanked populations of
  developing economies. Our market-leading system enables the estimated four
  billion people who generally have limited or no access to a bank account to
  enter affordably into electronic transactions with each other, government
  agencies, employers, merchants and other financial service providers. Our
  universal electronic payment system, or UEPS, uses biometrically secure smart
  cards that operate in real-time but offline, unlike traditional payment systems
  offered by major banking institutions that require immediate access through a
  communications network to a centralized computer. This offline capability means
  that users of our system can conduct transactions at any time with other card
  holders in even the most remote areas so long as a smart card reader, which is
  often portable and battery powered, is available. Our off-line systems also
  offer the highest level of availability and affordability by removing any
  elements that are costly and are prone to outages. In addition to effecting
  purchases, cash-backs and any form of payment, our system can be used for
  banking, health care management, international money transfers, voting and
  identification.

We also focus on the development
  and provision of secure transaction technology, solutions and services, and
  offer transaction processing, financial and clinical risk management solutions
  to both funders and providers of healthcare. Our core competencies around secure
  online transaction processing, cryptography and integrated circuit card
  (chip/smart card) technologies are principally applied to electronic commerce
  transactions in the telecommunications, banking, payroll, retail, health care,
  petroleum and utility industries.

Our technology is widely used in
  South Africa today, where we distribute pension and welfare payments to over 3.2
  million recipients in five of South Africas nine provinces, process debit and
  credit card payment transactions on behalf of retailers that we believe
  represent nearly 65% of retailers within the formal retail sector in South
  Africa through our EasyPay (Proprietary) Limited, or EasyPay system, process
  value added service such as bill payments and prepaid electricity for the major
  bill issuers and local councils in South Africa and provide mobile telephone
  top-up transactions for two of South Africas three mobile carriers. We are the
  largest provider of third party payroll payments in South Africa through our
  Net1 FIHRST Holdings (Proprietary) Limited, trading as FIHRST Management
  Services, or FIHRST, service that processes monthly payments for approximately
  700 employers representing over 750,000 employees. Our MediKredit Integrated
  Healthcare Solutions (Proprietary) Limited, or MediKredit, service provides the
  majority of funders and providers of healthcare in South Africa with an on-line
  real-time management system for healthcare transactions.

We generate revenue primarily by
  charging transaction fees to governmental agencies, employers, merchants and
  other financial services providers and by selling hardware, software and related
  technology. During fiscal 2010, 2009 and 2008, we had revenue of $280.4 million,
  $246.8 million and $254.1 million, respectively and operating income of $69.8
  million, $93.4 million and $110.4 million, respectively. Revenues derived from
  our South African operations were $267.5 million, $220.4 million and $238.9
  million in fiscal 2010, 2009 and 2008, respectively. Revenues derived from our
  operations in Europe were $12.3 million, $19.6 million and nil, in fiscal 2010,
  2009 and 2008, respectively and revenues derived from our operations in the rest
  of the world were $0.6 million, $6.9 million and $15.2 million in fiscal 2010,
  2009 and 2008, respectively.

2

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We analyze our business in terms
  of four inter-related independent operating segments: (1) transaction-based
  activities, (2) smart card accounts, (3) financial services, and (4) hardware,
  software and related technology sales. We discuss these segments in detail under
  Item 7. Managements Discussion and Analysis of Financial Condition and Results
  of Operations. In addition, note 17 to our consolidated financial statements
  included in this annual report contains detailed financial information about
  these operating segments for fiscal 2010, 2009 and 2008.

All references to Net1, the
  Company, we, us, or our are references to Net 1 UEPS Technologies, Inc.
  and its consolidated subsidiaries, collectively, except as otherwise indicated
  or where the context indicates otherwise.

Market Opportunity

Services for the Under-banked:According to the United States Census Bureau, the worlds population
  currently exceeds 6.9 billion people. Yet of this total, it has been reported
  that over four billion people earn less than the purchasing parity equivalent of
  two dollars per day. In general, these people either have no bank account or
  very limited access to formal financial services. This situation arises when
  either banking fees are too high relative to an individuals income, a bank
  account provides little or no meaningful benefit or there is insufficient
  infrastructure to provide financial services economically in the individuals
  geographic location. We refer to these people as the unbanked and the
  under-banked. These individuals typically receive wages, welfare benefits, money
  transfers or loans in the form of cash, and conduct commercial transactions,
  including the purchase of food and clothing, in cash.

The use of cash, however, does
  present significant risks. In the case of recipients, they generally have no
  secure way of protecting their cash other than by converting it immediately into
  goods, carrying it with them or hiding it. In cases where an individual has
  access to a bank account, the typical deposit, withdrawal and account fees
  meaningfully reduce the money available to meet basic needs. For government
  agencies and employers, using cash to pay welfare benefits or wages results in
  significant expense due to the logistics of obtaining that cash, moving it to
  distribution points and protecting it from theft.

With over 25 million cardholders
  in more than 20 developing countries around the world, our track record and
  scale uniquely positions us to continue further geographical penetration of our
  technology in additional emerging countries.

Online transaction processing
  services:The rapid global growth of retail credit and debit card
  transactions is reflected in the May 2009 Nilson Report, according to which
  worldwide annual general purpose card purchase volume increased 10% to $6.7
  trillion in 2008. General purpose cards include the major card network brands
  such as MasterCard, Visa and American Express. We operate the largest
  bank-independent transaction processing service in South Africa through EasyPay,
  where we have developed a suite of value-added services such as bill payment,
  airtime top-up, gift card, money transfer and pre-paid utility purchases that we
  offer as a complete solution to merchants and retailers. Our expertise in
  on-line transaction processing and value-added services provides us with the
  opportunity to participate globally in this rapidly growing market segment.

Mobile Payments:In
  February 2010, the United Nations International Telecommunications Union
  estimated that there are now approximately 4.6 billion mobile phone subscribers
  deployed globally, and we believe that this includes subscribers in the majority
  of our targeted emerging economies. Despite lacking access to formal financial
  services, large proportions of the under-banked customer segment own and utilize
  mobile phones. As a result, mobile phones are increasingly being viewed as a
  channel through which this underserved population can gain access to formal
  financial and other services. Today, most mobile payment solutions offered by
  various participants in the industry largely provide access to information and
  basic services, such as allowing consumers to check account balances or transfer
  funds between existing accounts with the financial institution, but they offer
  limited functionality and ability to use the mobile device as an actual payments
  and banking instrument.

Our proprietary Mobile Virtual
  Card technology, when used on a mobile device, is ideally suited to
  significantly reducing fraud in card-not-present transactions typically
  performed in developed countries such as the United States and Western Europe
  and is also a comprehensive banking and payment solution for the under-banked
  population in developing economies.

Healthcare:Given lack of
  broad-based healthcare services in many emerging countries, governments are
  increasingly focused on driving initiatives to provide affordable and accessible
  healthcare services to their populations. Similarly, countries such as the
  United States are embarking on expansive overhauls of their existing healthcare
  systems.

By combining Net1s payment
  expertise with MediKredits real-time claims processing technology, we are able
  to offer governments, funders and providers of healthcare with a comprehensive
  solution that offers a completely automated system, reducing both cost and
  time.

3

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Our Off-line Transacting Solution

We believe that we are the first
  company to enable the affordable delivery of financial products and services to
  the worlds unbanked and under-banked people. Our approach takes full advantage
  of moving processing away from a centralized point to the computer chip embedded
  on a smart card. A smart card reader, a point of service or POS device, is used
  to enable communication between smart cards in real-time during a transaction
  and indirectly with our mainframe computer at a later time. This architecture
  has significant implications in terms of the products and services that we can
  deliver compared to those offered by banking institutions or other card
  providers.

First, our system enables offline
  transactions, which is essential in serving the unbanked and under-banked.
  Second, while offline, the smart card can engage in sophisticated transaction
  processing, using data encryption and biometric fingerprint protection to ensure
  security. In fact, our smart cards can calculate the interest owed to the card
  holder for having funds recorded onto our system without ever coming online.
  Third, with all of the software and transaction records on the smart card, the
  POS device itself requires far fewer components, circuitry and memory,
  substantially reducing costs. Fourth, each transaction is recorded on both
  participating smart cards, copied in subsequent transactions to additional smart
  cards, and ultimately reported to our mainframe computer. This creates a full
  audit trail that significantly reduces the potential for corruption, theft and
  fraud. Lastly, instead of having to build the overall system to handle peak
  loads, our system further reduces costs by smoothing the transaction flow over
  time.

We believe that our solution delivers benefits to each of the
  users of our system, including:

Individuals.There is no
  minimum income requirement for individuals to use our smart card, making our
  solution universally accessible. It is also inexpensive since the overall cost
  of the system is much less than widely available solutions, including cash, bank
  accounts and bank cards that require online access. Our solution additionally
  has the advantage of working everywhere, including remote areas where many
  unbanked and under-banked people live. Equally important, our solution is secure
  and smart cards are replaceable. This means that individuals do not have to fear
  that their money will be stolen or that they will be charged for fraudulent
  transactions as all transactions are verified biometrically through
  fingerprints. Since the smart card performs all of the required computing
  processing and contains all of the different service features, the smart card
  can be tailored to meet the needs of the individual. Card holders can also
  receive interest on their card balances, a benefit not available to them when
  transacting solely in cash. We believe our solution has the potential to enhance
  significantly the living standards of the unbanked and under-banked by reducing
  transaction costs and providing them with new and additional financial products
  and services, which are otherwise largely procured from the informal sector.

Merchants and Financial
  Service Providers. Merchants derive multiple benefits from our system. Our
  system decreases the amount of cash they must hold, improving security and
  reducing expenses, such as cash deposit fees and cash losses. By providing
  financial services through our POS devices, merchants also benefit from new
  income streams at no additional incremental cost. In addition, our system
  provides a record of transactions that is useful for administrative purposes.
  For formal financial service providers, the use of smart cards provides
  opportunities to directly sell products and services to a market that was
  previously difficult to reach. For instance, insurance companies can offer their
  products with the premium deducted directly from the individuals smart card. In
  the case of lending, administrative costs are decreased along with the expense
  of holding cash. Again, the collection of payments can occur directly from the
  smart card, reducing credit risk and helping to establish credit history.

Employers. Our system
  enables employers to eliminate cash from the wage payment process. This reduces
  expenses by avoiding cash handling and management, the need to insure, secure
  and transport that cash and the bank transaction fees associated with obtaining
  cash in the first place. The process of paying employees using cash is also time
  consuming, taking up to half a day per pay period in some instances. The use of
  our system eliminates this process and thereby increases productivity. In
  addition, because cash payments are distributed in packets to employees,
  disputes can arise as to the amount of cash in the packet. Our system also
  addresses this issue as the amount reflected on the card holders accounts are
  recorded on the back-end system and then distributed on the smart cards.
  Finally, employers frequently provide additional services to their employees out
  of necessity, particularly loans. Our system enables other service providers to
  deliver these products.

Government Agencies.A
  fundamental policy goal for almost any government is to enhance the welfare of
  the poorest citizens in the country. Yet the use of cash is a poor method for
  delivering social welfare grants since it is difficult to track, and the
  recipients endure a range of expenses and dangers that reduce their options. By
  using our system, government agencies enjoy reduced costs in the delivery of
  benefits to recipients by eliminating the use of cash while increasing the
  options available to the recipient. This use of our system intrinsically
  increases the welfare that government agencies can provide from the same amount
  of taxes collected. Our system also has the potential to increase the amount of
  taxes collected by bringing informal businesses into the formal economy. The
  presence of a full audit trail also means that government agencies can combat
  corruption. Moreover, the use of smart cards for the delivery of additional
  services, including insurance products, means that regulatory bodies can expand
  their oversight of transactions for individuals who are frequently least able to
  protect themselves. In regard to medical benefits, our system provides
  comprehensive inventory management and has the potential to improve the
  treatment of patients significantly.

4

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The UEPS Technology

We developed our core UEPS and
  DUET technology to enable the affordable delivery of financial products and
  services to the worlds unbanked and under-banked populations. Our proprietary
  technology is designed to provide the secure delivery of these products and
  services in the most under-developed or rural environments, even in those that
  have little or no communications infrastructure. Unlike a traditional credit or
  debit card where the operation of the account occurs on a centralized computer,
  each of our smart cards effectively operates as an individual bank account for
  all types of transactions. All transactions that take place through our system
  occur between two smart cards at the POS as all of the relevant information
  necessary to perform and record transactions reside on the smart cards.

The transfer of money or other
  information can take place without any communication with a centralized computer
  since all validation, creation of audit records, encryption, decryption and
  authorization take place on, or are generated between, the smart cards
  themselves. Importantly, the cards are protected through the use of biometric
  fingerprint identification, which is designed to ensure the security of funds
  and card holder information. Transactions are generally settled by merchants and
  other commercial participants in the system by sending transaction data to a
  mainframe computer on a batch basis. Settlements can be performed online or
  offline. The mainframe computer provides a central database of transactions,
  creating a complete audit trail that enables us to replace lost smart cards
  while preserving the notional account balance, and to identify fraud.

System Components

Our platform consists of three
  fundamental components: (1) our funds transfer system, or FTS, intellectual
  property (2) our UEPS/DUET software and (3) our security protocol.

FTS. Our FTS intellectual
  property allows funds to be transferred from one smart card to another in a
  secure and offline manner. The term offline refers to transactions that are
  effected without the need to contact or communicate with the issuer when the
  transactions occur, as the smart cards themselves perform the authorizations
  required. The FTS also describes how smart cards can be loaded or re-loaded with
  funds and how these can be redeemed for value in either banking or non-banking
  environments.

UEPS / DUET. Our UEPS is a
  suite of software programs that make use of the FTS methodology to deliver an
  integrated information, payment, switching and settlement environment that
  underpins our transaction processing system. Our software principally runs on
  three devices: the smart card, the POS device and the back-end system mainframe.
  When we sell a complete system to a customer or license our technology, we
  provide all of the software required to operate the UEPS, including the smart
  card functionality, the POS devices that allow our smart cards to transact with
  each other in an offline manner and our back-end system that primarily stores an
  audit trail of all transactions effected.

The primary strengths of the UEPS
  are its affordability, security and flexibility. The system is affordable
  because the computer chips on the smart cards contain all the software necessary
  to process UEPS transactions, thereby allowing the POS devices required to
  conduct these transactions to contain far fewer components and less circuitry
  than traditional POS devices. There is also a reduced need for processing power
  and on-board memory given that online communication is not necessary. This
  eliminates the need for an internal or external modem and its associated
  hardware, maintenance and call costs. As a result, the UEPS terminals are
  relatively inexpensive and do not require specialized technical expertise for
  installation. The UEPS also reduces or eliminates the need for national
  infrastructures, including electricity, telephone or data transmission. The UEPS
  is secure because the funds in each smart card are protected from illegal access
  through biometric fingerprint technology. In addition, every transaction is
  verified by the two smart cards involved in the transaction using
  state-of-the-art cryptographic systems in conjunction with protocols and
  techniques that we have developed. Finally, our UEPS is flexible because
  transactions are completed offline, eliminating virtually all restrictions where
  verified transactions can occur.

Security Protocol.Our
  security protocol was designed to prevent opportunistic fraud and enforce the
  correct transaction flow. The symmetric triple data encryption standard, or DES,
  is used extensively in association with a native random number generator that
  ensures that all transactions are performed by using a random session key pair.
  The DES encryption algorithm can be easily modified to use alternative symmetric
  or asymmetric encryption algorithms such as the Rivest, Shamir and Adleman or
  elliptic curves. Each message exchanged during a transaction names both
  transacting parties, includes unique information to guarantee freshness and
  depends explicitly on all the messages that occur before it.

5

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Our Payment System Platform

The following diagram depicts how our UEPS platform is
  constructed.

UEPS / DUET PLATFORMFully-functional and integrated payment and settlement
        system, capable of operating all UEPS and DUET products and systems.




COMPLETE SYSTEMSCombination of products meeting a clients particular
        requirements.




STAND-ALONE
        PRODUCTSFinancial
        transaction applications (S2S products).




FUNCTIONALITYCombination of Hardware and Operating Systems on smart
        cards enable the creation of UEPS applications which can be customized for
        the particular needs of a client.




OPERATING SYSTEMSThird-party software.
      UEPS / DUET software programmed by us.




SMART CARDS / SIM CARDS 
        (Hardware)Cards sourced from third-party vendors.




HARDWAREPOS devices, ATMs, mobile phones, back-end computer systems
        sourced from third-party vendors.


6

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The UEPS we sell to clients is a
  platform with the potential to provide all of the products we develop which,
  when grouped together, form complete systems serving the specific needs of
  various business segments. Depending on the requirements of a particular
  customer, we assist the customer in the setup of its application which is
  tailored to provide only the products and services initially required, although
  the UEPS can later be updated to provide additional products. We outsource the
  manufacturing of the hardware components of our system, including smart cards,
  POS devices, automated teller machines, or ATMs, PCs and back-end mainframes.
  However, we have developed all of our application software modules so that they
  will run on different hardware platforms which allow us to be
  hardware-independent and to provide our customers with the latest and most
  economical hardware solutions.

Scalability.Our UEPS can
  be implemented in different environments, from small closed systems to national
  implementations. In closed-system environments, the UEPS front-end equipment is
  personal computer-based and can therefore be implemented at relatively low cost.
  In these instances, we provide the back-end system on a transaction fee basis,
  thus limiting the overall set up cost. This approach can also be used whenever
  larger implementations are required but where the customer prefers to focus on
  marketing and selling its products rather than initially concentrating on
  operating the back-end system. The cost to entry can thus be greatly reduced as
  the operations can first become profitable before expending large amounts of
  capital. On the other hand, large governmental institutions, financial
  institutions or medical insurers typically prefer to maintain control over the
  entire payment system and therefore invest in a full system implementation. The
  time to launch these projects tends to be longer due to the time that is
  required to train the end-user to operate the system.

Once a UEPS is installed on
  behalf of a customer, we believe that we are well-positioned to benefit from the
  scalability of the system as minimal changes are required to be made to the
  application base for the system to manage significantly greater numbers of
  users. We can therefore provide additional smart cards while leveraging the
  existing cost base in a market. In addition, we have a dedicated team of
  technicians and developers and an infrastructure capable of supporting a
  significant volume of customers and their transactions. As a result, we expect
  to benefit from economies of scale that pertain to increases in the number of
  products and services using the infrastructures we sell and/or implement.

Our Business Strengths

We believe our business strengths
  include:

Technology Leadership. We
  believe that we are the leader in developing, implementing and operating
  affordable, flexible and secure electronic payment systems for the unbanked and
  under-banked that work offline. Of equal importance, our smart cards are secured
  through biometric fingerprint authentication and have a broad range of
  additional functionality through the use of wallets that can be turned on as
  needed or as services become available. We can deliver these services to the
  unbanked population at a fraction of the cost of traditional systems. Our
  ability to implement an HIV/AIDS administrative system on the same smart card as
  financial services demonstrates the flexibility of our approach. In addition, we
  have validated the security of our smart cards along with our overall system,
  forming the foundation for a trusted solution. Independent third parties have
  reviewed and published our security protocols and we have refined our system in
  a way to provide system integrity over the life of the smart cards. From our
  inception in 1989 to date, we have not suffered any security breaches or losses
  of transactions or funds on our system. In addition, we have well-established
  core cryptography, software, hardware, embedded chip, wireless and payment
  expertise.

*Proven Solution.*Our
  system is proven and is widely used by over 25 million of cardholders in more
  than 20 countries.

Versatile Application.Once an individual begins using our smart card, we become a logical provider
  of a broad range of additional products and services. For instance, a card
  holder using our system for the administration of medical treatment can also use
  the same smart card for receiving welfare payments or wages as well as making
  purchases. Because use of each smart card is secured biometrically, the smart
  card can also be used for identification and voting. The additional uses mean
  that once we have enrolled and delivered a smart card to an individual, our
  revenue potential increases significantly beyond the initial service for which
  that individual has signed up.

Broad Appeal that Drives
  Opportunities.Because our system provides economic benefits to all
  participants, we believe there are strong incentives for government agencies and
  private sector companies to adopt our system in many developing countries. Our
  solution is also appealing because a single deployment enables the delivery of a
  broad array of new services to those who are potentially most in need of them,
  often at a lower cost than alternative distribution methods.

Increasing Returns to
  Scale. The initial establishment of our system in a province or country
  requires upfront expenditures for computers, distribution infrastructure and
  card holder registration. Once in place, though, the cost to us of supplying
  additional products to users is low. For instance, if a customer receives
  welfare payments on one of our smart cards and then chooses to purchase
  insurance through our system, there is almost no additional expense for us to
  deduct the insurance premium regularly. As a result, the operating margin for
  that customer increases significantly, offset only by any marketing or
  administrative costs associated with that product.

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Our Strategy

We intend to provide the leading
  transacting system for the worlds estimated four billion unbanked and
  under-banked people to engage in electronic transactions, as well as to provide
  our transaction processing, value-added services processing, new secure mobile
  payment technologies and health care processing services globally. To achieve
  these goals, we are pursuing the following strategies:

Using our first wave/second
  wave approach to expand into new marketsWe use what we refer to as a
  first wave/second wave approach to market expansion. In the first wave, we
  seek to identify an application for which there is a demonstrated and immediate
  need in a particular territory and then sell and implement our technology to
  fulfill this initial need. As a result, we achieve the deployment of the
  required technological infrastructure as well as the registration of a critical
  mass of cardholders. During this phase, we generate revenues from the sale of
  our software and hardware devices, as well as ongoing revenues from transaction
  fees, maintenance services and the use of our biometric verification engine.
  Once the infrastructure has been deployed and we achieve a critical mass of
  customers, we focus on the second wave, which allows us to use this
  infrastructure to provide users, at a low incremental cost to us, with a wide
  array of financial products and services for which we can charge fees based on
  the value of the transactions performed.

Realigning management
  responsibilities and internal systems on a geographic basis to maximize our
  ability to target more markets simultaneouslyThe new UEPS systems that we
  have launched outside South Africa have received a high level of attention from
  governments and central banks, among others, and we are continually being
  presented with opportunities to discuss the implementation of new systems in
  countries around the world. In addition, as a result of our August 2008
  acquisition of Net1 Universal Technologies (Austria) AG, or Net1 UTA, we now
  provide smart card-based payment systems in Russia and other members of the
  Commonwealth of Independent States, or CIS, as well as several other countries.
  We believe that we can accelerate our expansion into new markets while making
  the most efficient use of our senior management, marketing and information
  technology personnel by creating separate clusters and within those clusters,
  business units, each of which is devoted to a particular geographic area and/or
  specific technologies, products and services, and we have recently completed the
  process of defining and creating those groups.

Leveraging our new payment
  technologies to gain access to developed economiesWhile our business has
  traditionally focused on marketing products and services to the worlds unbanked
  and under-banked population, we have developed and acquired proprietary
  technology, such as our Virtual Card application for mobile telephones that is
  designed to eliminate fraud associated with card not present credit card
  transactions, which are those effected by telephone or over the internet. We
  plan to introduce this technology in the United States, Western Europe and other
  developed economies.

***Our Business in South
  Africa***

In South Africa, we are one of
  the leading independent transaction processors, as the leading provider of
  social welfare payment distribution services to the countrys large unbanked and
  under-banked population, the largest third-party processor of retail merchant
  transactions and the leading processor of third-party payroll payments. We
  believe that our large cardholder base, proprietary technology and payment
  infrastructure, together with our strong government and business relationships,
  position us at the epicenter of commerce in the country.

We believe that we are
  well-positioned to continue to gain market share and build upon the critical
  mass that we have developed in South Africa and have identified the following
  opportunities to continue to drive growth in our South African business:

Government focus on expansion
  of social benefitsAs a result of the South African governments focus on
  the provision of social grants as a core element of its social assistance and
  poverty alleviation policies, we believe that we remain well-positioned to
  continue to provide our payment services to the government and beneficiaries. We
  believe that there is a compelling argument for the South African Social
  Security Agency, or SASSA, and other government agencies to utilize our
  innovative, off-line, secure, efficient and low-cost payment solution to reach
  beneficiaries across the country, even in the most remote and deep rural areas
  where the communication and electricity infrastructure is sparse or
  non-existent. On August 24, 2010, we signed a new service level agreement with
  SASSA that expires on March 31, 2011. We discuss this new agreement in more
  detail elsewhere in this Annual Report, including under Item 9B. Other
  Information.

Increasing adoption of
  existing servicesOur technology supports a variety of other products and
  smart card to smart card, or S2S, services that expand the use of our technology
  and provide us with new sources of transaction-based revenues. During the last
  several years, we have introduced these new products and services in South
  Africa for existing and newly-enrolled cardholders. We have installed our POS
  terminals in thousands of mostly rural merchant locations throughout the country
  which allows beneficiaries to receive their grants at these locations and
  transact business with the retailers using our smart card. During fiscal 2010,
  we processed 18.4 million transactions with a total value of ZAR 11.7 billion at
  these merchant locations. In addition, during fiscal 2010, we began implementing
  our wage payment solution which provides for secure payroll distribution through
  our smart card.

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Introduction of new
  servicesWe are also poised to benefit from the introduction and
  adoption of new services across our various platforms, which we believe will
  generate significant incremental transaction fee revenue from current and new
  users at a relatively low cost to us. Some of these services include:

Acceptance of UEPS cards in
  traditional POS terminalsWe are currently enabling our cards to be
  compliant with international EMV standards, which will allow our cardholder base
  to purchase goods and services at merchant POS locations that currently accept
  MasterCard-branded cards. This additional functionality will allow us to expand
  significantly the number of terminals that use our smart card, capturing fees
  from new transactions and positioning our cards to be used by a larger share of
  the banked population.

Merchant processing through
  EasyPayEasyPay is the largest independent financial switch and merchant
  processor in South Africa for credit and debit card transactions. EasyPay
  processed 655.2 million transactions with a total value of ZAR 143.8 billion
  during fiscal 2010. Our technology also allows us to provide a variety of
  additional, value-added payment services, such as bill payment, prepaid mobile
  top-up, prepaid utility services and gift cards, that we can sell into our
  existing card holder base as well as to new customers. We have integrated our
  propriety UEPS software with these services to create a larger, seamless,
  value-added payments eco-system.

Third party payments from
  payroll processing through FIHRSTThrough our FIHRST service, we offer
  employers an easy and flexible method of making payments to employees and
  payroll-related creditors. During the three months ended June 30, 2010, FIHRST
  processed 5.3 million transactions with a total value of ZAR 14.1 billion. The
  FIHRST system enables human resources departments to achieve greater levels of
  efficiency and employee service. FIHRST is recognized by and works in
  partnership with the majority of third-party payroll organizations, including
  pension fund and medical aid administrators.

On-line real-time
  management of healthcare transactions processing through
  MediKreditThrough our MediKredit service we provide both funders and
  providers of healthcare on-line real-time management of healthcare transactions.
  During the six months ended June 30, 2010, MediKredit processed 14.8 million
  transactions. Our dynamic healthcare claims processing and managed care services
  are designed to accommodate our clients unique benefit designs and processing
  needs.

***The African Continent
  and Iraq***

During the last five years, we
  have embarked on an international expansion program to provide a UEPS-based
  solution in developing economies outside South Africa where we see significant
  growth opportunities, typically in those countries that have a significant
  unbanked or under-banked population. Consistent with our first wave/second
  wave approach, in each market, we seek to identify one or more specific
  applications for our technology and then determine how best to create a card
  holder base to whom we can then provide, at a low incremental cost to us,
  additional products and services for which we can charge transaction fees. We
  are currently targeting services such as payment schemes for welfare
  distribution, healthcare services, banking services, transportation services,
  bill payments, mobile communication services, payroll, remittances and
  e-commerce.

We are in varying stages of
  implementing this expansion and employ a variety of business models, depending
  on the market, including providing outsourced transaction processing services,
  licensing our UEPS system or creating joint ventures with local partners and
  service providers.

Some examples of our current and future expansion activities
  across the African continent include:

GhanaWe were awarded a
  contract by the Central Bank of Ghana to create the Ghanaian National Switch and
  Smart Card Payment System, which was officially launched in April 2008. All
  Ghanaian banks are required to participate in the system and issue our smart
  cards to their customers. The system creates interoperability between ATMs, POS
  and teller terminals owned by the individual banks.

IraqWe have implemented a
  customized UEPS banking and payment system that enables offline and online
  retail payment transactions in Iraq. This system provides interoperability
  between ATMs, POS devices and bank branches and facilitates the distribution of
  cash disbursements in Iraq (including the payment of social grants to war
  victims, employee salary/wage payments, banking products and other financial
  services).

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Joint ventures in Botswana,
  Namibia and NigeriaWe own 50% of SmartSwitch Botswana and SmartSwitch
  Namibia, which license our UEPS software and buy cards and terminals from us.
  These entities contract to provide our technology to various users, such as to
  the Botswana Department of Social Services, which distributes government grants
  and NamPost, a Namibian governmental entity which provides post office and
  banking services. In Nigeria, SmartSwitch Nigeria, of which we own 80%, has
  provided 50,000 smart cards to one of Nigerias largest banking institutions for
  its initial deployment into village community banks. Expected applications for
  the UEPS technology in Nigeria include banking, health care, money transfers,
  pre-paid utilities and telephony and voting.

Other African
  countriesWe are currently exploring opportunities with
  governments, as well as banks and merchants in other African countries, to
  establish alternate payment systems in these countries using our UEPS
  technology.

***Russia and Other CIS
  Members***

Through our majority-owned
  subsidiary, Net1 UTA, which we acquired in August 2008, we provide smart
  card-based payment systems under the DUET name to banks, enterprises and
  government authorities in Russia, Ukraine, Uzbekistan, Mongolia, Vietnam, India
  and Oman. The DUET system was developed by Net1 UTA as a derivative of the first
  version of our UEPS technology that we licensed to Net1 UTA in 1993. Net1 UTA
  provides the DUET system to Sberbank, the largest financial institution in
  Russia, which owns the remaining minority interest in Net1 UTA. One of our
  primary reasons for acquiring Net1 UTA was to obtain immediate access to the
  large Sberbank cardholder base. While Net1 UTAs business model has historically
  been based primarily on the sale of cards and hardware, we intend to transition
  the business into more of a transaction processing services provider over time
  by leveraging Net1 UTAs management, sales force and customer base to sell the
  UEPS platform and its suite of processing services.

***Emerging Growth
  Opportunities***

We believe that an area for
  significant potential growth is the opportunity to introduce some of our new
  technologies, such as our MediKredit, Net1 Virtual Card and mobile payment
  applications, in the more developed economies of the United States and Western
  Europe and to leverage the flexibility and multi-application capabilities of our
  UEPS technology to capture extensive, country-specific applications in less
  developed countries.

New
  technologiesOur Net1 Virtual Card application is designed to
  reduce the higher levels of fraud associated with card-not-present credit card
  transactions without the need for additional infrastructure or any changes to
  existing infrastructures. This application creates a one time-use digital card
  generated on demand (off-line) from a mobile phone. As opposed to a physical
  credit card, our virtual card is only valid for a specific value and cannot be
  used more than once. It contains no personal user information such as a bank
  account or telephone number. We believe that strong growth trends in e-commerce
  and the rapidly increasing adoption of mobile commerce, such as downloaded ring
  tones, mobile applications and mobile payment services, will present significant
  opportunities for our Net1 Virtual Card technology.

Mobile payment applications in
  Latin America and AsiaWe have entered the Latin American
  market by offering our VTU system and services through VTU Colombia, of which we
  own 37.50% . The joint venture provides virtual prepaid mobile top-up services
  for two of Colombias three largest mobile operators. We plan to expand this
  service into new areas of Colombia and other markets in Latin America. In
  addition, through our 30% equity stake in VinaPay, we are providing our VTU
  system and services in Vietnam.

Country-specific
  applicationsWe are also pursuing discrete opportunities to
  create unique country-specific applications, such as a national identification
  card with multiple applications like a contactless transport card.

Our Business Units and Technologies

Our group is organized into the
  following clusters and within each cluster, separate business units.

***Transactional
  Solutions Cluster***

**Cash
  Paymaster Services (CPS)**

Our CPS business unit deploys our
  UEPS  Social Grant Distribution technology to distribute social welfare grants
  on a monthly basis to roughly 3.2 million beneficiaries in five provinces out of
  the nine South African provinces. These social welfare grants are distributed on
  behalf of SASSA. During our 2010, 2009 and 2008 fiscal years, we derived 66%,
  65% and 67% of our revenues respectively, from CPS social welfare grant
  distribution business. As discussed above, on August 24, 2010, we signed a new
  service level agreement with SASSA.

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CPS provides a secure and
  affordable transacting channel between social welfare grant beneficiaries, SASSA
  and formal businesses. CPS enrolls social welfare grant beneficiaries by issuing
  them a UEPS smart card that digitally stores their biometric fingerprint
  templates on the smart card, enabling them to access their social welfare grants
  securely at any time or place. The smart card is issued to the beneficiary on
  site and utilizes optical fingerprint sensor technology to identify and verify a
  beneficiary. The beneficiary simply inserts a smart card into the POS device and
  is prompted to present his fingerprint. If the fingerprint matches the one
  stored on the smart card, the smart card is loaded with the value created for
  that particular smart card.

The smart card provides the
  holder with access to all of the UEPS functionality, which includes the ability
  to have the smart card funded with pension or welfare payments, make retail
  purchases, enjoy the convenience of pre-paid facilities and qualify for a range
  of affordable financial services, including insurance and short-term loans. The
  smart card also offers the card holder the ability to make debit order payments
  to a variety of third parties, including utility companies, schools and retail
  merchants, with which the holder maintains an account. The card holder can also
  use the smart card as a savings account.

Our UEPS - Social Grant
  Distribution technology provides numerous benefits to government agencies and
  beneficiaries. The system offers provincial governments a reliable service at a
  reasonable price. For beneficiaries, our smart card offers convenience,
  security, affordability and flexibility. They can avoid long waiting lines at
  payment locations and do not have to get to payment locations on scheduled
  payment dates to receive cash. They do not lose money if they lose their smart
  cards, since a lost smart card is replaceable and the biometric fingerprint
  identification technology helps prevent fraud. Their personal security risks are
  reduced since they do not have to safeguard their cash. Beneficiaries have
  access to affordable financial services, can save and earn interest on their
  smart cards and can perform money transfers to friends and relatives living in
  other provinces. Finally, beneficiaries pay no transaction charges to load their
  smart cards, perform balance inquiries, make purchases or downloads or effect
  monthly debit orders. For us, the system allows us to reduce our operating costs
  by reducing the amount of cash we have to transport.

The business unit has been allocated to our transaction-based
  activities and smart card accounts reporting segments.

**EasyPay**

Our EasyPay business unit
  operates the largest bank-independent financial switch in Southern Africa and is
  based in Cape Town, South Africa. EasyPay focuses on the provision of
  high-volume, secure and convenient payment, prepayment and value-added services
  to the South African market. EasyPays infrastructure connects into all major
  South African banks and switches both debit and credit card electronic funds
  transfer, or EFT, transactions for some of South Africas leading retailers and
  petroleum companies. It is a South African Reserve Bank, or SARB, approved
  third-party payment processor.

In addition to its core
  transaction processing and switching operations, EasyPay provides a complete
  end-to-end reconciliation and settlement service to its customers. This service
  includes dynamic reconciliation as well as easy-to-use report and screen-query
  tools for down-to-store-level, management and control purposes.

The EasyPay suite of services
  includes:

- EFT - EasyPay switches credit, debit and fleet card transactions for
    leading South African retailers and petroleum companies;
- EasyPay Bill Payment - As part of its value-added services offering,
    EasyPay has developed and operates a consumer bill payment service introduced
    at retail point-of sale over 11 years ago. Known and marketed as EasyPay,
    the service is integrated into a large number of national retailers and mobile
    channels and is available over the internet at www.easypay.co.za. EasyPay
    processes monthly account payment transactions for over 300 different bill
    issuers including major local authorities, telephone companies, utilities,
    medical service providers, traffic departments, mail order companies, banks
    and insurance companies;
- EasyPay Prepaid Electricity - This service enables local utility companies
    such as Eskom Holdings Limited and a growing number of local authorities on a
    national basis to sell prepaid electricity to their customers;
- Prepaid Airtime - EasyPay vends airtime at retail POS terminals for all
    the South African network operators;
- Electronic Gift Voucher - EasyPay supports the electronic generation,
    issuance and redemption of paper or card- based gift vouchers;
- EasyPay Licenses - EasyPay enables the issuance of new South African
    Broadcasting television licenses and the capturing of existing license details
    within retail environments via a web-based user interface;
- Third Party Switching and Processing Support  EasyPay switches
    transactions from retail POS systems to the relevant back-end systems; and
- Hosting Services - EasyPays infrastructure supports the hosting of
    payment servers and applications on behalf of third parties, including
    financial institutions.

EasyPay provides 24x7 monitoring
  and support services, reconciliation, automated clearing bureau, or ACB,
  settlement, reporting, full disaster recovery and redundancy services.

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The business unit has been
  allocated to our transaction-based activities reporting segment.

**Net1
  Austria**

Our Net1 Applied Technologies
  Austria GmbH, or Net1 Austria, incorporating Net1 UTA, business unit provides
  smart card-based payment systems to banks, enterprises and government
  authorities in Russia, Ukraine, Uzbekistan, India and Oman. Net1 UTA is
  headquartered in Vienna, Austria, and has subsidiaries in India and Russia.

Net1 UTA is a market leader in
  smart card-based payment systems in the CIS with the national interbank payment
  system in Uzbekistan and a nationwide smart card payment system in Russia. Net1
  UTA has historically employed a business model which focused on selling its
  product offering into various countries. In contrast, our service-based business
  model focuses on generating recurring revenues from our cardholder base through
  transaction-based fees, financial services and value-added products. We believe
  that the geographical footprint of Net1 Austria is now large enough to allow us
  to overlay our service-based model onto the various DUET systems operating in
  Russia and other countries, thereby creating new revenue streams for Net1 UTA
  and system operators.

Since we acquired Net1 Austria in
  August 2008, it has enhanced its product offering by leveraging our group
  technology platforms and information technology development resources. We
  believe that our technological leadership in fields such as biometric
  identification and in the integration of our UEPS technology with global systems
  for mobile communications, or GSM, will allow us to create new business
  opportunities for Net1 UTA such as national identification, voting and welfare
  distribution systems and mobile payment solutions. We expect that the addition
  of Net1 UTAs skilled human resources in the information technology area will
  greatly assist us in the ongoing development of our technologies and maintenance
  of our existing systems. Net1 Austria focuses its marketing efforts on markets
  in Central and Eastern Europe, Russia and other CIS members, the Middle East
  (excluding Iraq), India and Asia.

Net1 UTAs revenue has declined unexpectedly as a result of the difficult market and trading conditions in its traditional markets. These recent difficulties resulted in indefinite delays in the conclusion of certain expected significant business development opportunities.

The business unit has been allocated to our hardware, software
  and related technology sales reporting segment.

**MediKredit**

MediKredit is an independent
  technology company that offers financial and clinical risk management solutions
  to both funders and providers of healthcare, through online real-time, or OLRT,
  management of healthcare transactions. Our adaptable healthcare claims
  processing and managed care services are designed to accommodate the complex
  benefit design as well as other processing requirements of our clients.
  MediKredits healthcare claims processing functionality extends to all
  healthcare claim types, including pharmacy, doctor, public and private hospital
  claims. This is enabled by MediKredits innovative proprietary claims processing
  and managed care systems which lie at its core.

The business unit has been allocated to our transaction-based
  activities reporting segment.

**FIHRST**

FIHRST offers South African
  employers an easy and flexible method of making payments to creditors, arising
  from payroll processing. We currently process payments utilizing FIHRSTs system
  on behalf of our clients, enabling salaries departments to achieve greater
  levels of efficiency and employee service. FIHRST is recognized by and works in
  partnership with the majority of third party payroll organizations including
  pension fund and medical aid administrators.

We believe that FIHRSTs cost
  effective technology enhances the electronic movement of money in the business
  and financial community, assisting our clients to manage nett paid to employees,
  third party deductions, garnishee orders and creditor payments correctly,
  promptly and securely. We believe that the true value of the FIHRST service
  offering is not only to cost effectively move employer funds, but to provide the
  relevant information to the recipient organization via predefined schedules or
  payment remittance advices, thus reducing the reconciliation process from days
  to hours.

The business unit has been
  allocated to our transaction-based activities reporting segment.

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**Universal
  Electronic Technological Solutions (UETS)**

Our UETS business unit is based
  in Johannesburg, South Africa and focuses on the sale, implementation and
  support of our UEPS technology, ranging from large scale, national projects to
  smaller, product specific regional projects. UETS focuses on identifying,
  defining and activating an entry point to commence operations in Africa
  (excluding South Africa), Iraq.

The UETS sales and marketing
  approach is to sell the following solutions and products:

- The UEPS national switching, settlement, clearing and smart card solutions
    offering interoperability with existing banking infrastructure. We have sold
    such systems to the Central Bank of Ghana and the Reserve Bank of Malawi in
    the past;
- Wave 2 opportunities such as financial services sold via the existing
    UEPS infrastructure, such as loans and insurance to UEPS cardholders in
    Botswana;
- Individual stand-alone UEPS applications, with processing outsourced to
    Net1 regional offices, similar to the model deployed for the payment of
    welfare grants in Iraq;
- UEPS mobile banking solutions targeted at banks and/or mobile operators;
- E-Government applications such as multi-purpose national identity cards;
- Health care applications for countries seeking an electronic solution for
    the identification, benefit contribution monitoring and access control of
    patients in government hospitals,; and
- Secure verification of existing EMV Debit / credit card transactions using
    Net1s biometric identification technology.

Our UETS team also provides
  business development support in territories where UEPS systems have been sold
  and implemented, such as Ghana, Malawi, Namibia, Botswana and Nigeria.

The business unit has been
  allocated to our hardware, software and related technology sales reporting
  segment.

**Virtual
  Card**

Our Virtual Card business unit is
  responsible for the commercialization of our latest invention  the Net1 Virtual
  Card. This business unit operates from Johannesburg, South Africa and from
  Dallas, Texas. Net1 Virtual Card is a solution designed for bank card issuers to
  protect and grow their share of the remote transactions or card not present
  payment market.

The Net1 Virtual Card solution
  utilizes existing and traditional payment methods but enhances them by replacing
  plastic card data with a one-time-use virtual card data, hence eliminating the
  risk of theft, phishing, skimming, spoofing, etc. The virtual card data replaces
  digit-for-digit the credit (or debit) card number, the expiration date and the
  card verification value, or CVV, with only the Issuer Bank Identification Number
  (first 6-digit) remaining constant.

The Net1 Virtual Card solution
  uses the mobile phone to generate virtual cards. The mobile phone is the most
  available, cost-effective, secure and portable platform for generating virtual
  cards for remote payments (online, phone and catalogue orders). Following a
  simple registration process, the virtual card application is activated
  over-the-air, enabling the phone to generate virtual card numbers completely
  off-line.

Consumers can easily generate a
  new card on their mobile phone to shop on the internet, to fill-up a catalogue
  order, or to place a telephone order. Virtual cards are completely secure and
  can also be sent in a single click to family, friends, and service providers.
  Once the authorization request reaches the issuing bank processor, our servers
  decrypt the virtual card data, authenticate the consumer and pass the
  transaction request to the Card Issuer for authorization.

The benefits of the Net1 Virtual
  Card include, for:

- Card issuers- increased transactional revenues from existing
    accounts, driving more transactional revenues. Elimination of fraudulent card
    use.
- Mobile network operators- revenues from payments, reduced churn,
    opportunities for powerful co-branding schemes.
- Consumers- peace of mind, ease of use, rewards.
- Merchants- elimination of charge-backs and fraud at no extra cost.

The business unit has been
  allocated to our hardware, software and related technology sales reporting
  segment.

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***Hardware and Software
  Sales Cluster***

**Cryptographic
  Solutions**

Our Triple Data Encryption
  Standard, or TDES, and EMV security initiatives are conducted by a specialized
  business unit through close collaboration with suppliers of payment processing
  devices to help their technologies meet the stringent security standards
  required by the card associations.

Our self-developed range of PIN
  encryption devices, card acceptance modules and hardware security modules are
  primarily aimed at the financial, retail, telecommunication, utilities and
  petroleum sectors. These devices and modules are suited for high-speed
  transaction processing requirements, acceptance of multiple payment tokens,
  value-added services at point of transaction, and adherence to stringent
  transaction security and payment association standards such as TDES and EMV.

The business unit has been allocated to our hardware, software
  and related technology sales reporting segment.

**Chip
  and GSM Licensing**

Our Chip and GSM Licensing
  business unit is a supplier of chip cards into the South African and other
  international markets. We work with mobile network operators, card manufacturers
  and semiconductor manufacturers to provide card technology, solutions and
  software that enable mobile telephony, mobile transactions and value-added
  services to take place in a trusted, secure and convenient manner. These chip
  products and technology include operating system and application development,
  card manufacture and production, from concept and design through, printing,
  packaging and distribution. At the core of our chip business is the strategy of
  licensing chip software to a wide spectrum of other industry participants.

The business unit has been allocated to our hardware, software
  and related technology sales reporting segment.

**POS
  Solutions**

Our POS Solutions business unit
  is responsible for marketing in South Africa our secure, integrated POS payment
  products and systems, including:

- FlexiLANE  An in-store controller ideally suited to multi-lane retail and
    petroleum station environments. The in- store controller forms an interfacing
    and concentration layer between a group of distributed terminal devices and a
    centralized payment and value added service, or VAS, aggregator. This helps
    large retailers and petroleum companies to overcome the challenges associated
    with processing multiple transactions from multiple access devices using
    multiple tender types;
- FlexiGATE  A terminal and payment gateway that manages the routing of all
    FlexiLANE traffic and enables retailers to supply VAS such as airtime top-up,
    electricity payment and bill payment;
- FlexiPOS  An innovative retail solution that allows the retailer's
    various payment and VAS solution requirements to be streamlined into a single
    payment terminal. FlexiPOS transforms the POS terminal into a convenient and
    consumer friendly place of purchase, place of payment and place of service;
    and
- EMV  Net1s payment expertise helps ensure that retailers together with
    their acquirers meet the requirements of upgrading software, terminals and
    security for conformity with the latest international chip card standards.
- Ingenico POS equipment

The business unit has been
  allocated to our hardware, software and related technology sales reporting
  segment.

**VTU**

Our VTU business unit is
  responsible for marketing our VTU solution, which facilitates mobile phone-based
  prepaid airtime vending. The VTU technology enables prepaid cell phone users to
  purchase additional airtime simply, securely and conveniently. The vendor uses
  its GSM handset to purchase bulk airtime from a mobile network operator. Airtime
  value, as opposed to a virtual voucher, is then transferred directly from the
  vendors cellular handset to that of the customer. When the vendor runs out of
  airtime value, it is a simple task to purchase more to resell to customers.

The business unit has been
  allocated to our hardware, software and related technology sales reporting
  segment.

14

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***Financial Services
  Cluster***

**Finance
  Holdings**

Our Finance Holdings business
  unit is responsible for identifying financial services products that can be
  provided to our UEPS cardholders in South Africa and then marketing and
  implementing the provision of those products. We currently provide micro-loans
  to our UEPS cardholders who receive social welfare grants through our system in
  the KwaZulu-Natal and Northern Cape provinces. We provide the loans ourselves
  and generate revenue from the service fees charged on these loans. We also sell
  life insurance products on behalf of registered underwriters and earn revenue
  through the commissions we receive on the sale of policies.

Our wage payment system offers
  wage earners a UEPS card that allows them to receive payment, transact and
  access other financial services in a secure, cost-effective way. The target
  markets for our wage payment system are the unbanked and underbanked wage
  earners in South Africa, estimated at five million people. These wage earners
  are typically paid in cash and thus have all the risks associated with carrying
  cash but none of the benefits associated with having a formal bank account. In
  January 2007, we signed a co-operation agreement with Grindrod Bank, a fully
  registered bank in South Africa, for the establishment of a retail banking
  division within Grindrod Bank that will focus on deploying our wage payment
  solution in South Africa.

The business unit has been
  allocated to our financial services reporting segment.

***Corporate
  Cluster***

The Corporate Cluster provides
  global support services to the Net1 business units, joint ventures and
  investments for the following activities:

The Group Executive is
  responsible for the overall group management, defining the groups global
  strategy, investor relations and corporate finance activities.

The Finance and administration
  unit provides group support in the areas of accounting, treasury, human
  resources, administration, legal, secretarial, taxation, compliance and internal
  audit.

The Group Information Technology
  unit defines the group IT strategy and the overall systems architecture and is
  responsible for the identification and management of the groups research and
  development activities.

The Joint Ventures and
  Investments unit provides governance support to our joint ventures and assists
  with the evaluation of new investment opportunities.

Competition

In addition to competition that
  we face from the use of cash, checks, credit and debit cards, existing payment
  systems and the providers of financial services, there are a number of other
  products that use smart card technology in connection with a funds transfer
  system. While it is impossible for us to estimate the total number of
  competitors in the global payments marketplace, we believe that the most
  competitive product in this marketplace is EMV, a system that is promoted by
  Visa Inc., MasterCard International and EuroPay International. In addition, the
  JCB International Credit Card Co. Ltd, Diners Club International and American
  Express Compare are currently among the largest global processors of payment
  transactions. The competitive advantage of our UEPS offering is that our
  technology can operate real-time, but in an off-line environment, using
  biometric identification instead of the standard personal identification number,
  or PIN, methodology employed by our competitors. We estimate that we process
  less than 1% of all global payment transactions in the international
  marketplace.

In South Africa, and specifically
  in the payment of social welfare grants, our competitors include AllPay
  Consolidated Investment Holdings (Pty) Ltd, or AllPay, which is responsible for
  social welfare payments in the Free State, Gauteng and Western Cape provinces
  and a small portion of the Eastern Cape province, and Empilweni Payout Services,
  or Empilweni, which is responsible for payments in the Mpumalanga province. The
  South African banks and the South African Post Office, or SAPO, also offer
  beneficiaries the option to open bank accounts that enable the beneficiaries to
  receive their welfare grants through the formal banking payment networks.

15

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We compete primarily on the basis
  of the innovative nature and security of our technology. We are able to load
  social welfare grants on behalf of the South African government directly onto a
  biometrically secured UEPS smart card in rural areas where there is little or no
  infrastructure or in semi-urban areas through our merchant acquiring system. Our
  UEPS-enabled smart cards are therefore used as a means of identification,
  security and as a transacting instrument. Grants loaded onto our UEPS-enabled
  smart cards can be used both online and offline and beneficiaries pay no monthly
  account or transaction fees. The usefulness of a traditional bank card to its
  holder is dependent on the availability of a branch network, automatic teller
  machine, or ATM, infrastructure and merchants accepting the card. Access to bank
  branches, ATMs and merchants accepting traditional bank cards are limited or
  non-existent in the rural areas of South Africa. We believe the security,
  functionality and simplicity of our smart card provides us with a unique ability
  to service these rural areas of South Africa. Our technology eliminates the risk
  associated with receiving social welfare grants in cash as well as the costs
  associated with transaction fees charged by banks when beneficiaries exceed the
  minimum number of free transactions per month.

We believe that SASSA considers
  the technology utilized, pricing of the payment service rendered and other
  factors such as Black Economic Empowerment, or BEE, rating as the most important
  factors when considering potential service providers. We compete with other
  service providers on these aspects through SASSAs tender processes, when
  applicable, or through contract extension negotiations.

We own EasyPay, the largest
  bank-independent switch in South Africa. EasyPays competitors include
  BankservAfrica, eCentric and EFT POS. BankservAfrica is the largest transaction
  processor in South Africa which processes all transactions on behalf of the
  South African banks and claims to process in excess of 2.5 billion transactions
  valued at ZAR 8.0 trillion annually. During fiscal 2010, EasyPay processed 655.2
  million transactions with an approximate value of ZAR143.8 billion, or
  approximately 26% of the transaction volume processed by BankservAfrica.

We also may face competition from
  companies to which we have licensed rights to our technology. Moreover, as our
  product offerings increase and gain market acceptance, banks in South Africa and
  other jurisdictions in which we operate may seek governmental or other
  regulatory intervention if they view us as disrupting their EFT transacting
  businesses.

Research and Development

During fiscal 2010, 2009 and
  2008, we incurred research and development expenditures of $7.6 million, $8.9
  million and $5.7 million, respectively. These expenditures consist primarily of
  the salaries of our software engineers and developers. Our research and
  development activities relate primarily to the continual revision and
  improvement of our core UEPS software and its functionality and the design and
  development of our Mobile Virtual Card, or MVC, concept. For example, we
  continually advance our security protocols and algorithms as well as develop new
  UEPS features that we believe will enhance the attractiveness of our product and
  service offerings. Our research and development efforts also focus on taking
  advantage of improvements in the hardware platforms that are not proprietary to
  us but which form part of our system.

Intellectual Property

Our success depends in part on
  our ability to develop, maintain and protect our intellectual property. We rely
  on a combination of patents, copyrights, trademarks and trade secret laws, as
  well as non-disclosure agreements to protect our intellectual property.

Our FTS patents, which include
  aspects of the UEPS technology, are in effect in the United States, Hong Kong,
  South Africa, Botswana and Swaziland. The FTS patent in the United States was
  granted as US Patent No. 5,175,416 on December 29, 1992. The patent was reissued
  as US Patent No. RE36,788 on July 25, 2000, and will expire on May 17, 2011. The
  FTS patent in Hong Kong was granted on December 11, 1998, and expired in 2010.
  The FTS patents in South Africa, Botswana, and Swaziland were granted on
  September 25, 1991, March 9, 1993, and December 9, 1992, respectively. Our FTS
  patents expire in September 2010 in South Africa and Swaziland and in March 2011
  in Botswana.

During fiscal 2010, we continued
  the filing of the following three new patents on a world-wide basis:

|PCT Patent Application No: | PCT Filing Date   | Title                                                 
|-------------------------- | ----------------- | ------------------------------------------------------
|                           |                   |                                                       
|PCT/IB2007/054659          | November 15, 2007 | Verification of a transactors
      identity         
|PCT/IB2007/054676          | November 16, 2007 | Designation of electronic financial
      transactions
|PCT/IB2007/054678          | November 16, 2007 | Virtual Card                                          

We hold a number of trademarks in
  various countries.

16

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Financial Information about Geographical Areas and Operating
  Segments

During the last three fiscal
  years, we derived substantially all of our revenue from customers located in
  South Africa and substantially all of our assets were located in South Africa,
  except that in fiscal 2009 and 2008, respectively, we derived material revenues
  from a customer in Ghana and in 2009 from a customer in the Russian Federation
  and in fiscal 2010 and 2009, a material portion of our assets were located in
  Austria. See Note 17 to our consolidated financial statements for financial
  information about our operating segments.

Employees

As of June 30, 2010, we had 2,192
  employees. On a segmental basis, 232 employees were part of our management,
  1,551 were employed in transaction-based activities, 2 were employed in
  financial services and 407 were employed in smart card, hardware, software and
  related technology sales and corporate activities.

On a functional basis, three of
  our employees were part of executive management, 84 were employed in sales and
  marketing, 139 were employed in finance and administration, 276 were employed in
  information technology and 1,690 were employed in operations.

As of June 30, 2010,
  approximately 114 of the 265 employees we have in the Limpopo Province who were
  performing transaction-based activities were members of the South African
  Commercial Catering and Allied Workers Union. We believe we have a good
  relationship with our employees and these unions.

Corporate history

Net1 was incorporated in Florida
  in May 1997. Until June 2004, Net1 was a development stage company and its
  business consisted only of acquiring a license to the US FTS patent and
  obtaining an exclusive marketing agreement for the UEPS technology outside South
  Africa, Namibia, Botswana and Swaziland. In June 2004, Net1 acquired Net1
  Applied Technologies Holdings Limited, or Aplitec, a public company listed on
  the JSE Limited, or JSE. Aplitec owned the FTS patent in South Africa, Namibia,
  Botswana and Swaziland and one of its subsidiaries was the other party to the
  marketing agreement described above. The primary purpose of the Aplitec
  transaction was to consolidate into one group the intellectual property rights
  relating to the FTS patent and the UEPS technology, to establish a first-mover
  advantage in developing economies for the commercialization of the UEPS
  technology, and to exploit market opportunities for growth through strategic
  alliances and acquisitions. The transaction permitted Aplitecs shareholders to
  reinvest the sale proceeds in Net1, but under South African exchange control
  regulations, those shareholders were not permitted to hold Net1s securities
  directly. In October 2008, Net1 listed on the JSE, in a secondary listing, which
  enabled the former Aplitec shareholders (as well as South African residents
  generally) to hold Net1 common stock directly. See Note 11 to our consolidated
  financial statements for information regarding the equity instruments held by
  Aplitec shareholders from June 2004 to October 2008.

Available information

We maintain an Internet website
  at www.net1.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q,
  current reports on Form 8-K, and amendments to those reports are available free
  of charge through the SEC filings portion of our website, as soon as
  reasonably practicable after they are filed with the Securities and Exchange
  Commission. The information posted on our website is not incorporated into this
  Annual Report on Form 10-K.

**Executive Officers and Significant Employees of the
  Registrant**

***Executive
  officers***

The table below presents our
  executive officers, their ages and their titles:

|Name                    | Age | Title                                                           
|----------------------- | --- | ----------------------------------------------------------------
|Dr. Serge C.P. Belamant | 56  | Chief executive officer,
      chairman and director            
|Mr. Herman G. Kotze     | 40  | Chief financial officer, treasurer, secretary
      and director
|Mr. Nitin Soma          | 42  | Senior vice president
      information technology              

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Dr. Belamanthas been our
  chief executive officer since October 2000 and the chairman of our board since
  February 2003. From June 1997 until June 2004, Dr. Belamant served as chief
  executive officer and a director of Net 1 Applied Technology Holdings, or
  Aplitec, whose business was acquired by Net1 in June 2004. From 1996 to 1997,
  Dr. Belamant served as a consultant in the development of Chip Off-Line
  Pre-Authorized Card, which is a Visa product. From October 1989 to September
  1995, Dr. Belamant served as the managing director of Net 1 (Pty) Limited, a
  privately owned South African company specializing in the development of
  advanced technologies in the field of transaction processing and payment
  systems. Dr. Belamant also serves on the boards of a number of other companies
  that perform welfare distribution services and the provision of microfinance to
  customers. Dr. Belamant spent ten years working as a computer scientist for
  Control Data Corporation where he won a number of international awards. Later,
  he was responsible for the design, development, implementation and operation of
  the Saswitch ATM network in South Africa that rates today as the third largest
  ATM switching system in the world. Dr. Belamant has patented a number of
  inventions besides the FTS patent ranging from biometrics to gaming-related
  inventions. Dr. Belamant has more than 29 years of experience in the fields of
  operations research, security, biometrics, artificial intelligence and online
  and offline transaction processing systems. Dr. Belamant holds a PhD in
  Information Technology and Management.

Mr. Kotzehas been our
  chief financial officer, secretary and treasurer since June 2004. From January
  2000 until June 2004, he served on the board of Aplitec as group financial
  director. In mid-1997 until October 1998, Mr. Kotzé worked for the Industrial
  Development Corporation of South Africa Limited as a business analyst. Mr. Kotzé
  served his articles from 1994 to 1996 at KPMG in Pretoria, South Africa, and in
  1997 he became the audit manager for several major corporations in the
  manufacturing, mining, retail and financial services industries. Mr. Kotzé
  joined Aplitec in November 1998 as a strategic financial analyst. Mr. Kotzé is a
  member of the South African Institute of Chartered Accountants.

Mr. Somahas served as our
  Senior Vice President of Information Technology since June 2004. Mr. Soma joined
  Aplitec in 1997. He specializes in transaction switching and interbank
  settlements. Mr. Soma represented Nedcor Bank in assisting with the technical
  specifications for the South African Interbank Standards. He is also responsible
  for the ATM settlement process to balance ATMs with the host as well as balance
  the host with different card users. Mr. Soma designed the Stratus Back-End
  System for Aplitec, and is responsible for the Nedbank Settlement System for the
  Point of Sales Devices. Mr. Soma has over 14 years of experience in the
  development and design of smart card payment systems.

***Significant
  employees***

**Business
  Functions:**

Dr. Gerhard Claassen(51):
  General Manager  Cryptographic Solutions  Dr. Claasen joined us in August 2000
  and is responsible for the marketing and business development of our
  cryptographic solutions consisting of the internally developed Incognitorange of
  security solutions, as well as ToDos authenticators and the Cybertrust PKI
  products.

Leonid Delberg(64):
  Managing director: Net1 UTA  Mr. Delberg has been the CEO of Net1 UTA since
  1997. Net1 UTA is responsible for the marketing and business development of our
  payment solutions in Russia, the CIS, Oman, India and Asia.

Wimpie du Plessis(58):
  Managing director: MediKredit  Mrs. du Plessis joined us in January 2010 and is
  responsible for the marketing and business development of our MediKredit
  offering worldwide.

Anton Kok(49): Business
  Unit Leader: Business Unit Leader: Financial Services Cluster  Mr. Kok joined
  us in January 2010 and is responsible for the deployment of our wage payment
  solution and other financial services, such as insurance products and our
  UEPS-based microlending book.

Eric Meniere(44):
  Managing director: Virtual Card  Mr. Meniere joined us in March 2008 and is
  responsible for the marketing and business development of our new Virtual Card
  product. Mr. Meniere was previously the chief executive officer of Gemplus South
  Africa.

Nanda Pillay(39): General
  Manager: CPS and EasyPay  Mr. Pillay joined us in May 2000 and is responsible
  for our South African operations, consisting of CPS and EasyPay.

Richard Schweger(48):
  Financial & operations director: Net1 UTA  Mr. Schweger has been the CFO
  and COO of Net1 UTA since 1997. Net1 UTA is responsible for the marketing and
  business development of our payment solutions in Russia, the CIS, Oman, India
  and Asia.

James Sneedon(42):
  Business Unit Leader: VTU  Mr. Sneedon joined us January 2001 and is
  responsible for the marketing and business development of our Virtual Top UP
  products.

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Brenda Stewart(52):
  Managing director: Net1 Universal Electronic Technological Solutions  Mrs.
  Stewart joined us in 1997 and is responsible for the marketing and business
  development of our UEPS solutions in Africa (excluding South Africa), Iraq and
  the Philippines.

Mark Stuckenberg(48):
  Managing director: FIHRST  Mr. Stuckenberg joined us in March 2010 and is
  responsible for the marketing and business development of our FIHRST
  offering.

Deon Visser(43): General
  Manager: Chip and GSM licensing  Mr. Visser joined us in March 1997 and is
  responsible for the marketing and business development of our SIM card products
  and the licensing of our internally developed GSM masks.

**Support
  functions:**

Chris Britz(49): Vice
  President - Group production, repairs & maintenance  Mr. Britz joined us in
  April 2001 and is responsible for the groups production facilities, as well as
  all internal and external repairs and maintenance of terminals and other
  hardware.

Lawrie Chalmers(49): Vice
  President - Group Human Resources  Mr. Chalmers joined us in April 1998 and is
  responsible for the groups South African human resources activities, including
  recruitment, payroll, training and industrial relations.

Dhruv Chopra(36): Vice
  President: Investor Relations  Mr. Chopra joined us in June 2009 and was
  previously an analyst at Morgan Stanley, specializing in the payment processing
  and IT services sectors.

Paul Encarnacao(34): Vice
  President  Finance  Mr. Encarnacao joined us in June 2004 and is responsible
  for the preparation of the groups generally accepted accounting principles in
  the United States of America, or US GAAP, consolidated accounts and statutory
  reports.

Warren Segall(45): Vice President: Compliance  Mr.
  Segall joined us in July 2006 and is our compliance officer.

Trevor Smit(53): Vice
  President: Joint Ventures and Investments  Mr. Smit joined us in May 2007 and
  provides governance support to our joint ventures as our representative on the
  various boards of directors.

Cara van Straaten(49):
  Group Financial Controller  Ms. Van Straaten joined us in July 2004 and is
  responsible for the groups South African financial function, including
  financial accounting, taxation and statutory reporting.

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**ITEM 1A. RISK FACTORS**

OUR OPERATIONS AND FINANCIAL
  RESULTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE
  DESCRIBED BELOW, THAT COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION,
  RESULTS OF OPERATIONS, CASH FLOWS, AND THE TRADING PRICE OF OUR COMMON
  STOCK.

Risks Relating to Our Business

We currently derive
  approximately 65% of our revenues from the social welfare grants distribution
  service that we perform for SASSA. Our latest contract with SASSA, dated August
  24, 2010, expires on March 31, 2011, and we may be required to bid with
  competitors for a new contract which may not be awarded to us. If we were to
  discontinue providing our distribution service to SASSA, we would lose all of
  these revenues.

We currently derive a substantial
  majority of our revenues from the social welfare grants distribution service
  that we perform for SASSA, whereby we distribute these grants in five of the
  nine provinces of South Africa. For the foreseeable future, our revenues,
  results of operations and cash flows will depend on this activity. During the
  years ended June 30, 2010, 2009 and 2008, we derived approximately 66%, 65% and
  67%, respectively, of our revenues from our contract with SASSA to distribute
  social welfare grants. On August 24, 2010, we entered into a new service level
  agreement with SASSA which expires on March 31, 2011, and we expect that we may
  be required to bid with competitors for a new contract. If we are unsuccessful
  in obtaining a new contract and were to discontinue providing our distribution
  service to SASSA, we would lose all of these revenues.

In early 2007, SASSA commenced a
  national tender for the award of contracts to distribute social welfare grants
  throughout South Africa. We participated in the tender process and timely
  submitted proposals for each of South Africas nine provinces, as well as a
  proposal for the entire country. There were a series of extensive delays during
  the tender process which resulted in numerous extensions of our bid proposals as
  well as an extension of our existing contracts. On November 3, 2008, SASSA
  notified bidders that it had terminated the tender process without awarding new
  contracts, citing a number of defects in the original request for proposal
  published by SASSA and in the bid evaluation process. In late March 2009, we
  signed a new one-year contract with SASSA which expired on March 31, 2010 and
  which was subsequently extended to June 30, 2010. We signed a new agreement with
  SASSA on August 24, 2010. SASSA has stated that it may commence a new tender
  process at any time.

SASSAs decision to terminate the
  original tender process and the ensuing short-term agreements have created
  substantial uncertainty about the timing and ultimate outcome of the future
  contract award process. Once SASSA initiates a new tender process, we cannot
  assure you that the tender will result in our receiving a contract to continue
  to distribute social welfare grants in each of the five South African provinces
  where we currently distribute them. If we do not receive a new contract or if we
  were to discontinue providing our payment service to SASSA, we could lose a
  substantial majority of our revenues. Even if we do receive a new contract, or
  one or more extensions of the existing contract, we cannot predict the terms
  that such contracts will contain. Any new contract or extension we receive may
  contain pricing or other terms, such as provisions relating to early
  termination, that could be unfavorable to us. It is also possible that any new
  tender specification would include a requirement for the successful bidder to
  pre-fund the social welfare grants in the relevant province for a one month
  period, as we were required to do under certain of our previous provincial
  contracts, which would result in significant cash flow funding requirements for
  the contractor.

The previous tender process and
  the negotiation of the new contract and subsequent extensions have consumed a
  substantial amount of our managements time and attention during the past three
  years. Any future tender initiated by SASSA would require our management to
  devote further resources to the tender process which could adversely affect
  their ability to focus on other matters, including potential international
  business development activities. In addition, we have sued SASSA challenging,
  among other things, the cancellation of the previous tender process. We cannot
  predict the outcome of this litigation, or whether or how such litigation will
  affect the outcome of any future tender process.

Moreover, even if we were to
  receive a new contract or contract extensions containing similar economic terms
  to those of our current contract, our profit margin could be adversely affected
  to the extent that any such contracts would require us to incur significant
  capital expenditures during the initial implementation phase. Historically, we
  have incurred a significant portion of the expenses associated with these
  contracts during the initial implementation phase, which averages approximately
  18 months, and have historically enjoyed higher profit margins on these
  contracts after the completion of the implementation period. Therefore, to the
  extent that we were to be awarded a new contract that required significant
  capital expenditures, our profit margins would be adversely affected if the
  contract were to be terminated for any reason during the implementation
  period.

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Finally, if we were to be awarded
  one or more contracts by SASSA, an unsuccessful tenderor could seek to challenge
  the award, which could result in the contract being set aside or could require
  us to expend time and resources in an attempt to defeat any such challenge.

Our new contract with SASSA
  is less favorable to us than our previous contract which we expect to adversely
  affect our results of operations and cash flow for fiscal 2011. Furthermore, the
  terms of any further renewals or extensions or a contract awarded under a future
  tender process may be even less favorable to us than the current contract. To
  the extent that we are unsuccessful in diversifying our business and reducing
  our dependence on SASSA, our business and profitability will likely
  suffer.

On August 24, 2010, we entered
  into a new service level agreement with SASSA which replaces our previous SASSA
  contract that expired on June 30, 2010. The new agreement is retroactively
  effective from July 1, 2010, and expires on March 31, 2011. The new contract
  contains a standard pricing formula for all provinces based on a transaction fee
  per beneficiary paid, regardless of the number or amount of grants paid per
  beneficiary, calculated on a guaranteed minimum number of beneficiaries per
  month. However, the new contract provides for a reduction in both the level of
  the transaction fee per beneficiary paid and the guaranteed minimum number of
  beneficiaries. Because we continue to derive a substantial percentage of our
  revenues from our SASSA contract, we expect that the terms of the new contract
  will materially reduce our revenues, operating income, net income and cash flow
  for fiscal 2011. Further, as described in the preceding risk factor, it is
  possible that any further extension or renewal of the current contract or even a
  contract which we may be awarded under a future tender process may be even less
  favorable to us. While we are making significant efforts to reduce our
  dependence on our SASSA contract by diversifying our business in South Africa
  and expanding internationally, to the extent that these efforts are not
  successful, we may not be able to offset the effects of the current and possible
  future less favorable terms from SASSA which would have a material adverse
  effect on our results of operations, financial position and cash flows.

We may undertake
  acquisitions that could increase our costs or liabilities or be disruptive to
  our business.

Acquisitions are a significant
  part of our long-term growth strategy as we seek to grow our business
  internationally and to deploy our technologies in new markets both inside and
  outside South Africa. However, we may not be able to locate suitable acquisition
  candidates at prices that we consider appropriate. If we do identify an
  appropriate acquisition candidate, we may not be able to successfully negotiate
  the terms of an acquisition, finance the acquisition or, if the acquisition
  occurs, integrate the acquired business into our existing business. These
  transactions may require debt financing or additional equity financing,
  resulting in additional leverage or dilution of ownership.

Acquisitions of businesses or
  other material operations and the integration of these acquisitions will require
  significant attention from our senior management which may divert their
  attention from our day to day business. The difficulties of integration may be
  increased by the necessity of coordinating geographically dispersed
  organizations, integrating personnel with disparate business backgrounds and
  combining different corporate cultures. We also may not be able to maintain key
  employees or customers of an acquired business or realize cost efficiencies or
  synergies or other benefits that we anticipated when selecting our acquisition
  candidates. In addition, we may need to record write downs from future
  impairments of intangible assets, which could reduce our future reported
  earnings. As an example, we have determined to record a goodwill impairment
  charge of approximately $37.4 million related to our August 2008 acquisition of
  Net 1 UTA. Finally, acquisition candidates may have liabilities or adverse
  operating issues that we fail to discover through due diligence prior to the
  acquisition.

We have recorded and may
  need to record additional impairment charges relating to our businesses.

We assess the carrying value of
  goodwill for impairment annually, or more frequently, whenever events occur and
  circumstances change indicating potential impairment. We perform our annual
  impairment test as of June 30 of each year. For the fourth quarter of fiscal
  2010, we recognized an impairment loss of approximately $37.4 million on
  goodwill allocated to the Hardware, software and related technology sales
  segment as a result of deteriorating trading conditions of this segment,
  particularly at Net1 UTA, and uncertainty surrounding contract finalization
  dates which will impact future cash flows. A further deterioration in the
  Hardware, software and related technology sales segment, or in any other of our
  businesses, may lead to additional impairments in future periods.

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It may be difficult for us
  to implement our acquisition strategy in light of global market and economic
  conditions.

We believe that it is frequently
  desirable to issue equity or equity-linked securities, as full or partial
  consideration for strategic acquisitions. However, our stock price suffered a
  substantial decline during the second quarter of fiscal 2009 and continues to
  trade well below its historic trading levels. The decline in our stock price has
  reduced the feasibility of our pursuing acquisitions in which we would issue our
  stock, at least in the near term. In addition, the conditions in the global
  credit markets and other related trends affecting the banking industry have
  caused significant operating losses and bankruptcies throughout the banking
  industry which has made acquisition financing more difficult to obtain. If our
  stock price remains too low to serve as acquisition currency or if we are unable
  to obtain acquisition financing, we may be unable to take advantage of potential
  acquisitions or to otherwise expand our business as planned.

A prolonged economic
  slowdown or lengthy or severe recession in South Africa or elsewhere could harm
  our operations.

A prolonged economic downturn or
  recession could materially impact our results from operations. A recessionary
  economic environment could have a negative impact on mobile phone operators, our
  cardholders and retailers and could reduce the level of transactions we process
  and the take-up of financial services we offer, which would, in turn, negatively
  impact our financial results. If financial institutions and retailers experience
  decreased demand for their products and services our hardware, software and
  related technology sales will reduce, resulting in lower revenue.

The loss of the services of
  Dr. Belamant or any of our other executive officers would adversely affect our
  business.

Our future financial and
  operational performance depends, in large part, on the continued contributions
  of our senior management, in particular, Dr. Serge Belamant, our Chief Executive
  Officer and Chairman and Herman Kotze, our Chief Financial Officer. Many of our
  key responsibilities are performed by these two individuals, and the loss of the
  services of either of them could disrupt our development efforts or business
  relationships and our ability to continue to innovate and to meet customers
  needs, which could have a material adverse effect on our business and financial
  performance. We do not have employment agreements with our executive officers
  and they may terminate their employment at any time. We do not maintain any key
  person life insurance policies.

We face a highly
  competitive employment market and may not be successful in attracting and
  retaining a sufficient number of skilled employees, particularly in the
  technical and sales areas and senior management.

Our future success depends on our
  ability to continue to develop new products and to market these products to our
  target users. In order to succeed in our product development and marketing
  efforts, we need to identify, attract, motivate and retain sufficient numbers of
  qualified technical and sales personnel. An inability to hire and retain such
  technical personnel would adversely affect our ability to enhance our existing
  intellectual property, to introduce new generations of technology and to keep
  abreast of current developments in technology. Demand for personnel with the
  range of capabilities and experience we require is high and there is no
  assurance that we will be successful in attracting and retaining these
  employees. The risk exists that our technical skills and sales base may be
  depleted over time because of natural attrition. Furthermore, social and
  economic factors in South Africa have led, and continue to lead, numerous
  qualified individuals to leave the country, thus depleting the availability of
  qualified personnel in South Africa. In addition, our multi-country strategy
  will also require us to hire and retain highly qualified managerial personnel in
  each of these markets. If we cannot recruit and retain people with the
  appropriate capabilities and experience and effectively integrate these people
  into our business, it could negatively affect our product development and
  marketing activities.

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We face competition from
  the incumbent retail banks in South Africa in the unbanked market segment, which
  could limit growth in our transaction-based activities segment.

The incumbent South African
  retail banks have created a common banking product, generally referred to as a
  Mzansi account, for unbanked South Africans, which offers limited
  transactional capabilities at reduced charges, when compared to the accounts
  traditionally offered by these banks. According to the FinScope survey, which is
  an annual survey conducted by the FinMark Trust, a non-profit independent trust,
  approximately 4.4 million and 3.5 million people in South Africa claimed to use
  a Mzansi account in 2009 and 2008, respectively. In addition, the 2009 survey
  indicated that 22% of those surveyed opened a Mzansi account in order to receive
  a social welfare grant.

It is possible for a social
  welfare beneficiary to receive grants through a Mzansi or other low-cost banking
  account. SASSA does not pay us a fee for the disbursement of grants through
  Mzansi or other low cost bank accounts and to the extent that beneficiaries use
  these accounts, rather than our smart card, to receive their grants, we will not
  be able to generate additional revenues from retail spending by these
  beneficiaries. In contrast, when a beneficiary receives grants through our smart
  card, we are able to generate incremental revenues from the use of our card in
  our merchant acquiring system because merchants participating in our merchant
  acquiring systems are also able to accept UEPS-based smart cards. Thus, our
  ability to increase our revenues and operating margins will be adversely
  affected to the extent that there is an increase in the number or percentage of
  South Africans using Mzansi or other low cost bank accounts to receive their
  social welfare grants.

The period between our
  initial contact with a potential customer and the sale of our products or
  services to that customer tends to be long and may be subject to delays which
  may have an impact on our revenues.

The period between our initial
  contact with a potential customer and the purchase of our products and services
  is often long and subject to delays associated with the budgeting, approval and
  competitive evaluation processes that frequently accompany significant capital
  expenditures. A lengthy sales cycle may have an impact on the timing of our
  revenues, which may cause our quarterly operating results to fall below investor
  expectations. A customers decision to purchase our products and services is
  often discretionary, involves a significant commitment of resources, and is
  influenced by customer budgetary cycles. To sell our products and services
  successfully we generally must educate our potential customers regarding the
  uses and benefits of our products and services, which can require the
  expenditure of significant time and resources; however, there can be no
  assurance that this significant expenditure of time and resources will result in
  actual sales of our products and services.

We may face competition
  from other companies that offer smart card technology and other innovative
  payment technologies, which could result in loss of our existing business and
  adversely impact our ability to successfully market additional products and
  services.

In addition to competition that
  we face from the use of cash, checks, credit and debit cards, existing payment
  systems and the providers of financial services and low cost bank accounts such
  as Mzansi, there are a number of other products that use smart card technology
  in connection with a funds transfer system. During the past several years, smart
  card technology has become increasingly prevalent. We believe that the most
  competitive product in this marketplace is EMV, a system that is promoted by
  Visa Inc., MasterCard International and EuroPay International. Our ability to
  maintain our existing South African government contracts could be adversely
  affected to the extent that, in the future, the promoters of any of these
  systems would choose to compete directly in the South African pension and
  welfare business.

We also may face competition from
  companies to which we have licensed our technology. In 1997, we entered into a
  technology license agreement with Visa. Under that agreement, Visa purchased a
  non-exclusive, perpetual, worldwide license to our technology rights, as defined
  in the agreement, relating to our UEPS technology and an exclusive, perpetual,
  worldwide license under our patents, as defined in the agreement, licensed to
  Visa that is exclusive to the financial services industry, as defined in the
  agreement. Our Visa agreement grants back to us the non-exclusive right under
  our Visa-licensed patents to make, use and sell our payment systems and other
  products in the financial services industry as discussed in the agreement. In
  our Visa agreement, Visa agrees not to grant a sublicense to any payment system
  to any entities in the financial services industry who are not members of Visa
  already if such entity already has a right to use such payment systems from us.
  The agreement permits Visa to sublicense our licensed technology rights to any
  of its members, any entity in the financial services industry or any entity
  outside of the financial services industry that provides products to Visa or its
  sublicensees. The agreement prohibits us from licensing our technology rights,
  not just our licensed patents, to any of Visas competitors, including
  MasterCard, Europay, American Express Company, Discover Financial Services,
  Diners Club International Credit Card Co., Carte Blanche Card or JCB
  International Credit Card Co. or any of their parents, subsidiaries or
  affiliates. We may need Visas consent, not to be unreasonably withheld, in
  order to transfer or assign our rights and obligations under the agreement. As
  this agreement does not contain a termination date and contains restrictions on
  our ability to license our technology rights in the financial services industry
  and to competitors of Visa, we may not be able to realize the full value of our
  technology rights.

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Moreover, as our product
  offerings increase and gain market acceptance, banks in South Africa and other
  jurisdictions in which we operate may seek governmental or other regulatory
  intervention if they view us as disrupting their funds transfer or other
  businesses.

***System failures,
  including breaches in the security of our system, could harm our
  business.***

We may experience system failures
  from time to time, and any lengthy interruption in the availability of our
  back-end system computer could harm our revenues and profits, and could subject
  us to the scrutiny of our government customers.

Frequent or persistent
  interruptions in our services could cause current or potential customers and
  users to believe that our systems are unreliable, leading them to avoid our
  technology altogether, and could permanently harm our reputation and brands.
  These interruptions would increase the burden on our engineering staff, which,
  in turn, could delay our introduction of new applications and services. Finally,
  because our customers may use our products for critical transactions, any system
  failures could result in damage to our customers businesses. These customers
  could seek significant compensation from us for their losses. Even if
  unsuccessful, this type of claim could be time consuming and costly for us to
  address.

Although our systems have been
  designed to reduce downtime in the event of outages or catastrophic occurrences,
  they remain vulnerable to damage or interruption from earthquakes, floods,
  fires, power loss, telecommunication failures, terrorist attacks, computer
  viruses, computer denial-of-service attacks and similar events. Some of our
  systems are not fully redundant, and our disaster recovery planning may not be
  sufficient for all eventualities.

Protection against fraud is of
  key importance to the purchasers and end users of our solutions. We incorporate
  security features, including encryption software, biometric identification and
  secure hardware, into our solutions to protect against fraud in electronic
  transactions and to provide for the privacy and integrity of card holder data.
  Our solutions may be vulnerable to breaches in security due to defects in the
  security mechanisms, the operating system and applications or the hardware
  platform. Security vulnerabilities could jeopardize the security of information
  transmitted using our solutions. If the security of our solutions is
  compromised, our reputation and marketplace acceptance of our solutions will be
  adversely affected, which would cause our business to suffer, and we may become
  subject to damage claims. We have not yet experienced any security breaches
  affecting our business.

Despite any precautions we may
  take, the occurrence of a natural disaster or other unanticipated problems with
  our system could result in lengthy interruptions in our services. Our current
  business interruption insurance may not be sufficient to compensate us for
  losses that may result from interruptions in our service as a result of system
  failures.

The failure of any bank or
  financial institution in which we keep our cash and cash equivalents may prevent
  us from funding our business or may lead to substantial losses of
  assets.

We maintain a significant amount
  of cash and cash equivalents to fund our business operations at several major
  South African and European banks and financial institutions. As of June 30,
  2010, we maintained an aggregate of $153.7 million in cash and cash equivalents
  which were deposited with such banks and financial institutions. Although we
  maintain a policy of entering into transactions only with South African and
  European banks and financial institutions that have ratings acceptable to our
  board, as determined by credit rating agencies such as Standard & Poors,
  Moodys and Fitch Ratings, due to the recent credit crisis and global economic
  conditions, it is possible that despite such ratings, one or more of these banks
  or financial institutions may fail. The failure of one or more of these
  institutions may cause us to lose a significant amount of cash and cash
  equivalents. In addition to the actual value of our company which would be
  reduced due to the loss of cash and cash equivalents, our business could be
  materially and adversely affected by the failure of any institution where we
  maintain our cash and cash equivalents. Although to date we have not experienced
  any such losses or been prevented from funding our business operations, in light
  of recent global economic conditions such losses may occur in the future.

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***Our strategy of
  partnering with companies outside South Africa may not be
  successful.***

In order for us to expand our
  operations into foreign markets, it may be necessary for us to establish
  partnering arrangements with companies outside South Africa, such as the ones we
  have established in Namibia, Botswana, Nigeria, Colombia and Vietnam. The
  success of these endeavors is, however, subject to a number of factors over
  which we have little or no control, such as finding suitable partners with the
  appropriate financial, business and technical backing and continued governmental
  support for planned implementations. In some countries, finding suitable
  partners and obtaining the appropriate support from the government involved may
  take a number of years before we can commence implementation. Some of these
  partnering arrangements may take the form of joint ventures in which we receive
  a minority interest. Minority ownership carries with it numerous risks,
  including dependence on partners to provide knowledge of local market conditions
  and to facilitate the acquisition of any necessary licenses and permits, as well
  as the inability to control the joint venture vehicle and to direct its policies
  and strategies. Such a lack of control could result in the loss of all or part
  of our investment in such entities. In addition, our foreign partners may have
  different business methods and customs which may be unfamiliar to us and with
  which we disagree. Our joint venture partners may not be able to implement our
  business model in new areas as efficiently and quickly as we have been able to
  do in South Africa. Furthermore, limitations imposed on Net1 Applied
  Technologies South Africa Limited, or New Aplitec, by South African exchange
  control regulations, as well as limitations imposed on us by the Investment
  Company Act of 1940, may limit our ability to establish partnerships or entities
  in which we do not obtain a controlling interest. In addition, certain of our
  licensees, including Visa, have become our competitors and this could occur with
  our joint venture partners in the future.

We may have difficulty
  managing our growth, especially as we expand our business
  internationally.

We continue to experience growth,
  both in the scope of our operations and size of our organization. This growth is
  placing significant demands on our management, especially as we expand our
  business internationally. Continued growth would increase the challenges
  involved in implementing appropriate operational and financial systems,
  expanding our technical and sales and marketing infrastructure and capabilities,
  providing adequate training and supervision to maintain high quality standards,
  and preserving our culture and values. International growth, in particular,
  means that we must become familiar and comply with complex laws and regulations
  in other countries, especially laws relating to taxation.

Additionally, continued growth
  will place significant additional demands on our management and our financial
  and operational resources, and will require that we continue to develop and
  improve our operational, financial and other internal controls. If we cannot
  scale and manage our business appropriately, we will not experience our
  projected growth and our financial results may suffer.

We pre-fund the payment of
  social welfare grants through our merchant acquiring system and a significant
  level of payment defaults by these merchants would adversely affect
  us.

We pre-fund social welfare grants
  through the merchants who participate in our merchant acquiring system in the
  provinces where we operate. These pre-funding obligations expose us to the risk
  of default by these merchants. Although we have not experienced any material
  defaults by merchants in the return of pre-funded amounts to us, we cannot
  guarantee that material defaults will not occur in the future. A material level
  of merchant defaults could have a material adverse effect on us, our financial
  position and results of operations.

We may incur material
  losses in connection with our distribution of cash to recipients of social
  welfare grants.

Many social welfare recipients
  use our services to access cash using their smart cards. We use armored vehicles
  to deliver large amounts of cash to rural areas across South Africa to enable
  these welfare recipients to receive this cash. In some cases, we also store the
  cash that will be delivered by the armored vehicles in depots overnight or over
  the weekend to facilitate delivery to these rural areas. We cannot insure
  against the risk of loss or theft of cash from our delivery vehicles as we have
  not identified any insurance underwriters willing to accept this risk on
  reasonable terms. Therefore, we will bear the full cost of any loss or theft in
  connection with the delivery process, and such loss could materially and
  adversely affect our financial condition, cash flows and results of operations.
  The Company did not incur any material losses resulting from cash distribution
  during fiscal 2010, 2009 or 2008, but there is no assurance that we will not
  incur material losses in the future.

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We depend upon third-party
  suppliers, making us vulnerable to supply shortages and price fluctuations,
  which could harm our business.

We obtain our smart cards, POS
  devices and the other hardware we use in our business from a limited number of
  suppliers, and do not manufacture this equipment ourselves. We generally do not
  have long-term agreements with our manufacturers or component suppliers. If our
  suppliers become unwilling or unable to provide us with adequate supplies of
  parts or products when we need them, or if they increase their prices, we may
  not be able to find alternative sources in a timely manner and could be faced
  with a critical shortage. This could harm our ability to implement new systems
  and cause our revenues to decline. Even if we are able to secure alternative
  sources in a timely manner, our costs could increase. A supply interruption or
  an increase in demand beyond current suppliers capabilities could harm our
  ability to distribute our equipment and thus, to acquire a new source of
  customers who use our UEPS technology. Any interruption in the supply of the
  hardware necessary to operate our technology, or our inability to obtain
  substitute equipment at acceptable prices in a timely manner, could impair our
  ability to meet the demand of our customers, which would have an adverse effect
  on our business.

Shipments of our electronic
  payment systems may be delayed by factors outside of our control, which can harm
  our reputation and our relationships with our customers.

The shipment of payment systems
  requires us or our manufacturers, distributors or other agents to obtain customs
  or other government certifications and approvals and, on occasion, to submit to
  physical inspection of our systems in transit. Failure to satisfy these
  requirements, and the very process of trying to satisfy them, can lead to
  lengthy delays in the delivery of our solutions to our direct or indirect
  customers. Delays and unreliable delivery by us may harm our reputation and our
  relationships with our customers.

Risks Relating to Operating in South Africa and Other
  Emerging Markets

Fluctuations in the value
  of the South African rand have had, and will continue to have, a significant
  impact on our reported results of operations, which may make it difficult to
  evaluate our business performance between reporting periods and may also
  adversely affect our stock price.

The South African rand, or ZAR,
  is the primary operating currency for our business operations while our
  financial results are reported in US dollars. This means that as long as the ZAR
  remains our primary operating currency, depreciation in the ZAR against the US
  dollar, and to a lesser extent, the euro, would negatively impact our reported
  revenue and net income, while a strengthening of the ZAR would have the opposite
  effect. Depreciation in the ZAR may negatively impact the prices at which our
  stock trades. The US dollar/ZAR exchange rate has historically been volatile and
  we expect this volatility to continue. The ZAR was significantly weaker overall
  during 2009 than during 2010 and 2008, which negatively affected our reported
  2009 results of operations when compared to 2010 and 2008. We provide detailed
  information about historical exchange rates in Managements Discussion and
  Analysis of Financial Condition and Results of Operations--Currency Exchange
  Rate Information.

Due to the significant
  fluctuation in the value of the ZAR and its impact on our reported results, you
  may find it difficult to compare our results of operations between financial
  reporting periods even though we provide supplemental information about our
  results of operations determined on a ZAR basis. This difficulty may increase as
  we expand our business internationally and record additional revenue and
  expenses in the euro and other currencies. It may also have a negative impact on
  our stock price.

We generally do not engage in any
  currency hedging transactions intended to reduce the effect of fluctuations in
  foreign currency exchange rates on our results of operations, other than
  economic hedging relating to our inventory purchases which are settled in US
  dollars or euros. We have used forward contracts in order to hedge our economic
  exposure to the ZAR/US dollar and ZAR/euro exchange rate fluctuations from these
  foreign currency transactions. We cannot guarantee that we will enter into
  hedging transactions in the future or, if we do, that these transactions will
  successfully protect us against currency fluctuations.

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South Africas high levels
  of poverty, unemployment and crime may increase our costs and impair our ability
  to maintain a qualified workforce.

While South Africa has a highly
  developed financial and legal infrastructure, it also has high levels of crime
  and unemployment and there are significant differences in the level of economic
  and social development among its people, with large parts of the population,
  particularly in the rural areas, having limited access to adequate education,
  healthcare, housing and other basic services, including water and electricity.
  Government policies aimed at alleviating and redressing the disadvantages
  suffered by the majority of citizens under previous governments may increase our
  costs and reduce our profitability, all of which could negatively affect our
  business. These problems may prompt emigration of skilled workers, hinder
  investment into South Africa and impede economic growth. As a result, we may
  have difficulties attracting and retaining qualified employees.

The economy of South Africa
  is exposed to high inflation and interest rates which could increase our
  operating costs and thereby reduce our profitability.

The economy of South Africa in
  the past has been, and in the future may continue to be, characterized by rates
  of inflation and interest rates that are substantially higher than those
  prevailing in the United States and other highly developed economies. High rates
  of inflation could increase our South African-based costs and decrease our
  operating margins. Although higher interest rates would increase the amount of
  income we earn on our cash balances, they would also adversely affect our
  ability to obtain cost-effective debt financing in South Africa.

If we do not achieve
  applicable black economic empowerment objectives in our South African
  businesses, we risk losing our government and private contracts. In addition, it
  is possible that we may be required to achieve black shareholding of our company
  in a manner that could dilute your ownership.

The South African government,
  through the Broad-Based Black Economic Empowerment Act, 2003, established a
  legislative framework for the promotion of BEE. The law recognizes two distinct
  mechanisms for the achievement of BEE objectivescompliance with codes of good
  practice, which have already been issued, and compliance with industry-specific
  transformation charters. Although the charter that will likely apply to our
  company has not yet been finalized, we believe it is likely that the charter
  will not differ substantially from the codes of good practice. Achievement of
  BEE objectives is measured by a scorecard which establishes a weighting to
  various components of BEE. One component of BEE is achieving a certain
  percentage of shareholdings by black South Africans in South African businesses
  over a period of years. This shareholding component carries the highest BEE
  scorecard weighting. Other components include procuring goods and services from
  black-owned businesses or from businesses that have earned good BEE scores and
  achieving certain levels of black South African employment. Compliance with the
  codes and applicable charters are not enforced through civil or criminal
  sanction, but compliance does affect the ability of a company to secure
  contracts in the public and private sectors. Thus, it will be important for us
  to achieve applicable BEE objectives. Failing to do so could jeopardize our
  ability to maintain existing business, including our South African pension and
  welfare business, or to secure future business.

We have taken a number of actions
  as a company to increase empowerment of black South Africans. However, it is
  possible that these actions may not be sufficient to enable us to achieve
  applicable BEE objectives. In that event, in order to avoid risking the loss of
  our government and private contracts, we may have to seek to comply through
  other means, including by selling shares of Net1 or of our South African
  subsidiaries to black South Africans. Such sales of shares could have a dilutive
  impact of your ownership interest, which could cause the market price of our
  stock to decline.

South African exchange
  control regulations could hinder our ability to make foreign investments and
  obtain foreign-denominated financing.

South Africas exchange control
  regulations restrict the export of capital from South Africa, the Republic of
  Namibia and the Kingdoms of Lesotho and Swaziland, known collectively as the
  Common Monetary Area without the prior approval of SARB. While the South African
  government has relaxed exchange controls in recent years, it is difficult to
  predict whether or how it will further relax or abolish exchange control
  measures in the foreseeable future.

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Although Net1 is a US corporation
  and is not itself subject to South African exchange control regulations, these
  regulations do restrict the ability of our South African subsidiaries to raise
  and deploy capital outside the Common Monetary Area, to borrow money in
  currencies other than the South African rand and to hold foreign currency.
  Exchange control restrictions may also affect the ability of these subsidiaries
  ability to pay dividends to Net1 unless the affected subsidiary can show that
  any payment of such dividend will not place it in an over borrowed position. As
  of June 30, 2010, approximately 91% of our cash and cash equivalents were held
  by our South African subsidiaries. Exchange control regulations could make it
  difficult for our South African subsidiaries to: (i) export capital from South
  Africa; (ii) hold foreign currency or incur indebtedness denominated in foreign
  currencies without the approval of SARB; (iii) acquire an interest in a foreign
  venture without the approval of SARB and first having complied with the
  investment criteria of SARB; (iv) repatriate to South Africa profits of foreign
  operations; and (v) limit our business to utilize profits of one foreign
  business to finance operations of a different foreign business.

Under current exchange control
  regulations, SARB approval would be required for any acquisition of our company
  which would involve payment to our South African shareholders of any
  consideration other than South African rand. This restriction could limit our
  management in its ability to consider strategic options and thus, our
  shareholders may not be able to realize the premium over the current trading
  price of our shares.

HIV/AIDS and tuberculosis
  are major healthcare challenges in South Africa and other sub-Saharan countries.
  The prevalence of these diseases may force us to incur costs relating to the
  loss of personnel, reduction in the productivity of our workforce and recruiting
  and training of new personnel.

HIV/AIDS and tuberculosis, which
  is exacerbated in the presence of HIV/AIDS, are major healthcare challenges in
  South Africa and other sub-Saharan countries. We cannot estimate how much of our
  South African workforce may be infected with HIV/AIDS, due to the high
  prevalence of HIV/AIDS in South Africa, we may incur costs relating to the loss
  of personnel and the related loss of productivity as well as medical costs and
  costs relating to recruiting and training of new personnel. In addition, the
  potential for increased mortality rates due to HIV/AIDS deaths to reduce or slow
  the growth of the South African population could adversely impact our growth.
  Most of these factors are beyond our control. We are not able to quantify the
  impact of HIV/AIDS on our growth or costs and cannot assure you that the costs
  we will incur in connection with this epidemic will not have a material adverse
  effect on us, our financial condition and our operations.

Most of South Africas
  major industries are unionized, and the majority of employees belong to trade
  unions. We face the risk of disruption from labor disputes and new South African
  labor laws.

In the past, trade unions have
  had a significant impact on the collective bargaining process as well as on
  social and political reform in South Africa in general. Although only
  approximately five percent of our workforce is unionized and we have not
  experienced any labor disruptions in recent years, such labor disruptions may
  occur in the future. In addition, developments in South African labor laws may
  increase our costs or alter our relationship with our employees and trade
  unions, which may have an adverse effect on us, our financial condition and our
  operations.

Operating in South Africa
  and other emerging markets subjects us to greater risks than those we would face
  if we operated in more developed markets.

Emerging markets such as South
  Africa, as well as some of the other markets into which we have recently begun
  to expand, including African countries outside South Africa, South America,
  Southeast Asia and Central and Eastern Europe, are subject to greater risks than
  more developed markets. While we focus our business primarily on emerging
  markets because that is where we perceive there to be the greatest opportunities
  to market our products and services successfully, the political, economic and
  market conditions in many of these markets present risks that could make it more
  difficult to operate our business successfully.

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Some of these risks include:

- political and economic instability, including higher rates of inflation
    and currency fluctuations;
- high levels of corruption, including bribery of public officials;
- loss due to civil strife, acts of war or terrorism, guerrilla activities
    and insurrection;
- a lack of well-developed legal systems which could make it difficult for
    us to enforce our intellectual property and contractual rights;
- logistical and communications challenges;
- potential adverse changes in laws and regulatory practices, including
    import and export license requirements and restrictions, tariffs, legal
    structures and tax laws;
- difficulties in staffing and managing operations and ensuring the safety
    of our employees;
- restrictions on the right to convert or repatriate currency or export
    assets;
- greater risk of uncollectible accounts and longer collection cycles;
- indigenization and empowerment programs; and
- exposure to liability under US securities and foreign trade laws,
    including the Foreign Corrupt Practices Act, or FCPA, and regulations
    established by the US Department of Treasurys Office of Foreign Assets
    Control, or OFAC.

Many of these countries and
  regions are in various stages of developing institutions and political, legal
  and regulatory systems that are characteristic of democracies. However,
  institutions in these countries and regions may not yet be as firmly established
  as they are in democracies in the developed world. Many of these countries and
  regions are also in the process of transitioning to a market economy and, as a
  result, are experiencing changes in their economies and their government
  policies that can affect our investments in these countries and regions.
  Moreover, the procedural safeguards of the new legal and regulatory regimes in
  these countries and regions are still being developed and, therefore, existing
  laws and regulations may be applied inconsistently. In some circumstances, it
  may not be possible to obtain the legal remedies provided under those laws and
  regulations in a timely manner.

As the political, economic and
  legal environments remain subject to continuous development, investors in these
  countries and regions face uncertainty as to the security of their investments.
  Any unexpected changes in the political or economic conditions in these or
  neighboring countries or others in the region may have a material adverse effect
  on the international investments that we have made or may make in the future,
  which may in turn have a material adverse effect on our business, operating
  results, cash flows and financial condition.

Risks Relating to Government Regulation

We are required to comply
  with certain US laws and regulations, including the Foreign Corrupt Practices
  Act as well as economic and trade sanctions, which could adversely impact our
  future growth.

We must comply with the FCPA,
  which prohibits US companies or their agents and employees from providing
  anything of value to a foreign official for the purposes of influencing any act
  or decision of these individuals in their official capacity to help obtain or
  retain business, direct business to any person or corporate entity or obtain any
  unfair advantage. In addition, OFAC administers and enforces economic and trade
  sanctions against targeted foreign countries, entities and individuals based on
  US foreign policy and national security goals.

Any failure by us to adopt
  appropriate compliance procedures and ensure that our employees, agents and
  business partners comply with the FCPA could subject us to substantial
  penalties. In addition, the requirement that we comply with the FCPA could put
  us at a competitive disadvantage with companies that are not required to comply
  with the FCPA or could otherwise harm our business. For example, in many
  emerging markets, there may be significant levels of official corruption, and
  thus, bribery of public officials may be a commonly accepted cost of doing
  business. Our refusal to engage in illegal behavior, such as paying bribes, may
  result in us not being able to obtain business that we might otherwise have been
  able to secure or possibly even result in unlawful, selective or arbitrary
  action being taken against us by foreign officials. Furthermore, the trade
  sanctions administered and enforced by OFAC target countries which are typically
  less developed countries. Since less developed countries present some of the
  best opportunities for us to expand our business internationally, restrictions
  against entering into transactions with those foreign countries, as well as with
  certain entities and individuals in those countries, can adversely affect our
  ability to grow our business.

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Changes in current South
  African government regulations relating to social welfare grants could adversely
  affect our revenues and cash flows.

We derive a substantial portion
  of our current business from the distribution of social welfare grants onto
  smart cards in South Africa and the transaction fees resulting from use of these
  smart cards. Because social welfare eligibility and grant amounts are regulated
  by the South African government, any changes to or reinterpretations of the
  government regulations relating to social welfare may result in the non-renewal
  or reduction of grants for certain individuals, or a determination that
  currently eligible social welfare grant recipients are no longer eligible. If
  any of these changes were to occur, the number of smart cards in use could
  decrease, the amount of money on any particular smart card could decrease or the
  amount of transactions effected on any particular smart card may decrease, all
  of which could result in a reduction of our revenues and cash flows.

We do not have a South
  African banking license and therefore we provide our wage payment solution
  through an arrangement with a third party bank, which limits our control over
  this business and the economic benefit we derive from it. If this arrangement
  were to terminate, we would not be able to operate our wage payment business
  without alternate means of access to a banking license

The South African retail banking
  market is highly regulated, but the South African government has identified the
  need to service the unbanked market through the liberalization of the regulatory
  environment in order for retailers and non-banking service providers to innovate
  products and delivery channels for the unbanked market. However, under current
  law and regulations, a portion of our South African wage payment business
  activities in the unbanked market requires us to be registered as a bank in
  South Africa or to have access to an existing banking license. We are not
  currently so registered, but we have entered into a co-operation agreement with
  Grindrod Bank through which our wage payment solution is being implemented by
  Grindrod Banks retail division. As a result of this arrangement, we do not have
  complete control over the marketing and implementation of our wage payment
  system and we have to share the economic benefits with Grindrod Bank. If the
  co-operation agreement were to be terminated, we would not be able to operate
  our wage payment business unless we were able to obtain access to a banking
  license through alternate means.

In addition, the South African
  Financial Advisory and Intermediary Services Act, 2002, requires persons who
  give advice regarding the purchase of financial products or who act as
  intermediaries between financial product suppliers and consumers in South Africa
  to register as financial service providers. We have applied for a license under
  this Act in order to continue to provide advice and intermediary services in
  respect of the financial products on which we advise and the payment processing
  services we provide in South Africa on behalf of insurers and other financial
  product suppliers. If we fail to obtain this license, we may be stopped from
  continuing this part of our business in South Africa.

Our payment processing
  businesses in South Africa are subject to substantial governmental regulation
  and may be adversely affected by liability under, or any future inability to
  comply with, existing or future regulations or requirements.

Our payment processing activities
  are subject to extensive regulation. Compliance with the requirements under
  these various regulatory regimes may cause us to incur significant additional
  costs and failure to comply with such requirements could result in the shutdown
  of the non-complying facility, the imposition of liens, fines and/or civil or
  criminal liability.

We may be subject to
  privacy laws in South Africa and other jurisdictions in which we operate.
  Compliance with these laws may adversely affect our ability to operate our
  business most effectively. Moreover, we could face liability for damages if we
  are found to have violated any of these privacy laws.

Our collection, storage and
  processing, and any disclosure of, customer and employee personal information
  must comply with South Africas privacy laws, which are at various stages of
  legislative and judicial development. However, South African common law and the
  Constitution of the Republic of South Africa, 1996, do recognize an individuals
  right to privacy, and there are some statutes and other regulations which have
  been enacted that apply to us and the way we operate our business. For example,
  one statute sets out a framework for the electronic collection, processing,
  storage and disclosure of personal information. Although compliance with this
  statute is voluntary, a South African court could determine that we would be
  violating an individuals right to privacy if we do not operate in compliance
  with this framework. In addition, South African law requires that we must keep
  confidential the HIV status of the people that participate in any HIV/AIDS
  program.

New privacy laws may be enacted
  in the future which could adversely affect the way we do business, and we could
  be required to devote substantial management time and resources to comply with
  these new laws. In addition, if we violate, or are judged to have violated, the
  privacy rights of people whose information we collect, store and process, we
  could become liable for damages, which could have a material adverse effect on
  our financial condition, cash flows or results of operations.

30

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Risks Relating to Intellectual Property

Patent competition may
  adversely affect our products or processes, and limited patent protection, a
  lack of proprietary protection and the potential to incur costly litigation
  could be harmful to our operations.

Our products and technology have
  unique characteristics and structures and, as a result, are subject to patent
  protection, the extent of which varies from country to country. During the life
  of a patent, a product is only subject to competition by non-infringing
  products. However, aggressive patenting by our competitors and potential patent
  piracy may threaten protected products and processes and may result in an
  increased patent infringement risk, especially in emerging economies such as
  those where we currently operate. The expiration of a patent may also result in
  increased competition in the market for the previously patented products and
  processes. The patents for our FTS will expire at various dates ending in 2011.
  Lack of patent protection could have a material adverse effect on our business,
  operating results, cash flows and financial condition. In addition, to date, we
  have relied not only on patent protections, but also on trade secret, trademark
  and copyright laws, as well as nondisclosure, licensing and other contractual
  arrangements to protect the proprietary aspects of our solutions. Other than the
  patents discussed above, we do not own any other patents that protect important
  aspects of our current solutions. We will, however, prepare patent applications
  where possible for technology related to our smart cards and UEPS system when we
  believe it is appropriate to do so. These applications and contractual
  arrangements and our reliance on these laws may not be successful.

Litigation to enforce our
  intellectual property rights or protect our trade secrets could result in
  substantial costs and may not be successful. Any loss of, or inability to
  protect, intellectual property in our technology could diminish our competitive
  advantage and also seriously harm our business. In addition, the laws of certain
  foreign countries may not protect our intellectual property rights to the same
  extent as do the laws in countries where we currently have patent protection.
  Our means of protecting our intellectual property rights in countries where we
  currently have patent protection or any other country in which we operate, may
  not be adequate to fully protect our intellectual property rights. Similarly, if
  third parties claim that we infringe their intellectual property rights, we may
  be required to incur significant costs and devote substantial resources to the
  defense of such claims. We may be required to discontinue using and selling any
  infringing technology and services, to expend resources to develop
  non-infringing technology or to purchase licenses or pay royalties for other
  technology. In addition, if we are unsuccessful in defending any such
  third-party claims, we could suffer costly judgments and injunctions that could
  materially adversely affect our business, results of operations or financial
  condition.

The copyrights and certain
  related intellectual property rights in earlier versions of our UEPS software
  are jointly owned and potentially subject to non-exclusive rights, which may
  reduce our future revenues.

While we own the exclusive
  copyrights in the current version of the UEPS software, these copyrights are
  subject to the preexisting copyrights in the earlier versions of our software
  that are owned jointly by us and Nedbank Limited, or Nedbank. As joint owners of
  the copyrights in these earlier versions of our software that existed prior to
  July 2000, there is a risk that Nedbank could license these works to others and
  otherwise commercially exploit these earlier works. Under our Nedbank
  agreements, Nedbank also acquired the right to request a license of our South
  African and US FTS patents and of all technology and know-how relating to the
  UEPS described in those earlier patents from us for entities partly owned by
  Nedbank that are located anywhere within South Africa and neighboring countries.
  Under these licenses, Nedbank would pay us a license fee, with us supplying
  smart cards or being paid a royalty if the cards are obtained from a third
  party. If Nedbank licenses our works to others or otherwise commercially
  exploits our technology and know-how related to UEPS, our future revenues may be
  reduced.

Our current license
  agreement with Visa imposes long-term restrictions on our ability to license
  rights in our technology and could inhibit our ability to realize additional
  revenue from these rights in our technology.

In 1997, we entered into a
  technology license agreement with Visa. Under that agreement, Visa purchased a
  non-exclusive, perpetual, worldwide license to our technology rights, as defined
  in the agreement, relating to our UEPS technology and an exclusive, perpetual,
  worldwide license under our patents, as defined in the agreement, licensed to
  Visa that is exclusive to the financial services industry, as defined in the
  agreement. Our Visa agreement grants back to us the non-exclusive right under
  our Visa-licensed patents to make, use and sell our payment systems and other
  products in the financial services industry as discussed in the agreement. In
  our Visa agreement, Visa agrees not to grant a sublicense to any payment system
  to any entities in the financial services industry who are not members of Visa
  already if such entity already has a right to use such payment systems from us.

31

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The agreement permits Visa to
  sublicense our licensed technology rights to any of its members, any entity in
  the financial services industry or any entity outside of the financial services
  industry that provides products to Visa or its sublicensees. The agreement
  prohibits us from licensing our technology rights, not just our licensed
  patents, to any of Visas competitors, including MasterCard, Europay, American
  Express Company, Discover Financial Services, Diners Club International Credit
  Card Co., Carte Blanche Card or JCB International Credit Card Co. or any of
  their parents, subsidiaries or affiliates. We may need Visas consent, not to be
  unreasonably withheld, in order to transfer or assign our rights and obligations
  under the agreement. As this agreement does not contain a termination date and
  contains restrictions on our ability to license our technology rights in the
  financial services industry and to competitors of Visa, we may not be able to
  realize the full value of our technology rights.

Our license agreement with
  Visa substantially impacts our ability to defend and enforce our patents
  licensed to Visa and could substantially inhibit our ability to protect the
  rights in our technology.

Under our license agreement with
  Visa, we are restricted from suing Visa, its members and any third-party vendors
  or customers of Visa or its members for infringement of our technology rights
  licensed to Visa in connection with their manufacture, use or sale of any
  product or service offered by Visa. The license also grants Visa sole discretion
  with regard to enforcement of any of the licensed technology rights against
  third parties in the financial services industry. Under the agreement, Visa has
  the right to control the prosecution and maintenance of the patents and related
  patent applications we have licensed to Visa in all jurisdictions, and we are
  obligated to cooperate and support any of Visas actions in this regard. This
  arrangement could substantially impact our ability to defend these patents, and
  could make enforcement actions against our competitors more difficult.

Risks Relating to our Common Stock

***Our stock price has
  been and may continue to be volatile.***

Our stock price has experienced
  recent significant volatility. During the 2010 fiscal year, our stock price
  ranged from a low of $12.36 to a high of $22.47. We expect that the trading
  price of our common stock may continue to be volatile as a result of a number of
  factors, including, but not limited to the following:

- developments or the absence of developments in obtaining a new tender or
    contract from SASSA;
- fluctuations in currency exchange rates, particularly the US dollar/ZAR
    exchange rate;
- quarterly variations in our operating results, especially if our operating
    results fall below the expectations of securities analysts and investors;
- announcements of acquisitions or disposals;
- the timing of or delays in the commencement, implementation or completion
    of major projects;
- large purchases or sales of our common stock;
- general conditions in the markets in which we operate; and
- economic and financial conditions.

In particular, differences in
  relative growth rates between our businesses in our established markets for
  certain products and unestablished markets may have a significant effect on our
  operating results, particularly our reported operating profit margin, in any
  individual quarter, with unestablished market sales typically carrying lower
  margins in the initial phases of our operations in a new area or the
  introduction of a new product to an area in which we already operate. Certain
  transactions are difficult to predict and may have a significant effect on our
  operating results. Sales of this nature include hardware sales to customers and
  to our SmartSwitch investments and cause fluctuations in revenue and operating
  income when they occur.

We may seek to raise
  additional financing by issuing new securities with terms or rights superior to
  those of our shares of common stock, which could adversely affect the market
  price of our shares of common stock.

We may require additional
  financing to fund future operations, including expansion in current and new
  markets, programming development and acquisition, capital costs and the costs of
  any necessary implementation of technological innovations or alternative
  technologies, or to fund acquisitions. Because of the exposure to market risks
  associated with economies in emerging markets, we may not be able to obtain
  financing on favorable terms or at all. If we raise additional funds by issuing
  equity securities, the percentage ownership of our current shareholders will be
  reduced, and the holders of the new equity securities may have rights superior
  to those of the holders of shares of common stock, which could adversely affect
  the market price and voting power of shares of common stock. If we raise
  additional funds by issuing debt securities, the holders of these debt
  securities would similarly have some rights senior to those of the holders of
  shares of common stock, and the terms of these debt securities could impose
  restrictions on operations and create a significant interest expense for us.

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We may have difficulty
  raising necessary capital to fund operations or acquisitions as a result of
  market price volatility for our shares of common stock.

In recent years, the securities
  markets in the United States have experienced a high level of price and volume
  volatility, and the market price of securities of many companies have
  experienced wide fluctuations that have not necessarily been related to the
  operations, performances, underlying asset values or prospects of such
  companies. For these reasons, our shares of common stock can also be expected to
  be subject to volatility resulting from purely market forces over which we will
  have no control. If our business development plans are successful, we may
  require additional financing to continue to develop and exploit existing and new
  technologies, to expand into new markets and to make acquisitions, all of which
  may be dependent upon our ability to obtain financing through debt and equity or
  other means.

Issuances of significant
  amounts of stock in the future could potentially dilute your equity ownership
  and adversely affect the price of our common stock.

We believe that it is necessary
  to maintain a sufficient number of available authorized shares of our common
  stock in order to provide us with the flexibility to issue shares for business
  purposes that may arise from time to time. For example, we could sell additional
  shares to raise capital to fund our operations or to acquire other businesses,
  issue additional shares under our stock incentive plan or declare a stock
  dividend. Our board may authorize the issuance of additional shares of common
  stock without notice to, or further action by, our shareholders, unless
  shareholder approval is required by law or the rules of the NASDAQ Stock Market.
  The issuance of additional shares could dilute the equity ownership of our
  current shareholders. In addition, additional shares that we issue would likely
  be freely tradable which could adversely affect the trading price of our common
  stock.

Failure to maintain
  effective internal control over financial reporting in accordance with Section
  404 of the Sarbanes-Oxley Act, especially over companies that we may acquire,
  could have a material adverse effect on our business and stock price. Our
  management certification and auditor attestation regarding the effectiveness of
  our internal control over financial reporting as of June 30, 2010, excluded the
  operations of MediKredit and FIHRST. If we are not able to integrate MediKredit
  and FIHRSTs operations into our internal control over financial reporting, our
  internal control over financial reporting may not be effective.

Under Section 404 of the
  Sarbanes-Oxley Act of 2002, or Sarbanes, we are required to furnish a management
  certification and auditor attestation regarding the effectiveness of our
  internal control over financial reporting. We are required to report, among
  other things, control deficiencies that constitute a material weakness or
  changes in internal control that materially affect, or are reasonably likely to
  materially affect, internal control over financial reporting. A material
  weakness is a deficiency, or a combination of deficiencies, in internal control
  over financial reporting such that there is a reasonable possibility that a
  material misstatement of annual or interim financial statements will not be
  prevented or detected on a timely basis.

The requirement to evaluate and
  report on our internal controls also applies to companies that we acquire. As
  private companies, MediKredit and FIHRST were not required to comply with
  Sarbanes prior to the acquisitions by us. The integration of these operations
  into our internal control over financial reporting has required significant time
  and resources from our management and other personnel and may increase our
  compliance costs. As permitted by SEC rules, our management certification and
  auditor attestation regarding the effectiveness of our internal control over
  financial reporting as of June 30, 2010, excluded the operations of MediKredit
  and FIHRST. If we fail to successfully integrate these operations into our
  internal control over financial reporting, our internal control over financial
  reporting may not be effective.

While we continue to dedicate
  resources and management time to ensuring that we have effective controls over
  financial reporting, including with respect to the MediKredit and FIHRST
  operations, failure to achieve and maintain an effective internal control
  environment could have a material adverse effect on the markets perception of
  our business and our stock price.

You may experience
  difficulties in effecting service of legal process, enforcing foreign judgments
  or bringing original actions based upon U.S. laws, including the federal
  securities laws or other foreign laws, against us or our directors and officers
  and experts.

While Net1 is incorporated in the
  state of Florida, United States, the company is headquartered in Johannesburg,
  South Africa and substantially all of the companys assets are located outside
  the United States.

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In addition, the majority of
  Net1s directors and officers reside outside of the United States and our
  experts, including our independent registered public accountants, are based in
  South Africa. As a result, even though you could effect service of legal process
  upon Net1, as a Florida corporation, in the United States, you may not be able
  to collect any judgment obtained against Net1 in the United States, including
  any judgment based on the civil liability provisions of the U.S. federal
  securities laws, because substantially all of our assets are located outside the
  United States. Moreover, it may not be possible for you to effect service of
  legal process upon the majority of our directors and officers or upon our
  experts within the United States or elsewhere outside South Africa and any
  judgment obtained against any of our foreign directors, officers and experts in
  the United States, including one based on the civil liability provisions of the
  U.S. federal securities laws, may not be collectible in the United States and
  may not be enforced by a South African court. A foreign judgment is not directly
  enforceable in South Africa, but constitutes a cause of action which will be
  enforced by South African courts provided that:

- the court or arbitral body which pronounced the judgment had international
    jurisdiction and competence to entertain the case according to the principles
    recognized by South African law with reference to the jurisdiction of foreign
    courts;
- the judgment is final and conclusive (that is, it cannot be altered by the
    court which pronounced it);
- the judgment has not lapsed;
- the recognition and enforcement of the judgment by South African courts
    would not be contrary to public policy in South Africa, including observance
    of the rules of natural justice which require that no award is enforceable
    unless the defendant was duly served with documents initiating proceedings,
    that he was given a fair opportunity to be heard and that he enjoyed the right
    to be legally represented in a free and fair trial before an impartial
    tribunal;
- the judgment was not obtained by improper or fraudulent means;
- the judgment does not involve the enforcement of a penal or foreign
    revenue law or any award of multiple or punitive damages; and
- the enforcement of the judgment is not otherwise precluded by the
    provisions of the Protection of Business Act 99 of 1978 (as amended), of the
    Republic of South Africa.

It has been the policy of South
  African courts to award compensation for the loss or damage actually sustained
  by the person to whom the compensation is awarded. South African courts have
  awarded compensation to shareholders who have suffered damages as a result of a
  diminution in the value of their shares based on various actions by the
  corporation and its management. Although the award of punitive damages is
  generally unknown to the South African legal system, that does not mean that
  such awards are necessarily contrary to public policy. Whether a judgment was
  contrary to public policy depends on the facts of each case. Exorbitant,
  unconscionable, or excessive awards will generally be contrary to public policy.
  South African courts cannot enter into the merits of a foreign judgment and
  cannot act as a court of appeal or review over the foreign court. Further, if a
  foreign judgment is enforced by a South African court, it will be payable in
  South African currency. Also, under South Africas exchange control laws, the
  approval of SARB is required before a defendant resident in South Africa may pay
  money to a non-resident plaintiff in satisfaction of a foreign judgment enforced
  by a court in South Africa.

It is doubtful whether an
  original action based on United States federal securities laws may be brought
  before South African courts. A plaintiff who is not resident in South Africa may
  be required to provide security for costs in the event of proceedings being
  initiated in South Africa. Furthermore, the Rules of the High Court of South
  Africa require that documents executed outside South Africa must be
  authenticated for the purpose of use in South African courts.

In reaching the foregoing conclusions, we consulted with our
  South African legal counsel, Cliffe Dekker Hofmeyr Inc.

We may become subject to a
  US tax liability for failing to withhold on certain distributions on instruments
  issued in connection with the Aplitec transaction.

There is no statutory, judicial
  or administrative authority that directly addresses the tax treatment of non-US
  holders that elected to receive units in a trust representing beneficial
  interests in B class preference shares and B class loan accounts issued by New
  Aplitec pursuant to the reinvestment option in connection with our acquisition
  of Aplitec. We believe these interests should be treated for United States
  federal income tax purposes as, and we did treat them as, separate and distinct
  interests in New Aplitec. As such, we and our affiliates did not withhold any
  amounts for US federal taxes in respect of any distributions paid on such
  interests. There is a risk, however, that these interests, together with the
  special convertible preferred stock, may be treated as representing a single
  direct equity interest in us for US federal income tax purposes. In such case,
  distributions received with respect to the B class preference shares and B class
  loan accounts could be subject to US federal withholding tax, and we could be
  liable for failure to withhold such taxes in our capacity as withholding agent.
  In addition, our failure to collect and remit US federal withholding tax may
  also subject us to penalties.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

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ITEM 2. PROPERTIES

We lease our corporate
  headquarters facility which consists of 84,193 square feet in Johannesburg,
  South Africa. We also lease properties throughout South Africa, a 12,088 square
  foot manufacturing facility in Lazer Park, a 14,230 square foot manufacturing
  facility in Brakpan and 75 depot facilities. We also lease additional office
  space in Johannesburg, Pretoria, Cape Town and Durban, South Africa; Vienna,
  Austria; Moscow, Russia; Dallas, Texas; Fredrick, Maryland; and New Delhi,
  India. These leases expire at various dates through the year 2010 and 2014,
  respectively. We believe we have adequate facilities for our current business
  operations.

ITEM 3. LEGAL PROCEEDINGS

We sued SASSA in the South
  African High Court, or the Court, alleging that it unlawfully moved
  beneficiaries to SAPO in violation of our contract and the Public Finance
  Management Act, seeking injunctive relief. On January 26, 2010, the Court ruled
  in our favor and directed SASSA to discontinue the registration of any
  beneficiaries with SAPO until a proper procurement process has been completed.
  SASSA has appealed the Courts ruling and the parties currently await allocation
  of a hearing date for the appeal.

Additionally, we sued SASSA in
  the Court alleging that it unlawfully moved beneficiaries to certain banks, in
  violation of our contract and the Public Finance Management Act, seeking
  injunctive relief. On June 24, 2010, the Court ruled in our favor and directed
  SASSA to discontinue the registration of any beneficiaries with these banks
  until a proper procurement process has been completed. To date, SASSA has not
  appealed the Court's ruling.

Finally, we have launched a Court
  application for the review and setting aside of the decision to withdraw the
  most recent SASSA tender and we are currently responding to SASSAs answering
  affidavit, where after the parties will apply for a hearing date.

There are no other material
  pending legal proceedings, other than ordinary routine litigation incidental to
  our business, to which we are a party or of which any of our property is the
  subject.

ITEM 4. RESERVED

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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
  STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on The
  Nasdaq Global Select Market, or Nasdaq, in the United States under the symbol
  UEPS and on the JSE Limited, or JSE, in South Africa under the symbol NT1.
  The Nasdaq is our principal market for the trading of our common stock.

The following table sets forth,
  for the periods indicated, the high and low sales prices of our common stock as
  reported by Nasdaq.

Period
      
      High
      
      
      LowQuarter ended September 30, 2008
      $
      27.99
      
      $
      18.58Quarter ended December 31, 2008
      $
      22.93
      
      $
      8.21Quarter ended March 31, 2009
      $
      15.76
      
      $
      10.93Quarter ended June 30, 2009
      $
      18.01
      
      $
      11.93Quarter ended September 30, 2009
      $
      22.47
      
      $
      12.36Quarter ended December 31, 2009
      $
      21.77
      
      $
      17.11Quarter ended March 31, 2010
      $
      20.22
      
      $
      16.50Quarter ended June 30, 2010
      $
      18.50
      
      $
      13.14


Our transfer agent in the United
  States is The Bank of New York Mellon, One Wall Street, New York, New York,
  10286. According to the records of our transfer agent, as of August 6, 2010,
  there were 21 shareholders of record of our common stock. A substantially
  greater number of holders of our common stock are street name or beneficial
  holders, whose shares are held of record by banks, brokers, and other financial
  institutions. Our transfer agent in South Africa is Link Market Services South
  Africa (Pty) Ltd, 16th Floor, 11 Diagonal Street, Johannesburg, 2001, South
  Africa.

*Dividends*

We have not paid any dividends on
  our shares of common stock during our last two fiscal years and presently intend
  to retain future earnings to finance the expansion of the business. We do not
  anticipate paying any cash dividends in the foreseeable future. The future
  dividend policy will depend on our earnings, capital requirements, expansion
  plans, financial condition and other relevant factors.

*Issuer Purchases of Equity
  Securities*

The table below presents information relating to purchases of
  our common stock during the fourth quarter of fiscal 2010:

|           |  |              |  |  |               |  |  | (c)          |  |  | (d)              | 
|---------- |  | ------------ |  |  | ------------- |  |  | ------------ |  |  | ---------------- | 
|           |  |              |  |  |               |  |  | Total number |  |  | Maximum          | 
|           |  |              |  |  |               |  |  | of shares    |  |  | dollar value     | 
|           |  |              |  |  |               |  |  | purchased as |  |  | of shares that   | 
|           |  |              |  |  | (b)           |  |  | part of      |  |  | may yet be       | 
|           |  | (a)          |  |  | Average price |  |  | publicly     |  |  | purchased        | 
|           |  | Total number |  |  | paid per      |  |  | announced    |  |  | under the        | 
|           |  | of shares    |  |  | share         |  |  | plans or     |  |  | plans or         | 
|Period     |  | purchased    |  |  | (US dollars)  |  |  | programs     |  |  | **programs (1)** | 
|April 2010 |  | 0            |  |  |               |  |  | 0            |  |  |                  | 
|May 2010   |  | 0            |  |  | -             |  |  | 0            |  |  |                  | 
|June 2010  |  | 0            |  |  | -             |  |  | 0            |  |  |                  | 
|Total      |  |              |  |  |               |  |  |              |  |  | 100,000,000      | 

(1) On February 5, 2010, we
  announced that our Board of Directors had authorized the repurchase of up to $50
  million of our common stock from time to time in open market transactions. On
  May 5, 2010, we announced that our Board of Directors had increased this
  authorization to an aggregate of up to $100 million. During the fourth quarter
  of fiscal 2010, we did not purchase any shares of our common stock under this
  authorization.

36

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*Share performance
  graph*

The chart below compares the
  five-year cumulative return, assuming the reinvestment of dividends, where
  applicable, on our common stock with that of the S&P 500 Index and the
  NASDAQ Industrial Index. This graph assumes $100 was invested on June 30, 2005,
  in each of our common stock, the S&P 500 companies, and the companies in the
  NASDAQ Industrial Index.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(AMONG NET 1, THES&P 500 INDEX AND THENASDAQ INDUSTRIAL
    INDEX)



37

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial
  data should be read together with Item 7 - Managements Discussion and Analysis
  of Financial Condition and Results of Operations and Item 8 - Financial
  Statements and Supplementary Data.

Consolidated Statements of Operations Data(in thousands, except per share data)

|                                                                |   |         |  |   | Year Ended June 30 |  |   |         | 
|--------------------------------------------------------------- | - | ------- |  | - | ------------------ |  | - | ------- | 
|                                                                |   | 2010    |  |   | 2009               |  |   | 2008    | 
|Revenue                                                         | $ | 280,364 |  | $ | 246,822            |  | $ | 254,056 | 
|Cost of goods sold, IT processing, servicing and support        |   | 72,973  |  |   | 70,091             |  |   | 67,486  | 
|Selling, general and administrative(1)                          |   | 80,854  |  |   | 64,833             |  |   | 65,362  | 
|Depreciation and amortization                                   |   | 19,348  |  |   | 17,082             |  |   | 10,822  | 
|Costs related to public offering and Nasdaq
      listing       |   | -       |  |   | -                  |  |   | -       | 
|Profit on sale of microlending business                         |   | -       |  |   | 455                |  |   | -       | 
|Impairment of goodwill(2)                                       |   | 37,378  |  |   | 1,836              |  |   | -       | 
|Operating income                                                |   | 69,811  |  |   | 93,435             |  |   | 110,386 | 
|Foreign exchange gain related to short-term
      investment(3) |   | -       |  |   | 26,657             |  |   | -       | 
|Interest income, net                                            |   | 9,069   |  |   | 10,828             |  |   | 15,722  | 
|Income before income taxes                                      |   | 78,880  |  |   | 130,920            |  |   | 126,108 | 
|Income tax expense(4)                                           |   | 40,822  |  |   | 42,744             |  |   | 39,192  | 
|Income from continuing operations                               |   | 38,990  |  |   | 86,601             |  |   | 86,695  | 
|Net income attributable to shareholders                         |   | 38,990  |  |   | 86,601             |  |   | 86,695  | 
|Income from continuing operations per
      share:              |   |         |  |   |                    |  |   |         | 
|Basic                                                           | $ | 0.84    |  | $ | 1.53               |  | $ | 1.50    | 
|Diluted                                                         | $ | 0.84    |  | $ | 1.53               |  | $ | 1.49    | 

(1) Selling, general and administrative expense includes a
  charge of $5.5 million, $4.9 million, $3.8 million and $0.6 million,
  respectively, in respect of stock-based compensation. 
  (2) Goodwill related
  to the hardware, software and related technology sales segment was impaired
  during fiscal 2010, and goodwill related to the financial services segment was
  impaired during fiscal 2009.
  (3) The foreign exchange gain related to a
  short-term investment in the form of an asset swap arrangement which matured
  during fiscal 2009.
  (4) The fully distributed tax rate for fiscal 2010 and
  fiscal 2009 was 34.55%, for fiscal 2008 it was 35.45% and for fiscal 2007 and
  fiscal 2006 it was 36.89% . Our income tax expense for fiscal 2009, 2008 and
  2006 includes the impact of the change in the fully distributed rate during
  those fiscal years of approximately $3.5 million, $5.4 million and $0.2 million,
  respectively.

Additional Operating Data:(in thousands, except
    percentages)

|                                                              |   | Year ended June 30, |  
|------------------------------------------------------------- | - | ------------------- | -
|                                                              |   | 2010                |  
|Cash flows provided by operating activities                   | $ | 68,683              |  
|Cash flows used in investing activities                       |   | 90,186              |  
|Cash flows provided by (used in) financing
      activities . | $ | (48,478             | )
|Operating income margin                                       |   | 25%                 |  

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Consolidated Balance Sheet Data:(in
    thousands)

|                                                        |   | As
      of June 30, | 
|------------------------------------------------------- | - | -------------------- | 
|                                                        |   | 2010                 | 
|Cash and cash equivalents                               | $ | 153,742              | 
|Total current assets before settlement assets           |   | 226,429              | 
|Goodwill                                                |   | 76,346               | 
|Intangible assets                                       |   | 68,347               | 
|Total assets                                            |   | 472,090              | 
|Total current liabilities before settlement obligations |   | 57,927               | 
|Total debt                                              |   | 4,343                | 
|Total Net1 equity                                       | $ | 285,878              | 

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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 Item 6  Selected Financial Data
  and Item 8 Financial Statements and Supplementary Data. In addition to
  historical consolidated financial information, the following discussion and
  analysis contains forward-looking statements that involve risks, uncertainties
  and assumptions. See Item 1A. Risk Factors and Forward Looking
  Statements.

Overview

We provide a smartcard-based
  alternative payment system for the unbanked and underbanked populations of
  developing economies. We believe that we are the first company worldwide to
  implement a system that can enable the estimated four billion people who
  generally have limited or no access to a bank account to enter affordably into
  electronic transactions with each other, government agencies, employers,
  merchants and other financial service providers. Our UEPS uses secure smart
  cards that operate in real-time but offline, unlike traditional payment systems
  offered by major banking institutions that require immediate access through a
  communications network to a centralized computer. This offline capability means
  that users of our system can enter into transactions at any time with other card
  holders in even the most remote areas so long as a smart card reader, which is
  often portable and battery-powered, is available. Our off-line systems also
  offer the highest level of availability and affordability by removing any
  elements that are costly and are prone to outages. In addition to effecting
  purchases, cash-backs and any form of payment, our system can be used for
  banking, health care management, international money transfers, voting and
  identification.

We also develop and provide
  secure transaction solutions and services for first world markets. Our core
  competencies around mobile payment applications, secure online transaction
  processing, switching, cryptography and integrated circuit card technologies
  provide us with the building blocks to develop secure end-to-end payment
  solutions for a wide range of electronic commerce and financial transactions
  through which we generate fees.

Our technology is widely used in
  South Africa today, where we distribute pension and welfare payments to over 3.2
  million beneficiaries in five of South Africas nine provinces, process debit
  and credit card payment transactions on behalf of retailers that we believe
  represent nearly 65% of retailers within the formal retail sector in South
  Africa through our EasyPay system, offer claims processing to more than 60% of
  healthcare plans and administrators, process payroll for over 700,000 employees
  through our FIHRST system, and provide mobile telephone top-up transactions for
  the major South African mobile carriers. During the past several years, we have
  expanded our business to a number of markets outside South Africa, including
  other countries on the African continent, Russia and other members of the CIS,
  the Middle East, Asia and Latin America. We describe development of this
  international expansion in detail under Business.

Sources of Revenue

We generate our revenues by
  charging transaction fees to government agencies, merchants, financial service
  providers, employers and healthcare providers; by providing loans and insurance
  products and by selling hardware, licensing software and providing related
  technology services.

We have structured our business
  and our business development efforts around four related but separate approaches
  to deploying our technology. In our most basic approach, we act as a supplier,
  selling our equipment, software, and related technology to a customer. As an
  example, in Ghana, we sold a complete UEPS to the Central Bank, which owns and
  operates the resulting transaction settlement system. The revenue and costs
  associated with this approach are reflected in our Hardware, software and
  related technology sales segment.

We have found that we have
  greater revenue and profit opportunities, however, by acting as a service
  provider instead of a supplier. In this approach we own and operate the UEPS
  ourselves, charging one-time and on-going fees for the use of the system either
  on a fixed or ad valorem basis. This is the case in South Africa, where we
  distribute welfare grants on behalf of the South African government and wages on
  behalf of employers on a fixed fee basis, but charge a fee on an ad valorem
  basis for goods and services purchased using our smart card. The revenue and
  costs associated with this approach are reflected in our Smart card accounts,
  Transaction-based activities and Financial services segments. We have adopted a
  variation of this approach in Iraq, where we operate a UEPS system on an
  outsourced basis on behalf of a consortium consisting of the Iraqi government
  and local Iraqi banks, in return for transaction fees based on the volume and
  value of transactions processed through the system. Most significantly, we are
  focusing on migrating Net1 UTAs business model from a product-based model which
  relies on selling systems to customers to a services-based model which focuses
  on generating recurring revenue from the cardholder base through
  transaction-based fees and provision of other products and services.

40

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Because our smart cards are
  designed to enable the delivery of more advanced services and products, we are
  also willing to supply those services and products directly where the business
  case is compelling. For instance, we provide short-term UEPS-based loans to our
  smart card holders. This is an example of the third approach that we have taken.
  Here we can act as the principal in operating a business that can be better
  delivered through our UEPS. We can also act as an agent, for instance, in the
  provision of insurance policies. In both cases, the revenue and costs associated
  with this approach are reflected in our Financial services segment.

We also generated fees from
  transaction processing to both funders and providers of healthcare in South
  Africa and from providing a third party payroll payments solution to South
  African companies. In both cases, the revenue and costs associated with these
  services are reflected in our Transaction-based activities segment.

Finally, we have entered into
  business partnerships or joint ventures to introduce our UEPS and VTU solutions
  to new markets such as Botswana, Namibia, Nigeria, Colombia and Vietnam. In
  these situations, we take an equity position in the business while also acting
  as a supplier of technology. In evaluating these types of opportunities, we seek
  to maintain a highly disciplined approach, carefully selecting partners,
  participating closely in the development of the business plan and remaining
  actively engaged in the management of the new business. In most instances, the
  joint venture or partnership has a license to use the UEPS in the specific
  territory, including the back-end system. We account for our equity investments
  using the equity method. When we equity-account these investments, we are
  required under US GAAP to eliminate our share of the net income generated from
  sales of hardware and software to the investee. We recognize this net income
  from these during the period in which the hardware and software is utilized in
  the investees operations, or has been sold to third party customers, as the
  case may be.

We believe that this flexible
  approach enables us to drive adoption of our solution while capturing the value
  created by the implementation of our technology.

Business Developments during Fiscal 2010

***South
  Africa***

*SASSA contract*

Our one-year contract with SASSA
  for the payment of social welfare grants in the five provinces where we
  currently provide a grant payment service commenced on April 1, 2009 and expired
  on March 31, 2010. SASSA received special approval from the South African
  National Treasury Department to enter into new agreements with us and the other
  current service providers for a twelve month period without conducting a tender
  process. SASSA extended the contract for a further three months until June 30,
  2010. On August 24, 2010, we signed a new agreement with SASSA which was
  effective from July 1, 2010. The new contract expires on March 31, 2011.

As was the case with our previous
  contact, the new contract contains a standard pricing formula for all provinces
  based on a transaction fee per beneficiary paid, regardless of the number or
  amount of grants paid per beneficiary, calculated on a guaranteed minimum number
  of beneficiaries per month. However, the new contract provides for a reduction
  in both the level of the transaction fee per beneficiary paid and the guaranteed
  minimum number of beneficiaries. Because we continue to derive a substantial
  percentage of our revenues from our SASSA contract, we expect that the terms of
  the new contract will materially reduce our revenues, operating income, net
  income and cash flow for fiscal 2011, unless we are able to offset reduced fees
  from SASSA by increasing our revenues from our other business activities,
  reducing expenses, or both. For more information regarding our contract with
  SASSA, refer to discussion contained in the first captioned section under Item
  1A. Risk Factors and Item 9B. Other Information.

*Progress of wage payment
  implementation and UEPS-based lending*

Our recently appointed Financial
  Services Cluster general manager is pursuing a number of projects in order to
  further expand our wage payment initiative in South Africa. In addition, through
  our recent acquisition of FIHRST Management Services (Pty) Limiteds business
  and related software, described in more detail below, we will be able to promote
  our wage payment initiative by offering the employees of FIHRST customers
  banking solutions through our relationship with Grindrod Bank Limited.

During fiscal 2010 we grew our
  UEPS-based lending book through coordinated marketing of our products to our
  customer base.

41

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*Merger and Acquisition
  Activities in South Africa*

In January 2010, we acquired 100%
  of MediKredit for a purchase price of ZAR 74 million (approximately $10
  million). MediKredit offers transaction processing, financial and clinical risk
  management solutions to both funders and providers of healthcare. MediKredit
  currently operates its core business in South Africa and this business is
  currently cash sustainable. In addition, MediKredit is currently exploring
  various opportunities, primarily in the United States and we expect that
  development and set up costs, taken together with the core South Africa
  business, will result in net operating losses in the short-term. We do not
  expect the operating loss at MediKredit to be material to our overall
  profitability. We are also actively pursuing new customers and business
  opportunities in South Africas rapidly consolidating private health care
  industry and will focus on realizing cost savings and synergies identified
  during the acquisition process to minimize, and ultimately reverse, the
  anticipated operating losses.

We view the main drivers of the
  business as (1) processing fee per scheme card holders (the main member in the
  scheme), (2) scheme lives (the individuals linked to the main member in the
  scheme) and (3) fee per line (the number of products within a claim)
  processed.

We believe that MediKredit will
  provide us the opportunity to expand our technology to another adjacent market
  and to cross-sell our payment technologies. Together with the FIHRST acquisition
  described below, MediKredit has expanded our position as one of the leading
  independent transaction processors in South Africa, as we have added leadership
  in the healthcare transaction processing space to our existing leadership
  position in the merchant processing space (through EasyPay). The acquisition has
  also provided us with a small, strategic entry point for the US healthcare
  administration market. The rapidly changing US healthcare and administration
  industry provides a significant opportunity for the introduction of MediKredits
  real-time claims adjudication technology. MediKredits U.S. wholly-owned
  subsidiary, XeoHealth Corporation, recently launched its proven Real Time
  Adjudication rules engine for the health care industry in the US. Finally, like
  FIHRST, the MediKredit acquisition has also enhanced our technology platforms
  and IT development resources and added depth and diversity to our management
  team.

At the end of March 2010, we
  acquired FIHRST, a South African business, for ZAR 70 million (approximately $9
  million) in cash. FIHRST offers a third party payroll payments solution to South
  African companies, representing in excess of 700,000 employees, with a
  transaction volume of approximately ZAR 52.6 billion per annum. FIHRST gives us
  access to the 700,000 employees of its customers to whom we can market our range
  of transaction processing products and financial services, including bill
  payments, insurance products, prepaid utilities and third party payments and
  promote our wage payment initiative. FIHRSTs technology platforms and IT
  development resources enhance our existing platforms and resources.

***Outside
  South Africa***

*The African Continent and
  Iraq*

During fiscal 2010, we recorded
  revenue from transaction fees and the delivery of UEPS-enabled smartcards under
  our contract with the government of Iraq. During early January 2010, we received
  additional orders for 800,000 smart cards and 1,500 point of sale devices and
  more recently, in July 2010, we received a further order for 1.5 million smart
  cards. We expect to generate ongoing revenues from transaction fees under our
  Iraqi contract and from smart card sales during the first quarter of fiscal
  2011. We have entered the second phase of our initiative in Ghana and now
  generate recurring income in the form of hardware and software maintenance
  fees.

We continue to service our
  current customers on the African continent and in Iraq. Our UETS business unit
  continued its business development efforts in multiple new countries on the
  African continent during the quarter.

During fiscal 2010, SmartSwitch
  Namibia generated incremental transaction fees from prepaid airtime and
  electricity transactions and transactions conducted between Namibian merchants
  and UEPS-enabled smartcards. SmartSwitch Botswana generated transaction fees
  during the fiscal 2010 from the payment of food voucher grants. We expect
  SmartSwitch Namibia and Botswana to continue generating transaction fees during
  the first quarter of fiscal 2011.

*Net1 UTA*

Net1 UTAs operations are
  seasonal and the first quarter and third quarters are historically its weakest.
  Growth at Net1 UTA during fiscal 2010 continued to be adversely impacted by our
  transitioning of its business model from a hardware and software sale-oriented
  model to one which generates recurring transaction fees, as well as by
  challenging economic conditions in Eastern Europe. We expected to sign our first
  agreement that reflects the transformed business model for Net1 UTA during the
  fourth quarter of fiscal 2010, however, this project has been delayed due to key
  executive management changes at our target customer.

For the first quarter of fiscal
  2011, we expect revenue from Net1 UTA to be lower than a year ago due to the
  business transformation and weak economic conditions.

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*Net1 Virtual Card*

During fiscal 2010, we increased
  our business development efforts of our Virtual Card offering in the continental
  United States and surrounding territories and successfully demonstrated, in a
  live environment, this product to a number of prospective partners, including
  mobile operators, banks and card associations. The majority of fiscal 2010 was
  spent building the Virtual Card operations team in Dallas, Texas, and assessing
  the technical, regulatory and compliance environment in the United States. We
  signed our first agreement with a customer in July 2010 and the customer has
  advised us that it anticipates rolling out the Virtual Card offering on its
  products during the first quarter of fiscal 2011.

Operating Segments

We analyze our business and
  operations in terms of four inter-related but independent operating segments:
  (1) transaction-based activities, (2) smart card accounts, (3) financial
  services, and (4) hardware, software and related technology sales. Corporate and
  corporate office activities as well as any inter-segment eliminations are
  included in corporate/ eliminations. See Note 17 to our consolidated financial
  statements for further information about our operating segments.

***Transaction-Based
  Activities***

The transaction-based activities
  operating segment consists primarily of (1) our South African social welfare
  payments distribution operations which we conduct through our subsidiary Cash
  Paymaster Services (Proprietary) Limited, or CPS, and (2) our transaction
  processing operations, which consist of EasyPay, Iraq, MediKredit and FIHRST
  (collectively, transaction processors). CPS utilizes the UEPS technology to
  administer and distribute social welfare grants in five of South Africas nine
  provinces. Segment revenues include all fees that we earn from SASSA and
  participating retail merchants from recurring UEPS transactions that we process
  through our back-end system, such as the payment of social welfare grants, debit
  orders, payment of wages, point of sale spending, distribution of medicine,
  money transfers and prepayment of utility bills, prepayment of mobile phone
  airtime and transaction fees from customers of our transaction processors. The
  expenses associated with our social welfare payments activities are primarily
  variable expenses such as security and guarding expenses we incur to help insure
  the security of the cash we transport and the safety of our employees who
  transport the cash, banking fees we incur when we withdraw and redeposit cash,
  insurance and fixed expenses such as salaries and property rental. The expenses
  associated with our transaction processors operations are primarily variable
  expenses such as data communication and bank charges for switching transactions
  and fixed expenses such as salaries, depreciation of switch fixed assets and
  property rental.

***Smart Card
  Accounts***

Our smart card accounts operating
  segment derives revenue from the provision of smart card accounts to our card
  holders, which currently primarily consist of social welfare grant
  beneficiaries. We provide a smart card account to all social welfare
  beneficiaries to whom we distribute payments. A portion of the fee we earn for
  the delivery of the service is for the provision of the smart card account and
  is therefore included in the smart card accounts operating segment. The fixed
  costs included in this operating segment are primarily computer
  equipment-related and personnel costs associated with the operation of the smart
  card accounts.

***Financial
  Services***

Our financial services operating
  segment derives revenues from providing financial services to card holders
  through our smart card delivery channel. These financial services consist
  primarily of short-term loans and life insurance products. We provide the loans
  ourselves and generate revenue from the service fees charged on these loans. We
  sell life insurance products on behalf of registered underwriters and earn
  revenue through the commissions we receive on the sale of policies. The fees we
  earn for the collection of insurance policy premiums through our debit order
  system is included in the transaction-based activities operating segment. The
  fixed expenses associated with the financial services operating segment consist
  primarily of costs of administrative personnel and depreciation of computer
  equipment.

We operated a traditional
  microlending business in South Africa which we sold during the third quarter of
  fiscal 2009. The business extended short-term loans for periods ranging from 30
  days up to four months, with the majority of loans being 30-day loans.

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***Hardware, Software
  and Related Technology Sales***

We have developed a range of
  technological competencies to service our own internal needs and to provide
  links with our client enterprises. We derive revenues from the hardware,
  software and related technology sales operating segment by providing to
  customers the hardware and software required to implement our UEPS or DUET
  systems. Typical components for a UEPS/ DUET system installation are:

- hardware for the back-end switching and settlement system;
- customization of the UEPS/ DUET software to suit local conditions,
    including UEPS management system, automated teller machine, or ATM,
    integration and POS device integration;
- customization of an applications suite to clients specific requirements,
    such as banking, retail or wage payments;
- ongoing software and hardware support/maintenance; and
- license fees.

Three of our largest customers in
  this segment are the International Smart Card LLC, of the Iraqi Consortium, the
  Central Bank of Ghana and Nedbank, one of South Africas largest banks by asset
  size. In Ghana, we created a national payment system in which all Ghanaian banks
  are required to participate. We have an arrangement with Nedbank relating to the
  outsourcing of its entire POS device management system, front-end switching
  Stratus computer platform, development of their software systems, smart cards
  and POS device maintenance. We also supply hardware to Nedbank in the form of
  POS devices and card readers on an ad hoc basis.

Included in our hardware,
  software and related technology sales segment are Net1 UTA, Net1 UETS,
  cryptographic solutions, chip and GSM licensing, and POS Solutions.

We experience seasonality in this
  segment, as Net1 UTAs operations are typically most profitable in second and
  fourth quarters.

Critical Accounting Policies

Our consolidated financial
  statements have been prepared in accordance with US GAAP, which requires
  management to make estimates and assumptions about future events that affect the
  reported amount of assets and liabilities and disclosure of contingent assets
  and liabilities. As future events and their effects cannot be determined with
  absolute certainty, the determination of estimates requires managements
  judgment based on a variety of assumptions and other determinants such as
  historical experience, current and expected market conditions and certain
  scientific evaluation techniques. Management believes that the following
  accounting policies are critical due to the degree of estimation required and
  the impact of these policies on the understanding of the results of our
  operations.

***Deferred
  Taxation***

We estimate our tax liability
  through the calculations done for the determination of our current tax liability
  when tax returns are filed, together with assessing temporary differences
  resulting from the different treatment of items for tax and accounting purposes.
  These differences result in deferred tax assets and liabilities which are
  disclosed on our balance sheet. Management then has to assess the likelihood
  that deferred tax assets will be recovered from future taxable income. To the
  extent that we believe recovery is unlikely, we create a valuation allowance.
  The carrying value of our net deferred tax assets assumes that we will be able
  to generate sufficient future taxable income, based on estimates and
  assumptions. Management has considered future taxable income over a five year
  forecasting period and ongoing feasible tax strategies in determining the need
  for the valuation allowance, but in the event that we were to determine that we
  would be able to realize deferred tax assets in the future, a valuation
  allowance may not be required which would increase net income in the period that
  such determination is made.

***Stock-based
  Compensation***

Management is required to make
  estimates and assumptions related to our valuation and recording of stock-based
  compensation charges under current accounting standards. These standards require
  all share-based compensation to employees to be recognized in the statement of
  operations based on their respective grant date fair values over the requisite
  service periods and also requires an estimation of forfeitures when calculating
  compensation expense. We utilize the Cox Ross Rubinstein binomial model to
  measure the fair value of stock options granted to employees and directors and
  recognizes compensation cost on a straight line basis. Option-pricing models
  require estimates of a number of key valuation inputs including expected
  volatility, expected dividend yield, expected term and risk-free interest rate.
  Our management has estimated forfeitures based on historic employee behavior
  under similar compensation plans. No stock options were granted during fiscal
  2010. During fiscal 2009, our assumptions regarding volatility changed
  significantly as a result of general economic conditions and trading prices of
  our customers and suppliers. Accordingly, the fair value of stock options is
  affected by the assumptions selected. Stock-based compensation expense from
  continuing operations was $5.7 million, $5.0 million and $4.0 million for the
  years ended June 30, 2010, 2009 and 2008, respectively.

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***Intangible Assets
  Acquired Through Acquisitions***

The fair values of the
  identifiable intangible assets acquired through acquisitions were determined by
  management using guidance provided in accounting literature. We completed
  acquisitions during fiscal 2010 and 2009, where we identified and recognized
  intangible assets. We have used the relief from royalty method, the multi-period
  excess earnings, the income approach and the cost approach method to value
  acquisition-related intangible assets. In so doing, we made assumptions
  regarding revenue and cost of sales forecasts, applied contributory asset
  charges, discount rates, exchange rates, cash tax charges and useful lives.

The valuations were based on
  information at the time of the acquisition and the expectations and assumptions
  that have been deemed reasonable by us. No assurance can be given, however, that
  the underlying assumptions or events associated with such assets will occur as
  projected. For these reasons, among others, the actual cash flows may vary from
  forecasts of future cash flows. To the extent actual cash flows vary, revisions
  to the useful life or impairment of intangible assets may be necessary.

***Business Combinations
  and the Recoverability of Goodwill***

A component of our growth
  strategy has been to acquire and integrate businesses that complement our
  existing operations. The purchase price of an acquired business is allocated to
  the tangible and intangible assets acquired and liabilities assumed based upon
  their estimated fair value at the date of purchase. The difference between the
  purchase price and the fair value of the net assets acquired is recorded as
  goodwill. In determining the fair value of assets acquired and liabilities
  assumed in a business combination, we use various recognized valuation methods,
  including present value modeling. Further, we make assumptions using certain
  valuation techniques, including discount rates and timing of future cash flows.

We review the carrying value of
  goodwill annually or more frequently if circumstances indicate impairment may
  have occurred. In performing this review, we are required to estimate the fair
  value of goodwill that is implied from a valuation of the reporting unit to
  which the goodwill has been allocated after deducting the fair values of all the
  identifiable assets and liabilities that form part of the reporting unit.

The determination of the fair
  value of a reporting unit requires us to make significant judgments and
  estimates. In determining the fair value of reporting units, we consider the
  value of our business as whole and allocate this value across our reporting
  units based on the weighted average of the returns of the reporting units.

We base our estimates on
  assumptions we believe to be reasonable but that are unpredictable and
  inherently uncertain. In addition, we make judgments and assumptions in
  allocating assets and liabilities to each of our reporting units.

During the fourth quarter of
  2010, as part of our annual impairment test, we tested our goodwill of the
  hardware, software and related technology sales segment for impairment. As a
  result of this impairment review we concluded that the carrying value of
  goodwill of the hardware, software and related technology sales segment
  reporting unit exceeded the fair value and, as a result, recorded an impairment
  loss of $37.4 million.

***Accounts Receivable
  and Provision for Doubtful Debts***

We maintain a provision for
  doubtful debts related to our hardware, software and related technology sales
  segment as a result of sales or rental of hardware, support and maintenance
  services provided or sale of licenses to customers. Our policy is to regularly
  review the aging of outstanding amounts due from customers and adjust the
  provision based on managements estimate of the recoverability of the amounts
  outstanding. Management considers factors including period outstanding,
  creditworthiness of the customers, past payment history and the results of
  discussions by our credit department with the customer. We consider this policy
  to be appropriate taking into account factors such as historical bad debts,
  current economic trends and changes in our customer payment patterns. Additional
  provisions may be required should the ability of our customers to make payments
  when due deteriorate in the future. A significant amount of judgment is required
  to assess the ultimate recoverability of these receivables, including on-going
  evaluation of the creditworthiness of each customer.

***Research and
  Development***

Accounting standard require
  product development costs to be charged to expenses as incurred until
  technological feasibility is attained. Technological feasibility is attained
  when our software has completed system testing and has been determined viable
  for its intended use. The time between the attainment of technological
  feasibility and completion of software development has been short. Accordingly,
  we did not capitalize any development costs during the years ended June 30,
  2010, 2009 or 2008, particularly because the main part of our development is the
  enhancement and upgrading of existing products.

Costs to develop software for our
  internal use is expensed as incurred, except to the extent that these costs are
  incurred during the application development stage. All other costs including
  those incurred in the project development and post-implementation stages are
  expensed as incurred.

45

---

A significant amount of judgment
  is required to separate research costs, new development costs and ongoing
  development costs based as the transition between these stages. A multitude of
  factors need to be considered by management, including an assessment of the
  state of readiness of the software and the existence of markets for the
  software. The possibility of capitalizing development costs in the future may
  have a material impact on the groups profitability in the period when the costs
  are capitalized, and in subsequent periods when the capitalized costs are
  amortized.

**Recent Accounting
  Pronouncements**

*Recent accounting
  pronouncements adopted*

Refer to Note 2 of our
  consolidated financial statements for a full description of recent accounting
  pronouncements, including the expected dates of adoption and effects on
  financial condition, results of operations and cash flows.

*Recent accounting
  pronouncements not yet adopted as of June 30, 2010*

Refer to Note 2 of our
  consolidated financial statements for a full description of recent accounting
  pronouncements not yet adopted as of June 30, 2010, including the expected dates
  of adoption and effects on financial condition, results of operations and cash
  flows.

Currency Exchange Rate Information

***Actual exchange
  rates***

The actual exchange rates for and
  at the end of the periods presented were as follows:

Table 1
      
      Year ended June 30,2010
      
      
      2009
      
      
      2008ZAR : $ average exchange rate
      
      7.6117
      
      
      9.0484
      
      
      7.3123Highest ZAR : $ rate during period
      
      8.3187
      
      
      11.8506
      
      
      8.2440Lowest ZAR : $ rate during period
      
      7.1731
      
      
      7.1556
      
      
      6.4262Rate at end of period
      
      7.6529
      
      
      7.8821
      
      
      7.9645


ZAR: US $ Exchange Rates



46

---

***Translation exchange
  rates***

We are required to translate our
  results of operations from ZAR to US dollars on a monthly basis. Thus, the
  average rates used to translate this data for the years ended June 30, 2010,
  2009 and 2008, vary slightly from the averages shown in the table above. The
  translation rates we use in presenting our results of operations are the rates
  shown in the following table:

Year endedTable 2
      
      June 30,2010
      
      
      2009
      
      
      2008Income and expense items: $1 = ZAR .
      
      7.6092
      
      
      8.9397
      
      
      7.2905Balance sheet items: $1 = ZAR
      
      7.6529
      
      
      7.8821
      
      
      7.9645


Results of Operations

The discussion of our
  consolidated overall results of operations is based on amounts as reflected in
  our audited consolidated financial statements which are prepared in accordance
  with US GAAP. Our discussion analyzes our results of operations both in US
  dollars, as presented in the consolidated financial statements, and
  supplementally in ZAR, because ZAR is the functional currency of the entities
  which contribute the majority of our profits and is the currency in which the
  majority of our transactions are initially incurred and measured. Due to the
  significant impact of currency fluctuations between the US dollar and ZAR on our
  reported results and because we use the US dollar as our reporting currency, we
  believe that the supplemental presentation of our results of operations in ZAR
  is useful to investors to understand the changes in the underlying trends of our
  business. Our results of operations for fiscal 2009 and 2008 do not reflect the
  operations of MediKredit and FIHRST as we completed these acquisitions in
  January 1, 2010 and March 31, 2010, respectively, and their operations are
  included in our 2010 consolidated financial statements from those dates. Our
  results of operations for fiscal 2008 do not reflect the operations of Net1 UTA
  as we completed that acquisition on September 1, 2008 and Net 1 UTAs operations
  are included in our 2009 consolidated financial statements from that date.
  Finally, on March 1, 2009, we sold our traditional microlending business to
  Finbond Group Limited and therefore, our fiscal 2009 results include revenue and
  operating loss from this business for the first eight months of that year.

***Fiscal 2010 Compared
  to Fiscal 2009***

The following factors had an
  influence on our results of operations during fiscal 2010 as compared with the
  same period in the prior year:

| |  | Favorable impact from the weakness of the US
      dollar:The US dollar depreciated by 15% compared to the ZAR
      during fiscal 2010 which has had a positive impact on our reported
      results;                                                                                                                                                                                                                                                                                               
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Increased transaction volumes at EasyPay:Our reported results were positively impacted by increased
      transaction volumes at EasyPay resulting from growth in value-added
      services and higher than expected activity at retailers during the
      Christmas season;                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Increased user adoption in Iraq:Our
      reported results were favorably impacted by increased transaction revenues
      from the adoption of our UEPS technology in Iraq;                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Lower revenues and margins from hardware, software
      and related technology sales segment:Our hardware, software and
      related technology sales segment was adversely impacted by fewer ad hoc
      sales to the Bank of Ghana, lower revenues and overall margin generated by
      Net1 UTA and weaker demand for our products as well as pricing pressures
      resulting from the global recession in calendar 2009, all of which was
      partially offset by hardware sales to Iraq;
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Lower net interest income:Our interest
      income, net, was adversely impacted by lower average daily ZAR cash
      balance and a lower average deposit rate during fiscal 2010 compared to
      fiscal 2009;                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Lower intangible asset amortization:In
      ZAR, our reported results for fiscal 2010 were positively impacted by
      lower intangible asset amortization as the majority of Prism and EasyPay
      acquisition-related intangible assets were fully amortized in fiscal
      2009;                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Goodwill impairment losses:During fiscal
      2010, we recognized a goodwill impairment loss of $37.4 million (ZAR 284.4
      million); and                                                                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Non-recurring fiscal 2009 items:During
      fiscal 2009, we recognized a foreign exchange gain of $26.7 million (ZAR
      238.3 million) resulting from an asset swap arrangement and recognized a
      profit on the sale of our traditional microlending business of $0.5
      million (ZAR 4.1 million).                                                                                                                                                                                      

47

---

**Consolidated overall
  results of operations**

This discussion is based on the amounts which were prepared in
  accordance with US GAAP.

The following tables show the changes in the items comprising
  our statements of operations, both in US dollars and in ZAR:

|                                                                             |   | In United States Dollars |  
|---------------------------------------------------------------------------- | - | ------------------------ | -
|Table 3                                                                      |   | (US GAAP)                |  
|                                                                             |   | Year ended June 30,      |  
|                                                                             |   | 2010                     |  
|                                                                             | $ | 000                     |  
|Revenue                                                                      |   | 280,364                  |  
|Cost of goods sold, IT processing, servicing and support                     |   | 72,973                   |  
|Selling, general and administration                                          |   | 80,854                   |  
|Depreciation and amortization                                                |   | 19,348                   |  
|Profit on sale of microlending business                                      |   | -                        |  
|Impairment of goodwill                                                       |   | 37,378                   |  
|Operating income                                                             |   | 69,811                   |  
|Foreign exchange gain related to short-term
      investment                 |   | -                        |  
|Interest income, net                                                         |   | 9,069                    |  
|Income before income taxes                                                   |   | 78,880                   |  
|Income tax expense                                                           |   | 40,822                   |  
|Net income before earnings (loss) from equity-accounted
      investments.   |   | 38,058                   |  
|Earnings (Loss) from equity-accounted
      investments                      |   | 93                       |  
|Net income                                                                   |   | 38,151                   |  
|(Add) Less: net (loss) income attributable
      to non-controlling interest |   | (839                     | )
|Net income attributable to us                                                |   | 38,990                   |  

|                                                                             |  | In South African Rand |  
|---------------------------------------------------------------------------- |  | --------------------- | -
|Table 4                                                                      |  | (US GAAP)             |  
|                                                                             |  | Year ended June 30,   |  
|                                                                             |  | 2010                  |  
|                                                                             |  | ZAR                   |  
|                                                                             |  | 000                  |  
|Revenue                                                                      |  | 2,133,374             |  
|Cost of goods sold, IT processing,
      servicing and support               |  | 555,274               |  
|Selling, general and administration                                          |  | 615,243               |  
|Depreciation and amortization                                                |  | 147,225               |  
|Profit on sale of microlending business                                      |  | -                     |  
|Impairment of goodwill                                                       |  | 284,420               |  
|Operating income                                                             |  | 531,212               |  
|Foreign exchange gain related to
      short-term investment                 |  | -                     |  
|Interest income, net                                                         |  | 69,009                |  
|Income before income taxes                                                   |  | 600,221               |  
|Income tax expense                                                           |  | 310,627               |  
|Net income before earnings (loss) from
      equity-accounted investments.   |  | 289,594               |  
|Earnings (Loss) from equity-accounted investments                            |  | 708                   |  
|Net income                                                                   |  | 290,302               |  
|(Add) Less: net (loss) income attributable to
      non-controlling interest |  | (6,384                | )
|Net income attributable to us                                                |  | 296,686               |  

Analyzed in ZAR, the decrease in
  revenue and cost of goods sold, IT processing, servicing and support for fiscal
  2010 was primarily due to lower revenues in our hardware, software and related
  technology sales segment. This decrease was offset by an increase in
  transaction-based activities which resulted primarily from increased volumes at
  EasyPay and the inclusion of MediKredit and FIHRST operations for a portion of
  the year.

Our operating income margin
  decreased to 25% from 38% resulting primarily from the impairment of goodwill.
  The other contributors to operating income varied from fiscal 2010 compared with
  fiscal 2009 as presented in tables 7 and 8 below. Operating income
  contributions, based on operating margin, from our transaction-based activities
  and smart card accounts segments were comparable; however, our financial
  services segment contributed more and our hardware, software and related
  technology sales segment contributed less during fiscal 2010 compared with
  fiscal 2009. We discuss the components of the operating income margin in more
  detail under Results of operations by operating segment.

48

---

Analyzed in ZAR, selling, general
  and administration expenses were higher in fiscal 2010 primarily due to
  increases in goods and services purchased from third parties and the inclusion
  of MediKredits and FIHRSTs operations. Fiscal 2010 selling, general and
  administration expenses include acquisition-related costs of $0.6 million (ZAR
  4.7 million) and the stock-based compensation charge related to stock options
  awarded in May 2009 and restricted stock granted in August 2009.

Our direct costs of maintaining a
  listing on Nasdaq and obtaining a listing on the JSE, as well as compliance with
  the Sarbanes-Oxley Act of 2002, or Sarbanes, particularly Section 404 of
  Sarbanes, includes independent directors fees, legal fees, fees paid to Nasdaq
  and the JSE, our compliance officers salary, fees paid to consultants who
  assist with Sarbanes compliance, fees paid to our independent accountants
  related to the audit and review process and, during fiscal 2009, fees paid to
  our consultants and advisors assisting with the JSE listing. This has resulted
  in expenditures of $2.4 million (ZAR 17.9 million) and $2.1 million (ZAR 18.7
  million) during fiscal 2010 and 2009, respectively.

In ZAR, depreciation and
  amortization decreased during fiscal 2010 primarily as a result of lower Prism
  intangible asset amortization, offset by the intangible asset amortization
  related to the Net1 UTA, RMT, MediKredit and FIHRST acquisitions. The intangible
  asset amortization and deferred tax effects related to our various acquisitions
  are summarized in the tables below:

Table 5
      
      Year ended June 30,2010
      
      
      2009$
      000
      
      $
      000Amortization included in depreciation and
        amortization expense:
      
      14,138
      
      
      12,387Prism acquisition (1)
      
      1,697
      
      
      4,453RMT acquisition (2)
      
      1,579
      
      
      450MediKredit acquisition
      
      984
      
      
      -FIHRST acquisition
      
      544
      
      
      -Net1 UTA acquisition
      
      9,334
      
      
      7,484Deferred tax included in income tax expense:
      
      3,877
      
      
      3,515Prism acquisition (1)
      
      568
      
      
      1,515RMT acquisition (2)
      
      442
      
      
      126MediKredit acquisition
      
      340
      
      
      -FIHRST acquisition
      
      188
      
      
      -Net1 UTA acquisition
      
      2,339
      
      
      1,874


(1)  the majority of these intangible assets were amortized in
  fiscal 2009. (2)  the RMT intangibles were fully amortized in fiscal 2010.

Table 6
      
      Year ended June 30,2010
      
      
      2009ZAR 000
      
      
      ZAR 000Amortization included in depreciation and
        amortization expense:
      
      107,588
      
      
      110,734Prism acquisition (1)
      
      12,915
      
      
      39,805RMT acquisition (2)
      
      12,018
      
      
      4,024MediKredit acquisition
      
      7,490
      
      
      -FIHRST acquisition
      
      4,140
      
      
      -Net1 UTA acquisition
      
      71,025
      
      
      66,905Deferred tax included in income tax expense:
      
      29,506
      
      
      31,420Prism acquisition (1)
      
      4,325
      
      
      13,540RMT acquisition (2)
      
      3,365
      
      
      1,127MediKredit acquisition
      
      2,588
      
      
      -FIHRST acquisition
      
      1,430
      
      
      -Net1 UTA acquisition
      
      17,798
      
      
      16,753


(1)  the majority of these intangible assets were amortized in
  fiscal 2009. 
  (2)  the RMT intangibles were fully amortized in fiscal
  2010.

During the fourth quarter of
  fiscal 2010, we recognized an impairment loss of approximately $37.4 million on
  goodwill allocated to the hardware, software and related technology sales
  segment as a result of deteriorating trading conditions of this segment,
  particularly at Net1 UTA, and uncertainty surrounding contract finalization
  dates which will impact future cash flows. With regards to the latter, through
  the end of the third quarter of fiscal 2010 we expected to sign our first
  agreement that reflects the transformed business model for Net1 UTA during the
  fourth quarter of fiscal 2010. However, it subsequently became clear to us that
  this project has now been delayed due to key executive management changes at our
  target customer. A further deterioration in the hardware, software and related
  technology sales segment or in any other of our businesses, may lead to
  additional impairments in future periods.

49

---

During fiscal 2009 we sold our
  traditional microlending business and recognized a profit of approximately $0.5
  million (ZAR 4.1 million) and impaired goodwill of $1.8 million (ZAR 16.4
  million).

We recognized a foreign exchange
  gain of $26.7 million (ZAR 238.3 million) during fiscal 2009 resulting from an
  asset swap arrangement we entered into in August 2008.

Interest on surplus cash for
  fiscal 2010 decreased to $10.1 million (ZAR 77.0 million) from $20.3 million
  (ZAR 181.4 million) for fiscal 2009. The decrease in interest on surplus cash
  held in South Africa was due to a lower average daily ZAR cash balance during
  fiscal 2010 compared with fiscal 2009 and lower deposit rates resulting from the
  adjustment in the South African prime interest rate from an average of
  approximately 14.32% per annum for fiscal 2009 to 10.43% per annum for fiscal
  2010. The lower cash balances resulted primarily from our repurchase of
  approximately 9.2 million of our shares from Brait S.As investment affiliates
  in August 2009 for $124.5 million.

Included in interest expense for
  fiscal 2009 is the facility fee of approximately $1.1 million (ZAR 9.7 million)
  that we paid to the lender under the short-term loan facility we obtained to
  fund the Net1 UTA acquisition and approximately $0.8 million (ZAR 7.3 million)
  interest on the short-term loan facility. Excluding the impact of this facility
  fee and the interest on the short-term loan facility, interest expense decreased
  during fiscal 2010 due to a decrease in the average rates of interest on our
  short-term facilities and the elimination of our obligation to prefund social
  welfare grants under our SASSA contract. In ZAR, excluding the impact of the
  facility fee, finance costs decreased to $1.0 million (ZAR 8.0 million) for
  fiscal 2010 from $7.6 million (ZAR 67.6 million) for fiscal 2009.

Total tax expense for fiscal 2010
  was $40.8 million (ZAR 310.6 million) compared with $42.7 million (ZAR 382.1
  million) during the same period in the prior fiscal year. Deferred tax assets
  and liabilities are measured utilizing the enacted fully distributed tax rate.
  Accordingly, a reduction in the fully distributed tax rate from 35.45% to 34.55%
  results in lower deferred tax assets and liabilities and the net change of $3.5
  million (ZAR 26.5 million) is included in our income tax expense for fiscal
  2009. Our total tax expense decreased primarily due to the foreign exchange gain
  discussed above. Our effective tax rate for fiscal 2010 was 51.8%, compared to
  32.7% for fiscal 2009. The change in our effective tax rate was primarily due to
  an increase in non-deductible expenses, including the goodwill impairment
  described above, stock-based compensation charges and non-deductible
  acquisition-related expenses during fiscal 2010.

Earnings from equity-accounted
  investments for fiscal 2010 were $0.1 million (ZAR 0.7 million) compared with a
  net loss of $0.9 million (ZAR 7.8 million) during fiscal 2009. SmartSwitch
  Namibia generated net income during the year ended June 30, 2010, and we no
  longer account for the equity accounted losses in VTU Colombia as the
  accumulated losses have exceeded our initial investments.

50

---

**Results of operations by
  operating segment**

The composition of revenue and the contributions of our
  business activities to operating income are illustrated below.

|Table 7                                                                                          |  | In United States Dollars (US GAAP) |  
|------------------------------------------------------------------------------------------------ |  | ---------------------------------- | -
|                                                                                                 |  | Year ended June 30,                |  
|                                                                                                 |  | 2010                               |  
|Operating Segment                                                                                |  | $ 000                             |  
|Consolidated revenue:                                                                            |  |                                    |  
|Transaction-based activities                                                                     |  | 191,362                            |  
|Smart card accounts                                                                              |  | 31,971                             |  
|Financial services                                                                               |  | 4,023                              |  
|Hardware, software and related technology sales                                                  |  | 53,008                             |  
|Total consolidated
      revenue                                                                 |  | 280,364                            |  
|Consolidated operating income (loss):                                                            |  |                                    |  
|Transaction-based activities                                                                     |  | 106,036                            |  
|Operating income before amortization                                                             |  | 110,241                            |  
|Amortization                                                                                     |  | (4,205                             | )
|Smart card accounts                                                                              |  | 14,532                             |  
|Financial services                                                                               |  | 2,881                              |  
|Operating income before profit on
      sale of microlending business and impairment of goodwill |  | 2,881                              |  
|Profit on sale of
      microlending business and impairment of goodwill                         |  | -                                  |  
|Hardware, software and related technology sales                                                  |  | (42,524                            | )
|Operating income before
      amortization and impairment of goodwill                            |  | 4,787                              |  
|Amortization and
      impairment of goodwill                                                    |  | (47,311                            | )
|Corporate/eliminations                                                                           |  | (11,114                            | )
|Total consolidated
      operating income                                                        |  | 69,811                             |  

|Table 8                                                                                          |  | In South African Rand (US GAAP) |  
|------------------------------------------------------------------------------------------------ |  | ------------------------------- | -
|                                                                                                 |  | Year ended June 30,             |  
|                                                                                                 |  | 2010                            |  
|                                                                                                 |  | ZAR                             |  
|Operating Segment                                                                                |  | 000                            |  
|Consolidated revenue:                                                                            |  |                                 |  
|Transaction-based activities                                                                     |  | 1,456,131                       |  
|Smart card accounts                                                                              |  | 243,277                         |  
|Financial services                                                                               |  | 30,612                          |  
|Hardware, software and related technology sales                                                  |  | 403,354                         |  
|Total consolidated
      revenue                                                                 |  | 2,133,374                       |  
|Consolidated operating income (loss):                                                            |  |                                 |  
|Transaction-based activities                                                                     |  | 806,860                         |  
|Operating income before amortization                                                             |  | 838,859                         |  
|Amortization                                                                                     |  | (31,999                         | )
|Smart card accounts                                                                              |  | 110,578                         |  
|Financial services                                                                               |  | 21,922                          |  
|Operating income before profit on
      sale of microlending business and impairment of goodwill |  | 21,922                          |  
|Profit on sale of
      microlending business and impairment of goodwill                         |  | -                               |  
|Hardware, software and related technology sales                                                  |  | (323,578                        | )
|Operating income
      before amortization and impairment of goodwill                            |  | 36,431                          |  
|Amortization and impairment of goodwill                                                          |  | (360,009                        | )
|Corporate/eliminations                                                                           |  | (84,570                         | )
|Total consolidated operating
      income                                                        |  | 531,212                         |  

51

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**Transaction-based
  activities**

In ZAR, the increases in revenue
  were primarily due to our MediKredit and FIHRST acquisitions and increased
  transaction volumes at EasyPay and Iraq. We discuss these factors in more detail
  below.

Revenues for transaction-based
  activities include the transaction fees we earn through our merchant acquiring
  system and reflect the elimination of inter-company transactions.

Segment operating income margin
  decreased to 55% from 56%, mainly as a result of lower margins from our
  MediKredit and FIHRST operations and at EasyPay as compared with our pension and
  welfare operations. This decrease was partially offset by cost management
  controls in our pension and welfare operations and increased transaction fees
  from the utilization of our UEPS system in Iraq.

***Pension
  and welfare operations*:**

Effective April 1, 2009, we
  signed a one-year contract with SASSA which expired on March 31, 2010, and which
  was subsequently extended on its existing terms by three months to June 30,
  2010. See Business Developments during Fiscal 2010South AfricaSASSA
  contract for a further discussion of our new SASSA contract.

The SASSA contract described
  above contained a standard pricing formula for all provinces based on a
  transaction fee per beneficiary paid regardless of the number or amount of
  grants paid per beneficiary, calculated on a guaranteed minimum number of
  beneficiaries per month. Under our previous provincial contracts, depending on
  the province, we received either a fee per grant distributed, or per beneficiary
  paid, or as a percentage of the total grant amount distributed. In addition,
  commencing with the May 2009 pay cycle, SASSA assumed responsibility for the
  pre-funding of all social welfare grants. Our average revenue per beneficiary
  paid therefore remains unchanged during the term of the contract, including the
  current extension. From time to time, we are requested to assist with the
  payment of ad-hoc special grants or benefits (such as disaster relief payments),
  which may be at a different rate than the standard welfare distribution price.
  We also receive a once-off registration fee for every new beneficiary we enroll
  on our system.

***Continued
  adoption of our merchant acquiring system:***

The increase in the number of POS
  devices and number of participating UEPS retail locations since June 30, 2009,
  is due to increased rental or purchase of POS devices by current merchants
  requesting additional equipment and new merchants joining our UEPS merchant
  acquiring system.

52

---

The key statistics and indicators
  of our merchant acquiring system on a quarterly basis during the last 18 months
  in each of the South African provinces where we distribute social welfare grants
  are summarized in the table below:

|Table 9                                                                                                                     |  | Three months ended | 
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | 
|                                                                                                                            |  | Mar 31,            | 
|                                                                                                                            |  | 2009               | 
|                                                                                                                            |  |                    | 
|Total POS devices installed                                                                                                 |  | 4,263              | 
|Number of participating UEPS retail locations                                                                               |  | 2,391              | 
|Value of transactions processed through POS
      devices during the quarter (1) (in $ 000)                                |  | 276,947            | 
|Value of transactions processed through POS devices during
      the completed pay cycles for the quarter (2) (in $ 000)   |  | 278,685            | 
|Value of transactions processed through POS
      devices during the quarter (1) (in ZAR 000)                              |  | 2,758,391          | 
|Value of transactions processed through POS devices during
      the completed pay cycles for the quarter (2) (in ZAR 000) |  | 2,775,707          | 
|Number of grants paid through POS devices
      during the quarter (1)                                                      |  | 4,690,822          | 
|Number of grants paid through POS devices during the
      completed pay cycles for the quarter (2)                         |  | 4,769,010          | 
|Average number of grants processed per
      terminal during the quarter (1)                                                |  | 1,111              | 
|Average number of grants processed per terminal during the
      completed pay cycles for the quarter (2)                   |  | 1,129              | 

(1) Refers to events occurring during
  the quarter (i.e., based on three calendar months). 
  (2) Refers to events
  occurring during the completed pay cycle.

***Transaction
  processors:***

We acquired MediKredit and FIHRST
  on January 1 and March 31, 2010, respectively, and their operations are included
  in our results from those dates. MediKredits results include claims processing
  support fees received from a customer it lost in late calendar 2009 and which
  contractually continued to pay fees through the end of April 2010. After
  intangible asset amortization MediKredit generated nominal operating income and
  FIHRST generated a nominal operating loss, although it was cash flow positive.
  During fiscal 2011, we expect that MediKredit will be cash flow negative and
  that FIHRST will continue to be cash flow positive. These cash flows are not
  expected to be significant to our operations during fiscal 2011.

The table below presents the
  total volume and value processed during fiscal 2010 and 2009 by our transaction
  processors:

|Transaction |  | Total volume |  |  | **Total value $ (000)** |  |  | **Total value ZAR (000)** | 
|----------- |  | ------------ |  |  | ------------------------ |  |  | -------------------------- | 
|processor   |  | 2010         |  |  | 2009                     |  |  | 2010                       | 
|EasyPay     |  | 655,175,671  |  |  | 580,738,580              |  |  | 18,904,176                 | 
|MediKredit  |  | 5,410,984    |  |  | -                        |  |  | 227,881                    | 
|FIHRST      |  | 5,259,808    |  |  | -                        |  |  | 1,858,590                  | 

Transaction processing related to
  our Iraqi contract continued to grow sequentially through fiscal 2010 and we
  expect this trend to continue into fiscal 2011.

Certain EasyPay intangible assets
  were fully amortized at the end of fiscal 2009, however, savings related to the
  reduction in amortization of EasyPay intangible assets was offset by intangible
  asset amortization related to the MediKredit and FIHRST acquisitions.

**Smart card
  accounts**

Operating income margin from
  providing smart card accounts was constant at 45% for each of the fiscal 2010
  and 2009.

53

---

In ZAR, revenue from the
  provision of smart card-based accounts decreased in proportion to the lower
  number of beneficiaries serviced through our SASSA contract. A total number of
  3,532,620 smart card-based accounts were active at June 30, 2010, compared to
  3,875,463 active accounts as at June 30, 2009. The decrease in the number of
  active accounts resulted largely from the suspension and removal of invalid or
  fraudulent grants by SASSA.

**Financial
  services**

Revenue from UEPS-based lending
  increased primarily due to an increase in the number of loans granted. In
  addition, on average, the return on these UEPS-based loans was higher. Our
  current UEPS-based lending portfolio comprises loans made to elderly pensioners
  in some of the provinces where we distribute social welfare grants. We insure
  the UEPS-based lending book against default and thus no allowance is
  required.

The operating loss for fiscal
  2009 includes a profit of $0.5 million (ZAR 4.1 million) on the sale of our
  traditional microlending business and goodwill impairment of $1.8 million (ZAR
  16.4 million).

Excluding the effects of the
  goodwill impairment and profit on the sale of our traditional microlending
  business, operating income margin for the Financial services segment increased
  to 72% from 25%.

**Hardware,
  software and related technology sales**

Operating results include Net1
  UTA for fiscal 2010 and from September 1, 2008, for fiscal 2009. The following
  table presents our revenue and operating income during fiscal 2010 and 2009:

|Table 10                                                                                                                          |  | Year ended June 30, |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | -
|                                                                                                                                  |  | 2010                |  
|                                                                                                                                  |  | $ 000              |  
|Revenue                                                                                                                           |  | 53,008              |  
|Hardware, software and related
      technology sales excluding Net1 UTA                                                          |  | 40,707              |  
|Net1 UTA                                                                                                                          |  | 12,301              |  
|                                                                                                                                  |  |                     |  
|Operating income before amortization of
      intangible assets and goodwill impairment                                           |  | 4,787               |  
|                                                                                                                                  |  |                     |  
|Operating income                                                                                                                  |  | (42,524             | )
|Hardware, software and related
      technology sales excluding Net1 UTA                                                          |  | 6,332               |  
|Net1 UTA                                                                                                                          |  | (48,856             | )
|Net1 UTA excluding
      impairment of goodwill and amortization of acquisition 
               
       related intangible assets |  | (2,144              | )
|Impairment of
      goodwill                                                                                                      |  | (37,378             | )
|Amortization of acquisition related intangible assets                                                                             |  | (9,334              | )

|Table 11                                                                                                                          |  | Year ended June 30, |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | -
|                                                                                                                                  |  | 2010                |  
|                                                                                                                                  |  | ZAR 000            |  
|Revenue                                                                                                                           |  | 403,354             |  
|Hardware, software and
      related technology sales excluding Net1 UTA                                                          |  | 309,752             |  
|Net1 UTA                                                                                                                          |  | 93,602              |  
|                                                                                                                                  |  |                     |  
|Operating income before
      amortization of intangible assets and goodwill impairment                                           |  | 36,431              |  
|                                                                                                                                  |  |                     |  
|Operating income                                                                                                                  |  | (323,578            | )
|Hardware, software and
      related technology sales excluding Net1 UTA                                                          |  | 48,181              |  
|Net1 UTA                                                                                                                          |  | (371,759            | )
|Net1
      UTA excluding impairment of goodwill and amortization of acquisition 
                       related intangible assets |  | (16,314             | )
|Impairment of goodwill                                                                                                            |  | (284,420            | )
|Amortization of acquisition related intangible assets                                                                             |  | (71,025             | )

In ZAR, the decrease in revenue
  was primarily due to lower revenues at Net1 UTA and software development sales
  in 2009 under our Ghana contract that were not repeated in 2010, which was
  offset marginally by increased hardware sales to Iraq in 2010. In addition, our
  revenues in ZAR were negatively impacted by the depreciation of the USD against
  the ZAR as sales to customers in Europe, Ghana and Iraq are primarily
  denominated in USD. In ZAR, the decrease in operating income was primarily due
  to amortization of Net1 UTA intangible assets, impairment of goodwill and lower
  sales activity.

54

---

Revenue and operating income for
  fiscal 2010 comprised:

- software development and customization, sales of terminals and smart cards
    related to our Ghana contract;
- sales of licenses, smart cards and terminals to Net1 UTA clients , mainly
    in Russia and Uzbekistan;
- sales of SIM cards to customers;
- sales of cryptographic solutions to customers;
- rental of terminals to merchants participating in our merchant acquiring
    system; and
- repairs and maintenance services to customers.

Amortization of Prism intangible
  assets during fiscal 2010 and 2009, respectively, was approximately $0.6 million
  (ZAR 4.6 million) and $3.0 million (ZAR 26.9 million) and reduced our operating
  income. During fiscal 2010, we recognized an impairment loss of approximately
  $37.4 million (ZAR 284.4 million) as a result of deteriorating trading
  conditions of this segment, particularly at Net1 UTA, and uncertainty
  surrounding contract finalization dates which will impact future cash flows.

As we expand internationally,
  whether through traditional selling arrangements to provide products and
  services (such as in Ghana and Iraq) or through joint ventures (such as with
  SmartSwitch Namibia and SmartSwitch Botswana), we expect to receive revenues
  from sales of hardware and from software customization and licensing to
  establish the infrastructure of POS terminals and smart cards necessary to
  enable utilization of the UEPS and DUET technology in a particular country. To
  the extent that we enter into joint ventures and account for the investment as
  an equity investment, we are required to eliminate our portion of the sale of
  hardware, software and licenses to the investees. The sale of hardware, software
  and licenses under these arrangements occur on an ad hoc basis as new
  arrangements are established, which can materially affect our revenues and
  operating income in this segment from period to period.

**Corporate/
  Eliminations**

The increase in our losses
  resulted from increases in corporate head office-related expenditure, including
  the effects of the increase in inflation in South Africa and stock-based
  compensation charges.

Our loss includes expenditure
  related to compliance with Sarbanes; non-executive directors fees; employee and
  executive salaries and bonuses; stock-based compensation; legal and audit fees;
  directors and officers insurance premiums; telecommunications expenses;
  property-related expenditures including utilities, rental, security and
  maintenance; and elimination entries.

***Fiscal 2009 Compared
  to Fiscal 2008***

The following factors contributed
  significantly to the comparability of our results of operations for the 2009 and
  2008 fiscal years:

- Strengthening of the US dollar during fiscal 2009:The US
    dollar appreciated by 23% compared to the ZAR during fiscal 2009 compared to
    fiscal 2008 which has had a negative impact on our reported results;
- Non-recurring 2009 items:During fiscal 2009 we recognized a
    foreign exchange gain of $26.7 million (ZAR 238.3 million) resulting from an
    asset swap arrangement and recognized a profit on the sale of our traditional
    microlending business of $0.5 million (ZAR 4.1 million);
- Impact of Net1 UTA acquisition:Our reported revenue and
    intangible asset amortization increased during fiscal 2009 as a result of our
    acquisition of Net1 UTA during the first quarter of fiscal 2009;
- Lower revenue and operating income under our Ghana contract:Revenues and operating income under our Ghana contact decreased during
    fiscal 2009 compared with fiscal 2008 as we delivered the bulk of the software
    and hardware required during fiscal 2008; and
- Increased stock-based compensation charges:We recorded
    higher stock-based compensation charges during fiscal 2009 resulting from
    stock options granted in August 2008 and May 2009.

55

---

**Consolidated
  overall results of operations**

This discussion is based on the
  amounts which were prepared in accordance with US GAAP.

The following tables show the
  changes in the items comprising our statements of operations, both in US dollars
  and in ZAR:

|                                                                             |   | In United States Dollars |  
|---------------------------------------------------------------------------- | - | ------------------------ | -
|Table 12                                                                     |   | (US GAAP)                |  
|                                                                             |   | Year ended June 30,      |  
|                                                                             |   | 2009                     |  
|                                                                             | $ | 000                     |  
|Revenue                                                                      |   | 246,822                  |  
|Cost of goods sold, IT processing, servicing and support                     |   | 70,091                   |  
|Selling, general and administration                                          |   | 64,833                   |  
|Depreciation and amortization                                                |   | 17,082                   |  
|Profit on sale of microlending business                                      |   | 455                      |  
|Impairment of goodwill                                                       |   | 1,836                    |  
|Operating income                                                             |   | 93,435                   |  
|Foreign exchange gain related to short-term
      investment                 |   | 26,657                   |  
|Interest income, net                                                         |   | 10,828                   |  
|Income before income taxes                                                   |   | 130,920                  |  
|Income tax expense                                                           |   | 42,744                   |  
|Net income before loss from equity-accounted investments                     |   | 88,176                   |  
|Loss from equity-accounted investments                                       |   | (874                     | )
|Net income                                                                   |   | 87,302                   |  
|Less (Add): net income (loss) attributable
      to non-controlling interest |   | 701                      |  
|Net income attributable to us                                                |   | 86,601                   |  

|                                                                             |  | In South African Rand |  
|---------------------------------------------------------------------------- |  | --------------------- | -
|Table 13                                                                     |  | (US GAAP)             |  
|                                                                             |  | Year ended June 30,   |  
|                                                                             |  | 2009                  |  
|                                                                             |  | ZAR                   |  
|                                                                             |  | 000                  |  
|Revenue                                                                      |  | 2,206,512             |  
|Cost of goods sold, IT processing, servicing and support                     |  | 626,592               |  
|Selling, general and administration                                          |  | 579,587               |  
|Depreciation and amortization                                                |  | 152,708               |  
|Profit on sale of microlending business                                      |  | 4,068                 |  
|Impairment of goodwill                                                       |  | 16,413                |  
|Operating income                                                             |  | 835,280               |  
|Foreign exchange gain related to short-term
      investment                 |  | 238,306               |  
|Interest income, net                                                         |  | 96,799                |  
|Income before income taxes                                                   |  | 1,170,385             |  
|Income tax expense                                                           |  | 382,118               |  
|Net income before loss from equity-accounted investments                     |  | 788,267               |  
|Loss from equity-accounted investments                                       |  | (7,813                | )
|Net income                                                                   |  | 780,454               |  
|Less (Add): net income (loss) attributable
      to non-controlling interest |  | 6,267                 |  
|Net income attributable to us                                                |  | 774,187               |  

Analyzed in ZAR, the increase in
  revenue and cost of goods sold, IT processing, servicing and support for fiscal
  2009 was primarily due to the higher volumes in our transaction-based activities
  and a greater number of UEPS-based smart card holders and the acquisition of
  Net1 UTA.

56

---

Our operating income margin
  decreased to 38% from 43% mainly as a result of the decrease in contribution
  from our hardware, software and related technology sales segment, which
  generates a lower margin than our transaction-based activities segment;
  increased intangible asset amortization related to the Net1 UTA and RMT
  acquisitions and increases in goods and services purchased from third parties,
  including the effects of the increase in inflation in South Africa, and
  stock-based compensation charges.

During fiscal 2009 we sold our
  traditional microlending business and recognized a profit of approximately $0.5
  million (ZAR 4.1 million).

Selling, general and
  administration expenses increased primarily due to the stock-based compensation
  charge related to the options and restricted stock awarded in the first and
  fourth quarters of fiscal 2009, increases in goods and services purchased from
  third parties, including the effects of the increase in inflation in South
  Africa and expenses of $0.5 million related to our JSE listing.

Our direct costs of maintaining a
  listing on Nasdaq and obtaining a listing on the JSE, as well as compliance with
  the Sarbanes-Oxley Act of 2002, or Sarbanes, particularly Section 404 of
  Sarbanes, includes independent directors fees, legal fees, fees paid to Nasdaq,
  our compliance officers salary, fees paid to consultants who assist with
  Sarbanes compliance, fees paid to the JSE and consultants and advisors assisting
  with the JSE listing, and fees paid to our independent accountants related to
  the audit and review process. This has resulted in expenditures of $2.1 million
  (ZAR 18.7 million) and $1.9 million (ZAR 13.8 million) during fiscal 2009 and
  2008, respectively.

Depreciation and amortization and
  deferred tax expenses increased during fiscal 2009 primarily as a result of the
  Net1 UTA and RMT acquisitions, as summarized in the tables below:

Table 14
      
      Year ended June 30,2009
      
      
      
      2008$ 000
      
      
      
      $ 000Amortization included in depreciation and
        amortization expense:
      
      12,387
      
      
      
      5,460Prism acquisition
      
      4,453
      
      
      
      5,460RMT acquisition
      
      450
      
      
      
      -Net1 UTA acquisition
      
      7,484
      
      
      
      -Deferred tax included in income tax expense:
      
      3,515
      
      
      
      1,907Prism acquisition
      
      1,515
      
      
      
      1,907RMT acquisition
      
      126
      
      
      
      -Net1 UTA acquisition
      
      1,874
      
      
      
      -


Table 15
      
      Year ended June 30,2009
      
      
      
      2008ZAR 000
      
      
      
      ZAR 000Amortization included in depreciation and
        amortization expense:
      
      110,734
      
      
      
      39,805Prism acquisition
      
      39,805
      
      
      
      39,805RMT acquisition
      
      4,024
      
      
      
      -Net1 UTA acquisition
      
      66,905
      
      
      
      -Deferred tax included in income tax expense:
      
      31,420
      
      
      
      13,902Prism acquisition
      
      13,540
      
      
      
      13,902RMT acquisition
      
      1,127
      
      
      
      -Net1 UTA acquisition
      
      16,753
      
      
      
      -


Property, plant and equipment
  acquired to provide administration and distribution services to our customers is
  depreciated over the shorter of expected useful life and the contract period
  with the provincial government. Through June 30, 2009, we were in an extension
  phase with all our contracts thus and the majority of our property, plant and
  equipment related to the administration and distribution of social welfare
  grants had been written off in prior periods. Accordingly, depreciation expense
  related to these activities decreased during fiscal 2009 compared with fiscal
  2008. This reduction in depreciation was partially offset by the increase in
  depreciation related to new back-end processing computers and our participating
  merchant POS terminals.

We recognized a one-time foreign
  exchange gain of $26.7 million (ZAR 238.3 million) during fiscal 2009 resulting
  from an asset swap arrangement we entered into in August 2008.

57

---

Interest on surplus cash
  decreased to $20.3 million (ZAR 181.4 million) from $27.4 million (ZAR 199.7
  million). The decrease in interest on surplus cash held in South Africa was due
  to a lower average daily ZAR cash balance resulting from the Net1 UTA
  acquisition, offset by higher deposit rates resulting from the adjustment in the
  South African prime interest rate from an average of approximately 14.21% per
  annum for fiscal 2008 to 14.32% per annum for fiscal 2009.

Included in interest expense is
  the facility fee of approximately $1.1 million (ZAR 9.7 million) that we paid to
  the lender under the short-term loan we obtained to fund the Net1 UTA
  acquisition and approximately $0.8 million (ZAR 7.3 million) interest on the
  loan. Excluding the impact of the facility fee and interest, finance costs
  decreased to $7.6 million (ZAR 67.6 million) from $11.7 million (ZAR 85.3
  million) due to the elimination of our pre-funding requirements in April
  2009.

Total tax expense increased to
  $42.7 million (ZAR 382.1 million) from $39.2 million (ZAR 285.7 million).
  Deferred tax assets and liabilities are measured utilizing the enacted fully
  distributed tax rate. Accordingly, a reduction in the fully distributed tax rate
  from 35.45% to 34.55% during fiscal 2009 resulted in lower deferred tax assets
  and liabilities and the net change of $3.5 million (ZAR 26.5 million) is
  included in income tax expense. In ZAR, without giving effect to the change in
  our fully-distributed tax rate, our total tax expense increased, primarily due
  to the foreign exchange gain discussed above. Our effective tax rate increased
  to 32.7% from 31.0%, primarily due to an increase in non-deductible expenses,
  including stock-based compensation charges, and taxable deemed dividends in the
  United States offset by non-taxable gains on the sale of our traditional
  microlending business and foreign tax credits generated during fiscal 2009.

Loss from equity-accounted
  investments for fiscal 2009 and 2008 was $0.9 million (ZAR 7.8 million) and $1.0
  million (ZAR 7.6 million), respectively.

**Results of operations by
  operating segment**

The composition of revenue and the contributions of our
  business activities to operating income are illustrated below.

|Table 16                                                                                         |  |         |   |  | In United States Dollars (US GAAP) |  |  |         |  
|------------------------------------------------------------------------------------------------ |  | ------- | - |  | ---------------------------------- |  |  | ------- | -
|                                                                                                 |  |         |   |  | Year ended June 30,                |  |  |         |  
|                                                                                                 |  | 2009    |   |  | % of                               |  |  | 2008    |  
|Operating Segment                                                                                |  | $ 000  |   |  | total                              |  |  | $ 000  |  
|Consolidated revenue:                                                                            |  |         |   |  |                                    |  |  |         |  
|Transaction-based activities                                                                     |  | 148,399 |   |  | 60%                                |  |  | 153,444 |  
|Smart card accounts                                                                              |  | 29,576  |   |  | 12%                                |  |  | 35,914  |  
|Financial services                                                                               |  | 5,430   |   |  | 2%                                 |  |  | 8,251   |  
|Hardware, software and related technology sales                                                  |  | 63,417  |   |  | 26%                                |  |  | 56,447  |  
|Total consolidated
      revenue                                                                 |  | 246,822 |   |  | 100%                               |  |  | 254,056 |  
|Consolidated operating income (loss):                                                            |  |         |   |  |                                    |  |  |         |  
|Transaction-based activities                                                                     |  | 83,509  |   |  | 89%                                |  |  | 84,229  |  
|Operating income before amortization                                                             |  | 85,404  |   |  |                                    |  |  | 86,000  |  
|Amortization                                                                                     |  | (1,895  | ) |  |                                    |  |  | (1,771  | )
|Smart card accounts                                                                              |  | 13,442  |   |  | 14%                                |  |  | 16,325  |  
|Financial services                                                                               |  | (34     | ) |  | -%                                 |  |  | 1,935   |  
|Operating income before profit on
      sale of microlending business and impairment of goodwill |  | 1,347   |   |  |                                    |  |  | 1,935   |  
|Profit on sale of
      microlending business and impairment of goodwill                         |  | (1,381  | ) |  |                                    |  |  | -       |  
|Hardware, software and related technology sales                                                  |  | 5,498   |   |  | 6%                                 |  |  | 11,708  |  
|Operating income before
      amortization                                                       |  | 15,990  |   |  |                                    |  |  | 15,397  |  
|Amortization                                                                                     |  | (10,492 | ) |  |                                    |  |  | (3,689  | )
|Corporate/eliminations                                                                           |  | (8,980  | ) |  | (9)%                               |  |  | (3,811  | )
|Total consolidated operating
      income                                                        |  | 93,435  |   |  | 100%                               |  |  | 110,386 |  

58

---

|Table 17                                                              |  | In South African Rand (US GAAP) |  
|--------------------------------------------------------------------- |  | ------------------------------- | -
|                                                                      |  | Year ended June 30,             |  
|                                                                      |  | 2009                            |  
|                                                                      |  | ZAR                             |  
|Operating Segment                                                     |  | 000                            |  
|Consolidated revenue:                                                 |  |                                 |  
|Transaction-based activities                                          |  | 1,326,641                       |  
|Smart card accounts                                                   |  | 264,400                         |  
|Financial services                                                    |  | 48,543                          |  
|Hardware, software and related technology sales                       |  | 566,928                         |  
|Total consolidated
      revenue                                      |  | 2,206,512                       |  
|Consolidated operating income (loss):                                 |  |                                 |  
|Transaction-based activities                                          |  | 746,545                         |  
|Operating income before amortization                                  |  | 763,483                         |  
|Amortization of
      intangible assets                               |  | (16,938                         | )
|Smart card accounts                                                   |  | 120,167                         |  
|Financial services                                                    |  | (304                            | )
|Operating income before profit on
      sale of microlending business |  | 12,041                          |  
|Loss of sale of
      microlending business                           |  | (12,345                         | )
|Hardware, software and related technology sales                       |  | 49,150                          |  
|Operating income before
      amortization                            |  | 142,946                         |  
|Amortization of intangible assets                                     |  | (93,796                         | )
|Corporate/eliminations                                                |  | (80,278                         | )
|Total consolidated operating
      income                             |  | 835,280                         |  

**Transaction-based
  activities**

The increases in revenue and operating
  income were primarily due to higher average revenue per grant paid in all
  provinces where we provide a welfare distribution service, higher volumes from
  four of our provincial contracts, continued adoption of our merchant acquiring
  system in the provinces where we distribute welfare grants and increased
  transacting ability at participating retailers POS devices in these provinces.
  We discuss these factors in more detail below.

Revenues for transaction-based
  activities include the transaction fees we earn through our merchant acquiring
  system and reflect the elimination of inter-company transactions.

The revenue and operating loss,
  inclusive of intangible asset amortization of $0.5 million, of RMT is included
  in our fiscal 2009 results.

Segment operating income margin
  increased to 56% from 55% mainly as a result of the price increases described
  above, partially offset by continued inflationary increases in our cost
  components.

***Pension
  and welfare operations*:**

Refer to discussion under
  Fiscal 2010 compared to fiscal 2009Results of operations by operating
  segmentTransaction-based activities Pension and welfare operations.

***Continued
  adoption of our merchant acquiring system:***

Refer to discussion under
  Fiscal 2010 compared to fiscal 2009Results of operations by operating
  segmentTransaction-based activitiesContinued adoption of our merchant
  acquiring system.

***EasyPay
  transaction fees:***

During fiscal 2009 and 2008,
  EasyPay processed 580.7 million and 516.8 million transactions with an
  approximate value of $14.7 billion (ZAR 131.2 billion) and $15.9 billion (ZAR
  115.6 billion), respectively. The average fee per transaction during fiscal 2009
  and 2008, was $0.02 (ZAR 0.21) and $0.03 (ZAR 0.21), respectively.

59

---

Operating income margins
  generated by EasyPay during fiscal 2009 increased compared with fiscal 2008
  primarily due to an increase in the number of transactions processed in fiscal
  2009 and costs incurred in fiscal 2008 related to the implementation of a new
  integrated switch and restructuring costs. The new switch became operational
  during fiscal 2009 and we believe it has improved operating efficiencies and
  reduced costs at EasyPay and has enhanced our offering and enable us to take
  advantage of new business opportunities.

Amortization of EasyPay
  intangible assets during fiscal 2009 and 2008, of approximately $1.4 million
  (ZAR 12.9 million) and $1.8 million (ZAR 12.9 million), respectively, is
  included in the calculation of EasyPay operating margins.

**Smart
  card accounts**

Operating income margin from
  providing smart card accounts was constant at 45% for each of the fiscal 2009
  and 2008.

In ZAR, revenue from the
  provision of smart card-based accounts grew in proportion to the higher number
  of beneficiaries serviced through our social welfare payment contracts. A total
  number of 3,875,463 smart card-based accounts were active at June 30, 2009,
  compared to 4,022,193 active accounts as at June 30, 2008. The decrease in the
  number of active accounts resulted from the removal of invalid or fraudulent
  grants by SASSA and the prejudicial transfer of beneficiaries to SAPO and
  certain banks.

**Financial
  services**

Revenue from UEPS-based lending
  decreased primarily due to the lower number of loans granted. In addition, on
  average, the return on these UEPS-based loans was lower. Our current UEPS-based
  lending portfolio comprises loans made to elderly pensioners in some of the
  provinces where we distribute social welfare grants. We insure the UEPS-based
  lending book against default and thus no allowance is required. We consider
  UEPS-based lending less risky than traditional microfinance loans because the
  grants are distributed to these lenders by us and these loans are insured.

Operating loss for fiscal 2009
  includes a profit of $0.5 million (ZAR 4.1 million) on the sale of our
  traditional microlending business and goodwill impairment of $1.8 million (ZAR
  16.4 million).

Revenues from our traditional
  microlending business decreased during fiscal 2009 due to the sale of our
  traditional microlending business on March 1, 2009, increased competition, our
  strategic decision not to grow this business, and an overall lower return on
  traditional microlending loans as a result of compliance with the National
  Credit Act, or NCA.

Under the Finbond agreement, we
  were responsible for the collection of loans granted prior to March 1, 2009.
  Finbond notified us that certain of these loans sold to them had not been
  settled by the borrower and we were responsible for recovery. The overall
  recovery of loans sold was better than initially anticipated at the time of the
  sale which resulted in a profit compared to the loss on sale of the traditional
  microlending business during the third quarter of fiscal 2009.

Excluding the effects of the
  goodwill impairment and profit on the sale of our traditional microlending
  business, operating income margin for the Financial services segment increased
  to 25% from 23%.

**Hardware,
  software and related technology sales**

Operating results for this
  segment include Net1 UTA only for fiscal 2009. The following table presents our
  revenue and operating income during fiscal 2009 and 2008:

|Table 18                                                                       |  | Year ended June 30, |  
|------------------------------------------------------------------------------ |  | ------------------- | -
|                                                                               |  | 2009                |  
|                                                                               |  | $ 000              |  
|Revenue                                                                        |  | 63,417              |  
|Hardware, software and related
      technology sales excluding Net1 UTA       |  | 43,857              |  
|Net1 UTA                                                                       |  | 19,560              |  
|                                                                               |  |                     |  
|Operating income before amortization of
      intangible assets                |  | 15,990              |  
|                                                                               |  |                     |  
|Operating income                                                               |  | 5,498               |  
|Hardware, software and related
      technology sales excluding Net1 UTA       |  | 8,474               |  
|Net1 UTA                                                                       |  | (2,976              | )
|Net1 UTA excluding
      amortization of acquisition related intangible assets |  | 4,508               |  
|Amortization of acquisition related intangible assets                          |  | (7,484              | )

60

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|Table 19                                                                       |  | Year ended June 30, |  
|------------------------------------------------------------------------------ |  | ------------------- | -
|                                                                               |  | 2009                |  
|                                                                               |  | ZAR 000            |  
|Revenue                                                                        |  | 566,928             |  
|Hardware, software and related
      technology sales excluding Net1 UTA       |  | 392,068             |  
|Net1 UTA                                                                       |  | 174,860             |  
|                                                                               |  |                     |  
|Operating income before amortization of
      intangible assets                |  | 142,946             |  
|                                                                               |  |                     |  
|Operating income                                                               |  | 49,150              |  
|Hardware, software and related
      technology sales excluding Net1 UTA       |  | 75,755              |  
|Net1 UTA                                                                       |  | (26,605             | )
|Net1 UTA excluding
      amortization of acquisition related intangible assets |  | 40,300              |  
|Amortization of acquisition related intangible assets                          |  | (66,905             | )

In ZAR, the increase in revenue
  was primarily due to the inclusion of Net1 UTA and hardware and software
  development sales under our Iraqi contract, offset by lower sales to the Bank of
  Ghana. In ZAR, the decrease in operating income was primarily due to
  amortization of Net1 UTA intangible assets and fewer sales to the Bank of Ghana,
  offset by the inclusion of operating income generated by Net1 UTA .

Revenue and operating income for
  fiscal 2009 comprised:

- software development and customization, sales of terminals and smart cards
    related to our Ghana contract;
- sales of DUET licenses, smart cards and terminals to Net1 UTA clients ,
    mainly in Russia and Uzbekistan;
- sales of SIM cards to customers;
- sales of cryptographic solutions to customers;
- rental of terminals to merchants participating in our merchant acquiring
    system; and
- repairs and maintenance services to customers.

Amortization of Prism intangible
  assets during fiscal 2009 and 2008, respectively, was approximately $3.0 million
  (ZAR 26.9 million) and $3.7 million (ZAR 26.9 million) and reduced our operating
  income.

**Corporate/
  Eliminations**

The increase in our loss resulted
  from increases in corporate head office-related expenditure, including the
  effects of the increase in inflation in South Africa and stock-based
  compensation charges.

Our loss includes expenditure
  related to compliance with Sarbanes; non-executive directors fees; employee and
  executive salaries and bonuses; stock-based compensation; legal and audit fees;
  directors and officers insurance premiums; telecommunications expenses;
  property-related expenditures including utilities, rental, security and
  maintenance; and elimination entries.

**Liquidity
  and Capital Resources**

Our business has historically
  generated and continues to generate high levels of cash. At June 30, 2010, our
  cash balances were $153.7 million, which comprised mainly ZAR-denominated
  balances of ZAR 1.0 billion ($131.8 million), US dollar-denominated balances of
  $14.9 million and other currency deposits, primarily euro, of $7.1 million. Our
  cash balances decreased from June 30, 2009 levels mainly as a result of the
  $124.5 million repurchase of our common stock from Brait S.A.s investment
  affiliates, which decrease was offset by cash generated by operating
  activities.

During fiscal 2010, our Board of
  Directors authorized the repurchase of up to $100 million of our common stock.
  The authorization does not have an expiration date. The authorization may be
  suspended, terminated or modified at any time for any reason, including market
  conditions, the cost of repurchasing shares, liquidity and other factors that
  management deems appropriate. During fiscal 2010, we did not repurchase any
  shares under this authorization.

We generally invest the surplus
  cash held by our South African operations in overnight call accounts that we
  maintain at South African banking institutions, and surplus cash held by our
  non-South African companies in the US and European money markets.

61

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We have short-term facilities in
  South Africa of approximately ZAR 250 million ($32.7 million). We recently
  reduced these facilities from approximately ZAR 500 million in order to reduce
  the charge on unutilized credit facilities charged by our bankers. We also have
  a €1 million facility with each of Austrias two largest banks. These facilities
  are available to us when required.

Historically, we have financed
  most of our operations, research and development, working capital, capital
  expenditures and acquisitions through our internally generated cash. We take the
  following factors into account when considering whether to borrow under our
  financing facilities:

- cost of capital;
- cost of financing;
- opportunity cost of utilizing surplus cash; and
- availability of tax efficient structures to moderate financing costs.

We have a unique cash flow cycle
  due to the funding mechanism in our pension and welfare business and our
  pre-funding of merchants. We receive grant funds from SASSA 48 hours prior to
  the provision of the service and any interest we earn on these amounts is for
  the benefit of SASSA. In addition, we pre-fund certain merchants who facilitate
  the distribution of grants through our merchant acquiring system. When grants
  are paid at merchant locations before the start of the payment service at pay
  points, we pre-fund these payments to the merchants distributing the grants on
  our behalf. We typically reimburse these merchants within 48 hours after they
  distribute the grants to the social welfare beneficiaries.

We currently believe that our
  cash and credit facilities are sufficient to fund our current operations for at
  least the next four quarters.

We receive cash from health care
  plans which we disburse to health care service providers once we have
  adjudicated claims and from customers on whose behalf we processes payroll
  payments that we will disburse to customer employees, payroll-related payees and
  other payees designated by the customer. These funds do not represent cash that
  is available to us and we present these funds, and the associated liability,
  outside of our current assets and liabilities on our consolidated balance sheet.
  Movements in these cash balances are presented in investing activities and
  movements in the obligations are presented in financing activities in our
  consolidated statement of cash flows.

***Cash flows from
  operating activities***

Cash flows from operating
  activities for fiscal 2010 decreased to $68.7 million (ZAR 522.1 million) from
  $106.8 million (ZAR 954.5 million) for fiscal 2009, largely due to the factors
  that contributed to decreases in revenues and operating income in our hardware,
  software and related technology sales segments, offset by increases in revenue
  and operating income in our transaction-based activities.

In ZAR, cash flows from operating
  activities for fiscal 2009 increased to $106.8 million (ZAR 954.5 million) from
  $118.8 million (ZAR 865.9 million) for fiscal 2008, largely due to the factors
  that contributed to increases in revenues and operating income in our
  transaction-based activities and hardware, software and related technology sales
  segments, as well as the elimination of our pre-funding obligation.

During fiscal 2010 we made an
  additional second provisional tax payment of $4.0 million (ZAR 30.1 million)
  related to our 2009 tax year in South Africa. In addition, we made a first
  provisional payment of $17.8 million (ZAR 133.5 million), a second provisional
  payment of $20.3 million (ZAR 155.8 million) related to our 2010 tax year in
  South Africa and paid STC of $12.1 million (ZAR 92.2 million) related to
  cross-border intercompany dividends paid. During fiscal 2009 we paid provisional
  taxes of approximately $10.3 million (ZAR 86.0 million) related to the tax year
  ended June 30, 2008 and provisional taxes of approximately $40.1 million (ZAR
  361.2 million) related to the tax year ended June 30, 2009.

62

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Taxes paid during fiscal 2010 and 2009 were as follows:

Table 20
      
      
      
      
      Year ended June 30,2010
      
      
      2009
      
      
      2010
      
      
      2009**$**
      
      
      **$**
      
      
      ZAR
      
      
      ZAR000
      
      
      000
      
      
      000
      
      
      000First provisional payments
      
      17,788
      
      
      18,845
      
      
      133,522
      
      
      187,986Second provisional payments
      
      20,309
      
      
      21,226
      
      
      155,769
      
      
      173,201Third provisional payments
      
      239
      
      
      2,868
      
      
      1,789
      
      
      28,704Taxation paid related to prior years
      
      3,996
      
      
      7,412
      
      
      30,119
      
      
      57,284Taxation refunds received
      
      (241
      )
      
      (61
      )
      
      (1,913
      )
      
      (471
      )Secondary taxation on companies
      
      12,052
      
      
      2,230
      
      
      92,215
      
      
      22,318Total tax paid
      
      54,143
      
      
      52,520
      
      
      411,501
      
      
      469,022


Cash flows from investing activities

Cash used in investing activities
  for fiscal 2010 includes capital expenditure of $2.7 million (ZAR 20.7 million),
  primarily for the acquisition of POS devices to service our merchant acquiring
  system, improvements to leasehold property and the acquisition of computer
  equipment.

During fiscal 2010, we paid $1.0
  million (ZAR 7.3 million), net of cash received, for 100% of the outstanding
  ordinary capital of MediKredit and all claims outstanding and $9.4 million (ZAR
  69.0 million), net of cash received for the FIHRST business and software.

Cash used in investing activities
  for fiscal 2009 includes capital expenditure of $4.8 million (ZAR 42.6 million),
  which relates primarily to the purchase of back-end processing machines to
  maintain and expand current operations, equipment acquired for our card
  manufacturing facility, modifications to vehicles acquired to distribute social
  welfare grants, acquisition of POS terminals for our merchant acquiring system
  and computer hardware acquired to upgrade our EasyPay switch and service
  potential customers.

During fiscal 2009, we paid $97.9
  million (ZAR 767.3 million), net of cash received, for 80.1% of Net1 UTA, which
  includes approximately $0.5 million paid to consultants. In addition, we paid
  $3.4 million (ZAR 34.8 million) in cash to acquire a further interest in Finbond
  and $1.4 million (ZAR 12 million) in cash to purchase RMT. We also made
  additional equity investments in VinaPay and VTU Colombia for a total of
  approximately $0.6 million and a loan to VTU Colombia of approximately $0.2
  million, all of which were used to fund operating activities.

Cash used in investing activities
  for fiscal 2008 includes capital expenditures of $3.6 million (ZAR 26.0
  million), which relates primarily to the renovations of the transaction-based
  activities segment head office and data room, the hardware and software
  acquired, including hardware to perform switching activities and software to
  interface with customers and perform database management, vehicles acquired to
  distribute social welfare grants, the capital expenditure to maintain and expand
  our EasyPay operations, and the acquisition of POS terminals for our merchant
  acquiring system.

***Cash flows from
  financing activities***

During fiscal 2010 we
  repurchased, using our ZAR reserves, 9,221,526 shares of our common stock from
  Brait S.A.s investment affiliates for $13.50 (ZAR 105.98) per share, for an
  aggregate repurchase price of $124.5 million (ZAR 977.3 million). In addition,
  we incurred costs of approximately $0.5 million (ZAR 3.9 million) related to the
  repurchase of these shares. We also paid $1.3 million on account of shares we
  repurchased on June 30, 2009, under our 2009 share buy-back program and received
  $0.7 (ZAR 5.5 million) from employees exercising stock options and repaying
  loans.

During fiscal 2009, we received
  and repaid a $110 million short-term loan facility and we paid the $1.1 million
  related facility fee. We also acquired 3,621,247 shares of our common stock for
  $40.7 million, and received $0.3 million (ZAR2.7 million) from stock option
  exercises.

During fiscal 2008 we received
  approximately $0.6 million (ZAR 4.0 million) from employees to repay loans
  associated with stock options granted to them as well as the interest thereon.
  In addition, we received approximately $2.9 million (ZAR 21.3 million) from the
  proceeds of stock options exercises.

Off-Balance Sheet Arrangements

We have no off-balance sheet
  arrangements.

63

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Capital Expenditures

Capital expenditures for the
  years ended June 30, 2010, 2009 and 2008 were as follows:

|Table 21                                              |   |       |  |  |       |  |  | Year ended June 30, |  |  |        |  |  |        | 
|----------------------------------------------------- | - | ----- |  |  | ----- |  |  | ------------------- |  |  | ------ |  |  | ------ | 
|                                                      |   |       |  |  |       |  |  |                     |  |  | 2010   |  |  | 2009   | 
|                                                      |   | 2010  |  |  | 2009  |  |  | 2008                |  |  | ZAR    |  |  | ZAR    | 
|Operating Segment                                     | $ | 000  |  |  | $000 |  |  | $000               |  |  | 000   |  |  | 000   | 
|                                                      |   |       |  |  |       |  |  |                     |  |  |        |  |  |        | 
|Transaction-based activities                          |   | 2,177 |  |  | 3,161 |  |  | 2,774               |  |  | 16,565 |  |  | 28,258 | 
|Smart card accounts                                   |   | -     |  |  | -     |  |  | -                   |  |  | -      |  |  | -      | 
|Financial services                                    |   | 302   |  |  | 751   |  |  | 562                 |  |  | 2,298  |  |  | 6,714  | 
|Hardware, software and related
      technology sales |   | 251   |  |  | 858   |  |  | 227                 |  |  | 1,910  |  |  | 7,670  | 
|Corporate / Eliminations                              |   | -     |  |  | -     |  |  | -                   |  |  | -      |  |  | -      | 
|Consolidated total                                    |   | 2,730 |  |  | 4,770 |  |  | 3,563               |  |  | 20,773 |  |  | 42,642 | 

We operate in an environment
  where the payment of social welfare grants requires substantial capital
  investment to establish an operational infrastructure when a contract commences.
  Further capital investment is required when the number of beneficiaries
  increases to the point where the maximum capacity of the original infrastructure
  is exceeded.

Our capital expenditures for
  fiscal 2010, 2009 and 2008, are discussed under Liquidity and Capital
  ResourcesCash flows from investing activities.

All of our capital expenditures
  for the past three fiscal years were funded through internally generated funds.
  We had outstanding capital commitments as of June 30, 2010, of $0.02 million
  related mainly to computer equipment ordered in order to maintain and expand
  activities. We anticipate that capital spending for the first quarter of fiscal
  2011 will relate primarily to ongoing replacement of equipment used to
  administer and distribute social welfare grants, establish a backend processing
  centre related to our Virtual Card offering and provide transaction processing
  services. We expect to fund these expenditures through internally generated
  funds.

Contingent Liabilities, Commitments and Contractual
  Obligations

We lease various premises under
  operating leases. Our minimum future commitments for lease premises as well as
  other commitments are as follows:

Table 22
      
      **Payments due by Period, as of June 30, 2010 (in $
        000s)**Less
      
      
      
      
      
      
      
      
      Morethan 1
      
      
      1-3
      
      
      3-5
      
      
      than 5Total
      
      
      year
      
      
      years
      
      
      years
      
      
      yearsInterest bearing liabilities
      $
      4,343
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      4,343Operating lease obligations
      
      7,495
      
      
      3,349
      
      
      3,256
      
      
      890
      
      
      -Purchase obligations
      
      3,139
      
      
      3,139
      
      
      -
      
      
      -
      
      
      -Capital commitments
      
      21
      
      
      21
      
      
      -
      
      
      -
      
      
      -Total
      $
      14,998
      
      $
      6,509
      
      $
      3,256
      
      $
      890
      
      $
      4,343


64

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
  MARKET RISK

We seek to reduce our exposure to
  currencies other than the South African rand, or ZAR, through a policy of
  matching, to the extent possible, assets and liabilities denominated in those
  currencies. In addition, we use financial instruments to economically hedge our
  exposure to exchange rate and interest rate fluctuations arising from our
  operations. We are also exposed to equity price and liquidity risks as well as
  credit risks.

**Currency Exchange
  Risk**

We are subject to currency
  exchange risk because we purchase inventories that we are required to settle in
  other currencies, primarily the euro and US dollar. We have used forward
  contracts to limit our exposure in these transactions to fluctuations in
  exchange rates between the ZAR, on the one hand, and the US dollar and the euro,
  on the other hand. As of June 30, 2010, and 2009, our outstanding foreign
  exchange contracts were as follows:

**As of June 30,
  2010**

Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityEUR
      
      207,000
      
      ZAR
      
      10.1107
      
      ZAR
      
      9.4802
      
      July 30, 2010EUR
      
      31,200
      
      ZAR
      
      9.5976
      
      ZAR
      
      9.5080
      
      October 9, 2010


**As of June 30,
  2009**

Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityEUR
      
      241,500
      
      ZAR
      
      13.1515
      
      ZAR
      
      10.9967
      
      August 14, 2009EUR
      
      (241,500)
      
      ZAR
      
      11.3691
      
      ZAR
      
      10.9341
      
      July 17, 2009


**Translation
  Risk**

Translation risk relates to the
  risk that our results of operations will vary significantly as the US dollar is
  our reporting currency, but we earn most of our revenues and incur most of our
  expenses in ZAR. The US dollar to ZAR exchange rate has fluctuated significantly
  over the past three years. As exchange rates are outside our control, there can
  be no assurance that future fluctuations will not adversely affect our results
  of operations and financial condition.

**Interest Rate
  Risk**

As a result of our normal
  borrowing and leasing activities, our operating results are exposed to
  fluctuations in interest rates, which we manage primarily through our regular
  financing activities. We generally maintain limited investment in cash
  equivalents and have occasionally invested in marketable securities. The
  interest earned on our bank balances and short term cash investments is
  dependent on the prevailing interest rates in the jurisdictions where our cash
  reserves are invested.

**Credit Risk**

Credit risk relates to the risk
  of loss that we would incur as a result of non-performance by counterparties. We
  maintain credit risk policies with regard to our counterparties to minimize
  overall credit risk. These policies include an evaluation of a potential
  counterpartys financial condition, credit rating, and other credit criteria and
  risk mitigation tools as our management deems appropriate.

With respect to credit risk on
  financial instruments, we maintain a policy of entering into such transactions
  only with South African and European financial institutions that have a credit
  rating of BBB or better, as determined by credit rating agencies such as
  Standard & Poors, Moodys and Fitch Ratings.

65

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**Equity Price and
  Liquidity Risk**

Equity price risk relates to the
  risk of loss that we would incur as a result of the volatility in the
  exchange-traded price of equity securities that we hold and the risk that we may
  not be able to liquidate these securities. We have invested in approximately 22%
  of the issued share capital of Finbond Group Limited, or Finbond, which are
  exchange-traded equity securities. The fair value of these securities as of June
  30, 2010, represented approximately 2% of our total assets, including these
  securities. We expect to hold these securities for an extended period of time
  and we are not concerned with short-term equity price volatility with respect to
  these securities provided that the underlying business, economic and management
  characteristics of the company remain sound.

The market price of these
  securities may fluctuate for a variety of reasons, consequently, the amount we
  may obtain in a subsequent sale of these securities may significantly differ
  from the reported market value.

Liquidity risk relates to the
  risk of loss that we would incur as a result of the lack of liquidity on the
  exchange on which these securities are listed. We may not be able to sell some
  or all of these securities at one time, or over an extended period of time
  without influencing the exchange traded price, or at all.

The following table summarizes
  our exchange-traded equity securities with equity price risk as of June 30,
  2010. The effects of a hypothetical 10% increase and a 10% decrease in market
  prices as of June 30, 2010 is also shown. The selected 10% hypothetical change
  does not reflect what could be considered the best or worst case scenarios.
  Indeed, results could be far worse due both to the nature of equity markets and
  the aforementioned liquidity risk.

|                                   |  |              |  |  | As of June 30, 2010 |  |  |                 | 
|---------------------------------- |  | ------------ |  |  | ------------------- |  |  | --------------- | 
|Table 23                           |  |              |  |  |                     |  |  |                 | 
|                                   |  |              |  |  |                     |  |  |                 | 
|                                   |  |              |  |  |                     |  |  | Estimated fair  | 
|                                   |  |              |  |  |                     |  |  | value after     | 
|                                   |  | Fair         |  |  |                     |  |  | hypothetical    | 
|                                   |  | value        |  |  | Hypothetical        |  |  | change in price | 
|                                   |  | **($ 000)** |  |  | price change        |  |  | **($ 000)**    | 
|Exchange-traded equity securities. |  | 7,299        |  |  | 10%                 |  |  | 8,029           | 
|                                   |  |              |  |  | (10)%               |  |  | 6,569           | 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial
  statements, together with the report of our independent registered public
  accounting firm, appear on pages F-1 through F-51 of this Annual Report on Form
  10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
  ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

66

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ITEM 9A. CONTROLS AND PROCEDURES

***Evaluation of
  disclosure controls and procedures***

Under the supervision and with
  the participation of our management, including our chief executive officer and
  our chief financial officer, we conducted an evaluation of our disclosure
  controls and procedures, as such term is defined under Rule 13a-15(e) under the
  Securities Exchange Act of 1934. Based on this evaluation, the chief executive
  officer and the chief financial officer concluded that our disclosure controls
  and procedures were effective as of June 30, 2010.

*Internal Control over
  Financial Reporting*

Internal control over financial
  reporting is a process designed by, or under the supervision, of the companys
  chief executive officer (CEO) and chief financial officer (CFO), or persons
  performing similar functions, and effected by the companys board of directors,
  management, and other personnel, to provide reasonable assurance regarding the
  reliability of financial reporting and the preparation of financial statements
  for external purposes in accordance with GAAP.

Internal control over financial
  reporting includes those policies and procedures that (1) pertain to the
  maintenance of records that, in reasonable detail, accurately and fairly reflect
  the transactions and dispositions of the assets of the company; (2) provide
  reasonable assurance that transactions are recorded as necessary to permit
  preparation of financial statements in accordance with GAAP, and that receipts
  and expenditures of the company are being made only in accordance with
  authorizations of management and directors of the company; and (3) provide
  reasonable assurance regarding prevention or timely detection of unauthorized
  acquisition, use or disposition of the companys assets that could have a
  material effect on the consolidated financial statements.

*Inherent Limitations in
  Internal Control over Financial Reporting*

Internal control over financial
  reporting cannot provide absolute assurance of achieving financial reporting
  objectives because of its inherent limitations. Internal control over financial
  reporting is a process that involves human diligence and compliance and is
  subject to lapses in judgment and breakdowns resulting from human failures.
  Internal control over financial reporting also can be circumvented by collusion
  or improper management override. Because of such limitations, there is a risk
  that material misstatements may not be prevented or detected on a timely basis
  by internal control over financial reporting. However, these inherent
  limitations are known features of the financial reporting process. Therefore, it
  is possible to design into the process safeguards to reduce, though not
  eliminate, this risk.

*Managements Report on
  Internal Control Over Financial Reporting*

Management, including our chief
  executive officer and our chief financial officer, is responsible for
  establishing and maintaining adequate internal control over our financial
  reporting. Management conducted an evaluation of the effectiveness of internal
  control over financial reporting based on the Internal Control  Integrated
  Framework issued by the Committee of Sponsoring Organizations of the Treadway
  Commission. Based on this evaluation, management concluded that our internal
  control over financial reporting was effective as of June 30, 2010. Deloitte
  & Touche (South Africa), an independent registered public accounting firm,
  has issued an audit report on the Companys internal control over financial
  reporting. As permitted by the rules of the SEC, we have excluded MediKredit and
  FIHRST from our annual assessment of the effectiveness of internal control over
  financial reporting for the year ended June 30, 2010, the year of acquisition.
  As of June 30, 2010, MediKredits and FIHRSTs total combined assets represented
  approximately 11% of our consolidated total assets and approximately 12% of
  consolidated total current assets. Their total combined revenues constituted
  approximately 3% of our consolidated revenue and their net income constituted
  approximately 0.3% of our consolidated net income for the year ended June 30,
  2010.

*Changes in Internal Control
  over Financial Reporting*

There were no changes in our
  internal control over financial reporting during the most recent fiscal quarter
  ended June 30, 2010, that have materially affected, or are reasonably likely to
  materially affect, our internal control over financial reporting. As permitted
  by the rules of the SEC, we have excluded MediKredit and FIHRST from our annual
  assessment of the effectiveness of internal control over financial reporting for
  the year ended June 30, 2010, the year of acquisition. Management continues to
  evaluate MediKredit and FIHRSTs internal controls over financial reporting. See
  Item 1A. Risk Factors  Failure to maintain effective internal control over
  financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act,
  especially over companies that we may acquire, could have a material adverse
  effect on our business and stock price. Our management certification and auditor
  attestation regarding the effectiveness of our internal control over financial
  reporting as of June 30, 2010, excluded the operations of MediKredit and FIHRST.
  If we are not able to integrate MediKredit and FIHRST operations into our
  internal control over financial reporting, our internal control over financial
  reporting may not be effective in Part I, Item 1A of this Annual Report on Form
  10-K for additional information.

67

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
  FIRM

To The Shareholders of Net 1 UEPS Technologies, Inc.

We have audited the internal
  controls over financial reporting of Net 1 UEPS Technologies, Inc. and
  subsidiaries (the Company) as of June 30, 2010, based on criteria established
  in Internal ControlIntegrated Frameworkissued by the Committee of
  Sponsoring Organizations of the Treadway Commission. As described in
  Managements report on Internal Control Over Financial Reporting, management
  excluded from its assessment the internal control over financial reporting at
  MediKredit Integrated Healthcare Solutions (Proprietary) Limited (MediKredit)
  and Net 1 FIHRST Holdings (Proprietary) Limited (FIHRST), which was acquired
  on January 1, 2010 and March 31, 2010 respectively. As of June 30, 2010,
  MediKredits and FIHRSTs combined total assets represented approximately 11% of
  consolidated total assets, approximately 12% of consolidated total current
  assets and the total revenues constituted approximately 3% of consolidated
  revenue and the net income constituted approximately 0.3% of consolidated net
  income for the year ended June 30, 2010. Accordingly, our audit did not include
  the internal control over financial reporting at MediKredit and FIHRST. The
  Company's management is responsible for maintaining effective internal control
  over financial reporting and for its assessment of the effectiveness of internal
  control over financial reporting, included in Managements report on Internal
  Control Over Financial Reporting. Our responsibility is to express an opinion on
  the Companys internal control over financial reporting based on our audit.

We conducted our audit in
  accordance with the standards of the Public Company Accounting Oversight Board
  (United States). Those standards require that we plan and perform the audit to
  obtain reasonable assurance about whether effective internal control over
  financial reporting was maintained in all material respects. Our audit included
  obtaining an understanding of internal control over financial reporting,
  assessing the risk that a material weakness exists, testing and evaluating the
  design and operating effectiveness of internal control based on the assessed
  risk and performing such other procedures as we considered necessary in the
  circumstances. We believe that our audit provides a reasonable basis for our
  opinions.

A company's internal control over
  financial reporting is a process designed by, or under the supervision of, the
  company's principal executive and principal financial officers or persons
  performing similar functions, and effected by the company's board of directors,
  management and other personnel to provide reasonable assurance regarding the
  reliability of financial reporting and the preparation of financial statements
  for external purposes in accordance with generally accepted accounting
  principles. A company's internal control over financial reporting includes those
  policies and procedures that (1) pertain to the maintenance of records that, in
  reasonable detail, accurately and fairly reflect the transactions and
  dispositions of the assets of the company; (2) provide reasonable assurance that
  transactions are recorded as necessary to permit preparation of financial
  statements in accordance with generally accepted accounting principles, and that
  receipts and expenditures of the company are being made only in accordance with
  authorizations of management and directors of the company; and (3) provide
  reasonable assurance regarding prevention or timely detection of unauthorized
  acquisition, use or disposition of the company's assets that could have a
  material effect on the financial statements.

Because of the inherent
  limitations of internal control over financial reporting, including the
  possibility of collusion or improper management override of controls, material
  misstatements due to error or fraud may not be prevented or detected on a timely
  basis. Also, projections of any evaluation of the effectiveness of the internal
  control over financial reporting to future periods are subject to the risk that
  the controls may become inadequate because of changes in conditions, or that the
  degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company
  maintained, in all material respects, effective internal control over financial
  reporting as of June 30, 2010, based on the criteria established in Internal
    ControlIntegrated Frameworkissued by the Committee of Sponsoring
  Organizations of the Treadway Commission.

We have also audited, in
  accordance with the standards of the Public Company Accounting Oversight Board
  (United States), the consolidated financial statements as of and for the year
  ended June 30, 2010 of the Company and our report dated August 26, 2010,
  expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche (South Africa)Per PJ Smit 
      Partner 
      August 26, 2010

National Executive: GG Gelink Chief Executive AE Swiegers Chief
  Operating Officer GM Pinnock Audit
  DL Kennedy Tax & Legal and Risk
  Advisory L Geeringh Consulting L Bam Corporate Finance CR Beukman Finance 
  TJ
  Brown Clients & Markets NT Mtoba Chairman of the Board MJ Comber Deputy
  Chairman of the Board

A full list of partners and directors is available on
  request

68

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ITEM 9B. OTHER INFORMATION

On August 24, 2010, we entered
  into a new service level agreement with SASSA which replaces our previous SASSA
  contract that expired on June 30, 2010. The new agreement is retroactively
  effective from July 1, 2010 and expires on March 31, 2011. Under the contract,
  we continue to provide our social welfare grants distribution service to SASSA
  in five of South Africas nine provinces (KwaZulu-Natal, Limpopo, North West,
  Northern Cape and Eastern Cape). As was the case with our previous contact, the
  new contract contains a standard pricing formula for all provinces based on a
  transaction fee per beneficiary paid, regardless of the number or amount of
  grants paid per beneficiary, calculated on a guaranteed minimum number of
  beneficiaries per month. However, the new contract provides for a reduction in
  both the level of the transaction fee per beneficiary paid and the guaranteed
  minimum number of beneficiaries. We expect that our future revenues, operating
  income, net income and cash flow will be negatively impacted by these reductions
  unless we are able to offset the reductions by increasing our revenues from our
  other business activities, reducing expenses, or both. See the first captioned
  section under Item 1A. Risk Factors and Item 7. Managements Discussion and
  Analysis of Financial Condition and Results of OperationsBusiness Developments
  during Fiscal 2010South AfricaSASSA contract.

Under the new contract, SASSA
  will continue to pre-fund all social welfare grants. We continue to pre-fund
  merchants who facilitate the distribution of grants through our merchant
  acquiring system.

We will file our new SASSA
  service level agreement with our Form 10-Q for the quarter ending September 30,
  2010. However, consistent with our prior practice, we will redact certain
  portions of the agreement that specify the amount of the transaction fee per
  beneficiary paid and the guaranteed minimum number of beneficiaries per month
  and will seek confidential treatment under the Exchange Act for such
  portions.

69

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PART III

**ITEM 10. DIRECTORS,
  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

Information about our executive
  officers is set out in Part I, Item 1 under the caption Executive Officers and
  Significant Employees of the Registrant. The other information required by this
  Item is incorporated by reference to the sections of our definitive proxy
  statement for our annual meeting of shareholders to be held in 2010, entitled
  Board of Directors and Corporate Governance and Additional Information, to
  be filed with the SEC within 120 days after the end of the fiscal year covered
  by this Form 10-K.

**ITEM 11. EXECUTIVE
  COMPENSATION**

The information required by this
  Item is incorporated by reference to the sections of our definitive proxy
  statement for our annual meeting of shareholders to be held in 2010, entitled
  Compensation Discussion and Analysis, Summary Compensation Table, Grants of
  Plan-Based Awards, Outstanding Equity Awards at 2010 Fiscal Year-End,
  Options Exercised and Stock Vested, Compensation of Directors, Potential
  Payments Upon Termination or Changein-Control and Remuneration Committee
  Report to be filed with the SEC within 120 days after the end of the fiscal
  year covered by this Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF
  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this
  Item is incorporated by reference to the sections of our definitive proxy
  statement for our annual meeting of shareholders to be held in 2010, entitled
  Outstanding Equity Awards at 2010 Fiscal Year-End and Security Ownership of
  Certain Beneficial Owners, to be filed with the SEC within 120 days after the
  end of the fiscal year covered by this Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS
  AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this
  Item is incorporated by reference to the sections of our definitive proxy
  statement for our annual meeting of shareholders to be held in 2010, entitled
  Certain Relationships and Related Transactions and Board of Directors and
  Corporate Governance, to be filed with the SEC within 120 days after the end of
  the fiscal year covered by this Form 10-K.

**ITEM 14. PRINCIPAL
  ACCOUNTANT FEES AND SERVICES**

The information required by this
  Item is incorporated by reference to the sections of our definitive proxy
  statement for our annual meeting of shareholders to be held in 2010, entitled
  Audit and Non-Audit Fees, to be filed with the SEC within 120 days after the
  end of the fiscal year covered by this Form 10-K.

70

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PART IV

ITEM 15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES

a)   The following documents are filed as part of
  this report

1. Financial Statements

The following financial
  statements are included on pages F-1 through F-51.

|Report of the Independent Registered Public
      Accounting Firm  Deloitte & Touche (South Africa)          | F-2 
|------------------------------------------------------------------------------------------------------------- | ----
|Consolidated balance sheets as of June 30, 2010 and 2009                                                      | F-3 
|Consolidated statements of operations for
      the years ended June 30, 2010, 2009 and 2008                  | F-4 
|Consolidated statements of changes in equity for the years
      ended June 30, 2010, 2009 and 2008           | F-5 
|Consolidated statements of comprehensive
      income (loss) for the years ended June 30, 2010, 2009 and 2008 | F-7 
|Consolidated statements of cash flows for the years ended
      June 30, 2010, 2009 and 2008                  | F-9 
|Notes to the consolidated financial
      statements                                                          | F-10

2. Financial Statement Schedules

Financial statement schedules have been
  omitted since they are either not required, not applicable, or the information
  is otherwise included.

(b) Exhibits

|Exhibit | Description                                                                                                                                                                                                                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                                                                                                                  
|3.1     | Amended and Restated Articles of Incorporation
      (incorporated by reference to Exhibit 3.1 to our Form 8-K filed on
      December 1, 2008)                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                  
|3.2     | Amended and Restated By-Laws of Net 1 UEPS Technologies,
      Inc. (incorporated by reference to Exhibit 3.2 to our Form 8-K filed on
      November 5, 2009).                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                  
|4.1     | Form of common stock certificate (incorporated by
      reference to Exhibit 4.1 to our Registration Statement on Form S-1 filed
      June 20, 2005 (SEC File No. 333-125273))                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                  
|10.1    | Distribution Agreement, dated July 1, 2002, between Net 1
      UEPS Technologies, Inc. and Net 1 Investment Holdings (Pty) Limited
      (incorporated by reference to Exhibit 10.1 to our Registration Statement
      on Form S-4filed February 3, 2004 (Commission File No. 333-112463))                                     
|        |                                                                                                                                                                                                                                                                                                                                  
|10.2    | Patent and Technology Agreement, dated June 19, 2000, by
      and between Net 1 Holdings S.a.r.l. and Net 1 UEPS Technologies, Inc.
      (incorporated by reference to Exhibit 10.2 to our Registration Statement
      on Form S-4 filed February 3, 2004 (Commission File No. 333-112463))                                   
|        |                                                                                                                                                                                                                                                                                                                                  
|10.3    | Technology License Agreement between Net 1 Investment
      Holdings (Proprietary) Limited and Visa International Service Association
      (incorporated by reference to Exhibit 10.12 to our Registration Statement
      on Form S-1 filed May 26, 2005 (Commission File No. 333-125273))                                     
|        |                                                                                                                                                                                                                                                                                                                                  
|10.4    | Product License Agreement between Net 1 Holdings S.a.r.l.
      and Net 1 Operations S.a.r.l. (incorporated by reference to Exhibit 10.8
      to Amendment No. 2 to our Registration Statement on Form S-4/A, filed on
      April 21, 2004 (Commission File No. 333-112463))                                                   
|        |                                                                                                                                                                                                                                                                                                                                  
|10.5    | Non Exclusive UEPS License Agreement between Net 1
      Investment Holdings (Proprietary) Limited and SIA Netcards (incorporated
      by reference to Exhibit 10.10 to Amendment No. 2 to our Registration
      Statement on Form S-4/A, filed on April 21, 2004 (Commission File No.
      333-112463))                      
|        |                                                                                                                                                                                                                                                                                                                                  
|10.6    | Assignment of Copyright and License of Patents and Trade
      Marks between MetroLink (Proprietary) Limited and Net 1 Products
      (Proprietary) Limited (incorporated by reference to Exhibit 10.18 to our
      Registration Statement on Form S-1 filed May 26, 2005 (Commission File No.
      333-125273))               
|        |                                                                                                                                                                                                                                                                                                                                  
|10.7    | Agreement between Nedcor Bank Limited and Net 1 Products
      (Proprietary) Limited (incorporated by reference to Exhibit 10.16 to our
      Registration Statement on Form S-1/A filed July 19, 2005 (Commission File
      No. 333- 125273))                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                  
|10.8    | Patent and Technology Agreement by and among Net 1
      Investment Holdings (Proprietary) Limited, Net 1 Applied Technology
      Holding Limited and Nedcor Bank Limited (incorporated by reference to
      Exhibit 10.19 to our Registration Statement on Form S-1 filed May 26, 2005
      (Commission File No. 333-125273))
|        |                                                                                                                                                                                                                                                                                                                                  
|10.9    | Patent and Technology Agreement by and among Net 1
      Holdings S.a.r.l., Net 1 Applied Technology Holdings Limited and Nedcor
      Bank Limited (incorporated by reference to Exhibit 10.19 to our
      Registration Statement on Form S-1/A filed July 19, 2005 (Commission File
      No. 333-125273))                    

71

---

|10.10   | Agreement by and among Nedbank Limited, Net 1 UEPS
      Technologies, Inc., and Net 1 Applied Technologies South Africa Limited
      (incorporated by reference to Exhibit 10.20 to our Registration Statement
      on Form S-1/A filed July 19, 2005 (Commission File No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.11   | Stock Purchase Agreement dated July 18, 2005, by and
      among CI Law Trustees Limited for the San Roque Trust, Dr. Serge C.P.
      Belamant, South African Private Equity Fund III, L.P., South African
      Private Equity Trust III, Brenthurst Private Equity II Limited, Brenthurst
      Private Equity South Africa I Limited, General Atlantic Partners 80, L.P.,
      GapStar, LLC, GAP Coinvestments III, Brait International Limited, LLC, GAP
      Coinvestments IV, LLC, GAPCO GmbH & Co. KG and Net 1 UEPS
      Technologies, Inc. (incorporated by reference to Exhibit 10.21 to our
      Registration Statement on Form S-1/A filed July 19, 2005 (Commission File
      No. 333-125273))
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.12   | Amendment No. 1 to the Stock Purchase Agreement dated as
      of August 11, 2005 (incorporated by reference to Exhibit 10.23 to our Form
      10-K filed on September 13, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.13** | Banking Facility between Nedbank Limited and Net1 Applied
      Technologies South Africa Limited dated as of April 30, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.14   | Facility between Cash Paymaster Services Eastern Cape
      (Proprietary) Limited and Nedbank Limited (incorporated by reference to
      Exhibit 10.15 to our Registration Statement on Form S-1 filed May 26,
      2005(Commission File No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.15   | Addendum to Facility Letter  Approval of Increase
      Bridging Loan Facilities between Nedbank Limited and Net 1 Applied
      Technology Holdings Limited (incorporated by reference to Exhibit 10.16 to
      our Registration Statement on Form S-1 filed May 26, 2005 (Commission File
      No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.16   | Service Level Agreement between the Department of Social
      Welfare and Population Development Kwa-Zulu Natal and Cash Paymaster
      Services KwaZulu-Natal (Pty) Limited (incorporated by reference to Exhibit
      10.4 to our Registration Statement on Form S-4 filed February 3, 2004
      (Commission File No. 333-112463))                                                                                                                                                                                                                                                                                                                                                                         
|       
|10.17   | Addendum to service level agreement dated as of April 14,
      2006, entered into by and between the Kwa-Zulu Natal Provincial
      Government, in its Department of Welfare and Population Development and
      Cash Paymaster Services (KwaZulu-Natal) (Pty) (Ltd) (incorporated by
      reference to Exhibit 10.26 to our Annual Report on Form 10-K filed August
      29, 2006 (Commission File No. 000-31203))                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.18   | Letter agreement effective January 31, 2007 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Kwa-Zulu Natal province
      (incorporated by reference to Exhibit 10.31 to our Form 10-Q filed on
      February 7, 2007)                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.19   | Letter agreement effective March 7, 2008 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Kwa-Zulu Natal province
      (incorporated by reference to Exhibit 10.20 to our Form 10-K filed on
      August 28, 2008)                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.20   | Service Level Agreement between the Province of Eastern
      Cape Department of Social Development and CPS Eastern Cape (Proprietary)
      Limited (incorporated by reference to Exhibit 10.13 to our Registration
      Statement on Form S-1 filed May 26, 2005 (Commission File No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.21   | Letter agreement effective January 31, 2007 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Eastern Cape province
      (incorporated by reference to Exhibit 10.33 to our Form 10-Q filed on
      February 7, 2007)                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.22   | Letter agreement effective March 7, 2008 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Eastern Cape province
      (incorporated by reference to Exhibit 10.23 to our Form 10-K filed on
      August 28, 2008)                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.23   | Service level agreement dated March 31, 2006, between the
      Limpopo Provincial Government in its Department of Health and Social
      Development and Cash Paymaster Services (Northern) (Pty) Ltd (incorporated
      by reference to Exhibit 10.26 to our Quarterly Report on Form 10-Q filed
      May 9, 2006 (Commission File No. 000-31203))                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.24   | Letter agreement effective January 31, 2007 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Limpopo (formerly
      Northern) province (incorporated by reference to Exhibit 10.32 to our Form
      10-Q filed on February 7, 2007)                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.25   | Letter agreement effective March 7, 2008 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Limpopo province
      (incorporated by reference to Exhibit 10.26 to our Form 10-K filed on
      August 28, 2008)                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.26   | Letter agreement effective January 31, 2007 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the North West province
      (incorporated by reference to Exhibit 10.34 to our Form 10-Q filed on
      February 7, 2007)                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.27   | Letter agreement effective March 7, 2008 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the North West province
      (incorporated by reference to Exhibit 10.28 to our Form 10-K filed on
      August 28, 2008)                                                                                                                                                                                                                                                                                                                                                                                                   

72

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|10.28  | Letter agreement effective January 31, 2007 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Northern Cape province
      (incorporated by reference to Exhibit 10.35 to our Form 10-Q filed on
      February 7, 2007)        
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                              
|10.29  | Letter agreement effective March 7, 2008 between Net 1
      UEPS Technologies, Inc. and the South African Social Security Agency
      extending Net1s service level agreement in the Northern Cape province
      (incorporated by reference to Exhibit 10.30 to our Form 10-K filed on
      August 28, 2008)            
|       |                                                                                                                                                                                                                                                                                                                              
|10.30* | Amended and Restated Stock Incentive Plan of Net 1 UEPS
      Technologies, Inc. (incorporated by reference to Exhibit A to Proxy
      Statement filed on October 28, 2009)                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                              
|10.31* | Form of Stock Option Agreement dated as of August 24,
      2006, by and between Net 1 UEPS Technologies, Inc. and employees of Prism
      Holdings Limited (incorporated by reference to Exhibit 10.27 to our Form
      10-Q filed on November 8, 2006)                                                                   
|       |                                                                                                                                                                                                                                                                                                                              
|10.32* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Serge Christian Pierre  Belamant
      (incorporated by reference to Exhibit 10.36 to our Form 10-K filed on
      August 29, 2007)                                                                                                        
|      
|10.33* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Herman Gideon Kotze (incorporated by reference to
      Exhibit 10.37 to our Form 10-K filed on August 29, 2007)                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                              
|10.34* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Nitin Soma (incorporated by reference to Exhibit
      10.39 to our Form 10-K filed on August 29, 2007)                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                              
|10.35* | Form of Restricted Stock Agreement by and between Net 1
      UEPS Technologies, Inc. and employees of Net 1 UEPS Technologies, Inc.
      (incorporated by reference to Exhibit 10.40 to our Form 10-K filed on
      August 29, 2007)                                                                                      
|       |                                                                                                                                                                                                                                                                                                                              
|10.36* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Christopher Stefan Seabrooke dated February 11,
      2008 (incorporated by reference to Exhibit 10.41 to our Form 10-Q filed on
      May 8, 2008)                                                                                        
|       |                                                                                                                                                                                                                                                                                                                              
|10.37* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Paul Edwards dated February 12, 2008 (incorporated
      by reference to Exhibit 10.42 to our Form 10-Q filed on May 8, 2008)                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                              
|10.38  | Facility Agreement, dated August 27, 2008, by and among
      Smartswitch Netherlands C.V., Net1 Applied Technologies Netherlands B.V.
      and Investec Bank (UK) Limited (incorporated by reference to Exhibit 10.41
      to our Form 10-Q filed on November 6, 2008)                                                    
|       |                                                                                                                                                                                                                                                                                                                              
|10.39  | Deed of Guarantee, dated August 27, 2008, by and between
      Net 1 UEPS Technologies, Inc. and Investec Bank (UK) Limited (incorporated
      by reference to Exhibit 10.42 to our Form 10-Q filed on November 6, 2008)                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                              
|10.40  | Charge Over Deposits, dated August 27, 2008, by and
      between Net 1 UEPS Technologies, Inc. and Investec Bank (UK) Limited
      (incorporated by reference to Exhibit 10.43 to our Form 10-Q filed on
      November 6, 2008)                                                                                           
|       |                                                                                                                                                                                                                                                                                                                              
|10.41  | Cession and Pledge in Security, dated August 27, 2008, by
      and between Net 1 UEPS Technologies, Inc. and Investec Bank (UK) Limited
      (incorporated by reference to Exhibit 10.44 to our Form 10-Q filed on
      November 6, 2008)                                                                                 
|       |                                                                                                                                                                                                                                                                                                                              
|10.42  | Deed of Subordination, dated August 27, 2008, by and
      among Smartswitch Netherlands C.V., Net 1 UEPS Technologies, Inc. and
      Investec Bank (UK) Limited (incorporated by reference to Exhibit 10.45 to
      our Form 10-Q filed on November 6, 2008)                                                              
|       |                                                                                                                                                                                                                                                                                                                              
|10.43* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Christopher Stefan Seabrooke dated August 27, 2008*
      (incorporated by reference to Exhibit 10.46 to our Form 10-Q filed on
      November 6, 2008)                                                                                    
|       |                                                                                                                                                                                                                                                                                                                              
|10.44* | Restricted Stock Agreement by and between Net 1 UEPS
      Technologies, Inc. and Paul Edwards dated August 27, 2008* (incorporated
      by reference to Exhibit 10.47 to our Form 10-Q filed on November 6, 2008)                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                              
|10.45* | Form of Stock Option Agreement, by and between Net 1 UEPS
      Technologies, Inc. and recipients of stock options under the Amended and
      Restated 2004 Stock Option Incentive Plan of Net 1 UEPS Technologies, Inc.
      (incorporated by reference to Exhibit 10.48 to our Form 10-Q filed on
      November 6, 2008)
|       |                                                                                                                                                                                                                                                                                                                              
|10.46 | Interim agreement entered into between SASSA and Cash
      Paymaster Services (Proprietary) Limited dated March 25, 2009
      (incorporated by reference to Exhibit 10.49 to our Form 10-Q filed on May
      7, 2009)                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                              
|10.47  | Stock Repurchase Agreement by and between Net 1 UEPS
      Technologies, Inc., South African Private Equity Fund III, L.P. and Brait
      International Limited (incorporated by reference to Exhibit 10.48 to our
      Form 10-K filed on August 27, 2009)                                                                
|       |                                                                                                                                                                                                                                                                                                                              
|10.48* | Amendment to Restricted Stock Agreement for Non-U.S.
      Employees by and between Net 1 UEPS Technologies, Inc. and Serge C. P.
      Belamant dated March 18, 2010 (incorporated by reference to Exhibit 10.49
      to our Form 10-Q filed on May 6, 2010)                                                               
|       |                                                                                                                                                                                                                                                                                                                              
|10.49* | Amendment to Restricted Stock Agreement for Non-U.S.
      Employees by and between Net 1 UEPS Technologies, Inc. and Herman G. Kotze
      dated March 18, 2010 (incorporated by reference to Exhibit 10.50 to our
      Form 10-Q filed on May 6, 2010)                                                                    
|       |                                                                                                                                                                                                                                                                                                                              
|12**   | Statement of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                              

73

---

|14     | Amended and Restated Code of
      Ethics (incorporated by reference to Exhibit 14 to our Form 8-K filed on
      August 27, 2009)                      
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                         
|21**   | Subsidiaries of Registrant                                                                                                                              
|       |                                                                                                                                                         
|23**   | Consent of Independent
      Registered Public Accounting Firm                                                                                          
|       |                                                                                                                                                         
|31.1** | Certification of Principal
      Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the
      Securities Exchange Act of 1934, as amended
|       |                                                                                                                                                         
|31.2** | Certification of Principal
      Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the
      Securities Exchange Act of 1934, as amended
|       |                                                                                                                                                         
|32**   | Certification pursuant to 18
      USC. Section 1350                                                                                                    

  Confidential treatment has
  been granted for certain portions of this Exhibit pursuant to Rule 24b-2 of the
  Exchange Act, and thus, such portions have been omitted. A request to extend the
  period for which confidential treatment has been granted is pending.
  *
  Indicates a management contract or compensatory plan or arrangement. 
  **
  Filed herewith

74

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
  Securities Exchange Act of 1934, the registrant has duly caused this report to
  be signed on its behalf by the undersigned, thereunto duly authorized.

NET 1 UEPS TECHNOLOGIES, INC.

By: /s/ Serge C.P. Belamant

Serge C.P. Belamant 
  Chief Executive Officer, Chairman of
  the Board and Director

Date: August 26, 2010

Pursuant to the requirements of the Securities Exchange Act of
  1934, this report has been signed below by the following persons on behalf of
  the registrant and in the capacities and on the dates indicated.

|NAME                                                                           | TITLE                                                                                                                  |  | DATE           
|------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------- |  | ---------------
|                                                                               |                                                                                                                        |  |                
|/s/ Serge C.P. Belamant 
      Serge C.P. Belamant                             | Chief Executive Officer and Chairman of the
      Board and
      Director (Principal Executive Officer)               |  | August 26, 2010
|                                                                               |                                                                                                                        |  |                
|/s/ Herman Gideon Kotzé 
      Herman Gideon Kotzé                             | Chief Financial Officer, Treasurer and
      Secretary and
      Director (Principal Financial and Accounting Officer) |  | August 26, 2010
|                                                                               |                                                                                                                        |  |                
|/s/ Antony Charles Ball 
      Antony Charles Ball                             | Director                                                                                                               |  | August 26, 2010
|                                                                               |                                                                                                                        |  |                
|/s/ Christopher Stefan Seabrooke 
      Christopher
      Stefan Seabrooke     | Director                                                                                                               |  | August 26, 2010
|                                                                               |                                                                                                                        |  |                
|/s/ Alasdair Jonathan Kemsley Pein 
      Alasdair
      Jonathan Kemsley Pein | Director                                                                                                               |  | August 26, 2010
|                                                                               |                                                                                                                        |  |                
|/s/ Paul Edwards 
      Paul Edwards                                           | Director                                                                                                               |  | August 26, 2010
|                                                                               |                                                                                                                        |  |                
|/s/ Tom Tinsley 
      Tom Tinsley                                             | Director                                                                                                               |  | August 26, 2010

---

FORM 10-K  ITEM 8

NET 1 UEPS TECHNOLOGIES, INC.

LIST OF CONSOLIDATED FINANCIAL STATEMENTS

|Report
      of the Independent Registered Public Accounting Firm  Deloitte &
      Touche (South Africa)   | F-2 
|------------------------------------------------------------------------------------------------------------ | ----
|Consolidated
      balance sheets as of June 30, 2010 and 2009                                               | F-3 
|Consolidated
      statements of operations for the years ended June 30, 2010, 2009 and 2008                 | F-4 
|Consolidated
      statements of changes in equity for the years ended June 30, 2010, 2009
      and 2008    | F-5 
|Consolidated
      statements of comprehensive income for the years ended June 30, 2010, 2009
      and 2008 | F-8 
|Consolidated
      statements of cash flows for the years ended June 30, 2010, 2009 and 2008                 | F-9 
|Notes
      to the consolidated financial statements                                                         | F-10

F-1

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
  FIRM

To The Shareholders of Net 1 UEPS Technologies, Inc.

We have audited the accompanying
  consolidated balance sheets of Net 1 UEPS Technologies, Inc. and subsidiaries
  (the Company) as of June 30, 2010 and 2009 and the related consolidated
  statements of operations, changes in equity, comprehensive income and cash flows
  for each of the three years in the period ended June 30, 2010. These financial
  statements are the responsibility of the Companys management. Our
  responsibility is to express an opinion on these financial statements based on
  our audits.

We conducted our audits in
  accordance with standards of the Public Company Accounting Oversight Board
  (United States). Those standards require that we plan and perform the audit to
  obtain reasonable assurance about whether the financial statements are free of
  material misstatement. An audit includes examining, on a test basis, evidence
  supporting the amounts and disclosures in the financial statements. An audit
  also includes assessing the accounting principles used and significant estimates
  made by management, as well as evaluating the overall financial statement
  presentation. We believe that our audits provide a reasonable basis for our
  opinion.

In our opinion, such consolidated
  financial statements, referred to above, present fairly, in all material
  respects, the financial position of Net 1 UEPS Technologies, Inc. and
  subsidiaries at June 30, 2010 and 2009, the results of their operations and
  their cash flows for each of the three years in the period ended June 30, 2010
  in conformity with accounting principles generally accepted in the United States
  of America.

We have also audited, in
  accordance with the standards of the Public Company Accounting Oversight Board
  (United States), the Company's internal control over financial reporting as of
  June 30, 2010, based on the criteria established in Internal
    ControlIntegrated Frameworkissued by the Committee of Sponsoring
  Organizations of the Treadway Commission and our report dated August 26, 2010,
  expressed an unqualified opinion on the Company's internal control over
  financial reporting.

/s/ Deloitte & Touche (South Africa)

Per PJ Smit 
  Partner 
  August 26, 2010

National Executive: GG Gelink Chief Executive AE Swiegers Chief
  Operating Officer GM Pinnock Audit
  DL Kennedy Tax & Legal and Risk
  Advisory L Geeringh Consulting L Bam Corporate Finance CR Beukman Finance 
  TJ
  Brown Clients & Markets NT Mtoba Chairman of the Board MJ Comber Deputy
  Chairman of the Board

A full list of partners and directors is available on request

F-2

---

|NET 1 UEPS TECHNOLOGIES, INC.
|-----------------------------
|CONSOLIDATED BALANCE SHEETS  
|as of June 30, 2010 and 2009 

|                                                                                                                                                                                                                                                                      |   | 2010                              |   |   | 2009    |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------------- | - | - | ------- | -
|                                                                                                                                                                                                                                                                      |   | (In thousands, except share data) |  
|ASSETS                                                                                                                                                                                                                                                                |   |                                   |   |   |         |  
|CURRENT ASSETS                                                                                                                                                                                                                                                        |   |                                   |   |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                                             | $ | 153,742                           |   | $ | 220,786 |  
|Pre-funded social welfare grants receivable (Note 4)                                                                                                                                                                                                                  |   | 6,660                             |   |   | 4,930   |  
|Accounts receivable, net (Note 5)                                                                                                                                                                                                                                     |   | 41,854                            |   |   | 42,475  |  
|Finance loans receivable, net (Note 5)                                                                                                                                                                                                                                |   | 4,221                             |   |   | 2,563   |  
|Deferred expenditure on smart cards                                                                                                                                                                                                                                   |   | -                                 |   |   | 8       |  
|Inventory (Note 6)                                                                                                                                                                                                                                                    |   | 3,622                             |   |   | 7,250   |  
|Deferred income taxes (Note 14)                                                                                                                                                                                                                                       |   | 16,330                            |   |   | 12,282  |  
|Total current assets before settlement assets                                                                                                                                                                                                                         |   | 226,429                           |   |   | 290,294 |  
|Settlement assets                                                                                                                                                                                                                                                     |   | 83,661                            |   |   | -       |  
|Total current assets                                                                                                                                                                                                                                                  |   | 310,090                           |   |   | 290,294 |  
|OTHER LONG-TERM ASSETS, including available
      for sale securities (Note 7)                                                                                                                                                                                        |   | 7,423                             |   |   | 7,147   |  
|PROPERTY, PLANT AND EQUIPMENT, net (Note 8)                                                                                                                                                                                                                           |   | 7,286                             |   |   | 7,376   |  
|EQUITY-ACCOUNTED INVESTMENTS (Note 7)                                                                                                                                                                                                                                 |   | 2,598                             |   |   | 2,583   |  
|GOODWILL (Note 9)                                                                                                                                                                                                                                                     |   | 76,346                            |   |   | 116,197 |  
|INTANGIBLE ASSETS, net (Note 9)                                                                                                                                                                                                                                       |   | 68,347                            |   |   | 75,890  |  
|TOTAL ASSETS                                                                                                                                                                                                                                                          |   | 472,090                           |   |   | 499,487 |  
|LIABILITIES                                                                                                                                                                                                                                                           |   |                                   |   |   |         |  
|CURRENT LIABILITIES                                                                                                                                                                                                                                                   |   |                                   |   |   |         |  
|Accounts payable                                                                                                                                                                                                                                                      |   | 3,596                             |   |   | 5,481   |  
|Other payables (Note 10)                                                                                                                                                                                                                                              |   | 50,855                            |   |   | 61,454  |  
|Income taxes payable                                                                                                                                                                                                                                                  |   | 3,476                             |   |   | 10,874  |  
|Total current liabilities before settlement obligations                                                                                                                                                                                                               |   | 57,927                            |   |   | 77,809  |  
|Settlement obligations                                                                                                                                                                                                                                                |   | 83,661                            |   |   | -       |  
|Total current liabilities                                                                                                                                                                                                                                             |   | 141,588                           |   |   | 77,809  |  
|DEFERRED INCOME TAXES (Note 14)                                                                                                                                                                                                                                       |   | 38,858                            |   |   | 41,737  |  
|INTEREST BEARING LIABILITIES  non-controlling interest
      loans                                                                                                                                                                                                   |   | 4,343                             |   |   | 4,185   |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                         |   | -                                 |   |   | -       |  
|TOTAL LIABILITIES                                                                                                                                                                                                                                                     |   | 184,789                           |   |   | 123,731 |  
|EQUITY                                                                                                                                                                                                                                                                |   |                                   |   |   |         |  
|COMMON STOCK (Note
      11) 
                     Authorized
      shares: 200,000,000 with $0.001 par
      value; 
                     Issued
      and outstanding shares, net of treasury: 2010:
      45,378,397; 
                     2009:
      54,506,487 |   | 59                                |   |   | 59      |  
|PREFERRED
      STOCK 
                     Authorized
      shares: 50,000,000 with $0.001 par
      value; 
                     Issued
      and outstanding shares, net of treasury: 2010: -; 2009: -                                                             |   | -                                 |   |   | -       |  
|ADDITIONAL PAID-IN CAPITAL                                                                                                                                                                                                                                            |   | 133,543                           |   |   | 126,914 |  
|TREASURY SHARES, AT COST: 2010: 13,149,042;
      2009: 3,927,516 (Note 11)                                                                                                                                                                                           |   | (173,671                          | ) |   | (48,637 | )
|ACCUMULATED OTHER COMPREHENSIVE LOSS                                                                                                                                                                                                                                  |   | (66,396                           | ) |   | (58,472 | )
|RETAINED EARNINGS                                                                                                                                                                                                                                                     |   | 392,343                           |   |   | 353,353 |  
|TOTAL NET1 EQUITY                                                                                                                                                                                                                                                     |   | 285,878                           |   |   | 373,217 |  
|NON-CONTROLLING INTEREST                                                                                                                                                                                                                                              |   | 1,423                             |   |   | 2,539   |  
|TOTAL EQUITY                                                                                                                                                                                                                                                          |   | 287,301                           |   |   | 375,756 |  
|TOTAL LIABILITIES AND EQUITY                                                                                                                                                                                                                                          | $ | 472,090                           |   | $ | 499,487 |  

See accompanying notes to consolidated financial statements.

F-3

---

|NET 1 UEPS TECHNOLOGIES, INC.                   
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS           
|for the years ended June 30, 2010, 2009 and 2008

|                                                                              |   | 2010                                        |   |  |   | 2009    |   |  |   | 2008    |  
|----------------------------------------------------------------------------- | - | ------------------------------------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                              |   | (In thousands, except per share
      data) |  
|REVENUE (Note 12)                                                             | $ | 280,364                                     |   |  | $ | 246,822 |   |  | $ | 254,056 |  
|Sale of goods                                                                 |   | 36,228                                      |   |  |   | 47,003  |   |  |   | 39,021  |  
|Loan-based interest and
      fees received                                   |   | 4,214                                       |   |  |   | 5,659   |   |  |   | 8,585   |  
|Services rendered                                                             |   | 239,922                                     |   |  |   | 194,160 |   |  |   | 206,450 |  
|EXPENSE                                                                       |   |                                             |   |  |   |         |   |  |   |         |  
|Cost of goods sold, IT processing,
      servicing and support                |   | 72,973                                      |   |  |   | 70,091  |   |  |   | 67,486  |  
|Selling, general and
      administration                                     |   | 80,854                                      |   |  |   | 64,833  |   |  |   | 65,362  |  
|Depreciation and amortization                                                 |   | 19,348                                      |   |  |   | 17,082  |   |  |   | 10,822  |  
|PROFIT ON SALE OF MICROLENDING BUSINESS                                       |   | -                                           |   |  |   | 455     |   |  |   | -       |  
|IMPAIRMENT OF GOODWILL (Note 9)                                               |   | 37,378                                      |   |  |   | 1,836   |   |  |   | -       |  
|OPERATING INCOME                                                              |   | 69,811                                      |   |  |   | 93,435  |   |  |   | 110,386 |  
|FOREIGN EXCHANGE GAIN RELATED TO SHORT-TERM                                   |   |                                             |   |  |   |         |   |  |   |         |  
|INVESTMENT                                                                    |   | -                                           |   |  |   | 26,657  |   |  |   | -       |  
|INTEREST INCOME, net                                                          |   | 9,069                                       |   |  |   | 10,828  |   |  |   | 15,722  |  
|INCOME BEFORE INCOME TAXES                                                    |   | 78,880                                      |   |  |   | 130,920 |   |  |   | 126,108 |  
|INCOME TAX EXPENSE (Note 14)                                                  |   | 40,822                                      |   |  |   | 42,744  |   |  |   | 39,192  |  
|NET INCOME BEFORE EARNINGS (LOSS) FROM
      EQUITY-                          |   |                                             |   |  |   |         |   |  |   |         |  
|ACCOUNTED INVESTMENTS                                                         |   | 38,058                                      |   |  |   | 88,176  |   |  |   | 86,916  |  
|EARNINGS (LOSS) FROM EQUITY-ACCOUNTED
      INVESTMENTS (Note 7)              |   | 93                                          |   |  |   | (874    | ) |  |   | (1,036  | )
|NET INCOME                                                                    |   | 38,151                                      |   |  |   | 87,302  |   |  |   | 85,880  |  
|(ADD) LESS: NET (LOSS) INCOME ATTRIBUTABLE
      TO NON- CONTROLLING INTEREST |   | (839                                        | ) |  |   | 701     |   |  |   | (815    | )
|NET INCOME ATTRIBUTABLE TO NET1                                               | $ | 38,990                                      |   |  | $ | 86,601  |   |  | $ | 86,695  |  
|Net income per share(Note 15)                                                 |   |                                             |   |  |   |         |   |  |   |         |  
|Basic earnings attributable to Net1
      shareholders in $                   |   | 0.84                                        |   |  |   | 1.53    |   |  |   | 1.50    |  
|Diluted earnings
      attributable to Net1 shareholders in $                 |   | 0.84                                        |   |  |   | 1.53    |   |  |   | 1.49    |  
|See accompanying notes to consolidated financial
      statements.            |   |                                             |   |  |   |         |   |  |   |         |  

F-4

---

|NET 1 UEPS TECHNOLOGIES, INC.                                    
|-----------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in
      thousands)
|Net 1 UEPS
      Technologies, Inc. Shareholder                  

Special
        convertible
      
      
      B ClassCommon stock
      
      
      preferred stock
      
      
      Preference SharesNumber
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      Non-of
      
      
      
      
      
      Additional
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      Total
      
      
      control-Number
      
      
      
      
      
      Treasury
      
      
      Treasury
      
      
      Paid-In
      
      
      Number
      
      
      
      
      
      Number
      
      
      
      
      
      Retained
      
      
      AOC(L)I
      
      
      Net1
      
      
      lingof Shares
      
      
      Amount
      
      
      Shares
      
      
      Shares
      
      
      Capital
      
      
      of Shares
      
      
      Amount
      
      
      of Shares
      
      
      Amount
      
      
      Earnings
      
      
      (1)
      
      
      Equity
      
      
      Interests
      
      
      TotalBalance  July 1, 2007
      
      51,730,547
      
      $
      52
      
      
      (299,821
      )
      $
      (7,795
      )
      $
      112,167
      
      
      5,656,110
      
      $
      5
      
      
      41,676,625
      
      $
      7
      
      $
      180,552
      
      $
      (3,915
      )
      $
      281,073
      
      $
      -
      
      $
      281,073Adoption of new standard - adjustment to
        opening retained earnings
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (495
      )
      
      
      
      
      (495
      )
      
      
      
      
      (495
      )Options exercised
      
      324,542
      
      
      
      
      
      
      
      
      
      
      
      2,919
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,919
      
      
      
      
      
      2,919Restricted stock granted
      
      594,782
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      0
      
      
      
      
      
      -Shares withheld by the
        Company on automatic exercise of employee stock options
      
      
      
      
      
      
      
      (6,448
      )
      
      (155
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (155
      )
      
      
      
      
      (155
      )Settlement of loan note consideration for
        stock issued in accordance with Plan
      
      
      
      
      
      
      
      
      
      
      
      
      
      544
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      544
      
      
      
      
      
      544Loan note consideration for
        stock issued in accordance with Plan
      
      
      
      
      
      
      
      
      
      
      
      
      
      (463
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (463
      )
      
      
      
      
      (463
      )Conversion from special convertible preferred
        stock to common stock and cession of B class preference shares and B class
        loans to Net 1 as a result of trigger events
      
      773,681
      
      
      
      
      
      
      
      
      
      
      
      1
      
      
      (773,681
      )
      
      
      
      
      (5,700,807
      )
      
      (1
      )
      
      
      
      
      
      
      
      0
      
      
      
      
      
      -Stock-based compensation
        charge
      
      
      
      
      
      
      
      
      
      
      
      
      
      4,257
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      4,257
      
      
      
      
      
      4,257Reversal of stock-based compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      
      (286
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (286
      )
      
      
      
      
      (286
      )Income tax benefits from
        stock awards sold by employees
      
      
      
      
      
      
      
      
      
      
      
      
      
      144
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      144
      
      
      
      
      
      144Comprehensive income (loss), net of taxes:Net income (loss)
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      86,695
      
      
      
      
      
      86,695
      
      
      
      
      
      86,695Other comprehensive income (loss):Movement
        in foreign currency translation reserve
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (33,905
      )
      
      (33,905
      )
      
      
      
      
      (33,905
      )Balance  June 30, 2008
      
      53,423,552
      
      $
      52
      
      
      (306,269
      )
      $
      (7,950
      )
      $
      119,283
      
      
      4,882,429
      
      $
      5
      
      
      35,975,818
      
      $
      6
      
      $
      266,752
      
      $
      (37,820
      )
      $
      340,328
      
      $
      -
      
      $
      340,328


(1) - Accumulated Other Comprehensive (Loss) Income

F-5

---

|NET 1 UEPS TECHNOLOGIES, INC.                                    
|-----------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in
      thousands)
|Net 1 UEPS
      Technologies, Inc. Shareholder                  

|                                                                                                                                                                                  |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  | Special convertible |   |   | B Class |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- |  | - | --------------------- |  |  | ----------------------- | - | - | -------- | - | - | ---------- | - |  | ------------------- | - | - | ------- | - |  | --------------- | - | - | ------ | - | - | -------- |  | - | ------- | - | - | ------- | -
|                                                                                                                                                                                  |  | Common stock    |  |   | preferred
      stock |  |  | Preference
      Shares |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |  
|                                                                                                                                                                                  |  |                 |  |   |                       |  |  | Number                  |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|                                                                                                                                                                                  |  |                 |  |   |                       |  |  | of                      |   |   |          |   |   | Additional |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | Total   |  
|                                                                                                                                                                                  |  | Number          |  |   |                       |  |  | Treasury                |   |   | Treasury |   |   | Paid-In    |   |  | Number              |   |   |         |   |  | Number          |   |   |        |   |   | Retained |  |   |         |   |   | Net1    |  
|                                                                                                                                                                                  |  | of
      Shares |  |   | Amount                |  |  | Shares                  |   |   | Shares   |   |   | Capital    |   |  | of
      Shares     |   |   | Amount  |   |  | of
      Shares |   |   | Amount |   |   | Earnings |  |   | AOC(L)I |   |   | Equity  |  
|                                                                                                                                                                                  |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|Balance  July 1, 2008                                                                                                                                                            |  | 53,423,552      |  | $ | 52                    |  |  | (306,269                | ) | $ | (7,950   | ) | $ | 119,283    |   |  | 4,882,429           |   | $ | 5       |   |  | 35,975,818      |   | $ | 6      |   | $ | 266,752  |  | $ | (37,820 | ) | $ | 340,328 |  
|Options exercised                                                                                                                                                                 |  | 84,414          |  |   | 1                     |  |  |                         |   |   |          |   |   | 253        |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | 254     |  
|Restricted stock granted                                                                                                                                                          |  | 3,474           |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | -       |  
|Stock granted pursuant to Net1 UTA
      acquisition                                                                                                                              |  | 40,134          |  |   | -                     |  |  |                         |   |   |          |   |   | 981        |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | 981     |  
|Settlement of loan note
      consideration for stock issued in accordance with Plan                                                                                              |  |                 |  |   |                       |  |  |                         |   |   |          |   |   | 20         |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | 20      |  
|Loan note consideration for stock issued in
      accordance with Plan                                                                                                            |  |                 |  |   |                       |  |  |                         |   |   |          |   |   | (3         | ) |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | (3      | )
|Conversion from special
      convertible preferred stock to common stock and cession of B class
      preference shares and B class loans to Net 1 as a result of trigger events |  | 4,882,429       |  |   | 6                     |  |  |                         |   |   |          |   |   | 4          |   |  | (4,882,429          | ) |   | (5      | ) |  | (35,975,818     | ) |   | (6     | ) |   |          |  |   |         |   |   | (1      | )
|Stock-based compensation charge                                                                                                                                                   |  |                 |  |   |                       |  |  |                         |   |   |          |   |   | 5,239      |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | 5,239   |  
|Reversal of stock-based
      compensation charge                                                                                                                                 |  |                 |  |   |                       |  |  |                         |   |   |          |   |   | (213       | ) |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | (213    | )
|Treasury shares acquired                                                                                                                                                          |  |                 |  |   |                       |  |  | (3,621,247              | ) |   | (40,687  | ) |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | (40,687 | )
|Income tax benefits from 
      stock awards sold by 
      employees                                                                                                             |  |                 |  |   |                       |  |  |                         |   |   |          |   |   | 1,350      |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   | 1,350   |  
|Net1 UTA non- controlling interest acquired                                                                                                                                       |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|Comprehensive income (loss),
      net of taxes:                                                                                                                                  |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|Net income (loss)                                                                                                                                                                 |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   | 86,601   |  |   |         |   |   | 86,601  |  
|Other
      comprehensive income (loss):                                                                                                                                          |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|Net unrealized
      loss on available for sale investment                                                                                                                        |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   | (1,611  | ) |   | (1,611  | )
|Movement in foreign
      currency translation reserve                                                                                                                            |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   | (19,041 | ) |   | (19,041 | )
|                                                                                                                                                                                  |  |                 |  |   |                       |  |  |                         |   |   |          |   |   |            |   |  |                     |   |   |         |   |  |                 |   |   |        |   |   |          |  |   |         |   |   |         |  
|Balance  June 30, 2009                                                                                                                                                           |  | 58,434,003      |  | $ | 59                    |  |  | (3,927,516              | ) | $ | (48,637  | ) | $ | 126,914    |   |  | -                   |   | $ | -       |   |  | -               |   | $ | -      |   | $ | 353,353  |  | $ | (58,472 | ) | $ | 373,217 |  

F-6

---

|NET 1 UEPS TECHNOLOGIES, INC.                                    
|-----------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in
      thousands)
|                                                                 
|Net 1 UEPS
      Technologies, Inc. Shareholder                  

|                                                                                                                |  |            |  |   |        |  |  | Number of   |   |   |          |   |   | Additional |  |   |          |  |   |         |   |   |            |   |   | Non-        |   |   |          |  
|--------------------------------------------------------------------------------------------------------------- |  | ---------- |  | - | ------ |  |  | ----------- | - | - | -------- | - | - | ---------- |  | - | -------- |  | - | ------- | - | - | ---------- | - | - | ----------- | - | - | -------- | -
|                                                                                                                |  | Number of  |  |   |        |  |  | Treasury    |   |   | Treasury |   |   | Paid-In    |  |   | Retained |  |   |         |   |   | Total Net1 |   |   | controlling |   |   |          |  
|                                                                                                                |  | Shares     |  |   | Amount |  |  | Shares      |   |   | Shares   |   |   | Capital    |  |   | Earnings |  |   | AOC(L)I |   |   | Equity     |   |   | Interests   |   |   | Total    |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Balance  July 1, 2009                                                                                          |  | 58,434,003 |  | $ | 59     |  |  | (3,927,516  | ) | $ | (48,637  | ) | $ | 126,914    |  | $ | 353,353  |  | $ | (58,472 | ) | $ | 373,217    |   | $ | 2,539       |   | $ | 375,756  |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Options exercised                                                                                               |  | 83,338     |  |   | -      |  |  |             |   |   |          |   |   | 303        |  |   |          |  |   |         |   |   | 303        |   |   |             |   |   | 303      |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Restricted stock granted                                                                                        |  | 10,098     |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   | 0          |   |   |             |   |   | -        |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Settlement of loan note
      consideration for stock issued in accordance with 2004 Stock Incentive
      Plan |  |            |  |   |        |  |  |             |   |   |          |   |   | 417        |  |   |          |  |   |         |   |   | 417        |   |   |             |   |   | 417      |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Stock-based compensation
      charge                                                                           |  |            |  |   |        |  |  |             |   |   |          |   |   | 5,670      |  |   |          |  |   |         |   |   | 5,670      |   |   |             |   |   | 5,670    |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Treasury shares acquired
      (Note 11)                                                                        |  |            |  |   |        |  |  | (9,221,526  | ) |   | (125,034 | ) |   |            |  |   |          |  |   |         |   |   | (125,034   | ) |   |             |   |   | (125,034 | )
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Income tax benefits from
      stock awards sold by employees                                                   |  |            |  |   |        |  |  |             |   |   |          |   |   | 239        |  |   |          |  |   |         |   |   | 239        |   |   |             |   |   | 239      |  
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Comprehensive income (loss),
      net of taxes:                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Net income (loss)                                                                                               |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   | 38,990   |  |   |         |   |   | 38,990     |   |   | (839        | ) |   | 38,151   |  
|Other
      comprehensive income (loss):                                                                        |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Net unrealized loss on available for sale investment                                                            |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   | (684    | ) |   | (684       | ) |   |             |   |   | (684     | )
|Movement in
      foreign currency translation reserve                                                          |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   | (7,240  | ) |   | (7,240     | ) |   | (277        | ) |   | (7,517   | )
|                                                                                                                |  |            |  |   |        |  |  |             |   |   |          |   |   |            |  |   |          |  |   |         |   |   |            |   |   |             |   |   |          |  
|Balance  June 30, 2010                                                                                         |  | 58,527,439 |  | $ | 59     |  |  | (13,149,042 | ) | $ | (173,671 | ) | $ | 133,543    |  | $ | 392,343  |  | $ | (66,396 | ) | $ | 285,878    |   | $ | 1,423       |   | $ | 287,301  |  

See accompanying notes to consolidated financial
  statements.

F-7

---

|NET 1 UEPS TECHNOLOGIES, INC.                   
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
|for the years ended June 30, 2010, 2009 and 2008

|                                                                                       |   | 2010   |   |   | 2009           |   |   | 2008    |  
|-------------------------------------------------------------------------------------- | - | ------ | - | - | -------------- | - | - | ------- | -
|                                                                                       |   |        |   |   | (In thousands) |   |   |         |  
|                                                                                       |   |        |   |   |                |   |   |         |  
|Net income                                                                             | $ | 38,990 |   | $ | 86,601         |   | $ | 86,695  |  
|                                                                                       |   |        |   |   |                |   |   |         |  
|Other comprehensive loss:                                                              |   |        |   |   |                |   |   |         |  
|Net
      unrealized loss on asset available for sale                                  |   | (684   | ) |   | (19,041        | ) |   | (33,905 | )
|Movement in foreign currency translation reserve                                       |   | (7,240 | ) |   | (1,611         | ) |   | -       |  
|Total other comprehensive loss                                                         |   | (7,924 | ) |   | (20,652        | ) |   | (33,905 | )
|                                                                                       |   |        |   |   |                |   |   |         |  
|Comprehensive income                                                                   |   | 31,066 |   |   | 65,949         |   |   | 52,790  |  
|Less (Add) comprehensive income (loss) attributable to non- controlling
      interest |   | 1,116  |   |   | (701           | ) |   | -       |  
|Comprehensive income
      attributable to Net1                                        | $ | 29,950 |   | $ | 66,650         |   | $ | 52,790  |  

See accompanying notes to consolidated financial statements.

F-8

---

|NET 1 UEPS TECHNOLOGIES, INC.                   
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS           
|for the years ended June 30, 2010, 2009 and 2008

|                                                                                                                                             |   | 2010     |   |   | 2009           |   |   | 2008    |  
|-------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | - | - | -------------- | - | - | ------- | -
|                                                                                                                                             |   |          |   |   | (In thousands) |   |   |         |  
|Cash flows from operating activities                                                                                                         |   |          |   |   |                |   |   |         |  
|Net income                                                                                                                                   | $ | 38,151   |   | $ | 87,302         |   | $ | 85,880  |  
|Adjustments to reconcile net
      income to net cash provided by operating activities:                                                      |   |          |   |   |                |   |   |         |  
|Depreciation
      and amortization                                                                                                          |   | 19,348   |   |   | 17,082         |   |   | 10,822  |  
|(Earnings)
      Loss from equity-accounted investments                                                                                      |   | (93      | ) |   | 874            |   |   | 1,036   |  
|Fair value
      adjustment                                                                                                                  |   | 78       |   |   | (4,402         | ) |   | (269    | )
|Interest
      payable                                                                                                                       |   | 301      |   |   | 425            |   |   | 434     |  
|Facility
      fee amortized                                                                                                                 |   | -        |   |   | 1,100          |   |   | -       |  
|Loss (Profit)
      on disposal of property, plant and equipment                                                                             |   | 69       |   |   | 85             |   |   | (110    | )
|Profit
      on disposal of business                                                                                                         |   | -        |   |   | (455           | ) |   | -       |  
|Stock compensation
      charge, net of forfeitures                                                                                          |   | 5,670    |   |   | 5,026          |   |   | 3,971   |  
|Impairment
      of goodwill                                                                                                                 |   | 37,378   |   |   | 1,836          |   |   | -       |  
|Decrease (Increase) in
      accounts receivable, pre-funded social welfare 
       
         grants receivable and finance loans receivable |   | 4,666    |   |   | 14,639         |   |   | (9,983  | )
|Decrease
      in deferred expenditure on smart cards                                                                                        |   | 8        |   |   | 50             |   |   | 416     |  
|Decrease (Increase) in
      inventory                                                                                                       |   | 3,867    |   |   | (81            | ) |   | (1,138  | )
|(Decrease)
      Increase in accounts payable and other payables                                                                             |   | (27,138  | ) |   | (8,788         | ) |   | 24,353  |  
|(Decrease) Increase in
      taxes payable                                                                                                   |   | (7,582   | ) |   | (3,339         | ) |   | 1,369   |  
|(Decrease)
      Increase in deferred taxes                                                                                                  |   | (6,040   | ) |   | (4,586         | ) |   | 1,979   |  
|Net cash provided by operating activities                                                                                                    |   | 68,683   |   |   | 106,768        |   |   | 118,760 |  
|Cash flows from investing
      activities                                                                                                   |   |          |   |   |                |   |   |         |  
|Capital expenditures                                                                                                                         |   | (2,730   | ) |   | (4,770         | ) |   | (3,563  | )
|Proceeds from disposal of property,
      plant and equipment                                                                                |   | 106      |   |   | 159            |   |   | 160     |  
|Acquisition of available-for-sale securities                                                                                                 |   | -        |   |   | (3,422         | ) |   | -       |  
|Acquisition of MediKredit and FIHRST, net of
      cash acquired (Note 3)                                                                    |   | (10,319  | ) |   | -              |   |   | -       |  
|Acquisition of Net1 UTA, net of cash acquired
      (Note 3)                                                                                 |   | -        |   |   | (97,992        | ) |   | -       |  
|Acquisition of RMT, net of
      cash acquired (Note 3)                                                                                      |   | -        |   |   | (1,381         | ) |   | -       |  
|Acquisition of and advance of loans to equity-accounted
      investments                                                                    |   | -        |   |   | (450           | ) |   | (500    | )
|Net change in settlement assets                                                                                                              |   | (77,243  | ) |   | -              |   |   | -       |  
|Net cash used in investing
      activities                                                                                                  |   | (90,186  | ) |   | (107,856       | ) |   | (3,903  | )
|Cash flows from financing
      activities                                                                                                   |   |          |   |   |                |   |   |         |  
|Proceeds from issue of common stock                                                                                                          |   | 720      |   |   | 271            |   |   | 2,845   |  
|Acquisition of treasury stock
      (Note 11)                                                                                                |   | (126,304 | ) |   | (39,412        | ) |   | -       |  
|Proceeds from short-term loan facility (Note
      19)                                                                                       |   | -        |   |   | 110,000        |   |   | -       |  
|Repayment of short-term loan
      facility (Note 19)                                                                                        |   | -        |   |   | (110,000       | ) |   | -       |  
|Payment of facility fee (Note 19)                                                                                                            |   | -        |   |   | (1,100         | ) |   | -       |  
|Repayment of non-controlling
      interest loan                                                                                             |   | -        |   |   | -              |   |   | -       |  
|Net change in settlement obligations                                                                                                         |   | 77,243   |   |   | -              |   |   | -       |  
|Proceeds from bank overdraft                                                                                                                 |   | -        |   |   | 2,843          |   |   | 1,462   |  
|Repayment of bank overdraft                                                                                                                  |   | (137     | ) |   | (2,850         | ) |   | (1,443  | )
|Net cash (used in) provided
      by financing activities                                                                                    |   | (48,478  | ) |   | (40,248        | ) |   | 2,864   |  
|Effect of exchange rate changes on cash                                                                                                      |   | 2,937    |   |   | (10,353        | ) |   | (16,973 | )
|Net (decrease) increase in cash and cash
      equivalents                                                                                   |   | (67,044  | ) |   | (51,689        | ) |   | 100,748 |  
|Cash and cash equivalents  beginning
      of year                                                                                          |   | 220,786  |   |   | 272,475        |   |   | 171,727 |  
|Cash and cash equivalents at end of year                                                                                                     | $ | 153,742  |   | $ | 220,786        |   | $ | 272,475 |  

See accompanying notes to consolidated financial statements.

F-9

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

**Description of
  Business**

Net 1 UEPS Technologies, Inc.
  (Net1 and collectively with its consolidated subsidiaries, the Company) was
  incorporated in the State of Florida on May 8, 1997. The Company provides a
  smart-card based alternative payment system for the unbanked and underbanked
  populations of developing economies. Its universal electronic payment system
  (UEPS), uses secure smart cards that operate in real-time but offline, which
  allows users to enter into transactions at any time with other card holders in
  even the most remote areas so long as a smart card reader, which is often
  portable and battery-powered, is available. The Company also develops and
  provides secure transaction solutions and services for first world markets. The
  Companys technology is widely used in South Africa today, where it distributes
  pension and welfare payments to over 3.2 million beneficiaries in five of South
  Africas nine provinces, processes debit and credit card payment transactions on
  behalf of retailers that the Company believes represents nearly 65% of retailers
  within the formal retail sector in South Africa through the Companys EasyPay
  system, offers claims processing to more than 60% of South Africas funders and
  providers of healthcare, processes payroll for over 700,000 employees through
  its FIHRST system, and provides mobile telephone top-up transactions for the
  major South African mobile carriers. During the past several years, the Company
  has expanded its business to a number of markets outside South Africa, including
  other countries on the African continent, Russia and other members of the
  Commonwealth of Independent States (CIS), the Middle East, Asia and Latin
  America.

**Basis of
  presentation**

The accompanying consolidated
  financial statements include subsidiaries over which Net1 exercises control and
  have been prepared in accordance with accounting principles generally accepted
  in the United States of America (GAAP).

2. SIGNIFICANT ACCOUNTING POLICIES

**Principles of
  consolidation**

The financial statements of
  entities which are controlled by Net1, referred to as subsidiaries, are
  consolidated. Inter-company accounts and transactions are eliminated upon
  consolidation.

The Company, if it is the primary
  beneficiary, consolidates entities which are considered to be Variable Interest
  Entities (VIE). The primary beneficiary is considered to be the entity that
  will absorb a majority of the entity's expected losses, receive a majority of
  the entity's expected residual returns, or both. No entities were required to be
  consolidated in terms of these requirements during the years ended June 30, 2010
  and 2009.

**Use of
  estimates**

The preparation of financial
  statements in conformity with GAAP requires management to make estimates and
  assumptions that affect the reported amounts of assets and liabilities and
  disclosure of contingent assets and liabilities at the date of the financial
  statements and the reported amounts of revenues and expenses during the
  reporting period. Actual results could differ from those estimates.

**Property, plant and
  equipment**

Property, plant and equipment are
  shown at cost less accumulated depreciation. Property, plant and equipment are
  depreciated on the straight-line basis at rates which are estimated to amortize
  the assets to their anticipated residual values over their useful lives. Within
  the following asset classifications, the expected economic lives are
  approximately:

Computer equipment
      3 to 5 yearsOffice equipment
      2 to 10 yearsVehicles
      4 to 8 yearsFurniture and fittings
      5 to 10 yearsPlant and equipment
      5 to 10 years


F-10

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

****Property, plant
  and equipment (continued)

The gain or loss arising on the
  disposal or retirement of an asset is determined as the difference between the
  sales proceeds and the carrying amount of the asset and is recognized in
  income.

**Leasehold improvement
  costs**

Costs incurred in the adaptation
  of leased properties to serve the requirements of the Company are capitalized
  and amortized over the shorter of the term of the lease and the contract for
  which the lease has been entered into.

**Sales taxes**

Revenue and expenses are
  presented net of sales, use and value added taxes, as the case may be.

**Income taxes**

The Company provides for income
  taxes using the asset and liability method. This approach recognizes the amount
  of taxes payable or refundable for the current year, as well as deferred tax
  assets and liabilities for the future tax consequence of events recognized in
  the financial statements and tax returns. Deferred income taxes are adjusted to
  reflect the effects of changes in tax laws or enacted tax rates.

The tax rate in South Africa
  varies depending on whether income is distributed. During the years ended June
  30, 2010 and 2009, the income tax rate was 28%, but upon distribution an
  additional tax (STC) of 10% was due based on the amount of dividends declared
  net of dividends received during a dividend cycle. The Company therefore
  measures its income taxes and deferred income taxes for the year ended June 30,
  2010 and 2009 using a combined rate of 34.55% . The income tax rate during the
  year ended June 30, 2008, was 29%, and the STC rate was 10.0%, which resulted in
  a combined rate of 35.45% .

In establishing the appropriate
  income tax valuation allowances, the Company assesses the realizability of its
  net deferred tax assets, and based on all available evidence, both positive and
  negative, determines whether it is more likely than not that the net deferred
  tax assets or a portion thereof will be realized.

Uncertain tax positions are
  recognized in the financial statements for positions which are considered more
  likely than not of being sustained based on the technical merits of the position
  on audit by the tax authorities. The measurement of the tax benefit recognized
  in the financial statements is based upon the largest amount of tax benefit
  that, in managements judgement, is greater than 50% likely of being realized
  based on a cumulative probability assessment of the possible outcomes.

The Companys policy is to
  include interest related to unrecognized tax benefits in interest income, net
  and penalties in selling, general and administration in the consolidated
  statements of operations.

**Goodwill**

Goodwill represents the excess of
  the purchase price of an acquired enterprise over the fair values of the
  identifiable assets acquired and liabilities assumed. The Company tests for
  impairment of goodwill on an annual basis and at any other time if events or
  circumstances change that would more likely than not reduce the fair value of
  the reporting unit goodwill below its carrying amount.

Circumstances that could trigger
  an impairment test include but are not limited to: a significant adverse change
  in the business climate or legal factors; an adverse action or assessment by a
  regulator; unanticipated competition; loss of key personnel; the likelihood that
  a reporting unit or significant portion of a reporting unit will be sold or
  otherwise disposed; and results of testing for recoverability of a significant
  asset group within a reporting unit.

F-11

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Goodwill
  (continued)**

If the carrying amount of the
  reporting unit goodwill exceeds the implied fair value of that goodwill, an
  impairment loss is recorded in the statement of operations. Measurement of the
  fair value of a reporting unit is based on one or more of the following fair
  value measures: the amount at which the unit as a whole could be bought or sold
  in a current transaction between willing parties; present value techniques of
  estimated future cash flows; or valuation techniques based on multiples of
  earnings or revenue, or a similar performance measure.

**Intangible
  assets**

Intangible assets are shown at
  cost less accumulated amortization. Intangible assets are amortized over the
  following useful lives:

Customer relationships
      1 to 15 yearsSoftware and unpatented technology
      3 yearsFTS patent
      10 yearsExclusive licenses
      7 yearsTrademarks
      3 to 20 yearsCustomer databases
      3 years


Intangible assets are
  periodically evaluated for recoverability, and those evaluations take into
  account events or circumstances that warrant revised estimates of useful lives
  or that indicate that impairment exists.

**Equity-accounted
  investments**

The Company uses the equity
  method to account for investments in companies when it has significant influence
  but not control over the operations of the equity-accounted company. Under the
  equity method, the Company initially records the investment at cost and then
  adjusts the carrying value of the investment to recognize the proportional share
  of the equity-accounted companys net income (loss). In addition, dividends
  received from the equity-accounted company reduce the carrying value of the
  Companys investment.

**Inventory**

Inventory is valued at the lower
  of cost and market value. Cost is determined on a first-in, first-out basis and
  includes transport and handling costs.

**Translation of foreign
  currencies**

The primary functional currency
  of the Company is the South African Rand (ZAR) and its reporting currency is
  the US dollar. The Company also has consolidated entities which have the euro,
  Russian ruble or Indian rupee as their functional currency. The current rate
  method is used to translate the financial statements of the Company to US
  dollar. Under the current rate method, assets and liabilities are translated at
  the exchange rates in effect at the balance sheet date. Revenues and expenses
  are translated at average rates for the period. Translation gains and losses are
  reported in accumulated other comprehensive income in equity.

Foreign exchange transactions are
  translated at the spot rate ruling at the date of the transaction. Monetary
  items are translated at the closing spot rate at the balance sheet date.
  Transactional gains and losses are recognized in the statement of operations for
  the period.

F-12

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Revenue
  recognition**

The Company recognizes revenue
  when:

- there is persuasive evidence of an agreement or arrangement;
- delivery of products has occurred or services have been rendered;
- the sellers price to the buyer is fixed or determinable; and
- collectability is reasonably assured.

The Companys principal revenue
  streams and their respective accounting treatments are discussed below:

***Fees***

The Company provides a state
  welfare benefit distribution service to provincial governments in South Africa.
  Fees are computed based on the number of beneficiaries included in the
  government payfile. Fee income received for these services is recognized in the
  statement of operations when distributions have been made to the
  beneficiaries.

Beneficiaries are able to load
  their welfare grants at merchants enrolled in the Companys participating
  retailer program in certain provinces. There is no charge to the beneficiary to
  load the grant onto a smart card at the merchant location, however, a fee is
  charged to the merchant for purchases made at the merchant using the smart card.
  A fee is also charged to the merchant when the beneficiary makes a cash
  withdrawal. Fee income received for these services is recognized in the
  statement of operations when the transaction occurs.

The Company provides an automated
  payment collection service to third parties, for which it charges monthly fees.
  These fees are recognized in the statement of operations as the underlying
  services are performed.

The Company provides
  medical-related claims adjudication, reconciliation and settlement services
  (medical-related claim service) to customers, for which it charges fees. These
  fees are recognized in the statement of operations as the underlying services
  are performed.

***Contract
  variations fees***

The Company records additional
  revenue from variations to contracts for the provision of state welfare
  benefits, if:

- there is persuasive evidence of an agreement; and
- collectability is reasonably assumed; and
- all material terms and conditions of the agreement have been adhered to.

***Hardware
  sales***

Revenue from hardware sales is
  recognized when risk of loss has transferred to the customer and there are no
  unfulfilled Company obligations that affect the customers final acceptance of
  the arrangement. Any cost of warranties and remaining obligations that are
  inconsequential or perfunctory are accrued when the corresponding revenue is
  recognized.

To the extent that sales of
  hardware are made in an arrangement that includes software that is more than
  incidental, the Company considers post-contract maintenance and technical
  support or other future obligations which could impact the timing and amount of
  revenue recognized.

***Software***

Revenue from licensed software is
  recognized on a subscription basis over the period that the client is entitled
  to use the license. Revenue from the sale of software is recognized if all
  revenue recognition criteria have been met. Post-contract maintenance and
  technical support in respect of software is generally negotiated and sold as a
  separate service and is recognized over the period such items are delivered.

F-13

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Revenue recognition
  (continued)**

***Interest
  income***

Interest income earned from
  micro-lending activities is recognized in the statement of operations as it
  falls due, using the effective interest rate method by reference to the constant
  interest rate stated in each loan agreement. Fees earned for establishing loans
  are recognized over the period of the loan as interest income.

Capital and interest that is in
  arrears and determined to be doubtful is provided for in full if the capital
  outstanding has not been insured. The Company insures against losses of capital
  related to certain loans. For these loans, provision is made for the amount of
  interest previously recognized in the statement of operations if it is
  determined that the interest outstanding will not be collected.

***Systems
  implementation projects***

The Company undertakes smart card
  system implementation projects. The hardware and software installed in these
  projects are in the form of customized systems, which ordinarily involve
  modification to meet the customers specifications. Software delivered under
  such arrangements is available to the customer permanently, subject to the
  payment of annual license fees. Revenue for such arrangements is recognized
  under the percentage of completion method, save for annual license fees, which
  are recognized in the period to which they relate. Up-front and interim payments
  received are recorded as client deposits until customer acceptance.

The Companys customer
  arrangements may have multiple deliverables. Generally, the Companys multiple
  element arrangements fall within the scope of specific accounting standards that
  provide guidance regarding the separation of elements in multiple-deliverable
  arrangements and the allocation of consideration among those elements. If not,
  the Company unbundles multiple element arrangements into separate units of
  accounting when the delivered element(s) has stand-alone value and fair value of
  the undelivered element(s) exists.

***Terminal
  rental income***

The Company leases terminals to
  merchants participating in its merchant acquiring system. Operating rental
  income is recognized monthly on a straight-line basis in accordance with the
  lease agreement.

***Other
  income***

Revenue from service and
  maintenance activities is charged to customers on a time-and-materials basis and
  is recognized in the statement of operations as services are delivered to
  customers.

**Research
  and development expenditure**

Research and development
  expenditures is charged to net income in the period in which it is incurred.
  During the years ended June 30, 2010, 2009 and 2008, the Company incurred
  research and development expenditures of $7.6 million, $8.9 million and $5.7
  million, respectively.

**Computer
  software development**

Product development costs in
  respect of software intended for sale to licensees are expensed as incurred
  until technological feasibility is attained. Technological feasibility is
  attained when the Companys software has completed system testing and has been
  determined to be viable for its intended use. The time between the attainment of
  technological feasibility and completion of software development is generally
  short with immaterial amounts of development costs incurred during this period.

F-14

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Computer software
  development (continued)**

Costs in respect of the
  development of software for the Companys internal use are expensed as incurred,
  except to the extent that these costs are incurred during the application
  development stage. All other costs including those incurred in the project
  development and post-implementation stages are expensed as incurred.

**Settlement assets and
  settlement obligations**

Settlement assets comprise (1)
  cash received from the South African government that the Company holds pending
  disbursement to beneficiaries of social welfare grants, (2) cash received from
  health care plans which the Company disburses to health care service providers
  once it adjudicates claims and (3) cash received from customers on whose behalf
  the Company processes payroll payments that the Company will disburse to
  customer employees, payroll-related payees and other payees designated by the
  customer.

Settlement obligations comprise
  (1) amounts that the Company is obligated to disburse to beneficiaries of social
  welfare grants, (2) amounts which are due to health care service providers after
  claims have been adjudicated and reconciled, provided that the Company shall
  have previously received such funds from health care plan customers and (3)
  amounts that the Company is obligated to pay to customer employees,
  payroll-related payees and other payees designated by the customer.

**Loan provisions and
  allowance for doubtful debts**

***UEPS-based
  lending***

No provision is required for
  UEPS-based lending. The principal amount of the loan is insured and the amount
  due to be recovered from the insurer is recorded as a receivable once the amount
  is deemed unrecoverable. Default is considered when the beneficiary dies or can
  not be found. Once the loan is deemed unrecoverable, service fees related to the
  unrecoverable insured loan is not recognized.

***Traditional
  microlending***

The Company sold its traditional
  microlending business during fiscal 2009. Prior to disposition of this business,
  a specific provision was established for all traditional microlending loans
  where it was considered likely that all or a portion of the principal amount of
  the loan or interest thereon would not be repaid by the borrower. Default was
  considered likely after a specified period of repayment default, which was
  generally not more than 150 days. The provision was assessed based on a review
  by management of the ageing of outstanding amounts, the payment history in
  relation to those specific accounts and the overall default history.

***Allowance
  for doubtful debts***

A specific provision is
  established where it is considered likely that all or a portion of the amount
  due from customers renting point of sale (POS) equipment, receiving support
  and maintenance or transaction services or purchasing licenses from the Company
  will not be recovered. Non-recoverability is assessed based on a review by
  management of the ageing of outstanding amounts, the location of the customer
  and the payment history in relation to those specific amounts.

**Stock-based
  compensation**

Stock-based compensation
  represents the cost related to stock-based awards granted. The Company measures
  stock-based compensation cost at the grant date, based on the estimated fair
  value of the award, and recognizes the cost as an expense on a straight-line
  basis (net of estimated forfeitures) over the requisite service period. In
  respect of awards with only service conditions that have a graded vesting
  schedule, the Company recognizes compensation cost on a straight-line basis over
  the requisite service period for the entire award. The forfeiture rate is
  estimated using historical trends of the number of awards forfeited prior to
  vesting. The expense is recorded in the statement of operations based on the
  recipients respective functions.

F-15

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

****Stock-based
  compensation (continued)

The Company records deferred tax
  assets for awards that result in deductions on the Companys income tax returns,
  based on the amount of compensation cost recognized and the Companys statutory
  tax rate in the jurisdiction in which it will receive a deduction. Differences
  between the deferred tax assets recognized for financial reporting purposes and
  the actual tax deduction reported on the Companys income tax return are
  recorded in additional paid-in capital (if the tax deduction exceeds the
  deferred tax asset) or in the statement of operations (if the deferred tax asset
  exceeds the tax deduction and no additional paid-in capital exists from previous
  awards).

**Recent accounting
  pronouncements adopted**

The following summary of recent
  accounting pronouncements reflects only the new authoritative accounting
  guidance issued that is relevant and applicable to the Company.

On July 1, 2009, the Financial
  Accounting Standards Board (FASB) issued the FASB Accounting Standards
  Codification (the Codification) as the single source of authoritative GAAP
  recognized by the FASB to be applied by non-governmental entities. The
  Codification supersedes all existing non-SEC accounting and reporting standards.
  Following the issue of the Codification, the FASB has issued new guidance in the
  form of Accounting Standards Updates. The Codification was effective for the
  Company from July 1, 2009. The Codification did not impact the Companys
  financial position or results of operations. The following summary of recent
  accounting pronouncements reflects only the new authoritative accounting
  guidance issued by FASB that is relevant and applicable to the Company.

On July 1, 2009, the Company
  adopted guidance issued by FASB regarding business combinations. This guidance
  retains the fundamental requirements on business combinations that the
  acquisition method of accounting (previously referred to as the purchase method)
  be used for all business combinations and for an acquirer to be identified for
  each business combination. The adopted guidance requires the acquiring entity in
  a business combination to recognize the assets acquired and liabilities assumed
  at the acquisition date. In addition, it also requires acquisition-related costs
  to be recognized separately from the business combination. The adopted guidance
  applies prospectively to business combinations for which the acquisition date is
  on or after the beginning of the first annual reporting period beginning on or
  after December 15, 2008. The adoption of this authoritative guidance on business
  combinations has not had a material effect on the Companys results of
  operations or financial position.

On July 1, 2009, the Company
  adopted guidance issued by the FASB regarding non-controlling interests. This
  guidance establishes a single method of accounting for changes in a parents
  ownership interest in a subsidiary that does not result in de-consolidation. It
  clarifies that all of those transactions are equity transactions if the parent
  retains its controlling financial interest in the subsidiary. The adopted
  guidance was effective for the Company, prospectively, beginning July 1, 2009,
  except for the presentation and disclosure requirements which were applied
  retrospectively for all periods presented. Accordingly, the Companys
  consolidated balance sheet as of June 30, 2009, and consolidated statement of
  operations and cash flows for the years ended June 30, 2009 and 2008 have been
  revised to conform to the new presentation requirements.

On July 1, 2009, the Company
  adopted guidance issued by the FASB regarding unvested share-based payment
  awards. The guidance provides that contain non-forfeitable rights to dividends
  or dividend equivalents are participating securities and, therefore, are
  included in computing earnings per share pursuant to the two-class method. The
  two-class method determines earnings per share for each class of common stock
  and participating securities according to dividends or dividend equivalents and
  their respective participation rights in undistributed earnings. The Company
  issued restricted stock during fiscal 2010, 2009 and 2007 and these instruments
  are considered participating securities as they are eligible to receive
  non-forfeitable dividend equivalents at the same rate as common stock. The
  adopted guidance is effective for financial statements issued for fiscal years
  beginning after December 15, 2008, and interim periods within those fiscal
  years. Prior period basic earnings per share have been retrospectively adjusted
  to reflect the impact of the adoption. The impact of adoption decreased
  previously reported basic earnings per share by $0.02 for each of the years
  ended June 30, 2009 and 2008, and previously reported diluted earnings per share
  by $0.01 for each of the years ended June 30, 2009 and 2008.

F-16

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Recent accounting
  pronouncements adopted (continued)**

On July 1, 2009, the Company
  adopted guidance issued by FASB on fair value measurements for non-financial
  assets and non-financial liabilities. The adoption of this authoritative
  guidance has not had a material effect on the Companys results of operations or
  financial position.

On July 1, 2009, the Company
  adopted guidance issued by FASB on the determination of the useful life of
  intangible assets. This guidance amends the factors that should be considered in
  developing renewal or extension assumptions used to determine the useful life of
  a recognized intangible asset. The adoption of this guidance has not had a
  material effect on the Companys results of operations or financial
  position.

On October 1, 2009, the Company
  adopted guidance issued by the FASB which clarifies the treatment of certain
  distributions to shareholders that have both stock and cash components. The
  stock portion of such distributions is considered a share issuance that is
  reflected in earnings per share prospectively and is not a stock dividend. The
  adoption of this guidance did not have a material effect on the Companys
  results of operations or financial position; however, it may affect any future
  stock distributions.

In January 2010, the FASB issued
  guidance on fair value measurement and disclosures which amends existing
  guidance to add new requirements for disclosures about transfers into and out of
  Levels 1 and 2 and separate disclosures about purchases, sales, issuance, and
  settlements relating to Level 3 measurements. The guidance also clarifies
  existing fair value disclosures about the level of disaggregation and about
  inputs and valuation techniques used to measure fair value. However, the final
  guidance does not require entities to provide sensitivity disclosures. The FASB
  has indicated that it will consider whether to require sensitivity disclosures
  jointly with the International Accounting Standards Board as part of the new
  convergence project on fair value measurements and disclosures. The guidance was
  effective for the Company for the year ended June 30, 2010. The adoption of the
  guidance did not impact the Companys consolidated financial position, results
  of operations or cash flows.

**Recent accounting
  pronouncements not yet adopted as of June 30, 2010**

In September 2009, the FASB
  issued guidance on revenue recognition in multiple-deliverable revenue
  arrangements. The guidance amends the existing guidance on allocating
  consideration received between the elements in a multiple-deliverable
  arrangement and establishes a selling price hierarchy for determining the
  selling price of a deliverable. The selling price used for each deliverable will
  be based on vendor-specific objective evidence (VSOE) if available,
  third-party evidence if VSOE is not available, or estimated selling price if
  neither VSOE nor third-party evidence is available. The guidance replaces the
  term fair value in the revenue allocation with selling price to clarify that
  the allocation of revenue is based on entity specific assumptions rather than
  the assumptions of a market place participant. The guidance eliminates the
  residual method of allocation and requires that arrangement consideration be
  allocated using the relative selling price method. It also significantly expands
  the disclosures related to a vendors multiple-deliverable revenue arrangements.
  It will be effective prospectively for revenue arrangements entered into or
  materially modified for fiscal years beginning on or after June 15, 2010, and
  will therefore be adopted by the Company, effective July 1, 2010. The Company is
  currently evaluating the impact of adopting this guidance.

In October 2009, the FASB issued
  guidance which amends the scope of existing software revenue recognition
  accounting. Tangible products containing software components and non-software
  components that function together to deliver the products essential
  functionality would be scoped out of the accounting guidance on software and
  accounted for based on other appropriate revenue recognition guidance. This
  guidance must be adopted in the same period that the Company adopts the amended
  accounting for arrangements with multiple deliverables described in the
  preceding paragraph and therefore will become effective for the Company for
  revenue arrangements entered into or materially modified on or after July 1,
  2010. Earlier application is permitted with required transition disclosures
  based on the period of adoption. The Company is currently evaluating the impact
  of the adoption of this guidance.

F-17

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Recent accounting
  pronouncements not yet adopted as of June 30, 2010 (continued)**

In December 2009, the FASB issued
  new guidance on the consolidation of variable interest entities. This guidance
  changes how a reporting entity determines when an entity that is insufficiently
  capitalized or is not controlled through voting (or similar rights) should be
  consolidated. The determination of whether a reporting entity is required to
  consolidate another entity is based on, among other things, the other entitys
  purpose and design and the reporting entitys ability to direct the activities
  of the other entity that most significantly impact the other entitys economic
  performance. The guidance also requires a reporting entity to provide additional
  disclosures about its involvement with variable interest entities and any
  significant changes in risk exposure due to such involvement. This guidance is
  effective from the first annual reporting period beginning on or after November
  15, 2009, and will therefore be adopted by the Company, effective July 1, 2010.
  The Company is currently evaluating the impact of adopting this guidance.

In December 2009, the FASB issued
  new guidance issued on the accounting for transfers of financial assets. This
  guidance requires more information about transfers of financial assets,
  including securitization transactions, and where entities have continuing
  exposure to the risks related to transferred financial assets. It eliminates the
  concept of a qualifying special-purpose entity, changes the requirements for
  de-recognizing financial assets, and requires additional disclosures. This
  guidance is effective from the first annual reporting period beginning on or
  after November 15, 2009, and will therefore be adopted by the Company, effective
  July 1, 2010. The Company is currently evaluating the impact of adopting this
  guidance.

In July 2010, the FASB issued
  amendments to the disclosure requirements about the credit quality of financing
  receivables and the allowance for credit losses. The purpose of the additional
  disclosures is to enable users of financial statements to better understand the
  nature of credit risk inherent in an entitys portfolio of financing receivables
  and how that risk is analyzed. For end of period balances, the new disclosures
  are required to be made in all interim and annual periods ending on or after
  December 15, 2010. For activity during a reporting period, the disclosures are
  required to be made in all interim and annual periods after January 1, 2011.
  These changes will not have an impact on the Companys consolidated financial
  results as this guidance only relates to additional disclosures.

3. ACQUISITIONS

**2010
  Acquisitions**

***MediKredit
  Integrated Healthcare Solutions (Proprietary) Limited
  (MediKredit)***

On January 1, 2010, the Company
  acquired 100% of MediKredit, a South African private company, for ZAR 74 million
  (approximately $10 million) in cash. MediKredit offers transaction processing,
  financial and clinical risk management solutions to both health care plans and
  health care service providers, primarily in South Africa. The Company believes
  that the acquisition of MediKredit has increased the depth and diversity of the
  management team with the addition of experienced executives, and provides the
  potential to strengthen its position as the leading independent transaction
  processor in South Africa and expand its offering in some of its existing
  markets like Ghana and Nigeria, where national health insurance schemes have
  been introduced and where the UEPS platform and installed card base could offer
  a complete national solution when combined with the MediKredit system. In
  addition, MediKredit provides the Company with a small, strategic entry point
  for the US healthcare administration market. The rapidly changing US healthcare
  and administration industry provides a significant opportunity for the
  introduction of MediKredits technology. Finally, the Company and MediKredit
  both operate similar back-end systems, which require skilled developers and
  technicians and the addition of MediKredit would significantly broaden the
  Companys base of qualified development employees.

***FIHRST
  Management Services (Proprietary) Limited business and related software
  (collectively FIHRST)***

On March 31, 2010, the Company
  acquired FIHRST, a South African business, for ZAR 70 million (approximately $9
  million). The purchase consideration was paid in cash in the first week of April
  2010. FIHRST offers a third-party payroll payments solution to companies in
  South Africa.

F-18

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

3. ACQUISITIONS (continued)

**2010 Acquisitions
  (continued)**

FIHRST
  Management Services (Proprietary) Limited business and related software
  (collectively FIHRST) (continued)

The FIHRST acquisition provides
  the Company with access to employees of FIHRSTs customers which the Company
  believes will provide it with the opportunity to market its range of transaction
  processing products and financial services, including bill payments, insurance
  products, prepaid utilities and third party payments to these employees. The
  Company will have the potential to promote its wage payment initiative by
  offering the employees of FIHRST customers its banking solutions through the
  Companys relationship with Grindrod Bank Limited. Finally, the Company and
  FIHRST operate on different IT platforms, which will result in additional
  resources with complementary IT skills. The Company may also realize IT-related
  cost synergies in areas such as disaster recovery and computer maintenance and
  support.

The preliminary purchase price
  allocation of the MediKredit and FIHRST acquisitions, translated at the foreign
  exchange rates applicable on the date of acquisition, are provided in the table
  below:

MediKredit
      
      
      FIHRST
      
      
      TotalCash and cash equivalents
      $
      9,005
      
      $
      77
      
      $
      9,082Accounts receivable, net
      
      2,940
      
      
      640
      
      
      3,580Property, plant and equipment
      
      1,290
      
      
      106
      
      
      1,396Intangible assets (see Note 9)
      
      6,070
      
      
      7,983
      
      
      14,053Trade and other payables
      
      (9,931
      )
      
      (337
      )
      
      (10,268
      )Deferred tax assets
      
      2,718
      
      
      436
      
      
      3,154Deferred tax liabilities (see Note 14)
      
      (2,097
      )
      
      (623
      )
      
      (2,720
      )Goodwill (see Note 9)
      
      -
      
      
      1,187
      
      
      1,187Total purchase price
      $
      9,995
      
      $
      9,469
      
      $
      19,464


Pro forma results of operations
  have not been presented because the effect of the MediKredit and FIHRST
  acquisitions, individually and in the aggregate, were not material to the
  Companys consolidated results of operations. During the year ended June 30,
  2010, the Company incurred transaction-related expenditures of $0.4 million
  related to these acquisitions. Such expenditures were recognized in the
  Companys consolidated statements of operations.

**2009
  Acquisitions**

***Net1
  Universal Electronic Technologies (Austria) AG, formerly BGS Smartcard Systems
  AG (Net1 UTA)***

On August 27, 2008, the Company
  acquired 80.1% of the issued share capital of Net1 UTA for a total consideration
  of $101.6 million in cash and the issuance of an aggregate of 40,134 shares of
  Net1 common stock to certain former Net1 UTA shareholders. As described in note
  19, the Company financed the cash portion of the purchase price with the
  proceeds of a short-term bank loan which was repaid in full on October 16, 2008.
  For practical purposes the acquisition date was set as August 31, 2008.

The following table sets forth
  the components of the purchase price for the Net1 UTA acquisition using exchange
  rates applicable as of August 31, 2008:

Cash paid to former Net1 UTA shareholders
      $
      103,51740,134 shares of Net1 common stock valued at $24.46 per share
        issued to certain former Net1 UTA shareholders
      
      982Costs directly related to the acquisition
      
      2,915Total purchase price
      $
      107,414


F-19

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

3. ACQUISITIONS (continued)

**2009 Acquisitions
  (continued)**

***Net1
  Universal Electronic Technologies (Austria) AG, formerly BGS Smartcard Systems
  AG (Net1 UTA) (continued)***

The following table sets
        forth the allocation of the purchase price:Cash and cash equivalents
      $
      6,283Accounts receivable, net
      
      3,218Inventory
      
      740Property, plant and equipment
      
      350Intangible assets (see Note 9)
      
      68,859Trade and other payables
      
      (7,181
      )Other long-term liabilities
      
      (631
      )Deferred tax assets
      
      10,657Deferred tax liabilities (see Note 14)
      
      (17,214
      )Minority interests
      
      (1,838
      )Goodwill (see Note 9)
      
      44,171Total purchase price
      $
      107,414


***RMT
  Systems (Pty) Limited (RMT)***

During the fourth quarter of
  fiscal 2009, the Company acquired all the stock of RMT, a South African private
  company, for a total consideration of $1.4 million in cash. RMT Systems sells
  prepaid electricity in the greater Cape Town area in South Africa. The Company
  intends to integrate this offering into its EasyPay switching offering. The
  balance sheet, statement of operations and cash flows of RMT are not significant
  to the Company.

**2008
  Acquisitions**

None

4. PRE-FUNDED SOCIAL WELFARE GRANTS RECEIVABLE

Pre-funded social welfare grants
  receivable represents amounts pre-funded by the Company to certain merchants
  participating in the merchant acquiring system. The July 2010 payment service
  commenced during the last three days of June 2010 and was offered at merchant
  locations only.

F-20

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

5. ACCOUNTS RECEIVABLE AND FINANCE LOANS RECEIVABLE,
  net

|                                                                                                                           |   |  | 2010   |   |  |  |   |  | 2009   |   | 
|-------------------------------------------------------------------------------------------------------------------------- | - |  | ------ | - |  |  | - |  | ------ | - | 
|Accounts receivable, trade, net                                                                                            | $ |  | 31,593 |   |  |  | $ |  | 31,286 |   | 
|Accounts receivable, trade, gross                                                                                          |   |  | 32,400 |   |  |  |   |  | 31,681 |   | 
|Allowance for doubtful accounts
      receivable, end of year                                                              |   |  | 807    |   |  |  |   |  | 395    |   | 
|Allowance for doubtful accounts
      receivable, beginning of year re-measured at 
               year end rates          |   |  | 407    |   |  |  |   |  | 262    |   | 
|Allowance
      acquired in acquisitions, re-measured at year end rates                                                    |   |  | 75     |   |  |  |   |  | -      |   | 
|Allowance charged to statement
      of operations, re-measured at year end rates                                          |   |  | 640    |   |  |  |   |  | 209    |   | 
|Amount
      utilized, re-measured at year end rates                                                                       |   |  | (315   | ) |  |  |   |  | (76    | ) | 
|                                                                                                                           |   |  |        |   |  |  |   |  |        |   | 
|Prepaid establishment costs related to Grindrod
      opportunity                                                          |   |  | 385    |   |  |  |   |  | 501    |   | 
|Other receivables                                                                                                          |   |  | 9,876  |   |  |  |   |  | 10,688 |   | 
|Total accounts receivable, net                                                                                             | $ |  | 41,854 |   |  |  | $ |  | 42,475 |   | 
|                                                                                                                           |   |  |        |   |  |  |   |  |        |   | 
|Finance loans receivable, net                                                                                              |   |  |        |   |  |  |   |  |        |   | 
|UEPS-based lending                                                                                                         | $ |  | 4,221  |   |  |  | $ |  | 2,560  |   | 
|Traditional microlending 
      net                                                                                       |   |  | -      |   |  |  |   |  | 3      |   | 
|Traditional microlending
       gross                                                                                     |   |  | -      |   |  |  |   |  | 229    |   | 
|Allowance
      for doubtful microlending loans, end of year                                                               |   |  | -      |   |  |  |   |  | 226    |   | 
|Allowance for
      doubtful microlending loans, beginning of year re-measured 
         
               at year end rates |   |  | 234    |   |  |  |   |  | 1,017  |   | 
|Sale
      of traditional microlending business, re-measured at year end rates                                             |   |  | 4      |   |  |  |   |  | (1,259 | ) | 
|Allowances
      charged to the statement of operations, re-measured at year end 
       
                 rates           |   |  | (238   | ) |  |  |   |  | 468    |   | 
|Amounts utilized, re-measured at year end rates                                                                            |   |  | -      |   |  |  |   |  | -      |   | 
|                                                                                                                           |   |  |        |   |  |  |   |  |        |   | 
|Total finance loans receivable, net                                                                                        | $ |  | 4,221  |   |  |  | $ |  | 2,563  |   | 

Receivables from customers
  renting POS equipment from the Company are included in accounts receivable,
  trade, and are stated net of an allowance for certain amounts that the Companys
  management has identified may be unrecoverable. Accounts receivable, trade, also
  includes amounts due by customers from the sale of hardware, software licenses
  and SIM cards and provision of transaction processing services. The allowances
  for credit losses acquired in the MediKredit and FIHRST transactions are
  presented in the tables above, stated at exchange rates prevailing at June 30,
  2010.

The Company has a co-operation
  agreement with Grindrod Bank Limited (Grindrod) for the establishment of a
  retail banking division within Grindrod that will focus on deploying its wage
  payment solution in South Africa. Under the co-operation agreement, the Company
  was required to initially deposited $0.7 million to facilitate the establishment
  of this retail banking decision. The Company opened a bank account with Grindrod
  and transferred the funds and these funds are drawn down as and when required by
  the retail banking division. A portion of these funds have been utilized as of
  June 30, 2010 and 2009, and the remaining portion of these funds is $0.4 million
  and $0.5 million, respectively.

In March 2009, the Company sold
  its traditional microlending business, recognizing a loss on sale of
  approximately $0.7 million. Pursuant to the agreement with the purchaser the
  Company is responsible for the collection of loans granted prior to the sale
  date, and any monies collected in excess of the Finance loans receivable, net
  balance as of the effective sale date, accrue to the Company. In the quarter
  ended June 30, 2009, the Company collected $1.2 million which had previously
  been provided against. Consequently, the loss on sale was revised to a profit on
  sale of $0.5 million.

F-21

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

6. INVENTORY

The Companys inventory comprised
  the following categories as of June 30, 2010 and 2009.

2010
      
      
      2009Raw materials
      $
      75
      
      $
      153Finished goods
      
      3,547
      
      
      7,097$
      3,622
      
      $
      7,250


7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND EQUITY-ACCOUNTED
  INVESTMENTS

**Fair value of financial
  instruments**

***Initial
  recognition and measurement***

Financial instruments are
  recognized when the Company becomes a party to the transaction. Initial
  measurements are at cost, which includes transaction costs subsequent to initial
  recognition. These instruments are measured as set out below:

***Risk
  managemen**t*

The Company seeks to reduce its
  exposure to currencies other than the South African rand through a policy of
  matching, to the extent possible, assets and liabilities denominated in those
  currencies. In addition, the Company uses financial instruments in order to
  economically hedge its exposure to exchange rate and interest rate fluctuations
  arising from its operations. The Company is also exposed to equity price and
  liquidity risks as well as credit risks.

*Currency
  exchange risk*

The Company is subject to
  currency exchange risk because it purchases inventories that it is required to
  settle in other currencies, primarily the euro and US dollar. The Company has
  used forward contracts in order to limit its exposure in these transactions to
  fluctuations in exchange rates between the South African rand, on the one hand,
  and the US dollar and the euro, on the other hand.

The Companys outstanding
  foreign exchange contracts are as follows:

As of June 30, 2010

Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityEUR
      
      207,000
      
      ZAR
      
      10.1107
      
      ZAR
      
      9.4802
      
      July 30, 2010EUR
      
      31,200
      
      ZAR
      
      9.5976
      
      ZAR
      
      9.5080
      
      October 9, 2010


As of June 30, 2009

Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityEUR
      
      241,500
      
      ZAR
      
      13.1515
      
      ZAR
      
      10.9967
      
      August 14, 2009EUR
      
      (241,500)
      
      ZAR
      
      11.3691
      
      ZAR
      
      10.9341
      
      July 17, 2009


F-22

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND EQUITY-ACCOUNTED
  INVESTMENTS (continued)

**Fair value of financial
  instruments (continued)**

***Risk
  management (continued)***

*Translation
  risk*

Translation risk relates to the
  risk that the Companys results of operations will vary significantly as the US
  dollar is its reporting currency, but it earns most of its revenues and incurs
  most of its expenses in ZAR. The US dollar to ZAR exchange rate has fluctuated
  significantly over the past two years. As exchange rates are outside the
  Companys control, there can be no assurance that future fluctuations will not
  adversely affect the Companys results of operations and financial
  condition.

*Interest
  rate risk*

As a result of its normal
  borrowing and leasing activities, the Companys operating results are exposed to
  fluctuations in interest rates, which it manages primarily through regular
  financing activities. The Company generally maintains limited investment in cash
  equivalents and has occasionally invested in marketable securities.

*Credit
  risk*

Credit risk relates to the risk
  of loss that the Company would incur as a result of non-performance by
  counterparties. The Company maintains credit risk policies with regard to its
  counterparties to minimize overall credit risk. These policies include an
  evaluation of a potential counterpartys financial condition, credit rating, and
  other credit criteria and risk mitigation tools as the Companys management
  deems appropriate.

With respect to credit risk on
  financial instruments, the Company maintains a policy of entering into such
  transactions only with South African and European financial institutions that
  have a credit rating of BBB or better, as determined by credit rating agencies
  such as Standard & Poors, Moodys and Fitch Ratings.

*Microlending
  credit risk*

The Company was exposed to credit
  risk in its microlending activities, which provides unsecured short-term loans
  to qualifying customers. The Company manages this risk by assigning each
  prospective customer a creditworthiness score, which takes into account a
  variety of factors such as employment status, salary earned, other debts and
  total expenditures on normal household and lifestyle expenses.

*Equity
  Price and Liquidity Risk*

Equity price risk relates to the
  risk of loss that the Company would incur as a result of the volatility in the
  exchange-traded price of equity securities that it holds and the risk that it
  may not be able to liquidate these securities. On March 1, 2009, the Company
  acquired approximately 22% of the issued share capital of Finbond Group Limited
  (Finbond), which are exchange-traded equity securities. The fair value of
  these securities as of June 30, 2010, represented approximately 2% of the
  Companys total assets, including these securities. The Company expects to hold
  these securities for an extended period of time and it is not concerned with
  short-term equity price volatility with respect to these securities provided
  that the underlying business, economic and management characteristics of the
  company remain sound. The market price of these securities may fluctuate for a
  variety of reasons, consequently, the amount the Company may obtain in a
  subsequent sale of these securities may significantly differ from the reported
  market value.

Liquidity risk relates to the
  risk of loss that the Company would incur as a result of the lack of liquidity
  on the exchange on which these securities are listed. The Company may not be
  able to sell some or all of these securities at one time, or over an extended
  period of time without influencing the exchange traded price, or at all.

F-23

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND EQUITY-ACCOUNTED
  INVESTMENTS (continued)

**Financial
  instruments**

Fair value is defined as the
  price that would be received upon sale of an asset or paid upon transfer of a
  liability in an orderly transaction between market participants at the
  measurement date and in the principal or most advantageous market for that asset
  or liability. The fair value should be calculated based on assumptions that
  market participants would use in pricing the asset or liability, not on
  assumptions specific to the entity. In addition, the fair value of liabilities
  should include consideration of non-performance risk including the Companys own
  credit risk.

Fair value measurements and
  inputs are categorized into a fair value hierarchy which prioritizes the inputs
  into three levels based on the extent to which inputs used in measuring fair
  value are observable in the market. Each fair value measurement is reported in
  one of the three levels which is determined by the lowest level input that is
  significant to the fair value measurement in its entirety.

These levels are:

- Level 1  inputs are based upon unadjusted quoted prices for identical
      instruments traded in active markets.
- Level 2  inputs are based upon quoted prices for similar instruments in
      active markets, quoted prices for identical or similar instruments in markets
      that are not active, and model-based valuation techniques for which all
      significant assumptions are observable in the market or can be corroborated by
      observable market data for substantially the full term of the assets or
      liabilities.
- Level 3  inputs are generally unobservable and typically reflect
      managements estimates of assumptions that market participants would use in
      pricing the asset or liability. The fair values are therefore determined using
      model-based techniques that include option pricing models, discounted cash
      flow models, and similar techniques.

The following section describes
  the valuation methodologies the Company uses to measure financial assets and
  liabilities at fair value.

***Investments
  in common stock***

In general, and where applicable,
  the Company uses quoted prices in active markets for identical assets or
  liabilities to determine fair value. This pricing methodology would apply to
  Level 1 investments. If quoted prices in active markets for identical assets or
  liabilities are not available to determine fair value, then the Company uses
  quoted prices for similar assets and liabilities or inputs other than the quoted
  prices that are observable either directly or indirectly. These investments
  would be included in Level 2 investments. In circumstances in which inputs are
  generally unobservable, values typically reflect managements estimates of
  assumptions that market participants would use in pricing the asset or
  liability. The fair values are therefore determined using model-based techniques
  that include option pricing models, discounted cash flow models, and similar
  techniques. Investments valued using such techniques are included in Level 3
  investments.

The Company's Level 3 asset
  represents an investment of 84,632,525 shares of common stock of Finbond. The
  Companys ownership interest in Finbond as of June 30, 2010, is approximately
  22%. The Company has no rights to participate in the financial, operating, or
  governance decisions made by Finbond. The Company also has no participation on
  Finbonds board of directors whether through contractual agreement or otherwise.
  Consequently, the Company has concluded that it does not have significant
  influence over Finbond and therefore equity accounting is not appropriate.

Finbonds shares are traded on
  the JSE Limited (JSE) and the Company has designated such shares as available
  for sale investments. The Company has concluded that the market for Finbond
  shares is not active and consequently has employed alternative valuation
  techniques in order to determine the fair value of such stock. Currently, the
  operations of Finbond include primarily mortgage brokering services, property
  investment and microlending. In determining the fair value of Finbond, the
  Company has considered amongst other things Finbonds historical financial
  information (including its most recent public accounts), press releases issued
  by Finbond and its published net asset value. The Company believes that the best
  indicator of fair value of Finbond is its published net asset value and has used
  this value to determine the fair value.

F-24

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND EQUITY-ACCOUNTED
  INVESTMENTS (continued)

**Financial instruments
  (continued)**

***Derivative
  transactions - Foreign exchange contracts***

As part of the Companys risk
  management strategy, the Company enters into derivative transactions to mitigate
  exposures to foreign currencies using foreign exchange contracts. These foreign
  exchange contracts are over-the-counter customized derivative transactions.
  Substantially all of the Companys derivative exposures are with counterparties
  that have long-term credit ratings of BBB or better. The Company uses quoted
  prices in active markets for similar assets and liabilities to determine fair
  value. The Company has no derivatives that require fair value measurement under
  level 1 or 3 of the fair value hierarchy.

The following table presents the
  Companys assets and liabilities measured at fair value on a recurring basis as
  of June 30, 2010:

|                                                                                                                    |  | Quoted        |  |   |               |  |   |               |  |   |       | 
|------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | - | ------------- |  | - | ------------- |  | - | ----- | 
|                                                                                                                    |  | Price in      |  |   |               |  |   |               |  |   |       | 
|                                                                                                                    |  | Active        |  |   | Significant   |  |   |               |  |   |       | 
|                                                                                                                    |  | Markets for   |  |   | Other         |  |   | Significant   |  |   |       | 
|                                                                                                                    |  | Identical     |  |   | Observable    |  |   | Unobservable  |  |   |       | 
|                                                                                                                    |  | Assets        |  |   | Inputs        |  |   | Inputs        |  |   |       | 
|                                                                                                                    |  | **(Level 1)** |  |   | **(Level 2)** |  |   | **(Level 3)** |  |   | Total | 
|Assets                                                                                                              |  |               |  |   |               |  |   |               |  |   |       | 
|Investment in common stock 
         (available for sale assets included in 
         OTHER
      LONG-TERM ASSETS) |  | -             |  |   | -             |  | $ | 7,299         |  | $ | 7,299 | 
|Total assets at fair value                                                                                          |  | -             |  |   | -             |  | $ | 7,299         |  | $ | 7,299 | 
|                                                                                                                    |  |               |  |   |               |  |   |               |  |   |       | 
|Liabilities                                                                                                         |  |               |  |   |               |  |   |               |  |   |       | 
|Foreign exchange contracts                                                                                          |  | -             |  | $ | 17            |  |   | -             |  | $ | 17    | 
|Total liabilities at fair
      value                                                                               |  | -             |  | $ | 17            |  |   | -             |  | $ | 17    | 

The following table presents the
  Companys assets and liabilities measured at fair value on a recurring basis as
  of June 30, 2009:

|                                                                                                                    |  | Quoted        |  |   |               |  |   |               |  |   |       | 
|------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | - | ------------- |  | - | ------------- |  | - | ----- | 
|                                                                                                                    |  | Price in      |  |   |               |  |   |               |  |   |       | 
|                                                                                                                    |  | Active        |  |   | Significant   |  |   |               |  |   |       | 
|                                                                                                                    |  | Markets for   |  |   | Other         |  |   | Significant   |  |   |       | 
|                                                                                                                    |  | Identical     |  |   | Observable    |  |   | Unobservable  |  |   |       | 
|                                                                                                                    |  | Assets        |  |   | Inputs        |  |   | Inputs        |  |   |       | 
|                                                                                                                    |  | **(Level 1)** |  |   | **(Level 2)** |  |   | **(Level 3)** |  |   | Total | 
|Assets                                                                                                              |  |               |  |   |               |  |   |               |  |   |       | 
|Investment in common stock 
         (available for sale assets included in 
         OTHER
      LONG-TERM ASSETS) |  | -             |  |   | -             |  | $ | 6,979         |  | $ | 6,979 | 
|Total assets at fair value                                                                                          |  | -             |  |   | -             |  | $ | 6,979         |  | $ | 6,979 | 
|                                                                                                                    |  |               |  |   |               |  |   |               |  |   |       | 
|Liabilities                                                                                                         |  |               |  |   |               |  |   |               |  |   |       | 
|Foreign exchange contracts                                                                                          |  | -             |  | $ | 2             |  |   | -             |  | $ | 2     | 
|Total liabilities at fair
      value                                                                               |  | -             |  | $ | 2             |  |   | -             |  | $ | 2     | 

F-25

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND EQUITY-ACCOUNTED
  INVESTMENTS (continued)

**Financial instruments
  (continued)**

***Trade
  and other receivables***

Trade and other receivables
  originated by the Company are stated at cost less allowance for doubtful debts.
  The fair value of trade and other receivables approximate their carrying value
  due to their short-term nature.

***Trade
  and other payables***

The fair values of trade and other payables approximates their
  carrying amounts, due to their short-term nature.

***Assets
  and liabilities measured at fair value on a nonrecurring basis***

The Company measures its
  equity-accounted investments at fair value on a nonrecurring basis. The Company
  has no liabilities that are measured at fair value on a nonrecurring basis.
  These equity-accounted investments are recognized at fair value when they are
  deemed to be other-than-temporarily impaired.

The Company reviews the carrying
  values of its investments when events and circumstances warrant and considers
  all available evidence in evaluating when declines in fair value are
  other-than-temporary. The fair values of the Companys investments are
  determined using the best information available, and may include quoted market
  prices, market comparables, and discounted cash flow projections. An impairment
  charge is recorded when the cost of the investment exceeds its fair value and
  the excess is determined to be other-than-temporary. The Company has not
  recorded any impairment charges during the reporting periods presented herein.

The Company owns 50% of the
  ordinary shares in, and loans extended to, each of SmartSwitch Namibia
  (Proprietary) Limited (SmartSwitch Namibia) and SmartSwitch Botswana
  (Proprietary) Limited (SmartSwitch Botswana). The Company has determined that
  each of these entities is a VIE, as the loan to the entity represents a variable
  interest but that in each case, the Company is not the primary beneficiary.
  Therefore, the Company has not consolidated these entities and has accounted for
  these investments using the equity method. The interest earned by the Company on
  the loans to each of the entities has been eliminated. The Company also owns a
  30% interest in the issued and outstanding ordinary share capital of Vietnam
  Payment Technologies Joint Stock Company (VinaPay) and a 37.50% interest in
  the issued and outstanding ordinary share capital of VTU De Colombia S.A. (VTU
  Colombia). In February 2010, the Companys investment in VTU Colombia was
  diluted from 50% to 37.50% due to the admission of a new independent
  shareholder. The funds received from this shareholder by VTU Colombia were used
  to fund its continuing operations.

The Company has sold hardware,
  software and/or licenses to SmartSwitch Namibia and SmartSwitch Botswana and
  defers recognition of 50% of the net income after tax related to these sales
  until SmartSwitch Namibia and SmartSwitch Botswana has used the purchased asset
  or has sold it to a third party. The deferral of the net income after tax is
  shown in the Elimination column in the table below.

The functional currency of the
  Companys equity-accounted investments is not the US dollar and thus the
  investments are restated at the period end US dollar/foreign currency exchange
  rate with an entry against accumulated other comprehensive loss. The functional
  currency of SmartSwitch Namibia is the Namibian dollar, the functional currency
  of SmartSwitch Botswana is the Botswana pula, the functional currency of VTU
  Colombia is the Colombian peso and the functional currency of VinaPay is the
  Vietnamese dong.

F-26

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND EQUITY-ACCOUNTED
  INVESTMENTS (continued)

**Financial instruments
  (continued)**

***Assets
  and liabilities measured at fair value on a nonrecurring basis***

Summarized below is the Companys
  interest in equity-accounted investments as of June 30, 2010 and 2009:

|                                                  |   |        |  |   |       |  |   | Earnings |   |   |             |   |  |   |       |  
|------------------------------------------------- | - | ------ |  | - | ----- |  | - | -------- | - | - | ----------- | - |  | - | ----- | -
|                                                  |   | Equity |  |   | Loans |  |   | (Loss)   |   |   | Elimination |   |  |   | Total |  
|Balance as of June 30, 2009                       | $ | 3,467  |  | $ | 2,468 |  | $ | (3,451   | ) | $ | 99          |   |  | $ | 2,583 |  
|(Loss) Earnings from equity-accounted investments |   | -      |  |   | -     |  |   | (271     | ) |   | 364         |   |  |   | 93    |  
|SmartSwitch Namibia(1)                            |   | -      |  |   | -     |  |   | 40       |   |   | 120         |   |  |   | 160   |  
|SmartSwitch Botswana(1)                           |   | -      |  |   | -     |  |   | (194     | ) |   | 244         |   |  |   | 50    |  
|VTU Colombia(1)                                   |   | -      |  |   | -     |  |   | 24       |   |   | -           |   |  |   | 24    |  
|VinaPay(1)                                        |   | -      |  |   | -     |  |   | (141     | ) |   | -           |   |  |   | (141  | )
|Foreign currency adjustment(2)                    |   | 82     |  |   | 44    |  |   | (183     | ) |   | (21         | ) |  |   | (78   | )
|Balance as of June 30, 2010                       | $ | 3,549  |  | $ | 2,512 |  | $ | (3,905   | ) | $ | 442         |   |  | $ | 2,598 |  

(1)  includes the recognition of realized net income.
  (2) 
  the foreign currency adjustment represents the effects of the combined net
  currency fluctuations between the functional currency of the equity-accounted
  investments and the US dollar.

|                                                                   |   |        |  |   |       |   |   | Earnings |   |   |             |   |  |   |       |  
|------------------------------------------------------------------ | - | ------ |  | - | ----- | - | - | -------- | - | - | ----------- | - |  | - | ----- | -
|                                                                   |   | Equity |  |   | Loans |   |   | (Loss)   |   |   | Elimination |   |  |   | Total |  
|Balance as of June 30, 2008                                        | $ | 1,984  |  | $ | 3,312 |   | $ | (2,295   | ) | $ | (316        | ) |  | $ | 2,685 |  
|Share capital acquired/ loans extended                             |   | 1,423  |  |   | (673  | ) |   | -        |   |   | -           |   |  |   | 750   |  
|Share capital acquired 
      VinaPay                             |   | 300    |  |   | -     |   |   | -        |   |   | -           |   |  |   | 300   |  
|Share capital acquired and loans 
         extended  VTU Colombia |   | 300    |  |   | 150   |   |   | -        |   |   | -           |   |  |   | 450   |  
|Loan converted to equity  
         SmartSwitch Namibia           |   | 823    |  |   | (823  | ) |   | -        |   |   | -           |   |  |   | -     |  
|(Loss) Earnings from equity- accounted investments                 |   | -      |  |   | -     |   |   | (1,267   | ) |   | 393         |   |  |   | (874  | )
|SmartSwitch Namibia(1)                                             |   | -      |  |   | -     |   |   | (155     | ) |   | 160         |   |  |   | 5     |  
|SmartSwitch Botswana(1)                                            |   | -      |  |   | -     |   |   | (342     | ) |   | 233         |   |  |   | (109  | )
|VTU Colombia(1)                                                    |   | -      |  |   | -     |   |   | (634     | ) |   | -           |   |  |   | (634  | )
|VinaPay(1)                                                         |   | -      |  |   | -     |   |   | (136     | ) |   | -           |   |  |   | (136  | )
|Foreign currency adjustment(2)                                     |   | 60     |  |   | (171  | ) |   | 111      |   |   | 22          |   |  |   | 22    |  
|Balance as of June 30, 2009                                        | $ | 3,467  |  | $ | 2,468 |   | $ | (3,451   | ) | $ | 99          |   |  | $ | 2,583 |  

(1)  includes the recognition of realized net income.
  (2) 
  the foreign currency adjustment represents the effects of the combined net
  currency fluctuations between the functional currency of the equity-accounted
  investments and the US dollar.

F-27

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

8. PROPERTY, PLANT AND EQUIPMENT, net

2010
      
      
      2009Cost:Computer equipment
      $
      25,528
      
      $
      19,495Furniture and office equipment
      
      6,822
      
      
      5,912Motor vehicles
      
      7,541
      
      
      7,943Plant and equipment
      
      2,666
      
      
      2,19542,557
      
      
      35,545Accumulated depreciation:Computer equipment
      
      21,482
      
      
      15,473Furniture and office equipment
      
      5013
      
      
      3,651Motor vehicles
      
      6,632
      
      
      7,070Plant and equipment
      
      2,144
      
      
      1,97535,271
      
      
      28,169Carrying amount:Computer equipment
      
      4,046
      
      
      4,022Furniture and office equipment
      
      1,809
      
      
      2,261Motor vehicles
      
      909
      
      
      873Plant and equipment
      
      522
      
      
      220$
      7,286
      
      $
      7,376


9. GOODWILL AND INTANGIBLE
  ASSETS, net

Goodwill

Summarized below is the movement
  in the carrying value of goodwill for the years ended June 30, 2010 and 2009:

CarryingvalueBalance as of July 1, 2008
      $
      76,938Acquisition of Net1 UTA as of August 31, 2008
      
      44,171Net1 UTA deferred tax assets
        recognized on acquisition not used during the year
      
      720Impairment of goodwill
      
      (1,836
      )Financial services segment -
        sale of traditional microlending business
      
      (1,759
      )Foreign currency adjustment (1)
      
      (2,037
      )Balance as of June 30, 2009
      
      116,197Acquisitions(2)
      
      1,187Impairment of goodwill
      
      (37,378
      )Foreign currency adjustment (1)
      
      (3,660
      )Balance as of June 30, 2010
      $
      76,346


(1)  the foreign currency
  adjustment represents the effects of the fluctuations between the South African
  rand and the euro, and the US dollar on the carrying
  value.
       (2)  represents goodwill arising from
  the acquisition of FIHRST and has been translated at the foreign exchange rates
  applicable on the date the transactions became effective.

Goodwill associated with the
  acquisitions of Net1 UTA and FIHRST represents the excess of cost over the fair
  value of acquired net assets. A portion of the goodwill related to the
  acquisition of Net1 UTA is tax deductible. See note 3 for the allocation of the
  purchase price to the fair value of acquired net assets. The goodwill associated
  with the acquisition of FIHRST was allocated to the transaction-based activities
  segment on March 31, 2010 and the goodwill associated with the acquisition of
  Net1 UTA was allocated to the Companys hardware, software and related
  technology sales segment on August 31, 2008 (see note 3).

F-28

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

9. GOODWILL AND INTANGIBLE ASSETS, net (continued)

Goodwill (continued)

As part of the acquisition of
  Net1 UTA the Company recorded a deferred tax asset related to a license right
  for Austrian tax purposes (see note 14). Subsequent to completion of the
  allocation of the purchase price, the Company determined that approximately $0.7
  million of this deferred tax asset would not be realized and recorded an
  adjustment against goodwill.

The Company assesses the carrying
  value of goodwill for impairment annually, or more frequently, whenever events
  occur and circumstances change indicating potential impairment. The Company
  performs its annual impairment test as at June 30 of each year. During the year
  ended June 30, 2010, the Company recognized an impairment loss of approximately
  $37.4 million related to goodwill allocated to its Hardware, software and
  related technology sales segment as a result of deteriorating trading conditions
  of this segment, particularly at Net1 UTA, and uncertainty surrounding contract
  finalization dates which will impact future cash flows. With regards to the
  latter, through the end of the third quarter of the year ended June 30, 2010,
  the Company expected to sign its first agreement that reflects the transformed
  business model for Net1 UTA during the fourth quarter of the year ended June 30,
  2010. However towards the end of the year, it became clear to the Company that
  this project had been delayed due to key executive management changes at the
  Companys target customer.

In order to determine the amount
  of goodwill impairment, the estimated fair value of the Hardware, software and
  related technology sales segment was allocated to the individual fair value of
  the assets and liabilities of the segment as if the segment had been acquired in
  a business combination, which resulted in the implied fair value of the
  goodwill. The allocation of the fair value required the Company to make a number
  of assumptions and estimates about the fair value of assets and liabilities
  where the fair values were not readily available or observable.

A further deterioration in the
  Hardware, software and related technology sales segment, or in any other of the
  Companys businesses, may lead to additional impairments in future periods.

During the year ended June 30,
  2009, the Company recognized an impairment loss of approximately $1.8 million
  on goodwill allocated to the Financial services segment as a result of the deteriorating
  trading conditions of this segment, the Companys managements strategic
  decision not to grow this business and the offer received for the traditional
  microlending business in January 2009. On March 1, 2009, the Company sold all
  traditional microfinance loans receivables and goodwill and received shares
  in Finbond as consideration.

Goodwill has been allocated to
  the Companys reportable segments as follows:

2010
      
      
      2009Transaction-based activities
      $
      37,568
      
      $
      35,362Smart card accounts
      
      -
      
      
      -Financial services
      
      -
      
      
      -Hardware, software and related technology sales
      
      38,778
      
      
      80,835Total
      $
      76,346
      
      $
      116,197


F-29

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

9. GOODWILL AND INTANGIBLE ASSETS, net (continued)

**Intangible assets,
  net**

Summarized below is the fair
  value of intangible assets acquired, translated at the exchange rate applicable
  as of the relevant acquisition dates, and the weighted-average amortization
  period:

Weighted-Fair value
      
      
      Averageas of
      
      
      Amortizationacquisition
      
      
      period (indate
      
      
      years)Finite-lived intangible asset:FIHRST customer relationships
      $
      1,804
      
      
      10Net1 UTA customer relationships
      
      68,859
      
      
      7FIHRST software and unpatented
        technology
      
      6,179
      
      
      3MediKredit software and unpatented technology
      
      5,249
      
      
      3MediKredit customer database
      $
      821
      
      
      3


The Company recognized a deferred
  tax asset of approximately $0.4 million related to the acquisition of the FIHRST
  software and a deferred tax liability of approximately $2.7 million related to
  the MediKredit and the remaining FIHRST intangible assets.

Summarized below is the carrying value and accumulated
  amortization of intangible assets as of June 30, 2010 and 2009:

|                                                      |   | As of June 30, 2010 |  |   | As of June 30, 2009 |  
|----------------------------------------------------- | - | ------------------- |  | - | ------------------- | -
|                                                      |   | Gross               |  |   |                     |  
|                                                      |   | carrying            |  |   | Accumulated         |  
|                                                      |   | value               |  |   | amortization        |  
|Finite-lived intangible assets:                       |   |                     |  |   |                     |  
|Customer
      relationships(1)                       | $ | 77,452              |  | $ | (22,519             | )
|Software and unpatented 
               technology(1) |   | 11,047              |  |   | (1,343              | )
|FTS patent                                            |   | 5,007               |  |   | (4,880              | )
|Exclusive licenses                                    |   | 4,506               |  |   | (3,941              | )
|Trademarks                                            |   | 3,766               |  |   | (1,411              | )
|Customer database                                     |   | 795                 |  |   | (132                | )
|Total finite-lived intangible assets                  | $ | 102,573             |  | $ | (34,226             | )

(1) Includes the customer relationships and software and
  unpatented technology acquired as part of the MediKredit and FIHRST
  acquisitions.

Amortization expense charged for
  the years to June 30, 2010, 2009 and 2008 was $15.2 million, $13.4 million, and
  $6.7 million, respectively.

Future estimated annual
  amortization expense for the next five fiscal years, assuming exchange rates
  prevailing on June 30, 2010, is presented in the table below. Actual
  amortization expense in future periods could differ from this estimate as a
  result of acquisitions, changes in useful lives, exchange rate fluctuations and
  other relevant factors.

2011
      $
      14,3352012
      
      13,7722013
      
      12,2962014
      
      9,8252015
      $
      9,825


F-30

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

10. OTHER PAYABLES2010
      
      
      2009Participating merchants settlement
        obligation
      $
      19,200
      
      $
      23,368Payroll-related payables
      
      1,446
      
      
      1,300Accruals
      
      7,378
      
      
      4,985Value-added tax payable
      
      2,160
      
      
      2,027Other
      
      8,772
      
      
      17,958Provisions
      
      11,899
      
      
      11,816$
      50,855
      
      $
      61,454


11. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B
  CLASS LOANS

The Companys balance sheet as of
  June 30, 2010 and 2009, respectively, reflects one class of equity, namely
  common stock. From fiscal 2004 to fiscal 2008 the Companys balance sheet
  reflected two classes of equity - common stock and linked units. The linked
  units were created in June 2004 in connection with the acquisition of Net 1
  Applied Technology Holdings Limited (Aplitec). Effective October 2008, the
  linked units (which included a right to Net1 special convertible preferred stock
  as well as B Class preference shares and B Class loans of a Net1 subsidiary)
  were all converted to common stock as a result of the listing of Net1s common
  stock on the JSE and the linked units no longer exist.

**Common stock**

Holders of shares of Net1s
  common stock are entitled to receive dividends and other distributions when
  declared by Net1s board of directors out of funds available. Payment of
  dividends and distributions is subject to certain restrictions under the Florida
  Business Corporation Act, including the requirement that after making any
  distribution Net1 must be able to meet its debts as they become due in the usual
  course of its business.

Upon voluntary or involuntary
  liquidation, dissolution or winding up of Net1, holders of common stock share
  ratably in the assets remaining after payments to creditors and provision for
  the preference of any preferred stock according to its terms. There are no
  pre-emptive or other subscription rights, conversion rights or redemption or
  scheduled installment payment provisions relating to shares of common stock. All
  of the outstanding shares of common stock are fully paid and non-assessable.

Each holder of common stock is
  entitled to one vote per share for the election of directors and for all other
  matters to be voted on by shareholders. Holders of common stock may not cumulate
  their votes in the election of directors, and are entitled to share equally and
  ratably in the dividends that may be declared by the board of directors, but
  only after payment of dividends required to be paid on outstanding shares of
  preferred stock according to its terms. The shares of Net1 common stock are not
  subject to redemption.

**Common stock
  repurchases**

On July 28, 2009, the Company
  repurchased an aggregate of 9,221,526 shares of its common stock from two
  shareholders, who originally acquired their shares in connection with the
  Aplitec transaction. The purchase price was $13.50 (ZAR 105.98) per share and
  was paid from the Companys cash reserves in ZAR for an aggregate purchase price
  of $124.5 million (ZAR 977.3 million).

In February 2010 and in May 2010,
  the Companys Board of Directors authorized the repurchase of up to $50 million
  of the Company's common stock, for a total of $100 million. The authorization
  does not have an expiration date.

The share repurchase
  authorization will be used at managements discretion, subject to limitations
  imposed by SEC Rule 10b-18 and other legal requirements and subject to price and
  other internal limitations established by the Board. Repurchases will be funded
  from the Companys available cash. Share repurchases may be made through open
  market purchases, privately negotiated transactions, or both. There can be no
  assurance that the Company will purchase any shares or any particular number of
  shares.

F-31

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

11. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B
  CLASS LOANS (continued)

**Common stock repurchases
  (continued)**

The authorization may be
  suspended, terminated or modified at any time for any reason, including market
  conditions, the cost of repurchasing shares, liquidity and other factors that
  management deems appropriate. The Company did not repurchase any of its shares
  during the year ended June 30, 2010 under this authorization.

In November 2008, the Companys
  board approved the repurchase of up to $50 million of common stock. The Company
  repurchased 3,621,247 shares during the year ended June 30, 2009, for
  approximately $40.7 million.

In May 2007, the Companys board
  approved the repurchase of up to $50 million of common stock at any time and
  from time to time through June 30, 2008. The Company did not repurchase any of
  its shares during the year ended June 30, 2008.

**Linked units**

The equity instruments described
  below relate to the linked units which were converted to common stock in October
  2008. The linked units comprised the following instruments which were linked and
  could not be traded separately:

- a right to special convertible preferred stock,
- B Class preference shares in Net1 Applied Technologies South Africa Limited
      (New Aplitec), and
- B Class loans issued by New Aplitec.

Although the linked units
  included certain instruments (the B Class preference shares and the B Class
  loans) that were legally equity of a subsidiary of Net1, they were treated as
  equity of Net1 until October 2008 and recorded as part of shareholders equity
  in the Companys consolidated financial statements, in recognition of their
  substance, which was economically equivalent to that of common stock.

The B Class loans referred to
  above were not considered to be a liability as New Aplitec did not have an
  obligation to transfer assets to its shareholders in respect of the loans. In
  addition, any distributions relating to the loans were solely at the discretion
  of New Aplitec.

Voting rightsHolders of shares of special convertible preferred stock had the same voting
  rights as holders of common stock. Therefore, a linked unit-holder was able to
  vote on the same matters as a holder of common stock, including the selection of
  directors, corporate decisions submitted to shareholder vote, and decisions
  regarding distribution of earnings. In addition, the special convertible
  preferred stock did not provide any additional rights with respect to control of
  Net1 not shared by holders of common stock.

***Dividend rights***Holders of common stock and linked units had similar rights to
  the distribution of Net1s earnings.

Liquidation rightsIn the event of a liquidation of Net1 or New Aplitec, the
  linked units would have been automatically convertible into common stock of
  Net1, thereby allowing a linked unit holder to have identical liquidation rights
  to a holder of common stock in the event of liquidation.

Sale rightsA linked unit holder could only dispose of its interest in Net1 by 1)
  converting the linked units into common stock and 2) selling the common stock on
  the open market. Therefore, a holder of the linked units received the same risk
  and rewards in market price fluctuation as a common stockholder of Net1.

F-32

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

11. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B
  CLASS LOANS (continued)

**Linked units
  (continued)**

*Special
  convertible preferred stock*

The special convertible preferred
  stock ranked, on parity, without preference and priority, with Net1s common
  stock with respect to dividend rights (except as described below) or rights upon
  liquidation, dissolution or winding-up of Net1. The special convertible
  preferred stock was junior in preference and priority to each other class or
  series of preferred stock or other equity security of Net1 under terms which may
  have been determined by the board of directors to expressly provide that such
  other security rank senior in preference or priority to the special convertible
  preferred stock with respect to dividend rights or rights upon liquidation,
  dissolution or winding-up of Net1.

So long as any shares of special
  convertible preferred stock were outstanding, Net1s board was required to
  determine immediately prior to the declaration of any dividend or distribution
  (i) the portion, if any, of Net1s assets available for such dividend of
  distribution that was attributable to funds or assets from New Aplitec,
  regardless of the manner received (the South African Amount) and (ii) the
  portion of such funds or assets that was not from New Aplitec (the Non-South
  African Amount). The South African Amount would not include amounts received
  from New Aplitec due to its liquidation, distribution or dividend after
  insolvency or winding up.

So long as any shares of special
  convertible preferred stock were outstanding, (i) any dividends or distributions
  by Net1s board of Non-South African Amounts would have to be paid pro ratato all holders of common stock and special convertible preferred stock and
  (ii) and dividends or distributions by Net1s board of South African Amounts
  could be paid only to holders of common stock. Net1s board had complete
  discretion to declare a dividend or distribution with respect to South African
  Amounts or Non-South African Amounts.

So long as any shares of special
  convertible preferred stock were outstanding, (i) any dividends or distributions
  by Net1s board of Non-South African Amounts would have to be paid pro ratato all holders of common stock and special convertible preferred stock and
  (ii) and dividends or distributions by Net1s board of South African Amounts
  could be paid only to holders of common stock. Net1s board had complete
  discretion to declare a dividend or distribution with respect to South African
  Amounts or Non-South African Amounts.

In the event of the voluntary or
  involuntary liquidation, dissolution, distribution of assets or winding-up of
  Net1, all outstanding shares of special convertible preferred stock would
  automatically convert and holders of such stock will be entitled to receive pari passuwith holders of common stock, any assets of Net1 distributed
  for the benefit of its shareholders.

Holders of special convertible
  preferred stock had the right to receive notice of, attend, speak and vote at
  meetings of Net1s shareholders, and were entitled to vote on all matters on
  which holders of common stock are entitled to vote. Each holder of special
  convertible preferred stock present in person, or the person representing such
  holder, was entitled to a number of votes equal to the number of shares of
  common stock that would be have been issued upon conversion of the special
  convertible preferred stock held by such holder on the record date.

*B
  class preference shares*

Net1 owns 100% of the A class
  common stock in issue of New Aplitec. In addition, until October 2008, Net1
  owned 100% of the A class loans in issue of New Aplitec. The B class preference
  shares and A class loans were repaid in October 2008. The B class preference
  shares ranked pari passuwith the New Aplitec A class stock in respect of
  participation in dividends and return of capital prior to winding-up of New
  Aplitec. The B class preference shares would not, however, participate in
  dividends or a return of capital on a winding-up of New Aplitec for any reason.
  However, the unit holders would have participated, as the B class preference
  stock would have automatically converted into Company common stock on a
  winding-up of New Aplitec. The B class preference shares could not be sold or
  transferred other than to Net1 pursuant to the occurrence of a trigger event.
  Therefore, the B class preference shares, the B class loans and the rights to
  receive Company special convertible preferred stock are linked together and
  cannot be traded separately.

F-33

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

11. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B
  CLASS LOANS (continued)

**Linked units
  (continued)**

*B
  class preference shares (continued)*

The holders of B class preference
  shares would have only been entitled to vote on matters which directly affect
  the rights attaching to the B class preference shares. At every general meeting
  of New Aplitec at which more than one class of shareholders were present and
  entitled to vote, unit holders of the South African Trust which in turn held the
  B class preference shares, would have been entitled, upon a poll, to that
  proportion of the total votes in New Aplitec which the aggregate number of B
  class preference shares held bore to the aggregate number of all shares entitled
  to be voted at such meeting (provided that no resolution for the declaration of
  a dividend or for the disposal of any intellectual property of New Aplitec would
  be passed unless unit holders representing 50.1% of the B class preference
  shares present at the meeting in person or represented by proxy vote in favor of
  such resolution).

*B
  class loans*

The B class loans were unsecured
  and repayable as and when directed by the board of directors of New Aplitec
  provided that no capital may be repaid until at least 30 days have lapsed from
  the date of drawdown of the loans, and subject to South African Exchange Control
  approval. The B class loans were repaid in October 2008. The loans bore interest
  at such rates as may have been determined by the board of directors of New
  Aplitec at the beginning of each year, but could not be more than the prime rate
  as quoted by Standard Bank of South Africa Limited from time to time. Interest,
  if so declared by the board of directors of New Aplitec, would be payable by New
  Aplitec semi-annually in arrears.

*Conversion
  of special convertible preferred stock to common stock*

Special convertible preferred
  stock were convertible into shares of common stock on a one-for-one basis upon
  the occurrence of a trigger event. With each converted share of special
  convertible preferred stock that is converted, Net1 received:

- 7.368421056 B class preference shares; and
- such holders interest in the New Aplitec B loan accounts.

Upon conversion, all rights with
  respect to shares for special convertible preferred stock ceased. Converted
  shares were cancelled and had the status of authorized but unissued preferred
  stock, without designation as to series until such shares are once more
  designated as part of a particular series by the board of directors.

During the year ended June 30,
  2009, 4,882,429 shares of special convertible preferred stock were converted to
  common stock. The trigger event that gave rise to these conversions was the
  listing on the JSE Limited and requests by linked unit-holders to sell and/or
  convert 35,975,818 linked units during the year ended June 30, 2009. The net
  result of these conversions was that 35,975,818 B class preference shares and B
  class loans were ceded to Net1 during the year ended June 30, 2009, which
  converted 4,882,429 shares of special convertible preferred stock to 4,882,429
  shares of common stock in return for the ownership of 35,975,818 B class
  preference shares and B class loans. As a result of the conversion, the number
  of outstanding shares of common stock has increased by 4,882,429 and the number
  of outstanding shares of special convertible preferred stock has decreased by
  4,882,429. In addition, as a result of the conversion, Net1 owned all of the
  236,977,187 B class preference shares and B class loans.

On October 16, 2008, New Aplitec
  repaid the A and B class loans to Net1 and acquired the B class preference
  shares from Net1 for a total of approximately $84.7 million (ZAR 847.4 million
  at the negotiated $:ZAR exchange rate on October 16, 2008). As a result, as of
  October 16, 2008, the only class of shares that New Aplitec has in issue are the
  A class ordinary shares, all of which are owned by Net1.

F-34

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

11. CAPITAL STRUCTURE AND CREDITOR RIGHTS ATTACHED TO THE B
  CLASS LOANS (continued)

**Linked units
  (continued)**

*Conversion of special
  convertible preferred stock to common stock (continued)*

During the year ended June 30,
  2008, 773,681 shares of special convertible preferred stock were converted to
  common stock. The trigger events that gave rise to these conversions were
  requests by linked unit-holders to sell and/or convert 5,700,807 linked units
  during year ended June 30, 2008. The net result of these conversions was that
  5,700,807 B class preference shares and B class loans were ceded to Net1 during
  the year ended June 30, 2008, which converted 773,681 shares of special
  convertible preferred stock to 773,681 common stock in return for the ownership
  of the 5,700,807 B class preferred shares and B class loans. As a result of the
  conversion, the number of outstanding shares of common stock has increased by
  773,681 and the number of outstanding shares of special convertible preferred
  stock has decreased by 773,681. In addition, as a consequence of the conversion,
  at June 30, 2008, Net1 owned 201,001,369 B class preferred shares and B class
  loans. The reduction in the B class preference shares from $0.007 million to
  $0.006 million is due to the cession to Net1 of the B class preference shares as
  a result of the trigger events.

12. REVENUE

2010
      
      
      2009
      
      
      2008Sale of goods  comprising mainly hardware
        and software sales
      $
      36,228
      
      $
      47,003
      
      $
      39,021Loan-based interest and fees received
      
      4,214
      
      
      5,659
      
      
      8,585Services rendered  comprising mainly fees
        and commissions and contract variation fees
      
      239,922
      
      
      194,160
      
      
      206,450$
      280,364
      
      $
      246,822
      
      $
      254,056


During the years ended June 30,
  2010 and 2009, the Company did not recognize any revenue using the percentage of
  completion method.

System implementation revenue,
  arising from the contract with the Central Bank of Ghana, amounted to $14.2
  million for the year ended June 30, 2008. System implementation revenue is
  recognized using the percentage of completion method. Sale of goods  comprising
  mainly hardware and software sales for the year ended June 30, 2008, includes
  approximately $7.2 million related to hardware sales. Services rendered 
  comprising mainly fees and commissions and contract variation fees for the year
  ended June 30, 2008, includes approximately $7.0 million related to services
  rendered which is primarily software customization services performed.

13. STOCK-BASED COMPENSATION

**Amended and Restated 2004
  Stock Incentive Plan**

The Companys Amended and
  Restated 2004 Stock Incentive Plan (the Plan) has been approved by its
  shareholders. No evergreen provisions are included in the Plan. This means that
  the maximum number of shares issuable under the Plan is fixed and cannot be
  increased without shareholder approval, the plan expires by its terms upon a
  specified date, and no new stock options are awarded automatically upon exercise
  of an outstanding stock option. Shareholder approval is required for the
  repricing of awards or the implementation of any award exchange program. The
  Plan permits Net1 to grant to its employees, directors and consultants incentive
  stock options, nonqualified stock options, stock appreciation rights, restricted
  stock, performance-based awards and other awards based on its common stock. The
  Remuneration Committee of the Companys board of directors administers the
  Plan.

F-35

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

13. STOCK-BASED COMPENSATION (continued)

**Amended and Restated 2004
  Stock Incentive Plan (continued)**

On November 25, 2009, the
  Companys shareholders approved an increase in the number of shares of common
  stock that may be issued under the plan by 2,800,000 shares. The adjusted total
  number of shares of common stock issuable under the Plan is 8,552,580. The
  maximum number of shares for which awards, other than performance-based awards,
  may be granted in any combination during a calendar year to any participant is
  569,120. The maximum limits on performance-based awards that any participant may
  be granted during a calendar year are 569,120 shares subject to stock option
  awards and $20 million with respect to awards other than stock options. Shares
  that are subject to awards which terminate or lapse without the payment of
  consideration may be granted again under the Plan. Shares delivered to the
  Company as part or full payment for the exercise of an option or to satisfy
  withholding obligations upon the exercise of an option may be granted again
  under the Plan in the Remuneration Committees discretion. No awards may be
  granted under the Plan after June 7, 2019, but awards granted on or before such
  date may extend to later dates.

***Options***

*General
  Terms of Awards*

Option awards are generally
  granted with an exercise price equal to the market price of the Company's stock
  at the date of grant, with vesting conditioned upon the recipients continuous
  service through the applicable vesting date and expire 10 years after the date
  of grant. The options generally become exercisable in accordance with a vesting
  schedule ratably over a period of five years from the date of grant. The Company
  issues new shares to satisfy stock option award exercises but may also use
  treasury shares.

*Valuation
  Assumptions*

The fair value of each option is
  estimated on the date of grant using the Cox Ross Rubinstein binomial model that
  uses the assumptions noted in the following table. The estimated expected
  volatility is calculated based on the volatilities of similar listed companies
  within the payment processing industry. The Company has estimated an annual
  forfeiture rate of 7.50% based on historic employee behavior under similar
  awards granted pursuant to the Plan. No stock options were granted during the
  years ended June 30, 2010 and 2008. The table below presents the range of
  assumptions used to value options granted during the years ended June 30,
  2009:

2009Expected volatility
      
      30  45%Expected dividends
      
      0%Expected life (in years)
      
      2  6Risk-free rate
      
      2.0  4.5%


***Restricted
  Stock***

*General
  Terms of Awards*

Shares of restricted stock are
  considered to be non-vested equity shares. Restricted stock generally vests
  ratably over a three year period, with vesting conditioned upon the recipients
  continuous service through the applicable vesting date and under certain
  circumstances, the achievement of certain performance targets, as described
  below.

Restricted stock awarded to
  non-employee directors of the Company vests ratably over a three year period. In
  addition, until 11 months after the restricted stock become vested and
  nonforfeitable, the shares may not be sold, assigned, transferred, pledged,
  hypothecated, exchanged, or disposed of in any way (whether by operation of law
  or otherwise). If a recipient ceases to be a member of the Board of Directors
  for any reason, all shares of his restricted stock that are not then vested and
  nonforfeitable will be immediately forfeited and transferred to the Company for
  no consideration.

The Company issues new shares to
  satisfy restricted stock awards.

F-36

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

13. STOCK-BASED COMPENSATION (continued)

***Restricted
  Stock (continued)***

*Valuation
  Assumptions*

The fair value of restricted
  stock is based on the closing price of the Companys stock quoted on The Nasdaq
  Global Select Market on the date of grant.

*Performance
  Conditions - Restricted Stock Granted in August 2007*

In August 2007, the Remuneration
  Committee of the Board of Directors of the Company approved an award of 591,500
  shares of restricted stock to executive officers and other employees of the
  Company.

The awards provide for vesting of
  one-third of the award shares on each of September 1, 2009, 2010 and 2011,
  conditioned upon each recipients continuous service through the applicable
  vesting date and the Company achieving the financial performance target for that
  vesting date. Specifically, the financial performance targets were a 20%
  increase, compounded annually, in fundamental diluted earnings per share
  (expressed in South African rand) (Fundamental EPS) above Fundamental EPS for
  the fiscal year ended June 30, 2007. For award shares vesting prior to September
  1, 2009, the annual required increase in the case of Dr. Belamant and Mr. Kotze
  was 25% rather than 20%. On November 5, 2009, the Companys board of directors,
  on the recommendation of the Remuneration Committee, determined that the annual
  required target for Dr. Belamant and Mr. Kotze be 20%, effective immediately, to
  be consistent with the terms of the restricted stock awards granted to other
  employees. There were no other amendments to the terms of the restricted stock
  awards. For the purpose of the restricted stock granted in August 2007,
  Fundamental EPS is calculated by adjusting GAAP diluted earnings per share (as
  reflected in the Companys audited consolidated financial statements) to exclude
  the effects related to the amortization of intangible assets, stock-based
  compensation charges, one-time, large, unusual expenses as determined at the
  discretion of the Remuneration Committee, and assuming a constant tax rate of
  30%. If Fundamental EPS for the specified fiscal year does not equal or exceed
  the Fundamental EPS target for such year, no award shares will become vested or
  nonforfeitable on the corresponding vesting date but are available to become
  vested and nonforfeitable as of a subsequent vesting date if the Fundamental EPS
  target for a subsequent fiscal year is met; provided that the recipients
  service continues through such subsequent vesting date. Any outstanding award
  shares that have not become vested and nonforfeitable as of September 1, 2011,
  will be forfeited by the recipient on September 1, 2011 and transferred to the
  Company for no consideration.

***Stock
  Appreciation Rights***

The Remuneration Committee also
  may grant stock appreciation rights, either singly or in tandem with underlying
  stock options. Stock appreciation rights entitle the holder upon exercise to
  receive an amount in any combination of cash or shares of common stock (as
  determined by the Remuneration Committee) equal in value to the excess of the
  fair market value of the shares covered by the right over the grant price. No
  stock appreciation rights have been granted.

F-37

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

13. STOCK-BASED COMPENSATION (continued)

**Stock option and
  restricted stock activity**

***Options***

The following table summarizes stock option activity for the
  years ended June 30, 2010, 2009 and 2008:

|                                 |  |           |   |   |          |  |  | Weighted    |  |  |             |  |   | Weighted    | 
|-------------------------------- |  | --------- | - | - | -------- |  |  | ----------- |  |  | ----------- |  | - | ----------- | 
|                                 |  |           |   |   |          |  |  | Average     |  |  |             |  |   | Average     | 
|                                 |  |           |   |   | Weighted |  |  | Remaining   |  |  | Aggregate   |  |   | Grant       | 
|                                 |  |           |   |   | average  |  |  | Contractual |  |  | Intrinsic   |  |   | Date Fair   | 
|                                 |  | Number of |   |   | exercise |  |  | Term        |  |  | Value       |  |   | Value       | 
|                                 |  | shares    |   |   | price    |  |  | (in years)  |  |  | **($000)** |  |   | **($000)** | 
|Outstanding  July 1, 2007       |  | 1,374,543 |   | $ | 16.30    |  |  | 8.20        |  |  | 10,840      |  |   | -           | 
|Exercised                        |  | (324,542  | ) |   | -        |  |  | -           |  |  | 7,320       |  |   | -           | 
|Forfeitures                      |  | (96,623   | ) |   | -        |  |  | -           |  |  | -           |  |   | -           | 
|Outstanding  June 30, 2008      |  | 953,378   |   | $ | 18.20    |  |  | 7.40        |  |  | 5,813       |  |   | -           | 
|Options granted
      under Plan |  | 1,120,000 |   | $ | 18.81    |  |  | 10.00       |  |  | -           |  | $ | 5,786       | 
|Exercised                        |  | (84,414   | ) |   | -        |  |  | -           |  |  | 1,731       |  |   | -           | 
|Forfeitures                      |  | (91,970   | ) |   | -        |  |  | -           |  |  | -           |  |   | -           | 
|Outstanding  June 30, 2009      |  | 1,896,994 |   | $ | 19.03    |  |  | 8.30        |  |  | 1,576       |  |   | -           | 
|Exercised                        |  | (83,338   | ) |   | -        |  |  | -           |  |  | 1,667       |  |   | -           | 
|Outstanding  June 30, 2010      |  | 1,813,656 |   | $ | 19.76    |  |  | 7.41        |  |  | 585         |  |   | -           | 
|                                 |  |           |   |   |          |  |  |             |  |  |             |  |   |             | 
|Exercisable                      |  | 873,613   |   | $ | 20.86    |  |  | 6.7         |  |  | 473         |  |   |             | 

During each of the years ended
  June 30, 2010, 2009 and 2008, approximately 374,000, 264,000 and 430,000, stock
  options became exercisable, respectively.

Options granted to certain
  employees on August 24, 2006, were automatically exercised on May 8, 2008, as
  the employees did not provide the Company with an automatic exercise waiver
  notice. In accordance with the terms of the option agreements, 6,448 shares were
  withheld from these employees to settle the exercise price. These 6,448 shares
  are reflected as treasury shares and 1,951 of these shares are available for
  future grants under the Plan.

During the years ended June 30,
  2010, 2009 and 2008, respectively, the Company received approximately $0.7
  million, $0.3 million and $2.3 million from stock option exercises and
  approximately $0, $0.003 million and $0.5 million from repayment of stock
  option-related loans.

F-38

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

13. STOCK-BASED COMPENSATION (continued)

**Stock option and
  restricted stock activity (continued)**

***Restricted
  stock***

The following table summarizes restricted stock activity for
  the years ended June 30, 2010, 2009 and 2008:

WeightedAverageNumber of
      
      
      GrantShares of
      
      
      Date FairRestricted
      
      
      ValueStock
      
      
      **($000)**Non-vested  July 1, 2007
      
      -
      
      
      -Granted  August 2007
      
      591,500
      
      
      13,569Granted 
        February 2008
      
      3,282
      
      
      85Non-vested  June 30, 2008
      
      594,782
      
      
      -Granted  August
        2008
      
      3,474
      
      
      85Vested
      
      (1,094
      )
      
      -Non-vested  June 30, 2009
      
      597,162
      
      
      -Granted  August 2009
      
      10,098
      
      
      185Vested
      
      (199,432
      )
      
      3,800Non-vested  June 30, 2010
      
      407,828
      
      
      -


**Stock-based compensation
  charge and unrecognized compensation cost**

The Company has recorded a net
  stock compensation charge of $5.7 million, $5.0 million and $4.0 million for the
  year ended June, 2010, 2009 and 2008, respectively, which comprised:

|                                                                        |   | **Total** charge (reversal) |   |   | **Allocated
      to** cost of goods sold, IT processing, servicing and support |   |   | **Allocated
      to** selling, general and administration |  
|----------------------------------------------------------------------- | - | --------------------------- | - | - | ------------------------------------------------------------------------------- | - | - | ---------------------------------------------------------- | -
|Year ended June 30, 2010                                                |   |                             |   |   |                                                                                 |   |   |                                                            |  
|Stock-based compensation
      charge                                   | $ | 5,670                       |   | $ | 202                                                                             |   | $ | 5,468                                                      |  
|Total  year ended June 30, 2010                                        | $ | 5,670                       |   | $ | 202                                                                             |   | $ | 5,468                                                      |  
|                                                                        |   |                             |   |   |                                                                                 |   |   |                                                            |  
|Year ended June 30, 2009                                                |   |                             |   |   |                                                                                 |   |   |                                                            |  
|Stock-based compensation
      charge                                   | $ | 5,239                       |   | $ | 240                                                                             |   | $ | 4,999                                                      |  
|Benefit of stock compensation charge related
      to options forfeited |   | (213                        | ) |   | (109                                                                            | ) |   | (104                                                       | )
|Total  year ended June 30,
      2009                                  | $ | 5,026                       |   | $ | 131                                                                             |   | $ | 4,895                                                      |  
|                                                                        |   |                             |   |   |                                                                                 |   |   |                                                            |  
|Year ended June 30, 2008                                                |   |                             |   |   |                                                                                 |   |   |                                                            |  
|Stock-based compensation charge                                         | $ | 4,257                       |   | $ | 319                                                                             |   | $ | 3,938                                                      |  
|Benefit of stock compensation
      charge related to options forfeited |   | (286                        | ) |   | (147                                                                            | ) |   | (139                                                       | )
|Total  year ended June 30, 2008                                        | $ | 3,971                       |   | $ | 172                                                                             |   | $ | 3,799                                                      |  

The stock compensation charge and
  benefit have been allocated to cost of goods sold, IT processing, servicing and
  support and selling, general and administration based on the allocation of the
  cash compensation paid to the employees.

F-39

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

13. STOCK-BASED COMPENSATION (continued)

**Stock-based compensation
  charge and unrecognized compensation cost (continued)**

As of June 30, 2010, the total
  unrecognized compensation cost related to stock options was approximately $4.6
  million, which the Company expects to recognize over approximately four years.
  As of June 30, 2010, the total unrecognized compensation cost related to
  restricted stock awards was approximately $4.1 million, which the Company
  expects to recognize over approximately two years. As of June 30, 2010, interest
  due from employees related to loans extended to fund stock option exercises was
  approximately $0.01 million.

**Tax
  consequences**

There are no tax consequences
  related to options and restricted stock granted to employees of Company
  subsidiaries incorporated in South Africa, Austria and Russia. The Company has
  recorded a deferred tax asset of approximately $0.7 million and $0.6 million,
  respectively, for the years ended June 30, 2010 and 2009, related to the
  stock-based compensation charge recognized related to employees of Net1 as it is
  able to deduct the difference between the market value on date of exercise by
  the option recipient and the exercise price from income subject to taxation in
  the United States.

14. INCOME TAXES

**Income tax
  provision**

The table below presents the
  components of income before income taxes as of June 30, 2010, 2009 and 2008:

|                           |   | 2010    |   |   | 2009    |   |   | 2008    |  
|-------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
|                           |   |         |   |   |         |   |   |         |  
|South Africa               | $ | 136,197 |   | $ | 143,680 |   | $ | 126,439 |  
|United States              |   | (6,909  | ) |   | (31,048 | ) |   | 1,459   |  
|Other                      |   | (50,408 | ) |   | 18,288  |   |   | (1,790  | )
|Income before income taxes | $ | 78,880  |   | $ | 130,920 |   | $ | 126,108 |  

Presented below is the provision
  for income taxes by location of the taxing jurisdiction for each of the years
  ended June 30:

|                                                  |   | 2010    |   |  |   | 2009    |   |  |   | 2008   |  
|------------------------------------------------- | - | ------- | - |  | - | ------- | - |  | - | ------ | -
|                                                  |   |         |   |  |   |         |   |  |   |        |  
|Current income tax                                | $ | 109,669 |   |  | $ | 83,756  |   |  | $ | 45,520 |  
|South Africa                                      |   | 47,225  |   |  |   | 50,092  |   |  |   | 44,330 |  
|United States (1)                                 |   | 62,443  |   |  |   | 33,009  |   |  |   | 1,190  |  
|Other                                             |   | 1       |   |  |   | 655     |   |  |   | -      |  
|Deferred taxation charge (benefit)                |   | (2,770  | ) |  |   | (1,460  | ) |  |   | (931   | )
|South Africa                                      |   | (441    | ) |  |   | (916    | ) |  |   | (1,056 | )
|United States                                     |   | (1,236  | ) |  |   | 928     |   |  |   | (61    | )
|Other                                             |   | (1,093  | ) |  |   | (1,472  | ) |  |   | 186    |  
|Change in tax rate                                |   | -       |   |  |   | (3,003  | ) |  |   | (5,397 | )
|Foreign tax credits generated  United States (1) |   | (66,077 | ) |  |   | (36,549 | ) |  |   | -      |  
|Income tax provision                              | $ | 40,822  |   |  | $ | 42,744  |   |  | $ | 39,192 |  

(1) Balances for the year ended
  June 30, 2009, have been re-presented, with a reduction in both Current income
  tax  United States and Foreign tax credits generated  United States of
  $16,533. This re-presentation has no impact on the income tax expense or on net
  income for the Company.

F-40

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

14. INCOME TAXES (continued)

**Income tax provision
  (continued)**

A reconciliation of income taxes,
  calculated at the fully distributed South African income tax rate to the
  Companys effective tax rate, for the years ended June 30, 2010, 2009 and 2008
  is as follows:

|                                                                |  | 2010     |  |  | 2009     |  |  | 2008    | 
|--------------------------------------------------------------- |  | -------- |  |  | -------- |  |  | ------- | 
|Income tax rate reconciliation                                  |  |          |  |  |          |  |  |         | 
|Income taxes at fully distributed South
      African tax rates |  | 34.55%   |  |  | 34.55%   |  |  | 35.45%  | 
|Permanent items                                                 |  | 21.69%   |  |  | 1.60%    |  |  | 0.02%   | 
|Foreign tax credits                                             |  | (82.70)% |  |  | (40.09)% |  |  | -%      | 
|Taxation on deemed dividends in the United States               |  | 85.60%   |  |  | 41.58%   |  |  | -%      | 
|Movement in valuation allowance                                 |  | (5.02)%  |  |  | (0.41)%  |  |  | (0.11)% | 
|Prior year adjustments                                          |  | (2.37)%  |  |  | (2.28)%  |  |  | -%      | 
|Change in tax rate                                              |  | -%       |  |  | (2.29)%  |  |  | (4.28)% | 
|Income tax provision                                            |  | 51.75%   |  |  | 32.66%   |  |  | 31.08%  | 

There were no changes to the
  enacted tax rate in the year ended June 30, 2010. On July 22, 2008 a change in
  the corporate rate of taxation for South African companies was promulgated
  reducing the enacted tax rate to 34.55% for the year ended June 30, 2009. On
  January 8, 2008, the Revenue Laws Second Amendment Act (Act 36 of 2007)
  (Revenue Laws Act), was promulgated in South Africa. The Revenue Laws Act
  included legislation to reduce the rate of STC from 12.50% to 10.00%, effective
  October 1, 2007 which resulted in an enacted tax rate of 35.45% for the year
  ended June 30, 2008.

The permanent item relates principally to impairment of
  goodwill which is not deductible for tax purposes.

Net1 included actual and deemed
  dividends received from New Aplitec in its year ended June 30, 2010, taxation
  computation. Net1 applied net operating losses against this income. Net1
  generated foreign tax credits as a result of the inclusion of the dividends in
  its taxable income. Net1 has applied certain of these foreign tax credits
  against its current income tax provision for the year ended June 30, 2010.

Deferred tax assets and
  liabilities

Deferred income taxes reflect the
  temporary differences between the amounts at which assets and liabilities are
  recorded for financial reporting purposes and the amounts utilized for tax
  purposes. The primary components of the temporary differences that gave rise to
  the Companys deferred tax assets and liabilities as at June 30, and their
  classification, were as follows:

|                                                              |   | 2010    |   |   | 2009    |  
|------------------------------------------------------------- | - | ------- | - | - | ------- | -
|Total deferred tax assets                                     |   |         |   |   |         |  
|                                                              |   |         |   |   |         |  
|Net
      operating loss carryforwards                        | $ | 7,376   |   | $ | 2,837   |  
|Provisions and accruals                                       |   | 2,340   |   |   | 1,941   |  
|FTS
      patent                                              |   | 1,764   |   |   | 1,834   |  
|Intangible assets                                             |   | 20,728  |   |   | 25,825  |  
|Foreign
      tax credits (1)                                 |   | 16,278  |   |   | 21,308  |  
|Other                                                         |   | 2,297   |   |   | 3,136   |  
|Total deferred tax assets before valuation allowance          |   | 50,783  |   |   | 56,881  |  
|Valuation allowances (1)                                      |   | (26,412 | ) |   | (34,309 | )
|Total deferred tax
        assets, net of valuation allowance | $ | 24,371  |   | $ | 22,572  |  

(1) Balances as at June 30, 2009,
  have been re-presented, with an increase of $16,553 in both Foreign tax credits
  and Valuation allowance. This re-presentation has no impact on the Total
  deferred tax assets, net of valuation allowance.

F-41

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

14. INCOME TAXES (continued)

**Deferred tax assets and
  liabilities (continued)**

|                                          |   | 2010   |  |   | 2009   | 
|----------------------------------------- | - | ------ |  | - | ------ | 
|Total deferred tax liabilities:           |   |        |  |   |        | 
|                                          |   |        |  |   |        | 
|Intangible assets                         | $ | 17,614 |  | $ | 20,518 | 
|STC liability, net of STC
      credits   |   | 28,998 |  |   | 31,381 | 
|Other                                     |   | 287    |  |   | 128    | 
|Total deferred tax
      liabilities      |   | 46,899 |  |   | 52,027 | 
|                                          |   |        |  |   |        | 
|Reported as                               |   |        |  |   |        | 
|Current
      deferred tax assets         |   | 16,330 |  |   | 12,282 | 
|Long term deferred tax
      liabilities  |   | 38,858 |  |   | 41,737 | 
|Net deferred income
      tax liabilities | $ | 22,528 |  | $ | 29,455 | 

***Increase
  in total deferred tax assets  net operating loss
  carryforwards***

Included in total deferred tax
  assets  net operating loss carryforwards are net operating losses generated by
  MediKredit prior to acquisition. The MediKredit net deferred tax asset
  recognized on acquisition was $2.6 million, at exchange rates prevailing at year
  end. During the year ended June 30, 2010, the Company utilized approximately
  $0.9 million, at exchange rates prevailing at year end, of this deferred tax
  asset. Net operating loss carryforwards also includes $2.3 million related to
  Net1 UTA, refer discussion below under Decrease in total deferred tax assets 
  intangible assets.

***Decrease
  in total deferred tax assets  intangible assets***

Included in total deferred tax
  assets  intangible assets as of June 30, 2010, is an intangible asset related
  to license rights in Net1 UTA. These license rights are termed software for
  Austrian tax purposes and were valued for Austrian tax purposes based on
  previous license payments at €50.76 million in June 2006. The Company expects to
  amortize the license rights in its tax returns over a period of 15 years. Any
  unused amounts are not carried forward to the subsequent year of assessment.
  During the years ended June 30, 2010 and 2009, Net1 UTA utilized approximately
  $0.8 million and $0.7 million, respectively, of these license rights against its
  taxable income and in 2010 expensed $0.8 million of the unutilized deferred tax
  asset and in 2009 reversed $0.7 million of the deferred tax asset against
  goodwill. In addition, during the year ended June 30, 2010, the Company provided
  an additional valuation allowance of $0.5 million against this deferred tax
  asset. As of June 30, 2010, the gross carrying value of this deferred tax asset
  is approximately $11.4 million and the net amount is $2.6 million.

Net1 Applied Technologies Austria
  GmbH (Net1Austria) generated tax deductible goodwill related to the
  acquisition of Net1 UTA in August 2008 of $4.2 million, net of a valuation
  allowance of $8.4 million, at exchange rates prevailing as of August 31, 2008.
  Under Austrian tax law Net1Austria can deduct up to 50% of the goodwill
  recognized, as defined under Austrian tax law, over a period of 15 years. Unused
  amounts are carried forward to subsequent years of assessment and are included
  in net operating loss carryforwards. During the year ended June 30, 2010,
  approximately $5.6 million was available for deduction against Net1 Austria
  taxable income. This amount was not used during the year ended June 30, 2010 and
  has been included in net operating loss carryforwards. As of June 30, 2009, the
  gross value of this goodwill deferred tax asset was approximately $9.1 million
  and the net amount was $2.1 million.

***Decrease
  in total deferred tax liabilities  intangible assets***

Deferred tax liabilities 
  intangible assets have decreased during the year ended June 30, 2010 primarily
  as a result of the amortization of the underlying assets during the year.

F-42

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

14. INCOME TAXES (continued)

**Deferred tax assets and
  liabilities (continued)**

***Decrease
  in total deferred tax liabilities  STC liability, net of STC
  credits***

Deferred tax liabilities  STC
  liability, net of STC credits have decreased during the year ended June 30,
  2010, primarily as a result of payments of STC during the year resulting from
  the distribution of dividends by New Aplitec exceeding the STC liability
  recognized during the year resulting from net income generated by the Companys
  South African subsidiaries.

***Valuation
  allowance***

At June 30, 2010, the Company had
  deferred tax assets of $24.4 million (2009: $22.6 million), net of the valuation
  allowance. Management believes, based on the weight of available positive and
  negative evidence it is more likely than not that the Company will realize the
  benefits of these deductible differences, net of the valuation allowance.
  However, the amount of the deferred tax asset considered realizable could be
  adjusted in the future if estimates of taxable income are revised.

At June 30, 2010, the Company had
  a valuation allowance of $31.9 million (2009: $21.4 million) to reduce its
  deferred tax assets to estimated realizable value. The valuation allowances at
  June 30, 2010 and 2009, relate to net operating loss carryforwards (2010: $3.2
  million, 2009: $1.7 million), the FTS patent (2010: $0.4 million, 2009: $0.8
  million), intangible assets including tax deductible goodwill (2010: $15.8
  million, 2009: $17.5 million), foreign tax credits (2010: $7.0 million, 2009: $0
  million) and other (2010: $0 million, 2009: $1.4 million).

***Net
  operating loss carryforwards and foreign tax credits***

*United
  States*

As of June 30, 2010, Net1 had net
  operating loss carryforwards that will expire, if unused, as follows:

Year of expiration
      
      US netoperating losscarryforwards2023
      $
      2722024
      
      4,532$
      4,804


During the years ended June 30,
  2010 and 2009, Net1 generated additional foreign tax credits related to the cash
  dividends received and deemed dividend for tax reporting purposes. Net1 has
  unused net foreign tax credits of $9.2 million as of June 30, 2010, which its
  management believes will be utilized in future periods. The unused foreign tax
  credits generated expire after ten years in 2020 and 2019.

*South
  Africa and Austria*

Net operating losses incurred in
  South Africa generally expire if a company does not trade during the year. In
  South Africa, the subsidiary companies that incurred the losses are currently
  trading and will continue to trade for the foreseeable future. Net operating
  losses incurred in Austria generally do not expire.

F-43

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

14. INCOME TAXES (continued)

**Uncertain tax
  positions**

As of June 30, 2010 and 2009,
  respectively the Company has unrecognized tax benefits of $1.5 million and $1.1
  million, all of which would impact the Companys effective tax rate. The Company
  files income tax returns mainly in South Africa, Austria, the Russian Federation
  and in the US federal jurisdiction. As of June 30, 2010, the Companys South
  African subsidiaries are no longer subject to income tax examination by the
  South African Revenue Service for periods before June 30, 2006. The Company is
  subject to income tax in other jurisdictions outside South Africa, none of which
  are individually material to its financial position, statement of cash flows, or
  results of operations. The Company does not expect the change related to
  unrecognized tax benefits will have a significant impact on its results of
  operations or financial position in the next 12 months.

The Company increased its
  unrecognized tax benefits by $0.4 million during the year ended June 30, 2010.
  The following is a reconciliation of the total amounts of unrecognized tax
  benefits for the year ended June 30, 2010 and 2009:

2010
      
      
      2009Unrecognized tax benefits - opening balance
      $
      1,060
      
      $
      813Gross increases - tax positions in current period
      
      368
      
      
      510Lapse of statute limitations
      
      -
      
      
      (272
      )Foreign currency adjustment
      
      32
      
      
      9Unrecognized tax benefits - closing balance
      $
      1,460
      
      $
      1,060


As of each of June 30, 2010 and
  2009, the Company had accrued interest related to uncertain tax positions of
  approximately $0.1 million on its balance sheet.

15. EARNINGS PER SHARE

The entire consolidated net
  income of the Company was attributable to the shareholders of the Company
  comprising both the holders of Net1 common stock and the holders of linked units
  prior to the Companys listing on the JSE in October 2008. As discussed in note
  11, all of the remaining linked unit holders converted their linked units to
  common stock as a result of listing of all of the Companys common stock on the
  JSE and the linked units had the same rights and entitlements as those attached
  to common stock. As a result of the conversion of all the linked units, the
  entire consolidated net income of the Company is attributable to the holders of
  Net1 common stock.

As the linked units owned by
  holders were exchangeable for special convertible preferred stock at the ratio
  of 7.37:1, which was then converted to common stock at the ratio of 1:1, the
  basic earnings per share for the year ended June 30, 2008, for the common stock
  and linked units are the same and is calculated by dividing the net income by
  the combined number (2008: 57.2 million) of weighted average common stock (2008:
  52.3 million) and special convertible preferred stock (2008: 4.9 million) in
  issue.

Basic earnings per share include
  restricted stock awards that meet the definition of a participating security.
  Restricted stock awards are eligible to receive non-forfeitable dividend
  equivalents at the same rate as common stock. Basic earnings per share have been
  calculated using the two-class method and basic earnings per share for the years
  ended June 30, 2010, 2009 and 2008, reflects only undistributed earnings. Basic
  earnings per shares for the years ended June 30, 2009 and 2008, respectively,
  have been retrospectively adjusted to include participating securities in the
  weighted average number of outstanding shares of common stock as their rights to
  participate in undistributed earnings are identical to those of common
  stock.

Diluted earnings per share has
  been calculated to give effect to the number of additional common stock/ linked
  units that would have been outstanding if the potential dilutive instruments had
  been issued in each period. The calculation of diluted earnings per share
  includes the dilutive effect of a portion of the restricted stock awards granted
  to employees in August 2007 as these restricted stock awards are considered
  contingently issuable shares for the purposes of the diluted earnings per share
  calculation and the vesting conditions in respect of a portion of the awards had
  been satisfied. The vesting conditions are discussed in note 13  Stock-based
  compensation.

F-44

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

15. EARNINGS PER SHARE (continued)

The weighted average number of
  outstanding shares presented below includes the common stock as well as the
  special convertible preferred stock, as the holders of special convertible
  preferred stock had the same rights and entitlements as those attached to the
  common stock.

The following tables detail the
  weighted average number of outstanding shares used for the calculation of
  earnings per share as of June 30, 2010, 2009 and 2008:

|                                                                                                                   |  | 2010   |  |  | **2009(1)** |  |  | **2008(1)** | 
|------------------------------------------------------------------------------------------------------------------ |  | ------ |  |  | ----------- |  |  | ----------- | 
|                                                                                                                   |  | 000   |  |  | 000        |  |  | 000        | 
|Weighted average number of outstanding shares
      of common stock and linked units basic                        |  | 46,245 |  |  | 56,552      |  |  | 57,698      | 
|Weighted average effect of dilutive securities: employee stock
      options                                       |  | 190    |  |  | 187         |  |  | 480         | 
|Weighted average number of outstanding shares
      of common stock and linked units  diluted                     |  | 46,435 |  |  | 56,739      |  |  | 58,178      | 
|(1) the weighted average number
      of outstanding shares have been retrospectively adjusted as discussed above.
|                                                                                                                   |  |        |  |  |             |  |  |             | 
|16. SUPPLEMENTAL CASH FLOW INFORMATION                                                                             |  |        |  |  |             |  |  |             | 
|                                                                                                                   |  |        |  |  |             |  |  |             | 
|Supplemental cash flow
      information:                                                                          |  |        |  |  |             |  |  |             | 

The following table presents the
  supplemental cash flow disclosures for the years ended June 30, 2010, 2009 and
  2008:

|                            |   | 2010   |  |   | 2009   |  |   | 2008   | 
|--------------------------- | - | ------ |  | - | ------ |  | - | ------ | 
|Cash received from interest | $ | 10,294 |  | $ | 20,375 |  | $ | 27,366 | 
|Cash paid for interest      | $ | 747    |  | $ | 7,982  |  | $ | 11,255 | 
|Cash paid for income taxes  | $ | 54,143 |  | $ | 52,520 |  | $ | 35,384 | 

***Financing
  activities***

Treasury shares, at cost
  presented on the Companys consolidated balance sheet as of June 30, 2009,
  includes 93,372 shares of the Companys common stock acquired for approximately
  $1.3 million which were paid for on July 1, 2009. The liability for this payment
  was included in accounts payable on the Companys consolidated balance sheet as
  of June 30, 2009.

As discussed in Note 13, during
  the year ended June 30, 2008, the Company acquired 6,448 of the Companys common
  stock at $24.00 from employees exercising stock options as a result of net share
  exercises under the terms of the option agreements. These shares are included in
  the share count and amount reflected as treasury shares issued on the
  consolidated balance sheet as of June 30, 2008.

17. OPERATING SEGMENTS

The Company discloses segment
  information as reflected in the management information systems reports that its
  chief operating decision makers use in making decisions and to report certain
  entity-wide disclosures about products and services, major customers, and the
  countries in which the entity holds material assets or reports material
  revenues.

The Company currently has four
  reportable segments: Transaction-based activities, Smart card accounts,
  Financial services and Hardware, software and related technology sales. Each
  segment, other than the Hardware, software and related technology sales segment,
  operates mainly within South Africa. The Companys reportable segments offer
  different products and services and require different resources and marketing
  strategies and share the Companys assets.

F-45

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

17. OPERATING SEGMENTS (continued)

The Transaction-based activities
  segment currently consists mainly of a state pension and welfare benefit
  distribution service provided to the South African government, transaction
  processing for retailers, utilities, medical-related claim service customers and
  banks and transaction fees generated from UEPS-enabled smartcards used in Iraq.
  Fee income is earned based on the number of beneficiaries included in the
  government pay-file as well as from merchants and card holders using the
  Companys merchant retail application. In addition, utility providers and banks
  are charged a fee for transaction processing services performed on their behalf
  at retailers. This segment has individually significant customers that each
  provides more than 10% of the total revenue of the Company. For the year ended
  June 30, 2010, there were three such customers, providing 29%, 17% and 11% of
  total revenue (2009: two such customers, providing 31% and 15% of total revenue;
  2008: three such customers, providing 31%, 16% and 10% of total revenue). The
  MediKredit and FIHRST businesses have been allocated to the Transaction-based
  activities segment and are more fully described in note 3.

The Smart card accounts segment
  derives revenue from the provision of smart card accounts, as a fixed monthly
  fee per card is charged for the maintenance of these accounts.

The Financial services segment
  provides short-term loans as a principal and life insurance products on an
  agency basis and generates interest income and initiation and services fees.
  Interest income is recognized in the consolidated statement of operations as it
  falls due, using the interest method by reference to the constant interest rate
  stated in each loan agreement. The Company sold its traditional microlending
  business included in this segment on March 1, 2009. In addition, the Company
  recorded a goodwill impairment of $1.8 million which was allocated to the
  Financial services segment during the year ended June 30, 2009. From March 1,
  2009, the Financial services segment comprised only the Companys UEPS-based
  microlending business.

The Hardware, software and
  related technology sales segment markets, sells and implements the UEPS as well
  as develops and provides Prism secure transaction technology, solutions and
  services. From September 1, 2008, the segment includes the operations of Net1
  UTA, which comprise mainly hardware sales and licenses of the DUET system. The
  segment undertakes smart card system implementation projects, delivering
  hardware, software and business solutions in the form of customized systems.
  Sales of hardware, SIM cards, cryptography services, SIM card licenses and other
  software licenses are recorded within this segment. This segment also generates
  rental income from hardware provided to merchants enrolled in the Companys
  merchant retail application. Sales to SmartSwitch Nigeria Limited and the
  related taxation implications are not reflected in revenue to external
  customers, operating income, income taxation expense or net income after
  taxation presented in the tables below. The impairment loss of approximately
  $37.4 million discussed in note 9 is included in the results of this operating
  segment during the year ended June 30, 2010.

Corporate/Eliminations includes
  the Companys head office cost centers in addition to the elimination of
  inter-segment transactions.

The Company evaluates segment
  performance based on operating income. The following tables summarize segment
  information which is prepared in accordance with GAAP:

June 30,2010
      
      
      2009
      
      
      2008RevenuesTransaction-based
        activities
      $
      191,362
      
      $
      148,399
      
      $
      153,444Smart card accounts
      
      31,971
      
      
      29,576
      
      
      35,914Financial services
      
      4,023
      
      
      5,430
      
      
      8,251Hardware, software and related
        technology sales
      
      53,008
      
      
      63,417
      
      
      56,447Total
      
      280,364
      
      
      246,822
      
      
      254,056Inter-company RevenuesTransaction-based
        activities
      
      3,837
      
      
      3,499
      
      
      4,243Smart card accounts
      
      -
      
      
      -
      
      
      -Financial services
      
      -
      
      
      -
      
      
      -Hardware, software and related
        technology sales
      
      1,892
      
      
      2,557
      
      
      1,107Total
      $
      5,729
      
      $
      6,056
      
      $
      5,350


F-46

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

17. OPERATING SEGMENTS (continued)

June 30,2010
      
      
      2009
      
      
      2008Operating incomeTransaction-based activities
      $
      106,036
      
      $
      83,509
      
      $
      84,229Smart card accounts
      
      14,532
      
      
      13,442
      
      
      16,325Financial services
      
      2,881
      
      
      (34
      )
      
      1,935Hardware, software and related technology
        sales
      
      (42,524
      )
      
      5,498
      
      
      11,708Corporate/ Eliminations
      
      (11,114
      )
      
      (8,980
      )
      
      (3,811
      )Total
      
      69,811
      
      
      93,435
      
      
      110,386Interest earnedTransaction-based activities
      
      -
      
      
      -
      
      
      -Smart card accounts
      
      -
      
      
      -
      
      
      -Financial services
      
      -
      
      
      -
      
      
      -Hardware, software and related
        technology sales
      
      -
      
      
      -
      
      
      -Corporate/ Eliminations
      
      10,116
      
      
      20,290
      
      
      27,411Total
      
      10,116
      
      
      20,290
      
      
      27,411Interest expenseTransaction-based activities
      
      981
      
      
      7,368
      
      
      11,590Smart card accounts
      
      -
      
      
      -
      
      
      -Financial services
      
      1
      
      
      -
      
      
      -Hardware, software and related technology
        sales
      
      5
      
      
      197
      
      
      79Corporate/ Eliminations
      
      60
      
      
      1,897
      
      
      20Total
      
      1,047
      
      
      9,462
      
      
      11,689Depreciation and amortizationTransaction-based activities
      
      6,714
      
      
      4,461
      
      
      4,755Smart card accounts
      
      -
      
      
      -
      
      
      -Financial services
      
      510
      
      
      434
      
      
      434Hardware, software and related
        technology sales
      
      10,978
      
      
      11,020
      
      
      4,312Corporate/ Eliminations
      
      1,146
      
      
      1,167
      
      
      1,321Total
      
      19,348
      
      
      17,082
      
      
      10,822Income taxation expenseTransaction-based activities
      
      29,713
      
      
      21,966
      
      
      21,512Smart card accounts
      
      4,068
      
      
      3,764
      
      
      4,735Financial services
      
      806
      
      
      702
      
      
      559Hardware, software and related technology
        sales
      
      684
      
      
      1,547
      
      
      3,809Corporate/ Eliminations
      
      5,551
      
      
      14,765
      
      
      8,577Total
      
      40,822
      
      
      42,744
      
      
      39,192Net incomeTransaction-based activities
      
      75,536
      
      
      54,179
      
      
      51,942Smart card accounts
      
      10,465
      
      
      9,678
      
      
      11,592Financial services
      
      2,073
      
      
      (711
      )
      
      1,371Hardware, software and related
        technology sales
      
      (43,405
      )
      
      3,905
      
      
      7,797Corporate/ Eliminations
      
      (5,679
      )
      
      19,550
      
      
      13,993Total
      $
      38,990
      
      $
      86,601
      
      $
      86,695


F-47

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

|17. OPERATING SEGMENTS (continued)              |   |       |  |   |          |  |   |       | 
|----------------------------------------------- | - | ----- |  | - | -------- |  | - | ----- | 
|                                                |   |       |  |   |          |  |   |       | 
|                                                |   |       |  |   | June 30, |  |   |       | 
|                                                |   | 2010  |  |   | 2009     |  |   | 2008  | 
|                                                |   |       |  |   |          |  |   |       | 
|Expenditures for long-lived assets              |   |       |  |   |          |  |   |       | 
|Transaction-based activities                    | $ | 2,177 |  | $ | 3,161    |  | $ | 2,774 | 
|Smart card accounts                             |   | -     |  |   | -        |  |   | -     | 
|Financial services                              |   | 302   |  |   | 751      |  |   | 562   | 
|Hardware, software and related technology sales |   | 251   |  |   | 858      |  |   | 227   | 
|Corporate/ Eliminations                         |   | -     |  |   | -        |  |   | -     | 
|Total                                           | $ | 2,730 |  | $ | 4,770    |  | $ | 3,563 | 

The segment information as
  reviewed by the chief operating decision maker does not include a measure of
  segment assets per segment as all of the significant assets are used in the
  operations of all, rather than any one, of the segments. The Company does not
  have dedicated assets assigned to a particular operating segment. Accordingly,
  it is not meaningful to attempt an arbitrary allocation and segment asset
  allocation is therefore not presented.

It is impractical to disclose
  revenues from external customers for each product and service or each group of
  similar products and services.

**Geographic
  Information**

Revenues based on the geographic
  location from which the sale originated for the years ended June 30, are
  presented in the table below:

|              |   | 2010    |  |   | 2009    |  |   | 2008    | 
|------------- | - | ------- |  | - | ------- |  | - | ------- | 
|              |   |         |  |   |         |  |   |         | 
|South Africa  | $ | 267,478 |  | $ | 220,408 |  | $ | 238,905 | 
|Europe        |   | 12,301  |  |   | 19,560  |  |   | -       | 
|Rest of world |   | 585     |  |   | 6,854   |  |   | 15,151  | 
|Total         | $ | 280,364 |  | $ | 246,822 |  | $ | 254,056 | 

18. COMMITMENTS AND CONTINGENCIES

**Operating lease
  commitments**

The Company leases certain
  premises. At June 30, 2010, the future minimum payments under operating leases
  consist of:

Due within 1 year
      $
      3,349Due within 2 years
      
      2,083Due within 3 years
      
      1,173Due within 4 years
      
      890Due within 5 years
      $
      -


Operating lease payments related
  to the premises and equipment were $5.2 million, $4.1 million and $4.2 million,
  respectively, for the years ended June 2010, 2009 and 2008, respectively.

**Capital
  commitments**

As of June 30, 2010 and 2009, the
  Company had outstanding capital commitments of approximately $0.02 million and
  $0.04 million, respectively.

F-48

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|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

18. COMMITMENTS AND CONTINGENCIES (continued)

**Purchase
  obligations**

As of June 30, 2010 and 2009, the
  Company had purchase obligations totaling $3.1 million and $1.1 million,
  respectively.

**Contingencies**

The Company is subject to a
  variety of insignificant claims and suits that arise from time to time in the
  ordinary course of business.

Management currently believes
  that the resolution of these matters, individually or in the aggregate, will not
  have a material adverse impact on the Companys financial position, results of
  operations and cash flows.

19. SHORT-TERM FACILITIES

As of June 30, 2010, the Company
  had a short-term facility in South African Rand of approximately $32.7 million,
  translated at exchange rates applicable as of June 30, 2010, with Nedbank
  Limited (Nedbank). As of June 30, 2010 the overdraft rate on this facility was
  8.85% . Certain of the Companys South African subsidiaries have provided a
  cross deed of suretyship whereby each of these companies has bound itself as
  surety and co-principal debtor with each other for the fulfillment of each
  other's obligations under the facility. These South African subsidiaries have
  agreed that any debit and credit bank account balances with Nedbank may be set
  off against each other. Certain South African subsidiaries have ceded trade
  receivables with an aggregate value of approximately $20.5 million, translated
  at exchange rates applicable as of June 30, 2010, as security for the facility
  as well as the Companys investment in Cash Paymaster Services (Proprietary)
  Limited, a wholly owned South African subsidiary. As of June 30, 2010, the
  Company had utilized none of its South African short-term facility.

In addition, Net1 UTA had
  short-term facilities of approximately $1.2 million, translated at exchange
  rates applicable as of June 30, 2010, with each of two of Austrias largest
  banks. These facilities are available to the Company. The interest rate
  applicable to these short-term facilities is negotiated when the facilities are
  utilized. As of June 30, 2010, the Company had utilized none of its Austrian
  short-term facilities.

Management believes that the
  Companys current short-term facilities are sufficient in order to meet its
  future obligations as they arise.

**Short-term loan facility
  obtained to fund the Net1 UTA acquisition**

In 2009, the Company obtained a
  $110 million six month bank loan facility to fund the cash portion of the
  purchase price for the Net1 UTA acquisition. The Company was entitled to settle
  the full facility at any time during the six month period without incurring a
  prepayment penalty. During the year ended June 30, 2009, the Company utilized
  approximately $103 million of this facility to pay the cash portion of the
  purchase price, the $1.1 million facility fee and transaction-related costs. The
  interest rate charged on this facility was LIBOR plus 2.50% .

In 2009, the Company pledged $25
  million of its US dollar-denominated cash reserves and the A class shares and B
  class shares it owned in New Aplitec, as collateral security for the bank loan.
  The Company paid the lender an upfront facility fee of $1.1 million which was
  amortized over the period that the loan was outstanding. Included in interest
  income, net for year ended June 30, 2009, is $1.1 million related to the
  facility fee. On October 16, 2008, the Company used internally generated funds
  to repay the loan in full and all collateral security arrangements were
  terminated.

F-49

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|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

20. RELATED PARTY TRANSACTIONS

During the year end June 30,
  2010, the Company engaged the services of PBel (Pty) Ltd (PBEL) to perform
  software development services, primarily software utilized on mobile phones and
  by cash-accepting kiosks. All software developed is the Companys property. PBEL
  is jointly owned by Dr. Belamant and his son. The PBEL transaction was approved
  by the Companys Audit Committee and thus Dr. Belamant did not participate in
  the Boards decision to engage PBEL. During the year ended June 30, 2010, the
  Company paid PBEL approximately $0.2 million for software development
  services

A South African trust was created
  in connection with the Aplitec transaction to hold the linked units. As
  described in note 11, as of October 16, 2008, the linked units ceased to exist.
  The Company did not have any interests in the trust nor did it have any
  involvement in the day-to-day operations of the trust. The Company paid the
  expenses of the trust which comprised mainly the administrative costs related to
  the conversion by linked unit holders to Net1 common stock. During the years
  ended June 30, 2009 and 2008, these expenses were approximately $0.03 million
  and $0.1 million, respectively. In August 2009, the trustee of the trust
  received written confirmation from the Master of the Court that the trust had
  been deregistered.

21. FOREIGN EXCHANGE GAIN RELATED TO SHORT-TERM
  INVESTMENT

The Company entered into an asset
  swap arrangement (in the form of a $110 million 32-day call account instrument)
  in order to facilitate the short-term loan facility described in note 19,
  however this asset swap arrangement was not linked to the loan facility and did
  not require redemption on the same date as the repayment of the loan facility.
  The Company earned interest at a rate of one month US dollar London Interbank
  Offered Rate (LIBOR) plus 0.25% on this instrument. The Company gave a call
  notice to the obligor on September 10, 2008, and the capital of $110 million (or
  ZAR 1,100.7 million) and interest on this instrument was repaid on October 16,
  2008. The Company has realized a foreign exchange gain of approximately $26.7
  million for the year ended June 30, 2009. No hedge accounting was applied.

22. COSTS RELATED TO JSE LISTING

The Company completed its inward
  listing, a secondary listing, on the JSE in South Africa on October 8, 2008. The
  Company did not issue any additional shares in connection with the listing,
  however, the listing did result in a trigger event which converted all of the
  Companys special convertible preferred stock to common stock (see note 11). The
  Companys selling, general and administration expense includes the costs
  incurred related to the listing on the JSE.

The table below presents the costs incurred in connection with
  JSE listing during the year ended June 30, 2009:

June 30,2009Advisory fee to sponsor
      $
      122Legal fees
      
      174Regulatory and filing fees
      
      93Printing
      
      47Accounting fees
      
      27Other
      
      32Total
        costs related to JSE listing
      $
      495


F-50

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the consolidated financial statements                                           
|for the years ended June 30, 2010, 2009 and 2008                                         
|(All amounts
      stated in thousands of United States Dollars, unless otherwise stated)

23. UNAUDITED QUARTERLY RESULTS

The following tables contain
  selected unaudited consolidated statements of (loss) income for each quarter of
  fiscal 2010 and 2009:

|                                        |   |                                            |   |   | Three months ended |  |   |         |  |   |         | 
|--------------------------------------- | - | ------------------------------------------ | - | - | ------------------ |  | - | ------- |  | - | ------- | 
|                                        |   |                                            |   |   |                    |  |   |         |  |   |         | 
|                                        |   | Jun 30,                                    |   |   | Mar 31,            |  |   | Dec 31, |  |   | Sep 30, | 
|                                        |   | 2010                                       |   |   | 2010               |  |   | 2009    |  |   | 2009    | 
|                                        |   | (In thousands except per share
      data) |  
|                                        |   |                                            |   |   |                    |  |   |         |  |   |         | 
|Revenue                                 | $ | 68,695                                     |   | $ | 72,291             |  | $ | 73,864  |  | $ | 65,514  | 
|Operating (loss) income                 |   | (12,835                                    | ) |   | 26,859             |  |   | 29,419  |  |   | 26,368  | 
|Net (loss) income attributable to Net1  | $ | (17,007                                    | ) | $ | 18,772             |  | $ | 19,284  |  | $ | 17,941  | 
|(Loss) Earnings per share               |   |                                            |   |   |                    |  |   |         |  |   |         | 
|Basic (loss) earnings per share, in $   |   | (0.37                                      | ) |   | 0.41               |  |   | 0.43    |  |   | 0.37    | 
|Diluted (loss) earnings per share, in $ |   | (0.37                                      | ) |   | 0.41               |  |   | 0.42    |  |   | 0.37    | 

|                                 |   |                                            |  |   | Three months ended |  |   |         |  |   |         | 
|-------------------------------- | - | ------------------------------------------ |  | - | ------------------ |  | - | ------- |  | - | ------- | 
|                                 |   |                                            |  |   |                    |  |   |         |  |   |         | 
|                                 |   | Jun 30,                                    |  |   | Mar 31,            |  |   | Dec 31, |  |   | Sep 30, | 
|                                 |   | 2009                                       |  |   | 2009               |  |   | 2008    |  |   | 2008    | 
|                                 |   | (In thousands except per share
      data) | 
|                                 |   |                                            |  |   |                    |  |   |         |  |   |         | 
|Revenue                          | $ | 61,621                                     |  | $ | 55,878             |  | $ | 61,388  |  | $ | 67,935  | 
|Operating income                 |   | 22,479                                     |  |   | 20,873             |  |   | 22,805  |  |   | 27,278  | 
|Net income attributable to Net1  | $ | 18,216                                     |  | $ | 14,379             |  | $ | 27,762  |  | $ | 26,244  | 
|Earnings per share               |   |                                            |  |   |                    |  |   |         |  |   |         | 
|Basic earnings per share, in $   |   | 0.33                                       |  |   | 0.26               |  |   | 0.49    |  |   | 0.45    | 
|Diluted earnings per share, in $ |   | 0.33                                       |  |   | 0.26               |  |   | 0.49    |  |   | 0.45    | 

24. SUBSEQUENT EVENTS

On August 24, 2010, the Company
  entered into a new service level agreement with the South African Social
  Security Agency (SASSA) which replaces its previous SASSA contract that
  expired on June 30, 2010. The new agreement is retroactively effective from July
  1, 2010 and expires on March 31, 2011. Under the new contract, the Company will
  continue to provide its social welfare grants distribution service to SASSA in
  five of South Africas nine provinces. As was the case with the Company's
  previous contact with SASSA the new contract contains a standard pricing formula
  for all provinces based on a transaction fee per beneficiary paid, regardless of
  the number or amount of grants paid per beneficiary, calculated on a guaranteed
  minimum number of beneficiaries per month. However, the new contract provides
  for a reduction in both the level of the transaction fee per beneficiary paid
  and the guaranteed minimum number of beneficiaries. Because the Company
  continues to derive a substantial percentage of its revenues from the SASSA
  contract, it expects that the terms of the new contract will materially reduce
  its revenues, operating income, net income and cash flow for the year ended June
  30, 2011.

*********************

F-51

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