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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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 endedJune 30, 2009

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 RoadRosebank, 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. [   ]

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, 2008 (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 $508,875,663. This calculation does
not reflect a determination that persons are affiliates for any other
purposes.

As of August 27, 2009, 45,284,961 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 2009 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,
2009

|                                                                                                                                 | Page
|-------------------------------------------------------------------------------------------------------------------------------- | ----
|PART
      I                                                                                                                     |     
|Item
      1. Business                                                                                                           | 2   
|Item
      1A. Risk Factors                                                                                                      | 19  
|Item
      1B. Unresolved Staff Comments                                                                                         | 31  
|Item
      2. Properties                                                                                                         | 32  
|Item
      3. Legal Proceedings                                                                                                  | 32  
|Item
      4. Submission of Matters to a Vote of Security Holders                                                                | 32  
|                                                                                                                                 |     
|PART
      II                                                                                                                    |     
|Item
      5. Market for Registrants Common Equity, Related Shareholder Matters and
      Issuer Purchases of Equity Securities | 33  
|Item
      6. Selected Financial Data                                                                                            | 35  
|Item
      7. Managements Discussion and Analysis of Financial Condition and Results
      of Operations                        | 37  
|Item
      7A. Quantitative and Qualitative Disclosures About Market Risk                                                        | 66  
|Item
      8. Financial Statements and Supplementary Data                                                                        | 67  
|Item
      9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure                         | 67  
|Item
      9A. Controls and Procedures                                                                                           | 68  
|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 Shareholder 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 2010 fiscal year, which runs from
July 1, 2009 to June 30, 2010.

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 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 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 3.5
million recipients in five of South Africas nine provinces, process nearly 65%
of retail payment transactions through our EasyPay system and provide mobile
telephone top-up transactions for two of South Africas three 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 Commonwealth of Independent States,
or CIS, the Middle East, Asia and Latin America. Most significantly, on August
27, 2008, we acquired 80.1% of BGS Smartcard Systems AG, or BGS, an Austrian
private company that provides smart card-based payment systems to banks,
enterprises and government authorities in Russia, Ukraine, Uzbekistan, India and
Oman.

We generate revenue primarily by
charging transaction fees to government agencies, employers, merchants and other
financial services providers and by selling hardware, software and related
technology. During the fiscal years 2009 and 2008, we had revenue of $246.8
million and $254.1 million, respectively and operating income of $93.4 million
and $110.4 million, respectively.

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.

2

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Market Opportunity

According to the United States
Census Bureau, the worlds population currently exceeds 6.8 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 banking services.
This situation arises when 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 banking services economically in the
individuals geographic location. We refer to these people as the unbanked and
the under-banked. These individuals generally receive wages, welfare benefits,
money transfers or loans in the form of cash and conduct commercial
transactions, including buying food and clothing, in cash.

The use of cash, however,
presents significant problems. 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.

The use of cash or lack of access
to a bank account can dramatically increase the cost to, and in some cases
completely prevent, individuals from engaging in basic financial transactions.
These basic transactions include the routine payment of insurance premiums, the
transfer of money to relatives and the use of credit. Without a bank account, it
is also difficult for an individual to obtain a loan on attractive terms since
that individual lacks a credit history and usually cannot present a reliable
means of repayment to the lender.

For governments, assistance
programs face significant challenges when dependent on the use of cash. In
addition to the costs and difficulties of using cash, corruption becomes an even
more challenging problem since there is no clear audit trail. In fact, the
absence of an electronic system for the distribution of goods, including
foodstuff or medicine, or welfare benefits presents a significant obstacle to
ensuring the fair and reliable implementation of government policy or deployment
of foreign aid.

Traditional payment systems
offered today by the major banking institutions do not address the key
requirements of the unbanked and the under-banked populations. In addition to
the high cost of maintaining a bank account relative to a customers income
level, customers must generally have basic literacy, administrative and
record-keeping abilities and a minimum income level. Additionally, banks operate
through online transaction settlement systems, which are often unavailable or
costly to implement in undeveloped areas. Finally, having a bank account does
not eliminate the need for significant quantities of cash in many instances
because customers must withdraw large sums at one time to avoid incremental
transaction fees.

Our 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, 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.

3

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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. Even more importantly, 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.

Merchants and Financial
Service Providers. Merchants derive several different 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
eliminates this problem since 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.

The UEPS Technology

We developed our core UEPS
technology (incorporating DUET as developed by BGS) to enable the affordable
delivery of financial products and services to the worlds unbanked and
under-banked people. 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 point of service, or POS, as all of the relevant
information necessary to perform and record transactions reside on the smart
cards.

4

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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 FTS patent, (2) our UEPS, including DUET, and
(3) our security protocol.

FTS Patent. The FTS patent
describes a method by which funds can 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 patent 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 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 millions of cardholders in many
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
employers 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.

7

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Our Strategy

We intend to provide the leading
system for the worlds estimated four billion unbanked and under-banked people
to engage in electronic transactions globally, as well as to provide our new
secure payment technologies in developed countries where e-commerce is already
well-established. 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 a
UEPS-enabled 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 BGS, we now provide smart card-based payment systems in Russia
and other members of the 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 new 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 the
leading distributor of social welfare payments to the countrys large, unbanked
and under-banked population and the largest third-party processor of retail
merchant transactions. 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 announced
intention to increase the size and scope of social welfare grants, we believe
that we are well-positioned to expand our current market share as well as to
diversify the types of payment services that we provide to beneficiaries. We
have recently entered into a new one-year contract with the South African Social
Security Agency, or SASSA, to distribute pension and social welfare grants
pending the decision by government to issue a new national tender. We believe
that there is a compelling argument for SASSA and other government agencies to
favor our innovative, secure, efficient and low cost payment solution over other
providers which provide a standard system which does not address the real needs
of a social program.

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 2009,
we processed 18.2 million transactions with a total value of ZAR10.6 billion at
these merchant locations. These retailers can in turn use their smart cards to
transact with wholesalers and financial services providers. In addition, we have
recently begun 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Through our EasyPay service we own the
largest independent financial switch and merchant processor in South Africa for
credit and debit card transactions. EasyPay processed 580.7 million transactions
with a total value of ZAR 131.2 billion during fiscal 2009. 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.

***The African Continent
and Iraq***

During the last three 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 by 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).

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 national payment systems in these countries using our UEPS technology.

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***Russia and Other CIS
Members***

Through BGS, we now provide smart
card-based payment systems to banks, enterprises and government authorities in
Russia, Ukraine, Uzbekistan, Mongolia, Vietnam, India and Oman. BGSs DUET
system was developed by BGS as a derivative of the first version of our UEPS
technology that we licensed to BGS in 1993. BGS provides the DUET system to
Sberbank, the largest financial institution in Russia, which owns the remaining
minority interest in BGS. One of our primary reasons for acquiring BGS was to
obtain immediate access to the large Sberbank cardholder case. While BGS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 BGSs management, sales
force and customer base to sell the UEPS platform and its suite of processing
services.

***Emerging Growth
Opportunities***

We believe that one area for
significant potential growth is the opportunity to introduce some of our new
technologies, such as our 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 50%. The joint venture provides virtual prepaid mobile top-up services for
Colombias first and third 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

During the past year, we have extensively evaluated our product
and service offerings and geographical presence. As a result, we recently
completed the restructure of the group into the following clusters and within
each cluster, separate business units.

***Transactional
Solutions Cluster***

BGS

Our BGS business unit provides
smart card-based payment systems to banks, enterprises and government
authorities in Russia, Ukraine, Uzbekistan, India and Oman. BGS is headquartered
in Vienna, Austria, and has subsidiaries in India and Russia, and a branch
office in the Ukraine.

BGS is the market leader in
smart card-based payment systems in the CIS with the national interbank payment
system in Uzbekistan and the nationwide smart card payment system in Russia. BGS
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 BGS 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 BGS and
system operators.

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Since we acquired BGS in August
2008, BGS 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
BGS such as national identification, voting and welfare distribution systems and
mobile payment solutions. We expect that the addition of BGS 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.
BGS will focus its marketing efforts on markets in Central and Eastern Europe,
Russia and other CIS members, the Middle East (excluding Iraq), India, Vietnam,
and the Philippines.

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

**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 3.5 million beneficiaries in five provinces of South
Africa. These social welfare grants are distributed under a contract with SASSA.
Our current contract with SASSA expires on March 31, 2010, but may be extended
if SASSA has not completed a new tender process prior to expiration. During our
2009, 2008 and 2007 fiscal years, we derived 65%, 67% and 70% of our revenues,
respectively, from CPS social welfare grant distribution business.

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.

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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 10 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 approximately 200 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.

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

**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 and the Philippines.

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.

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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.

***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.

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**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.

***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. Under the agreement, Grindrod Bank is responsible for
the human resources, administration, compliance, risk management and financial
affairs of the division. We are responsible for the supply and maintenance of
all UEPS hardware and software required to implement and run its wage payment
system, for which it will charge a monthly fee per smart card account at our
cost price, and will receive ongoing fee payments based on the amount of
business transacted by the division utilizing the UEPS technology. The Finance
Holdings business unit assists Grindrod Bank with the implementation of the
business plan and operational activities.

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

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***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, we have identified a number of
other products currently being produced that use smart card technology in
connection with a funds transfer system and the companies that promote them.
These include: EMV, a system that is being promoted by Visa Inc., MasterCard
International and Europay International; Mondex International Limited, a
subsidiary of MasterCard; and Proton World International N.V., a subsidiary of
STMicroelectronics Belgium N.V. In South Africa, and specifically in the payment
of social welfare grants, our competitors also include AllPay Consolidated
Investment Holdings (Pty) Ltd, 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, which is responsible for
payments in the Mpumalanga province.

The incumbent South African
retail banks have a joint initiative that has created a common banking product
to offer to the significant portion of South Africas population that does not
have access to traditional banking services, or the unbanked. This bank account,
generally referred to as the Mzansi account, was introduced in October 2004
and offers limited transactional capabilities at reduced charges, when compared
to the accounts traditionally offered by these banks. According to the FinScope
2008 survey, approximately 3,500,000 people (approximately 7% of the population)
in South Africa claim to use an Mzanzi account. The social welfare beneficiaries
who are currently paid through our smart card system may elect to use these
accounts to receive their grants rather than our smart card system.

We also may face competition from
companies to which we have licensed rights to our technology, including Visa.
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 infringing on their funds
transfer businesses.

Research and Development

Our business activities and
product offerings depend on our proprietary UEPS software. As a result, we have
a large group of software engineers and developers who are constantly revising
and improving the core UEPS software and its functionality.

We believe that our smart card
system is the most advanced system of its kind in the world today. However, we
use a number of hardware platforms that are not proprietary to us and which are
continuously being improved. These platforms include smart cards
micro-controllers, POS devices, biometric readers and other back-end computer
hardware. We continually work to take advantage of these improvements in our
attempt to stay at the head of the competitive curve. A faster micro-controller
on a smart card may allow us to process transactions faster and with more
security. A larger memory smart card allows us to store more transactions and to
load larger software applications. Larger memories also allow our smart cards to
be used for more than one application at a time, thus eliminating the cost and
the management of multiple smart card systems.

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Our smart card system is designed
to manage tokens of value such as cash, credit, savings, medical history,
identification criteria, finger print templates and insurance policies. Security
is therefore of prime importance as any breach would result in the loss of our
system integrity. This would be followed by a loss of confidence and credibility
that would jeopardize our growth and market penetration. We therefore continue
to advance our security protocols and algorithms to combat the potential attacks
that have currently been identified. These include crypto- analysis techniques
as well as reverse engineering. Attacks such as the latest differential power
analysis, or DPA, must also be circumvented.

We continue our research in new
and more secure algorithms, such as the Rivest, Shamir and Adleman, or RSA, as
well as new competitive asymmetric algorithms such as elliptic curves. We
develop and implement these techniques ourselves and own the software that we
create. We are also involved in extensive research and development in GSM,
cryptography, POS, retail and card not present payment applications.

Lastly, we continue to study the
needs of our target market and develop new UEPS features that satisfy these
needs. As our UEPS system is implemented in more and more developing countries,
we create greater connectivity between our systems to subsequently activate
international transactions and cross-border money transfers.

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 will expire 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. The FTS
patents expire in 2009 in South Africa, Botswana and Swaziland.

During fiscal 2009, 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.

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 customers in the Russian Federation and Ghana and in fiscal 2009, a
material portion of our assets were located in Austria. See Note 19 to our
consolidated financial statements for financial information about our operating
segments.

Employees

As of June 30, 2009, we had 2,022
employees. On a segmental basis, 170 employees were part of our management,
1,272 were employed in transaction-based activities, 22 were employed in
financial services and 558 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, 109 were employed in sales and
marketing, 128 were employed in finance and administration, 307 were employed in
information technology and 1,475 were employed in operations.

As of June 30, 2009,
approximately 100 of the 268 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 and all 24 of our weekly paid
employees who perform hardware, software and related technology sales activities
were members of the National Union of Metalworkers of South Africa. We believe
we have a good relationship with our employees and these unions.

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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 12 and 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.net1ueps.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 | 55  | Chief executive
      officer, chairman and director            
|Mr. Herman G. Kotze     | 39  | Chief financial officer,
      treasurer, secretary and director
|Mr. Nitin Soma          | 41  | Senior vice
      president information technology              

Dr. Belamant has 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 28 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. Kotze has 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. Soma has 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 13 years of experience in the development
  and design of smart card payment systems.

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***Significant employees***

**Business
Functions:**

Dr. Gerhard Claassen (50):
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 (63):
Managing director: BGS Smartcard Systems AG  Mr. Delberg has been the CEO of
BGS since 1997. BGS is responsible for the marketing and business development of
our DUET solution in Russia, the CIS, Oman, India and the Philippines.

Neil Magnuson (50):
Business Unit Leader: POS solutions  Mr. Magnusson joined us in March 2000 and
is responsible for the South African sales and marketing of our POS solutions,
consisting of the internally developed FlexiLane, FlexiGate, FlexiPOS solutions
and the Ingenico terminal product range.

Eric Meniere (43):
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 (38): 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 (47):
Financial & operations director: BGS Smartcard Systems AG  MR. Schweger has
been the CFO and COO of BGS Smartcard Systems AG since 1997. We acquired a
majority stake in BGS in August 2008. BGS is responsible for the marketing and
business development of our DUET solution in Russia, the CIS, Oman, India and
the Philippines.

James Sneedon (41):
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.

Brenda Stewart (51):
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.

Deon Visser (42): 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 (48): 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 (48): 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 (35): 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 (33): Vice
President  Finance  Mr. Encarnacao joined us in June 2004 and is responsible
for the preparation of the groups US GAAP consolidated accounts and statutory
reports.

Warren Segall (44): Vice President: Compliance  Mr.
Segall joined us in July 2006 and is our compliance officer.

Trevor Smit (52): 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 (48):
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

INVESTING IN OUR COMMON STOCK
INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS, AS WELL AS THE OTHER INFORMATION IN THIS FORM 10-K, BEFORE DECIDING TO
INVEST IN OUR SHARES OF COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCURS, OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS, CASH FLOWS AND
LIQUIDITY WOULD SUFFER.IF THIS HAPPENS, THE TRADING PRICE OF OUR COMMON STOCK
WOULD LIKELY DECLINE AND YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT IN OUR
COMMON STOCK.

Risks Relating to Our Business

As a result of SASSAs
decision to cancel the tender process for new contract awards and its stated
intention to initiate another tender process, there is continued uncertainty
about the timing and ultimate outcome of any future SASSA contract awards. Our
management will be required to continue to devote significant time and resources
to matters relating to our SASSA contract, including responding to the new
tender and conducting the litigation we have instituted against SASSA
challenging the cancellation of the tender process.

We currently derive a majority of
our revenues from our contract with SASSA to distribute social welfare 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 contract.
During the years ended June 30, 2009, 2008 and 2007, we derived approximately
65%, 67% and 70%, respectively, of our revenues from our government social
welfare contracts.

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 contract with SASSA which expires on March 31, 2010. SASSA has
stated that it will commence a new tender process during the period of this new
contract.

As a result of SASSAs decision
to terminate the tender process, there is 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 contracts to continue to distribute social welfare grants in
each of the five South African provinces where we currently distribute them.
Even if we do receive new contracts, or extensions of our new 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 are not as favorable to us as the contracts
under which we currently operate. 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 contracts consumed a substantial amount of our
managements time and attention during the past two and half 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 initiated litigation against SASSA challenging
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 new contracts or contract extensions containing similar economic terms
to those of our current one year 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.

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 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. At times, acquisition candidates may have liabilities or adverse
operating issues that we fail to discover through due diligence prior to the
acquisition.

It may be difficult for us
to implement our acquisition strategy in light of recent 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. Many
lenders and institutional investors have ceased to provide funding to even the
most credit-worthy borrowers. 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 most of our executive
officers, any of whom may terminate their employment at any time, nor do we
maintain any key person life insurance policies.

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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.

We may face competition
from the incumbent retail banks in South Africa in the unbanked market 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 2008 survey,
approximately 3,500,000 people (approximately 7% of the population) in South
Africa claim to use an Mzanzi account. The social welfare beneficiaries who are
currently paid through our smart card system may elect to use these accounts to
receive their grants. A decision by a substantial number of these beneficiaries
to elect to use these accounts rather than our smart card system may have a
material adverse effect on our financial condition, cash flows and results of
operations.

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 increased competition as our sales and
product offerings increase.

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, we have identified a number of
other products currently being produced that use smart card technology in
connection with a funds transfer system and the companies that promote them.
These include EMV, a system that is being promoted by Visa, MasterCard
International and Europay International; Mondex International Limited, a
subsidiary of MasterCard; and Proton World International N.V., a subsidiary of
STMicroelectronics Belgium N.V. In South Africa, and specifically in the payment
of social welfare grants, our competitors also include AllPay Consolidated
Investment Holdings (Pty) Ltd, 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, which is responsible for
payments in the Mpumalanga province. We also may face competition from companies
to which we have licensed our technology, including Visa. 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 infringing on 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.

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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,
2009, we maintained an aggregate of $220.8 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 current 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.

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.

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

We continue to experience
significant 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.

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.

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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. However the ZAR was consistently weaker
against the US dollar during 2008 than during 2007 and further weakened during
the first three quarters of 2009. Although the ZAR strengthened during the last
quarter of 2009, the ZAR was significantly weaker overall during 2009 than
during 2008, which negatively affected our 2009 results of operations when
compared to 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.

Our primary operations are
located in South Africa and we currently generate most of our revenues from
these operations. We face risks relating to operating in South Africa that could
adversely affect our business, operating results, cash flows and financial
condition.

South Africa has high levels
of poverty, unemployment and crime and needs additional infrastructure to
accommodate future economic growth.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 education, healthcare,
housing and other basic services. Furthermore, South Africa faces challenges in
building adequate infrastructure. For example, during the winter and spring of
2008, there were widespread and prolong power outages, known as load shedding,
as a result of market demand for electricity that exceeded the available supply.
The global economic slowdown has reduced demand for power and thus has mostly
eliminated the load shedding problem but an economic recovery could cause power
outages to become prevalent in the future. These problems may prompt emigration
of skilled workers, hinder investment into South Africa and impede economic
growth, all of which could negatively affect our business.

High inflation and interest
rates could increase our operating costs. 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.

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If we do not achieve
applicable black economic empowerment objectives, 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 black economic empowerment, or 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, since failing to do so could jeopardize
our existing and future contractual relationships, including our contracts with
the South African government.

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, exchange controls are expected to
continue for the foreseeable future.

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, 2009, approximately 90% of our cash and cash equivalents were held
by our South African subsidiaries. Thus, unless we can obtain funding at the
Net1 level, exchange control regulations could make it difficult for our South
African subsidiaries to obtain financing to fund acquisitions outside South
Africa, which could limit our ability to expand our 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. 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. 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 the 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. 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 and our financial condition.

Trade unions and labor
laws. Most of South Africas major industries are unionized, and the
majority of employees belong to trade unions. 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. We currently have approximately
101 unionized employees which represents approximately 5.0% of our workforce.
Although in recent years we have not experienced any labor disruptions, such
labor disruptions may occur in the future. In addition, the cost of complying
with labor laws may adversely affect our operations.

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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. 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 and regulations
      established by the Office of Foreign Assets Control.

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 Foreign
Corrupt Practices Act, or 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, the US
Department of Treasurys Office of Foreign Assets Control, or OFAC, administers
and enforces economic and trade sanctions against targeted foreign countries,
entities and individuals based on US foreign policy and national security goals.

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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.

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 an 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 cooperation
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. While the license application is pending, we are entitled to
continue this part of our business in South Africa. If we fail to obtain this
license, we may be stopped from continuing this part of our business in South
Africa.

EasyPay is 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

EasyPays business is 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.

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***We may be subject to
privacy laws in South Africa and other jurisdictions in which we operate.***

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.

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. 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.

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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.
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 2009 fiscal year, our stock price
ranged from a low of $8.21 to a high of $27.99. 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:

| | - | 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;
| | - | 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.

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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. 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.

We may have difficulty
raising necessary capital to fund operations 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, additional
financing may be required to continue to develop and exploit existing and new
technologies and to expand into new markets. The exploitation of our
technologies may, therefore, 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, 2009, excluded the
operations of BGS. If we are not able to integrate BGS 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.

30

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The requirement to evaluate and
report on our internal controls also applies to companies that we acquire. As a
private company, BGS was not required to comply with Sarbanes prior to its
acquisition by us. The integration of BGS 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. The
majority of BGS operations are in Austria, Russia and other CIS members. The
geographic distance between BGS and our South African headquarters, as well as
the fact that its operations are conducted in languages and with source
documents in languages other than English, has made the integration process of
BGS slower and more difficult than initially expected, and management was not
able to complete the evaluation of BGS' internal control over financial
reporting prior to filing this report on Form 10-K . Therefore, and 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,
2009, excluded the operations of BGS. If we fail to successfully integrate BGS
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 BGS 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 management.

A significant portion of our
assets and the assets of our directors and executive officers are located
outside the United States. In addition, most of the members of our board of
directors and all of our executive officers are residents of South Africa or
other foreign countries. As a result, it may not be possible to effect service
of process within the United States or elsewhere outside South Africa upon these
persons. Moreover, any judgment obtained against us or any of these foreign
persons 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. 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 the South African Reserve Bank 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 may
also be difficult for you to assert U.S. securities law claims in original
actions instituted in South Africa.

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

31

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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, including a
12,088 square foot manufacturing facility in Lazer Park, a 14,230 square foot
manufacturing facility in Brakpan and 74 depot facilities. We also lease
additional office space in Johannesburg, Pretoria, Cape Town and Durban, South
Africa; Vienna, Austria; Kiev, Ukraine; Moscow and Nizhny Novgorod, Russia; New
Delhi, India and Lagos, Nigeria. These leases expire at various dates through
the year 2009 and 2013, respectively. We believe we have adequate facilities for
our current business operations.

ITEM 3. LEGAL PROCEEDINGS

On February 10, 2009, we
instituted a legal proceeding in the form of a review application in the High
Court of South Africa (Transvaal Provincial Division) against the Chief
Executive Officer of SASSA, in his capacity as such. Various other parties were
also cited as respondents, by virtue of them being interested parties. These
parties have a right to defend the application, but elected not to do so. In the
proceeding, we are seeking to have the Court review and set aside the October
31, 2008 decision of the Chief Executive Officer to make no tender award and
terminate the procurement process in respect of SASSA Tender 19/06/BS. The Chief
Executive Officer has entered a notice of intention to defend and is obliged to
provide us with the entire record of proceedings leading up to the decision. We
cannot predict the outcome of this legal proceeding.

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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted
to a vote of our security holders during the fourth quarter of the year ended
June 30, 2009.

32

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PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
SHAREHOLDER 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,
      2007
    
    $27.98
    
    $21.25Quarter ended December 31, 2007
    
    $33.82
    
    $27.18Quarter ended March 31, 2008
    
    $31.60
    
    $22.41Quarter ended June 30, 2008
    
    $29.92
    
    $22.45Quarter 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
    
    $11.93


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 12, 2009,
there were 27 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 2009:

|          |  |              |  |  |               |  |  |                 |  |   | Maximum          | 
|--------- |  | ------------ |  |  | ------------- |  |  | --------------- |  | - | ---------------- | 
|          |  |              |  |  |               |  |  | Total number of |  |   | number (or       | 
|          |  |              |  |  |               |  |  | shares          |  |   | approximate      | 
|          |  |              |  |  |               |  |  | purchased as    |  |   | dollar value) of | 
|          |  |              |  |  |               |  |  | part of         |  |   | shares that may  | 
|          |  |              |  |  | Average price |  |  | publically      |  |   | yet be           | 
|          |  | Total number |  |  | paid per      |  |  | announced       |  |   | purchased        | 
|          |  | of shares    |  |  | share         |  |  | plans or        |  |   | under the plans  | 
|          |  | purchased    |  |  | (US dollars)  |  |  | programs        |  |   | or programs      | 
|Period    |  | (a)          |  |  | (b)           |  |  | (c)             |  |   | (d)              | 
|May 2009  |  | 579,229      |  |  | 13.04         |  |  | 579,229         |  | $ | 17,697,643       | 
|June 2009 |  | 621,878      |  |  | 13.47         |  |  | 621,878         |  | $ | 9,321,849        | 
|Total     |  | 1,201,107    |  |  |               |  |  | 1,201,107       |  |   |                  | 

33

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The table below presents our
common stock purchased during fiscal 2009 per quarter:

Average priceTotal number
    
    
    paid perof shares
    
    
    sharePeriod
    
    purchased
    
    
    (US dollars)First
    
    -
    
    
    -Second
    
    2,420,140
    
    
    10.23Third
    
    -
    
    
    -Fourth
    
    1,201,107
    
    
    13.26Total fiscal 2009
    
    3,621,247
    
    
    11.24


*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, 2004,
in each of our common stock, the S&P 500 companies, and the companies in the
NASDAQ Industrial Index.



34

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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 302009
      
      
      2008
      
      
      2007
      
      
      2006
      
      
      2005Revenue
      $
      246,822
      
      $
      254,056
      
      $
      223,968
      
      $
      196,098
      
      $
      176,290Cost of goods sold, IT processing, servicing and support(1)
      
      70,091
      
      
      67,486
      
      
      54,417
      
      
      50,619
      
      
      50,682Selling, general and administrative(1)
      
      64,833
      
      
      65,362
      
      
      61,625
      
      
      48,627
      
      
      45,897Depreciation and amortization
      
      17,082
      
      
      10,822
      
      
      11,050
      
      
      5,710
      
      
      6,591Costs related to public offering and Nasdaq
        listing
      
      -
      
      
      -
      
      
      -
      
      
      1,529
      
      
      1,817Profit on sale of microlending business
      
      455
      
      
      -
      
      
      -
      
      
      -
      
      
      -Impairment of goodwill(2)
      
      1,836
      
      
      -
      
      
      -
      
      
      -
      
      
      -Operating income
      
      93,435
      
      
      110,386
      
      
      96,876
      
      
      89,613
      
      
      71,303Foreign exchange gain related to short-term
        investment(3)
      
      26,657
      
      
      -
      
      
      -
      
      
      -
      
      
      -Interest income, net
      
      10,828
      
      
      15,722
      
      
      4,401
      
      
      5,889
      
      
      2,389Income before income taxes
      
      130,920
      
      
      126,108
      
      
      101,277
      
      
      95,502
      
      
      73,692Income tax expense(4)
      
      42,744
      
      
      39,192
      
      
      37,574
      
      
      36,653
      
      
      29,666Income from continuing operations
      
      86,601
      
      
      86,695
      
      
      63,679
      
      
      59,232
      
      
      44,562Net income attributable to shareholders
      
      86,601
      
      
      86,695
      
      
      63,679
      
      
      59,232
      
      
      44,562Income from continuing operations per share
        (5):Basic
      $
      1.55
      
      $
      1.52
      
      $
      1.12
      
      $
      1.05
      
      $
      0.81Diluted
      $
      1.54
      
      $
      1.50
      
      $
      1.11
      
      $
      1.03
      
      $
      0.80


(1) Financial Accounting Standards Board Statement No. 123(R)
(revised 2004), Share-Based Payment, was adopted in 2006 in accordance
with the modified prospective method and the 2009, 2008 and 2007 data include a
charge of $5.0 million, $4.0 million and $0.9 million, respectively, in respect
of stock-based compensation. Prior periods were not restated and are therefore
not presented on a comparable basis. (2) We impaired goodwill related to our
financial services segment 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) Our income tax expense for fiscal 2009
includes the impact of the change in the fully distributed rate from 35.45% in
fiscal 2008 to 34.55% in fiscal 2009. Our income tax expense for fiscal 2008
includes the impact of the change in the fully distributed rate from 36.89% in
fiscal 2007 to 35.45% in fiscal 2008. The fully distributed rate for fiscal 2007
was 36.89% . Our income tax expense for fiscal 2006 includes the impact of the
change in the fully distributed rate from 37.78% to 36.89% . The fully
distributed rate for 2005 was 37.78% . (5) Basic and diluted income from
continuing operations was previously restated to reflect a one-for-six reverse
stock split effected on June 13, 2005.

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Additional Operating Data:(in thousands, except percentages)Year ended June
        30,2009
      
      
      2008
      
      
      2007
      
      
      2006
      
      
      2005Cash flows provided by operating activities
      $
      106,768
      
      $
      118,760
      
      $
      65,466
      
      $
      75,777
      
      $
      38,142Cash flows used in investing activities
      
      107,856
      
      
      3,903
      
      
      91,540
      
      
      5,505
      
      
      3,397Cash flows provided by (used in) financingactivities
      $
      40,248
      
      $
      2,864
      
      $
      3,225
      
      $
      29,723
      
      $
      (19
      )Operating income margin
      
      38%
      
      
      43%
      
      
      43%
      
      
      46%
      
      
      40%Consolidated Balance Sheet Data:(in thousands)As of June 30,2009
      
      
      2008
      
      
      2007
      
      
      2006
      
      
      2005Cash and cash equivalents
      $
      220,786
      
      $
      272,475
      
      $
      171,727
      
      $
      189,735
      
      $
      107,749Total current assets
      
      290,294
      
      
      345,734
      
      
      247,982
      
      
      240,718
      
      
      150,664Goodwill
      
      116,197
      
      
      76,938
      
      
      85,871
      
      
      13,923
      
      
      14,636Intangible assets
      
      75,890
      
      
      22,216
      
      
      31,609
      
      
      5,649
      
      
      7,944Total assets
      
      499,487
      
      
      454,071
      
      
      376,090
      
      
      269,979
      
      
      181,754Total current liabilities
      
      77,809
      
      
      76,503
      
      
      54,698
      
      
      43,123
      
      
      34,353Total debt
      
      4,185
      
      
      3,766
      
      
      4,100
      
      
      -
      
      
      -Total shareholders equity
      $
      373,217
      
      $
      340,328
      
      $
      281,073
      
      $
      209,010
      
      $
      137,002


36

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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  1A. Risk Factors.

Overview

We provide a smart-card 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 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 3.5
million beneficiaries in five of South Africas nine provinces, process nearly
65% of retail payment transactions through our EasyPay system and provide mobile
telephone top-up transactions for two of South Africas three 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 these international expansion efforts in detail under
Business.

Sources of Revenue

We generate our revenues by
charging transaction fees to government agencies, merchants and financial
service 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 BGS 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.

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 profit
potential 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.

37

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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 2009

South
Africa

*New SASSA
contract*

We have entered into a new one
year contract with the South African Social Security Agency, or SASSA, for the
payment of social welfare grants in the five provinces where we currently
provide a grant payment service. The new contract commenced on April 1, 2009 and
expires 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. Our current contract with SASSA expires on March 31, 2010, but
may be extended if SASSA has not completed a new tender process prior to
expiration.

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. Under our previous 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 has now assumed responsibility for the pre-funding of all
social welfare grants. We continue to pre-fund certain merchants who facilitate
the distribution of grants through our merchant acquiring system.

We do not expect that the new
contract will materially affect our future results of operations since the
reduced pricing should be offset by the guaranteed minimum number of
beneficiaries per month and the increased interest income we expect to receive
as a result of the elimination of our pre-funding requirement. For more
information regarding our contract with SASSA, refer to discussion under Item
1A. Risk Factors.

*Progress of wage payment
implementation*

The rollout of our wage payment
system has taken a considerable amount of time during which we and the bank
completed installation and integration of the required technological platforms,
which included achieving interoperability of the card with EMV and obtaining
MasterCard certification. In addition, Grindrod Bank joined the South African
Payment System and various payment clearing houses and both we and the bank
developed products, pricing and marketing strategy. We have also concluded
agreements with the relevant financial service providers to ensure that we offer
our customer base a complete suite of financial solutions.

We officially launched the wage
payment system in the KwaZulu-Natal province in May 2008 and we have
successfully implemented several systems with smaller employers in the area,
mainly in the agricultural sector. During the first quarter of fiscal 2009, we
entered into an agreement with our first major corporate customer, which is the
largest provider of security and guarding services in South Africa and employs
approximately 30,000 people. We are currently negotiating additional agreements
to provide our wage payment system with larger employers and with established
agents who will act as originators of bank accounts in the communities and
industries where they have established relationships.

*Merger and Acquisition
Activities in South Africa*

During the third quarter of fiscal
  2009, we sold our traditional microlending business to Finbond Property Finance
  Limited, a JSE-listed company which operates a microlending business in South
  Africa and in connection therewith, we acquired a 22% shareholding in Finbond.
  After the acquisition, Finbond now has approximately 179 branches. Finbond has
  agreed to install our UEPS technology and POS devices at its branches for the
  marketing of pre-paid electricity, pre-paid cell phone air time and bill payments.
  In addition, Finbond will utilize its branch and broker network to market our
  wage payment and EasyPay bill payment solutions. In early July 2009, we began
  installation of POS devices at select Finbond branches.

38

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During the fourth quarter of
fiscal 2009, we acquired all the stock of RMT Systems (Proprietary) Limited, a
South African private company for $1.4 million in cash. RMT Systems is one of
the three approved vendors of prepaid electricity in the greater Cape Town area
in South Africa. We intend to integrate this offering into our EasyPay value
added services offering.

*Proposed Abolishment of
Secondary Taxation on Companies*

On February 21, 2007, the South
African Minister of Finance announced in his National Budget speech that the
National Government intends to phase out Secondary Taxation on Companies, or
STC, and introduce a dividend tax at a shareholder level. Currently, South
African companies are required to pay STC at a rate of 10.00% on dividends
distributed, subject to certain exemptions. If a dividend tax is introduced
South African companies will no longer be liable to pay STC and the shareholder
will be liable to pay the dividend tax. Treaty relief would be available for
foreign shareholders.

The conversion to a dividend tax
is expected during calendar 2011. We can not reasonably determine whether the
conversion to a dividend tax will be enacted as proposed and we will comply with
that new tax legislation once it has been enacted. If the announcements made by
the South African Minister of Finance in his National Budget speeches regarding
the second phase are enacted, under current enacted tax legislation, we expect
the proposed replacement of STC with a dividend tax to reduce our current fully
distributed rate of 34.55% to 28% in South Africa. Under US GAAP, we apply the
fully distributed tax rate of 34.55% to our deferred taxation assets and
liabilities. We have not yet determined whether we would qualify for the treaty
relief available to foreign shareholders.

Included in our earnings for
fiscal 2009, is deferred income tax expense of approximately $8.8 million (ZAR
78.7 million) related to the application of the fully distributed rate of 34.55%
compared with the South African statutory rate of 28% to our Income before
income taxes. The following table illustrates the effect on our June 30, 2009,
income tax expense, earnings per share and net deferred tax liability as if the
conversion to a dividend tax described above had been enacted on July 1,
2008:

|Table 1                                                              |   | Year ended    |  
|-------------------------------------------------------------------- | - | ------------- | -
|                                                                     |   | June 30, 2009 |  
|                                                                     |   |               |  
|                                                                     |   | Actual        |  
|                                                                     |   | $ 000        |  
|                                                                     |   |               |  
|                                                                     |   |               |  
|Fully distributed tax rate                                           |   | 34.55%        |  
|                                                                     |   |               |  
|Income tax expense before change in fully distributed
      tax rate | $ | 46,200        |  
|Reduction in income tax expense resulting from change in fully       |   |               |  
|distributed rate during fiscal 2009(2)                               |   | (3,456        | )
|Income tax expense                                                   | $ | 42,744        |  
|                                                                     |   |               |  
|Net deferred tax liability reversal to net income (2)                |   | -             |  
|                                                                     |   |               |  
|Basic earnings per share, in $                                       |   | 1.55          |  
|                                                                     |   |               |  
|Net deferred tax liability (asset) as at June 30, 2009               | $ | 29,455        |  

(1) Illustrates the abolishment
of STC had this been enacted on July 1, 2008. Accordingly, the fully distributed
rate decreases from 34.55% (effective as at July 1, 2008) to 28%. All South
African deferred tax assets and liabilities would then be measured at 28% which
would result in a reversal of a portion of the net deferred tax liabilities
recognized.

(2) 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.

(3) The net deferred tax
liability reversal to net income represents the portion of the net deferred tax
liability rate adjustment as of June 30, 2009, translated at rates applicable as
of June 30, 2009, assuming the fully distributed tax rate is 28%.

As discussed above, we can not
reasonably determine whether, or when, the conversion to a dividend tax
amendments will be enacted as proposed and what the ultimate effect on our
reported earnings will be.

39

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***Outside
South Africa***

*Merger and Acquisition
Activities*

In the first quarter of fiscal
2009, we acquired 80.1% of BGS Smartcard Systems AG, or BGS, an Austrian private
company that provides smart card-based payment systems to banks, enterprises and
government authorities in Russia, Ukraine, Uzbekistan, India and Oman. We
believe that the acquisition of BGS offers us multiple strategic benefits,
including increasing our revenues from providing our financial services and
value-added products to a new cardholder base; enhancing our product offering by
leveraging our technology platforms and IT development resources; increasing the
depth of our management team with the addition of experienced executives; and
accelerating the rollout of UEPS in Russia and other new territories. BGS
operations are highly seasonal, with its second and fourth quarters typically
being its most profitable and its first and third quarters generally the
weakest. During the 2009 fiscal year BGS generated a majority of its revenues
and operating income during the second quarter. While BGS currently derives most
of its revenues from sales of systems, which we reflect in our Hardware,
software and related technology sales segment, we are focused on migrating BGS
business model 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.

*The African Continent and
Iraq*

During fiscal 2009, we recorded
revenue from the performance of software development activities and hardware
delivery under our Iraqi contract and from the delivery of hardware, including
smart cards, under our contract with the Bank of Ghana. During fiscal 2010, we
expect to commence generating license fees under these contracts and to sell
additional smart cards and perform revenue-generating maintenance services to
the Bank of Ghana.

In February 2009, SmartSwitch
Namibia signed an agreement with the Government Insurance Pension Fund in
Namibia. Enrolment of the systems is expected to commence in the second quarter
of fiscal 2010 and SmartSwitch Namibia expects to generate revenues related to
this agreement in the third quarter of fiscal 2010. Negotiations are currently
underway with other financial institutions and companies that wish to
participate as customers of SmartSwitch Namibia. SmartSwitch Namibia is
currently expanding its offering to include medical identification and life
insurance sales and premium collection. Negotiations with the service providers
are at an advanced stage. We expect the suite of smart card applications to
include banking, retail, money transfers, third party bill payments, wages and
social security grants.

During fiscal 2009, SmartSwitch
Botswana commenced registration of food voucher recipients under the tender
granted by the Department of Social Services in Botswana. SmartSwitch Botswana
commenced paying recipients of food voucher grants using our UEPS technology in
April 2009. We expect SmartSwitch Botswana to generate transaction fees during
fiscal 2010 from the payment of food voucher grants.

SmartSwitch Nigeria has entered
into a contract with the River State government for the distribution of funds
using our UEPS technology. The system went live during the fourth quarter of
2009 and currently there are 13,000 card holders in the River State using our
technology.

*Net1 Virtual
Card*

During fiscal 2009, we
established a marketing office for our Virtual Card product in Dallas, Texas.
The Virtual Card technology was successfully demonstrated in a live environment
and our marketing team has introduced the concept to a number of prospective
partners, including mobile operators, banks and card associations.

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. In addition,
corporate and corporate office activities that are impracticable to ascribe
directly to any of the other operating segments, as well as any inter-segment
eliminations are included in corporate/ eliminations. See Note 19 to our
consolidated financial statements for further information about our operating
segments.

40

---

***Transaction-Based
Activities***

The transaction-based activities
operating segment consists primarily of our contracts to distribute social
welfare payments in South Africa through our subsidiary Cash Paymaster Services
(Proprietary) Limited, or CPS, and its operating subsidiaries and our EasyPay
operation. CPSs operating subsidiaries utilize the UEPS technology to
administer and distribute social welfare grants in five of South Africas nine
provinces. Revenues from transaction-based activities 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
EasyPay. The expenses associated with our provincial contracts transaction-based
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 EasyPay transaction-based
activities are primarily variable expenses such as data communication charges in
order to switch transactions and fixed expenses such as salaries, depreciation
of switch fixed assets and property rental.

We experience seasonality in this
segment, with revenue in the second quarter being lower than in the other three
quarters. Our beneficiaries are able to load their grants onto their cards as
soon as the grant payment file is activated, which typically happens during the
week preceding the commencement of a calendar month. We recognize the fee
revenue related to the distribution of welfare grants when the beneficiaries
load the grants to their cards. The general exception to this rule is the
January payment cycle, when the activation of the payment file is done on a
limited basis at merchant locations only, which results in a lower number of
grants distributed during the last week of December. The activation of the
payment file for any month also depends on whether the first calendar day of a
month is a weekday, or a Saturday, Sunday or public holiday.

***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. As described under Transaction-Based Activities above, 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. The fixed
costs associated with this business were primarily office space and salaries.

***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.

41

---

Three of our largest customers in
this segment are Sberbank (the largest bank in the Russian Federation), the
Central Bank of Ghana and Nedbank Limited, one of South Africas largest banks
by asset size. Our transactions with the Central Bank of Ghana during fiscal
2009 and 2008 are discussed above underTrends and Material
Developments Affecting our BusinessInternational
ExpansionGhana. 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 BGS, UETS, cryptographic
solutions, chip and GSM licensing, and POS Solutions.

We also experience seasonality in
this segment, as BGS operations are typically most profitable in second and
fourth quarters.

Critical Accounting Policies

Our annual 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***

Estimates and assumptions
required to be made by Statement of Financial Accounting Standards No. 123R,
Share-Based Payment, or FAS 123R require our managements judgment. FAS
123R requires 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. 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 $5.0
million, $4.0 million and $0.9 million for the years ended June 30, 2009, 2008
and 2007, respectively.

***Intangible Assets
Acquired Through the Acquisition of BGS and Prism***

The fair values of the
identifiable intangible assets acquired through the acquisition of BGS and Prism
were determined by management and guidance provided by FAS 141, Business
Combinations. During fiscal 2009 and 2007, respectively, BGS and Prism and
EasyPay intangible assets were valued separately. The relief from royalty method
was used to value Prism and EasyPay trademarks, the multi-period excess earnings
was used to value Prism and EasyPay customer relationships, the income approach
was used to value BGS customer relationships and the cost approach method was
used to value Prism and EasyPay software and unpatented technology. Management
was required to make 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.

42

---

***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***

We account for the development
cost of software intended for sale to licensees in accordance with FAS No. 86,
Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed, or FAS 86. FAS 86 requires 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, 2009, 2008 or 2007, particularly because
the main part of our development is the enhancement and upgrading of existing
products.

We account for the costs to
develop software for our internal use in accordance with Statement of Position
98-1 Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, or SOP 98-1, issued by the American Institute of Certified
Public Accountants. SOP 98-1 requires these costs to be 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.

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,
within the criteria set by FAS 86 or SOP 98-1, 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.

***Revenue Recognition 
System Implementation Projects***

We undertake 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, except 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. During fiscal 2009 and
2007, we did not recognize any revenue using the percentage of completion
method. For fiscal 2008, we recognized revenue of approximately $14.2 million
using the percentage of completion method related to a contract with the Central
Bank of Ghana.

**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, 2009*

Refer to Note 2 of our
consolidated financial statements for a full description of recent accounting
pronouncements not yet adopted as of June 30, 2009, including the expected dates
of adoption and effects on financial condition, results of operations and cash
flows.

43

---

**Currency Exchange Rate Information**

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

Table 2
      
      Year ended June 30,2009
      
      
      2008
      
      
      2007ZAR : $ average exchange rate
      
      9.0484
      
      
      7.3123
      
      
      7.2188Highest ZAR : $ rate during period
      
      11.8506
      
      
      8.2440
      
      
      7.9748Lowest ZAR : $ rate during period
      
      7.1556
      
      
      6.4262
      
      
      6.7193Rate at end of period
      
      7.8821
      
      
      7.9645
      
      
      7.0760




***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, 2009,
2008 and 2007, 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 3
      
      June 30,2009
      
      
      2008
      
      
      2007Income and expense items: $1 = ZAR .
      
      8.9397
      
      
      7.2905
      
      
      7.2100Balance sheet items: $1 = ZAR
      
      7.8821
      
      
      7.9645
      
      
      7.0760


44

---

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 the year ended June 30, 2008 and 2007, do not reflect the operations of
  BGS as we completed that acquisition in September 1, 2008. BGSs operations
  are included in our consolidated financial statements from September 1, 2008.

***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:

- weakening of the ZAR, our functional currency, against the US dollar, our
  reporting currency, which had a negative impact on our fiscal 2009 revenues
  and net income in US dollars;
- one-time foreign exchange gain recorded in fiscal 2009 related to the
  asset swap we entered into during the period that the short-term loan to
  acquire BGS was to remain outstanding;
- revenue and intangible asset amortization related to our acquisition of
  BGS during the first quarter of fiscal 2009;
- revenues from our Ghana contract which were primarily recorded in fiscal
  2008; and
- increased stock-based compensation charges for fiscal 2009 resulting from
  stock options granted in August 2008 and May 2009.

**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 4                                                  |  | (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                   |  
|Income before minority interest and loss from equity-    |  |                          |  
|accounted investments                                    |  | 88,176                   |  
|Minority interest                                        |  | 701                      |  
|Loss from equity-accounted investments                   |  | (874                     | )
|Net income                                               |  | 86,601                   |  

45

---

|                                                         |  | In South African Rand |  
|-------------------------------------------------------- |  | --------------------- | -
|Table 5                                                  |  | (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               |  
|Income before minority interest and loss from equity-    |  |                       |  
|accounted investments                                    |  | 788,267               |  
|Minority interest                                        |  | 6,267                 |  
|Loss from equity-accounted investments                   |  | (7,813                | )
|Net income                                               |  | 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
BGS.

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 BGS 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.

46

---

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

|Table 6                                                               |  | Year ended June
      30, | 
|--------------------------------------------------------------------- |  | ------------------------- | 
|                                                                      |  | 2009                      | 
|                                                                      |  | $ 000                    | 
|Amortization included in depreciation and amortization
      expense: |  | 12,387                    | 
|Prism acquisition                                                     |  | 4,453                     | 
|RMT acquisition                                                       |  | 450                       | 
|BGS acquisition                                                       |  | 7,484                     | 
|                                                                      |  |                           | 
|Deferred tax included in income tax expense:                          |  | 3,515                     | 
|Prism acquisition                                                     |  | 1,515                     | 
|RMT acquisition                                                       |  | 126                       | 
|BGS acquisition                                                       |  | 1,874                     | 
|                                                                      |  |                           | 
|Table 7                                                               |  | Year ended June 30,       | 
|                                                                      |  | 2009                      | 
|                                                                      |  | ZAR 000                  | 
|Amortization included in depreciation and amortization
      expense: |  | 110,734                   | 
|Prism acquisition                                                     |  | 39,805                    | 
|RMT acquisition                                                       |  | 4,024                     | 
|BGS acquisition                                                       |  | 66,905                    | 
|                                                                      |  |                           | 
|Deferred tax included in income tax expense:                          |  | 31,420                    | 
|Prism acquisition                                                     |  | 13,540                    | 
|RMT acquisition                                                       |  | 1,127                     | 
|BGS 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.

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 BGS 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 BGS 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.

47

---

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 8                                           |  | In United States
      Dollars (US GAAP) |  
|------------------------------------------------- |  | ---------------------------------------- | -
|                                                  |  | Year ended June 30,                      |  
|                                                  |  | 2009                                     |  
|Operating Segment                                 |  | $000                                    |  
|Consolidated revenue:                             |  |                                          |  
|Transaction-based activities                      |  | 148,399                                  |  
|Smart card accounts                               |  | 29,576                                   |  
|Financial services                                |  | 5,430                                    |  
|Hardware, software and related technology sales   |  | 63,417                                   |  
|Total consolidated revenue                        |  | 246,822                                  |  
|Consolidated operating income (loss):             |  |                                          |  
|Transaction-based activities                      |  | 83,509                                   |  
|Operating income before
      amortization        |  | 85,404                                   |  
|Amortization of intangible assets                 |  | (1,895                                   | )
|Smart card accounts                               |  | 13,442                                   |  
|Financial services                                |  | (34                                      | )
|Operating income before
      profit on sale of   |  |                                          |  
|microlending business and impairment of           |  |                                          |  
|goodwill                                          |  | 1,347                                    |  
|Profit on sale of microlending business
      and |  |                                          |  
|impairment of goodwill                            |  | (1,381                                   | )
|Hardware, software and related technology sales   |  | 5,498                                    |  
|Operating income before
      amortization        |  | 15,990                                   |  
|Amortization of intangible assets                 |  | (10,492                                  | )
|Corporate/eliminations                            |  | (8,980                                   | )
|Total consolidated operating income               |  | 93,435                                   |  

|Table 9                                         |  | 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                               |  

48

---

**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.

Operating income margin of our
transaction-based activities 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.

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

We have installed our POS
terminals in those merchant locations we deem the most important to service the
bulk of our cardholder base. The productivity of the existing terminal base
continues to improve, as is evident from the increase in the number of
transactions processed per POS terminal installed. We believe that the existing
terminal base and number of participating UEPS retail locations has reached or
is close to saturation and do not expect significant growth in the future. The
acquisition of EasyPay provides us with potential access to an existing terminal
base of approximately 50,000 customer-owned terminals, the majority of which are
situated in retailers in the urban and semi-urban areas of South Africa. These
50,000 terminals were acquired from Prism in prior periods and are owned by the
retailers. In order for these terminals to become UEPS enabled, we will need to
equip these terminals with biometric readers and install our UEPS software. We
have already successfully demonstrated the integration of the biometric readers
to the major retailers and we are currently negotiating the commercial terms and
conditions of implementing the biometric solution.

During the first quarter of
fiscal 2009 we performed an extensive exercise to identify those merchants that
had contracted to participate in our merchant acquiring system and had an
installed but unused POS device. After discussions with these merchants a number
of them cancelled their contracts to participate in our merchant acquiring
system. In addition, we have implemented procedures to identify merchants that
are abusing our merchant acquiring system. If a merchant is identified as
abusing the merchant acquiring system, its contract is terminated and its
equipment is removed. However, these contract cancellations and terminations
have had no impact on the number of grants paid through our merchant acquiring
system. Excluding the impact of the cancellations and terminations during fiscal
2009, the increase in the number of POS devices since June 2008 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.

49

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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 10
      
      Three months endedMar. 31,
      
      
      Jun. 30,
      
      
      Sept. 30,
      
      
      Dec. 31,
      
      
      Mar. 31,
      
      
      Jun. 30,2008
      
      
      2008
      
      
      2008
      
      
      2008
      
      
      2009
      
      
      2009Total POS devices installed
      
      4,222
      
      
      4,394
      
      
      4,170
      
      
      4,182
      
      
      4,263
      
      
      4,427Number of participating UEPS retail locations
      
      2,468
      
      
      2,454
      
      
      2,382
      
      
      2,385
      
      
      2,391
      
      
      2,422Value of transactions processed through POSdevices during the quarter (1) (in $ 000)
      
      264,525
      
      
      287,725
      
      
      319,410
      
      
      269,425
      
      
      276,947
      
      
      341,270Value of transactions processed through POSdevices during the completed pay cycles for thequarter (2) (in $ 000)
      
      268,085
      
      
      279,390
      
      
      293,899
      
      
      253,967
      
      
      278,685
      
      
      345,511Value of transactions processed through POSdevices during the quarter (1) (in ZAR 000)
      
      1,996,072
      
      
      2,243,592
      
      
      2,486,912
      
      
      2,550,082
      
      
      2,758,391
      
      
      2,818,276Value of transactions processed through POSdevices during the completed pay cycles for
        thequarter (2) (in ZAR 000)
      
      2,022,938
      
      
      2,178,596
      
      
      2,288,288
      
      
      2,496,496
      
      
      2,775,707
      
      
      2,853,303Number of grants paid through POS devicesduring the quarter (1)
      
      3,910,667
      
      
      4,158,161
      
      
      4,543,147
      
      
      4,383,642
      
      
      4,690,822
      
      
      4,623,666Number of grants paid through POS devicesduring the completed pay cycles for the quarter(2)
      
      3,979,363
      
      
      4,030,571
      
      
      4,208,634
      
      
      4,328,107
      
      
      4,769,010
      
      
      4,676,460Average number of grants processed perterminal during the quarter (1)
      
      917
      
      
      965
      
      
      1,061
      
      
      1,050
      
      
      1,111
      
      
      1,064Average number of grants processed perterminal during the completed pay cycles
        forthe quarter (2)
      
      933
      
      
      936
      
      
      983
      
      
      1,036
      
      
      1,129
      
      
      1,076


(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.

The following chart presents the
number of POS devices installed and the average spend per POS device, per pay
cycle and calendar month, during the 18 month period ended June 30, 2009:



50

---

The following chart presents the
growth in the value of loads at merchant locations processed through our
installed base of POS devices, per pay cycle and calendar month, during
the 18 month period ended June 30, 2009:



The following graph presents the
number of social welfare grants loaded at merchant locations, per pay cycle
and calendar month, for the 18 month period ended June 30, 2009:



51

---

***Higher
number of grants paid and pricing increases under our provincial
contracts*:**

During fiscal 2009, we
experienced an increase in the number of grants paid in four of the provinces
where we administer payments of social welfare grants. This growth was mainly
due to an increase in the number of child support grants and disability grants
approved by the various provincial governments. In total, the number of payments
processed during fiscal 2009 increased 1.1% to 48,128,792 from fiscal 2008.

Our new interim contract with
SASSA became effective on April 1, 2009 and expires on March 31, 2010. 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. Under our previous 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. We expect this
new price to reduce our average revenue per grant paid during fiscal 2010
compared with fiscal 2009.

The higher number of grants paid
under existing provincial contracts during the year ended June 30, 2009, as well
as average revenue per grant paid, are detailed below:

Table 11
      
      Year ended June 30,Number of
      
      
      Average Revenue
        per Grant PaidGrants Paid
      
      
      2009
      
      
      2008
      
      
      2009
      
      
      2008Province
      
      2009
      
      
      2008
      
      
      $(1)
      
      
      $(2)
      
      
      ZAR(1)
      
      
      ZAR(2)KwaZulu-Natal (A).
      
      20,796,751
      
      
      20,337,526
      
      
      2.93
      
      
      3.03
      
      
      26.49
      
      
      22.19Limpopo (B)
      
      11,867,222
      
      
      11,791,095
      
      
      2.25
      
      
      2.43
      
      
      20.33
      
      
      17.76North West (C)
      
      5,188,361
      
      
      4,984,479
      
      
      2.79
      
      
      2.98
      
      
      25.26
      
      
      21.79Northern Cape (D)
      
      1,999,881
      
      
      1,986,525
      
      
      2.62
      
      
      2.79
      
      
      23.70
      
      
      20.44Eastern Cape (E)
      
      8,276,577
      
      
      8,491,929
      
      
      2.12
      
      
      2.19
      
      
      19.16
      
      
      16.05**Total**
      
      48,128,792
      
      
      47,591,554


*(1) Average Revenue per Grant
Paid excludes $ 0.61 (ZAR 5.50) related to the provision of smart card
accounts.*

*(2) Average Revenue per Grant
Paid excludes $ 0.75 (ZAR 5.50) related to the provision of smart card
accounts.*

(A) - in ZAR, the
increase in the Average Revenue per Grant Paid in KwaZulu-Natal was due to an
increase in the value of all grant types, which forms the basis of our
remuneration in this province as well as an inflation adjustment to the rate we
charge. During the second quarter of fiscal 2009, the South African government
announced an interim increase in the grant amounts payable to beneficiaries.
These increases were effective from October 2008, but paid in December 2008.
Effective April 1, 2009, we receive a fixed amount per beneficiary paid in the
province.

(B) - in ZAR, the increase
in the Average Revenue per Grant Paid in Limpopo was due to the negotiated
annual price adjustment effective from January 2009. Effective April 1, 2009, we
receive a fixed amount per beneficiary paid in the province.

(C) - in ZAR, the increase
in the Average Revenue per Grant Paid in North West was due to the negotiated
annual price adjustment approved by the provincial government in September 2008.
Effective April 1, 2009, we receive a fixed amount per beneficiary paid in the
province.

(D) - in ZAR, the increase
in the Average Revenue per Grant Paid in Northern Cape was due to the negotiated
annual price adjustment effective from January 2008. Effective April 1, 2009, we
receive a fixed amount per beneficiary paid in the province.

(E) - in ZAR, the increase
in the Average Revenue per Grant Paid in Eastern Cape was due to negotiated
price increases effective from November 2008. Effective April 1, 2009, we
receive a fixed amount per beneficiary paid in the province.

***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. We do not
expect a significant fluctuation, in ZAR, in the average fee per transaction
during the first quarter of fiscal 2010.

52

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Operating income margins
generated by EasyPay during fiscal 2009 increased to 45% from 34% in 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. Operating income
margin before amortization of EasyPay intangible assets during fiscal 2009 and
2008 was 55% and 46%, respectively.

**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.

**Financial
services**

On March 1, 2009, we sold our
traditional microlending business to Finbond and therefore, segment results
include revenue and operating loss from this business for all of fiscal 2008 and
the first eight months of fiscal 2009. Operating loss for fiscal 2009 also
includes a profit of $0.5 million (ZAR 4.1 million) on the sale of this
business.

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.

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. The NCA regulates fees and interest charged on micro-lending
loans and imposes credit check obligations on lenders prior to granting of
credit to individuals. We establish an allowance for doubtful traditional
microlending loans in respect of which we consider it likely that all or a
portion of the principal amount of the loan or interest thereon would not be
repaid by the borrower. We consider default likely after a specified period of
non-payment, which is generally not more than 150 days. We assessed this
allowance based on a review by management of the aging of outstanding amounts,
the payment history in relation to those specific accounts and the overall
default history. Under the Finbond agreement, we are responsible for the
collection of loans granted prior to March 1, 2009. Finbond has notified us that
certain of these loans sold to them have not been settled by the borrower and we
are responsible for recovery. The overall recovery of loans sold was better than
initially anticipated at the time of the sale which has result in a profit
compared to the loss on sale of the traditional microlending business during the
third quarter of fiscal 2009.

53

---

Some of the key indicators of
these businesses are illustrated below:

Table 12
      
      As at June 30,2009
      
      
      2008
      
      
      
      
      
      2009
      
      
      2008$%
      
      
      ZAR
      
      
      ZAR
      
      
      ZAR %$000
      
      
      $ 000
      
      
      change
      
      
      000
      
      
      000
      
      
      changeTraditional microlending:Finance loans receivable  gross
      
      229
      
      
      2,864
      
      
      (92)%
      
      
      1,804
      
      
      22,814
      
      
      (92)%Allowance for doubtful
        finance loansreceivable
      
      (226
      )
      
      (1,007
      )
      
      (78)%
      
      
      (1,785
      )
      
      (8,020
      )
      
      (78)%Finance
        loans receivable  net
      
      3
      
      
      1,857
      
      
      (100)%
      
      
      19
      
      
      14,794
      
      
      (100)%UEPS-based lending:Finance loans receivable net andgross
        (i.e., no allowance)
      
      2,560
      
      
      2,444
      
      
      5%
      
      
      20,178
      
      
      19,464
      
      
      4%Total
        finance loans receivable,net
      
      2,563
      
      
      4,301
      
      
      
      
      
      20,197
      
      
      34,258


Excluding the effects of the goodwill
  impairment and loss 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 BGS only for fiscal 2009. The table below presents the
contribution of BGS to our revenue and operating income during fiscal 2009:

|Table 13                                                                  |  | Year ended June 30, |  
|------------------------------------------------------------------------- |  | ------------------- | -
|                                                                          |  | 2009                |  
|                                                                          |  | 000                |  
|Revenue                                                                   |  | 63,417              |  
|Hardware, software and related technology
      sales excluding BGS       |  | 43,857              |  
|BGS                                                                       |  | 19,560              |  
|                                                                          |  |                     |  
|Operating income before amortization of intangible
      assets           |  | 15,990              |  
|                                                                          |  |                     |  
|Operating income                                                          |  | 5,498               |  
|Hardware, software and related technology
      sales excluding BGS       |  | 8,474               |  
|BGS                                                                       |  | (2,976              | )
|BGS excluding amortization
      of acquisition related intangible assets |  | 4,508               |  
|Amortization
      of acquisition related intangible assets               |  | (7,484              | )

|Table 14                                                                  |  | Year ended June 30, |  
|------------------------------------------------------------------------- |  | ------------------- | -
|                                                                          |  | 2009                |  
|                                                                          |  | ZAR 000            |  
|Revenue                                                                   |  | 566,928             |  
|Hardware, software and related technology
      sales excluding BGS       |  | 392,068             |  
|BGS                                                                       |  | 174,860             |  
|                                                                          |  |                     |  
|Operating income before amortization of intangible
      assets           |  | 142,946             |  
|                                                                          |  |                     |  
|Operating income                                                          |  | 49,150              |  
|Hardware, software and related technology
      sales excluding BGS       |  | 75,755              |  
|BGS                                                                       |  | (26,605             | )
|BGS 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 BGS 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 BGS
intangible assets and fewer sales to the Bank of Ghana, offset by the inclusion
of operating income generated by BGS.

54

---

Revenue and operating income for
fiscal 2009 comprises:

- software development and customization, sales of terminals and smart cards
  related to our Ghana contract;
- sales of DUET licenses, smart cards and terminals to BGS 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.

Segment revenues for fiscal 2008
included approximately $14.2 million (ZAR 102.8 million) from software
development and customization activities and hardware under our Ghana contract
compared with revenues of $8.6 million (ZAR 76.0 million) during fiscal 2009.
Software development and customization are high margin activities for us and
contributed to the increase in operating income for the segment during fiscal
2008 compared with fiscal 2009.

Our revenues for fiscal 2009 and
2008, includes approximately $3.2 million (ZAR 25.8 million) and $3.2 million
(ZAR 23.6 million), respectively, from sales to Nedbank. Sales of hardware to
Nedbank occur on an ad hoc basis.

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.

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 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 operating
loss in this segment 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 operating 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 2008 Compared
to Fiscal 2007***

The following factors had a
significant influence on our results of operations for the 2008 fiscal year as
compared to the 2007 fiscal year:

- weakening of the ZAR, our functional currency, against the US dollar, our
  reporting currency, which had a negative impact on our revenues and net income
  in US dollars;
- settlement payment received from SASSA during fiscal 2007 which affects
  the comparability of revenue and net income between the periods due to the
  non-recurring nature of a substantial portion of that payment;
- increased revenues from price increases under all of our provincial
  contracts;
- increased number of grants paid in all provinces, particularly in the
  North West province;
- commencement of the contract to provide the Central Bank of Ghana with a
  National Switch and Smart Card Payment System utilizing our UEPS technology;
- increased revenues from continued adoption of our merchant acquiring
  system by cardholders;
- increased stock-based compensation charges resulting from restricted stock
  grants in fiscal 2008;
- increased interest income resulting from higher deposit rates and higher
  overall cash balances; and
- change in our fully distributed tax rate from 36.89% to 35.45%, which had
  a positive impact on our net income.

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 15                                                       |  | (US GAAP)                |  
|                                                               |  | Year ended June 30,      |  
|                                                               |  | 2008                     |  
|                                                               |  | $ 000                   |  
|Revenue                                                        |  | 254,056                  |  
|Cost of goods sold, IT processing, servicing
      and support |  | 67,486                   |  
|Selling, general and administration                            |  | 65,362                   |  
|Depreciation and amortization                                  |  | 10,822                   |  
|Operating income                                               |  | 110,386                  |  
|Interest income, net                                           |  | 15,722                   |  
|Income before income taxes                                     |  | 126,108                  |  
|Income tax expense                                             |  | 39,192                   |  
|Income before minority interest and (loss) earnings from       |  |                          |  
|equity-accounted investments                                   |  | 86,916                   |  
|Minority interest                                              |  | (815                     | )
|(Loss) Earnings from equity-accounted investments              |  | (1,036                   | )
|Net income                                                     |  | 86,695                   |  

|                                                               |  | In South African Rand |  
|-------------------------------------------------------------- |  | --------------------- | -
|Table 16                                                       |  | (US GAAP)             |  
|                                                               |  | Year ended June 30,   |  
|                                                               |  | 2008                  |  
|                                                               |  | ZAR                   |  
|                                                               |  | 000                  |  
|Revenue                                                        |  | 1,852,188             |  
|Cost of goods sold, IT processing, servicing and support       |  | 492,005               |  
|Selling, general and administration                            |  | 476,520               |  
|Depreciation and amortization                                  |  | 78,897                |  
|Operating income                                               |  | 804,766               |  
|Interest income, net                                           |  | 114,621               |  
|Income before income taxes                                     |  | 919,387               |  
|Income tax expense                                             |  | 285,728               |  
|Income before minority interest and (loss)
      earnings from |  |                       |  
|equity-accounted investments                                   |  | 633,659               |  
|Minority interest                                              |  | (5,942                | )
|(Loss) Earnings from equity-accounted investments              |  | (7,553                | )
|Net income                                                     |  | 632,048               |  

Analyzed in ZAR, the increase in
revenue and cost of goods sold, IT processing, servicing and support for fiscal
2008, was primarily due to the higher volumes in our transaction-based
activities, a greater number of UEPS-based smart card holders and the sale of
hardware and the provision of software development and customization services to
the Central Bank of Ghana.

Our overall operating income
margin remained constant at 43% but varied by operating segment as discussed in
further detail in our segment discussion below.

Cost of goods sold, IT
processing, servicing and support during fiscal 2008 and 2007 includes a
stock-based compensation charge of $0.2 million (ZAR 1.3 million) and $0.3
million (ZAR 2.0 million), respectively, related to options granted to
employees. These amounts are net of adjustments resulting from forfeitures of
$0.1 million (ZAR 1.1 million) and $0.2 million (ZAR 1.5 million),
respectively.

56

---

Selling, general and
administration expenses increased during fiscal 2008 from the comparable period
in fiscal 2007 primarily due to the stock-based compensation charge related to
the restricted stock grants awarded in the first and third quarters of fiscal
2008 and increases in goods and services purchased from third parties, including
the effects of the increase in inflation in South Africa. Selling, general and
administration expenses during fiscal 2008 and 2007 includes a stock-based
compensation charge of $4.0 million (ZAR 29.2 million) and $0.6 million (ZAR 4.6
million), respectively, related to options and restricted stock granted to
employees, executive officers and directors. These amounts are net of
adjustments resulting from forfeitures of $0.1 million (ZAR 1.0 million) and
$0.2 million (ZAR 4.4 million), respectively.

Our direct costs of maintaining a
listing on Nasdaq as well as compliance with Sarbanes includes independent
directors fees, legal fees, fees paid to Nasdaq, our compliance officers
salary, fees paid to consultants who assist with compliance with Sarbanes and
fees paid to our independent accountants related to the audit and review
process. This has resulted in expenditures of $1.9 million (ZAR 13.8 million)
and $1.5 million (ZAR 10.8 million) during fiscal 2008 and 2007, respectively.

Depreciation and amortization
includes the amortization charge related to the acquisition of Prism of $5.5
million (ZAR 39.8 million) and $5.4 million (ZAR 39.0 million), respectively,
for fiscal 2008 and 2007. The deferred tax benefit included in our statement of
operations related to the intangible amortization charge for fiscal 2008 and
2007 was $1.9 million (ZAR 13.9 million) and $2.0 million (ZAR 14.2 million),
respectively. 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. We
are currently in an extension phase with all our contracts and the majority of
our property, plant and equipment related to the administration and distribution
of social welfare grants has been written off. Accordingly, depreciation expense
related to these activities decreased during fiscal 2008, which was partially
offset by the increase in depreciation of our participating merchant POS
terminals. We expect our depreciation charge to increase during fiscal 2009 as a
result of the acquisition of the latest generation Stratus backend processing
computers for current and new operations, improvements to our smart card
manufacturing facility, and the replacement of motor vehicles in certain
provinces where we provide a social welfare distribution and administration
service.

Interest on surplus cash during
fiscal 2008 increased to $27.4 million (ZAR 199.7 million) from $16.4 million
(ZAR 118.2 million) during fiscal 2007. The increase in interest on surplus cash
held in South Africa was due to a higher average daily ZAR cash balance during
fiscal 2008 compared with fiscal 2007 and the higher deposit rates resulting
from the adjustment in the South African prime interest rate from an average of
approximately 12.12% per annum during fiscal 2007, to 14.21% per annum during
fiscal 2008.

During fiscal 2008, our finance
costs decreased due to an increase in available cash for our pre-funding
obligation which resulted in less utilization of our short-term facilities which
was offset by the increase in the average rates of interest on short-term
facilities. Finance costs decreased from $12.0 million (ZAR 86.5 million) during
fiscal 2007 to $11.7 million (ZAR 85.3 million) during fiscal 2008.

Total tax expense for fiscal 2008
was $39.0 million (ZAR 284.5 million) compared with $37.6 million (ZAR 270.9
million) during fiscal 2007. Deferred tax assets and liabilities are measured
utilizing the enacted fully distributed tax rate. Accordingly, a reduction in
the fully distributed tax rate from 36.89% to 35.45% results in lower deferred
tax assets and liabilities and the net effect of the change in tax rate of $5.4
million (ZAR 38.5 million) is included in our income tax expense in our audited
consolidated statement of operations for fiscal 2008. If the effect of the
change in our fully distributed tax rate is ignored, the increase in total tax
expense was primarily due to our increased profitability in our
transaction-based and hardware, software and related technology sales
activities. Our effective tax rate during fiscal 2008 was 31.0%, compared to
37.1% during fiscal 2007. The change in our effective tax rate was primarily due
to reduction in our fully distributed tax rate to 35.45% and fewer
non-deductible expenses during fiscal 2008 compared to fiscal 2007. The adoption
of FIN 48 did not have a significant impact on our effective tax rate during
fiscal 2008.

Loss from equity-accounted
investments for fiscal 2008, of $1.0 million (ZAR 7.6 million) does not include
equity-accounted earnings attributable to Permit because Permit was sold in the
fourth quarter of fiscal 2007. Earnings from equity-accounted investments during
2007 of $0.2 million (ZAR 1.3 million) does not include equity-accounted losses
attributable to VinaPay because we had not invested in this entity as of June
30, 2007. During fiscal 2008, we recognized income from license fees, software
and hardware sales made to equity-accounted investees in prior periods of
approximately $0.6 million (ZAR 4.2 million). Eliminations of hardware sales and
other services and income from license fees, software and hardware sales made in
prior periods have been included in (loss) earnings from equity-accounted
investments.

57

---

**Results
of operations by operating segment**

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

Table 17
      
      In United States
        Dollars (US GAAP)Year ended June 30,2008
      
      
      % of
      
      
      2007
      
      
      % of
      
      
      %Operating Segment
      
      $ 000
      
      
      total
      
      
      $ 000
      
      
      total
      
      
      changeConsolidated revenue:Transaction-based activities
      
      153,444
      
      
      60%
      
      
      139,006
      
      
      62%
      
      
      10%Smart card accounts
      
      35,914
      
      
      14%
      
      
      34,562
      
      
      15%
      
      
      4%Financial services
      
      8,251
      
      
      3%
      
      
      11,241
      
      
      5%
      
      
      (27)%Hardware, software and related technology
        sales
      
      56,447
      
      
      23%
      
      
      39,159
      
      
      18%
      
      
      44%Total consolidated revenue
      
      254,056
      
      
      100%
      
      
      223,968
      
      
      100%
      
      
      13%Consolidated operating income (loss):Transaction-based activities
      
      84,229
      
      
      76%
      
      
      78,785
      
      
      81%
      
      
      7%Smart card accounts
      
      16,325
      
      
      15%
      
      
      15,710
      
      
      16%
      
      
      4%Financial services
      
      1,935
      
      
      2%
      
      
      3,351
      
      
      3%
      
      
      (42)%Hardware, software and related technology
        sales
      
      11,708
      
      
      11%
      
      
      6,115
      
      
      6%
      
      
      91%Corporate/ Eliminations
      
      (3,811
      )
      
      (4)%
      
      
      (7,085
      )
      
      (6)%
      
      
      (46)%Total consolidated
        operating income
      
      110,386
      
      
      100%
      
      
      96,876
      
      
      100%
      
      
      14%


Table 18
      
      In South African
        Rand (US GAAP)Year ended June 30,2008
      
      
      
      
      
      2007ZAR
      
      
      % of
      
      
      ZAR
      
      
      % of
      
      
      %Operating Segment
      
      000
      
      
      total
      
      
      000
      
      
      total
      
      
      changeConsolidated revenue:Transaction-based activities
      
      1,118,679
      
      
      60%
      
      
      1,002,233
      
      
      62%
      
      
      12%Smart card accounts
      
      261,830
      
      
      14%
      
      
      249,192
      
      
      15%
      
      
      5%Financial services
      
      60,154
      
      
      3%
      
      
      81,048
      
      
      5%
      
      
      (26)%Hardware, software and related technology
        sales
      
      411,525
      
      
      23%
      
      
      282,336
      
      
      18%
      
      
      46%Total consolidated revenue
      
      1,852,188
      
      
      100%
      
      
      1,614,809
      
      
      100%
      
      
      15%Consolidated operating income (loss):Transaction-based activities
      
      614,069
      
      
      76%
      
      
      568,040
      
      
      81%
      
      
      8%Smart card accounts
      
      119,017
      
      
      15%
      
      
      113,269
      
      
      16%
      
      
      5%Financial services
      
      14,107
      
      
      2%
      
      
      24,161
      
      
      3%
      
      
      (42)%Hardware, software and related technology
        sales
      
      85,357
      
      
      11%
      
      
      44,089
      
      
      6%
      
      
      94%Corporate/ Eliminations
      
      (27,784
      )
      
      (4)%
      
      
      (51,083
      )
      
      (6)%
      
      
      (46)%Total consolidated
        operating income
      
      804,766
      
      
      100%
      
      
      698,476
      
      
      100%
      
      
      15%


**Transaction-based
activities**

These increases in revenues were
due primarily to the price increases in all provinces, higher number of grants
paid under 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. These increases in revenues and operating income were partially
offset by the fact that a substantial portion of the settlement payments that we
received from SASSA during the third quarter of fiscal 2007 was non-recurring.
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.

Operating income margin of our
recurring transaction-based activities during fiscal 2008 decreased to 55% from
57% during fiscal 2007. These profit margin decreases were mainly due to:

- inflationary increases in our cost components that were higher than the
  increases we negotiated with our customers;
- timing differences relating to our annual price increase negotiations,
  specifically in the Limpopo province where we received a back-dated price
  increase during fiscal 2007; and
- costs incurred during fiscal 2008 for the registration of 180,000 new
  beneficiaries in the North West province.

58

---

These operating income margin
decreases were partially offset by the increased revenues from price increases
from all the provinces where we perform welfare distribution and administration
services and improved margins from EasyPay.

***Settlement payment
received from SASSA***

During fiscal 2007, we received
approximately $6.9 million (ZAR 49.5 million) from SASSA as a result of the
settlement of contract deviations that occurred during the implementation phases
in the Eastern Cape province and for annual inflation price increases over the
last three years which were not forthcoming. During fiscal 2007, the price
charged per beneficiary in the Eastern Cape province was increased as a result
of the settlement reached. The settlement amount of approximately $6.9 million
(ZAR 49.5 million) contained elements of a recurring and non-recurring nature.
The recurring amount was due to price increases that relate to our third quarter
of fiscal 2007 and continued to have a beneficial impact on our operating income
until the end of the contract period and amounted to approximately $0.9 million
(ZAR 6.5 million). The non-recurring amount included in our operating income
amounted to approximately $4.0 million (ZAR 28.8 million).

The tables below present the
components of our reported transaction-based activities revenue, operating
income and operating income margin during fiscal 2008 and 2007:

|Table 19                                     |  | In United States
      Dollars (US GAAP) | 
|-------------------------------------------- |  | ---------------------------------------- | 
|                                             |  | Year ended June 30,                      | 
|                                             |  | 2008                                     | 
|                                             |  | $ 000                                   | 
|Reported revenue                             |  | 153,444                                  | 
|Consisting of:                               |  |                                          | 
|Recurring transaction-based
      activities |  | 153,444                                  | 
|Non-recurring portion of settlement payment  |  |                                          | 
|received from SASSA                          |  | -                                        | 
|                                             |  |                                          | 
|Reported operating income                    |  | 84,229                                   | 
|Consisting of:                               |  |                                          | 
|Recurring transaction-based
      activities |  | 84,229                                   | 
|Non-recurring portion of settlement payment  |  |                                          | 
|received from SASSA                          |  | -                                        | 
|                                             |  |                                          | 
|Operating income margin as reported          |  | 55%                                      | 
|Consisting of:                               |  |                                          | 
|Recurring transaction-based
      activities |  | 55%                                      | 
|Non-recurring portion of settlement payment  |  |                                          | 
|received from SASSA                          |  | -                                        | 

|Table 20                                     |  | In South African
      Rand (US GAAP) | 
|-------------------------------------------- |  | ------------------------------------- | 
|                                             |  | Year ended June 30,                   | 
|                                             |  | 2008                                  | 
|                                             |  | ZAR                                   | 
|                                             |  | 000                                  | 
|Reported revenue                             |  | 1,118,790                             | 
|Consisting of:                               |  |                                       | 
|Recurring transaction-based
      activities |  | 1,118,790                             | 
|Non-recurring portion of settlement payment  |  |                                       | 
|received from SASSA                          |  | -                                     | 
|                                             |  |                                       | 
|Reported operating income                    |  | 614,130                               | 
|Consisting of:                               |  |                                       | 
|Recurring transaction-based
      activities |  | 614,130                               | 
|Non-recurring portion of settlement payment  |  |                                       | 
|received from SASSA                          |  | -                                     | 
|                                             |  |                                       | 
|Operating income margin as reported          |  | 55%                                   | 
|Consisting of:                               |  |                                       | 
|Recurring transaction-based
      activities |  | 55%                                   | 
|Non-recurring portion of settlement payment  |  |                                       | 
|received from SASSA                          |  | -                                     | 

59

---

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

Refer also to discussion under
Fiscal 2009 compared to fiscal 2008Results of operations by operating
segmentTransaction-based activitiesContinued adoption of our merchant
acquiring system.

***Higher
number of grants paid and pricing increases under our provincial
contracts*:**

During fiscal 2008, we
experienced an increase in the number of grants paid in four of the provinces
where we administer payments of social welfare grants. This growth was mainly
due to an increase in the number of child support grants and disability grants
approved by the various provincial governments. In total, the number of payments
processed during fiscal 2008 increased 5.0% to 47,591,554 from fiscal 2007.

The higher number of grants paid
under existing provincial contracts during the year ended June 30, 2008, as well
as average revenue per grant paid, are detailed below:

|Table 21           |  | Year ended June
      30, | 
|------------------ |  | ------------------------- | 
|                   |  | Number of                 | 
|                   |  | Grants Paid               | 
|Province           |  | 2008                      | 
|KwaZulu-Natal (A). |  | 20,337,526                | 
|Limpopo (B)        |  | 11,791,095                | 
|North West (C)     |  | 4,984,479                 | 
|Northern Cape (D)  |  | 1,986,525                 | 
|Eastern Cape (E)   |  | 8,491,929                 | 
|**Total**          |  | 47,591,554                | 

*(1) Average Revenue per Grant
Paid excludes $ 0.75 (ZAR 5.50) related to the provision of smart card
accounts.*

*(2) Average Revenue per Grant
Paid excludes $ 0.76 (ZAR 5.50) related to the provision of smart card
accounts.*

A - in ZAR, the increase
in the Average Revenue per Grant Paid in KwaZulu-Natal was due to price
adjustments effective from July 2007.

B - in ZAR, the increase
in the Average Revenue per Grant Paid in Limpopo was due to the negotiated
annual price adjustment effective from January 2008.

C - in ZAR, the increase
in the Average Revenue per Grant Paid in North West was due to the negotiated
annual price adjustment approved by the provincial government in September 2007.

D - in ZAR, the increase
in the Average Revenue per Grant Paid in Northern Cape was due to the negotiated
annual price adjustment effective from January 2008.

E - in ZAR, the increase
in the Average Revenue per Grant Paid in Eastern Cape was due to negotiated
price increases effective from January 2008.

EasyPay transaction fees:

During fiscal 2008 and 2007,
EasyPay processed 516.8 million and 441.4 million transactions with an
approximate value of $15.9 billion (ZAR 115.6 billion) and $13.8 billion (ZAR
99.4 billion), respectively. The average fee per transaction during each of
fiscal 2008 and 2007, was $0.03 (ZAR 0.21), respectively. We do not expect a
significant fluctuation, in ZAR, in the average fee per transaction during the
first quarter of fiscal 2009.

Operating income margins
generated by EasyPay during fiscal 2008 increased to 34% from 28% in fiscal 2007
primarily due to an increase in the number of transactions processed in fiscal
2008 which was offset by costs incurred related to the implementation of a new
integrated switch and restructuring costs. Once the new switch is completed we
expect improved operating efficiencies and reduced costs at EasyPay and also
expect the new switch to greatly enhance our offering at EasyPay and enable us
to take advantage of new business opportunities. We expect the new switch to be
full operating capacity during the first quarter of fiscal 2009.

Amortization of EasyPay
intangible assets during fiscal 2008 and 2007, of approximately $1.8 million
(ZAR 12.9 million) and $1.7 million, (ZAR 12.1 million), respectively, is
included in the calculation of EasyPay operating margins. Operating income
margin before amortization of EasyPay intangible assets during fiscal 2008 and
2007 was 46% and 41%, respectively.

60

---

**Smart card
accounts**

Operating income margin from
providing smart card accounts was fairly constant at 45% for each of the years
ended June 30, 2008 and 2007.

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 4,022,193 smart card-based accounts were active at June 30, 2008,
compared to 3,812,273 active accounts as at June 30, 2007. The increase in the
number of active accounts resulted from an increase in the number of
beneficiaries in all provinces qualifying for government grants due to the
efforts of the South African government to provide social assistance to the very
old and very young.

**Financial
services**

Revenues from UEPS-based lending
decreased during fiscal 2008 compared with fiscal 2007 primarily due to the
lower number of loans granted during fiscal 2008 compared to fiscal 2007. In
addition, on average, the return on these UEPS-based loans was lower during
fiscal 2008 compared with fiscal 2007 due to the implementation of the
provisions of the National Credit Act, or NCA.

Revenues from our traditional
microlending business decreased during fiscal 2008, due to increased
competition, stringent lending requirements introduced by the South African
National Credit Regulator through the NCA, and our strategic decision not to
grow this business. The loan portfolio of the traditional microlending
businesses has declined as a result of our strategic decision not to grow this
business.

Some of the key indicators of
these businesses are illustrated below:

Table 22
      
      As at June 30,2008
      
      
      2007
      
      
      
      
      
      2008
      
      
      2007$%
      
      
      ZAR
      
      
      ZAR
      
      
      ZAR %$ 000
      
      
      $ 000
      
      
      change
      
      
      000
      
      
      000
      
      
      changeTraditional microlending:Finance loans receivable  gross
      
      2,864
      
      
      5,263
      
      
      (46)%
      
      
      22,814
      
      
      37,244
      
      
      (39)%Allowance for doubtful
        finance loansreceivable
      
      (1,007
      )
      
      (2,773
      )
      
      (64)%
      
      
      (8,020
      )
      
      (19,622
      )
      
      (59)%Finance
        loans receivable  net
      
      1,857
      
      
      2,490
      
      
      (25)%
      
      
      14,794
      
      
      17,622
      
      
      (16)%UEPS-based lending:Finance loans receivable net andgross
        (i.e., no allowance)
      
      2,444
      
      
      3,265
      
      
      (25)%
      
      
      19,464
      
      
      23,103
      
      
      (16)%Total
        finance loans receivable,net
      
      4,301
      
      
      5,755
      
      
      
      
      
      34,258
      
      
      40,725


Operating income margin for the
financial services segment decreased to 23% during fiscal 2008 from 30% during
fiscal 2007, primarily due to lower interest rates offered on our UEPS-based
lending products and continued difficult operating conditions in our traditional
micro-lending operations.

**Hardware,
software and related technology sales**

Revenue and operating income for
fiscal 2008 comprised:

- software development and customization related to our Ghana contract;
- sales of terminals under our Ghana contract and to retailers and other
  customers;
- sales of smart cards under our Ghana contract;
- 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.

61

---

Segment revenues include
approximately $14.2 million (ZAR 102.8 million) from software development and
customization activities and hardware under our Ghana contract. These are high
margin activities for us and contributed to the increase in operating income for
the segment during fiscal 2008.

Initially we expected to generate
revenues of approximately $19.0 million, excluding travel related expenditures,
from our Ghana contract during fiscal 2008. However, we allowed the client to
procure approximately $1.6 million (ZAR 4.4 million) of low margin hardware for
its data room from local Ghanaian suppliers and we agreed that the bank will not
be required to reimburse us for any loss of margin. We believe that this
concession will improve the already strong working relationship we have with the
client. In addition, at present we believe that the client will not require us
to deliver items with a value of $0.6 million (ZAR 4.4 million) as they no
longer require them. As a result, under the Ghana contract, we are still
required to deliver software and hardware with a value of approximately $2.6
million (ZAR 19.0 million), which we expect to deliver during the first quarter
of fiscal 2009.

As of June 30, 2008, we had
received additional hardware orders from the bank to the value of approximately
$9.9 million (ZAR 72.2 million) of which we have recognized revenue of
approximately $1.6 million (ZAR 11.6 million) during fiscal 2008.

Our revenues for fiscal 2008 and
2007, includes approximately $3.2 million (ZAR 23.6 million) and $4.4 million
(ZAR 32.0 million), respectively, from sales to Nedbank. Sales of hardware to
Nedbank occur on an ad hoc basis.

Amortization of Prism intangible
  assets during fiscal 2008 and 2007, respectively, was approximately $3.7 million
  (ZAR 26.9 million) and reduced our operating income.

Revenues from sales of hardware
to SmartSwitch Botswana during fiscal 2007, totaled approximately $2.1 million
(ZAR 14.9 million) of which approximately $0.4 million (ZAR 3.2 million), after
taxation, was eliminated and will be recognized in future periods. The
elimination has been included in the Corporate/Eliminations. Our operating
margin on these sales was significantly higher than other items included within
the hardware, software and related technology sales segment.

**Corporate/
Eliminations**

The decrease in our operating
losses was mainly due to higher administration fees charged by our corporate
head offices to operating segments.

Corporate/eliminations during
fiscal 2007 includes the non-recurring charges of approximately $1.6 million
(ZAR 11.7 million) related to an acquisition we ultimately decided not to
pursue.

Liquidity and Capital Resources

Our business has historically
generated and continues to generate high levels of cash. At June 30, 2009, our
cash balances were $220.8 million, which comprised mainly ZAR-denominated
balances of ZAR 1,560.7 million ($198.0 million), US dollar-denominated balances
of $11.8 million and other currency deposits, primarily euro, of $11.0 million.
Our cash balances decreased from June 30, 2008 levels mainly as a result of our
acquisition of BGS, repurchases of our common stock under our repurchase
program, payment of taxes, all offset by the elimination in April 2009 of our
obligation to provide pre-fund social welfare grants. On July 28, 2009, we
repurchased, using our ZAR reserves, 9,221,526 shares of our common stock from
Brait S.A. and its investment entities affiliates for $13.50 (ZAR 105.98) per
share, for an aggregate repurchase price of $124.5 million (ZAR 977.3 million).

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.

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.

62

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We have historically had a unique
cash flow cycle due to our obligation to pre-fund the payments of social welfare
grants in two provinces, although under our new SASSA contract, we are no longer
required to pre-fund. Under the new contract, we receive the grant funds 48
hours prior to the provision of the service and any interest we earn on these
amounts is for the benefit of SASSA. We will continue to 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, after taking into account the repurchase of our
shares from Brait S.A., are sufficient to fund our current operations for at
least the next four quarters.

***Cash flows from
operating 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 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. During
fiscal 2008 we paid provisional taxes of approximately $12.5 million (ZAR 90.9
million) related to the tax year ended June 30, 2007 and provisional taxes of
approximately $23.4 million (ZAR 170.7 million) related to the tax year ended
June 30, 2008.

Taxes paid during fiscal 2009 and
  2008 were as follows:

Table 23
      
      Year ended June 30,2009
      
      
      2008
      
      
      2009
      
      
      2008ZAR
      
      
      ZAR$000
      
      
      $000
      
      
      000
      
      
      000First provisional payments
      
      18,845
      
      
      13,641
      
      
      187,986
      
      
      95,278Second provisional payments
      
      21,226
      
      
      9,776
      
      
      173,201
      
      
      77,677Third provisional payments
      
      2,868
      
      
      3,861
      
      
      28,704
      
      
      26,526Taxation paid related to prior years
      
      7,412
      
      
      8,358
      
      
      57,284
      
      
      60,471Taxation refunds received
      
      (61
      )
      
      (252
      )
      
      (471
      )
      
      (1,911
      )Secondary taxation on companies
      
      2,230
      
      
      -
      
      
      22,318
      
      
      -Total tax paid
      
      52,520
      
      
      35,384
      
      
      469,022
      
      
      258,041


Cash flows from operating
activities for fiscal 2008 increased to $118.8 million (ZAR 865.9 million) from
$65.5 million (ZAR 472.3 million) for fiscal 2007. The increase is largely due
to the factors described under Results of Operations that contributed to the
increase in revenues and operating income in our transaction-based activities
and hardware, software and related technology sales segments and to better
working capital management. Another contributing factor was that the July 2008
pay cycle was opened at merchants on June 30, 2008 and the merchants were
reimbursed in the first two days of July 2008.

Cash flows from investing activities

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 backend 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 BGS, 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 are intended to be used to fund operating activities.

63

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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 used in investing activities
for fiscal 2007 includes capital expenditures of $3.7 million (ZAR 26.8
million), which relates primarily to the purchase of enrollment equipment and
vehicles for the North West province, the purchase of equipment and furniture
for SmartSwitch Nigerias data room in Nigeria and the purchase of equipment and
other property plant and equipment by EasyPay in order to maintain operations.

During fiscal 2007, we lent an
  additional $0.3 million (ZAR 2.2 million) to SmartSwitch Botswana.

During fiscal 2007, we paid $82.1
million (ZAR 591.1 million), net of cash received, for Prism and approximately
$9.7 million (ZAR 70 million) in cash to purchase the remaining 25.1% of
EasyPay. In addition, we sold our 43.16% interest in Permit for $2.3 million
(ZAR 16.6 million) and in connection therewith, we received repayment of
outstanding loans of $1.6 million (ZAR 11.5 million).

***Cash flows from
financing activities***

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.

During fiscal 2007 we were
required to utilize our ZAR based-credit facilities in order to meet our
obligations to distribute social welfare grants to beneficiaries. As our
reporting currency is the US dollar and our functional currency is the ZAR the
exchange rate fluctuations during fiscal 2007 resulted in reporting
discrepancies between the proceeds from bank overdrafts and the repayment of
bank overdrafts presented in our audited consolidated statement of cash flow for
fiscal 2007. The result of these exchange rate fluctuations is included in
Effect of exchange rate changes on cash in our audited consolidated statement
of cash flow for fiscal 2007. We also received approximately $0.6 million (ZAR
4.3 million) from employees to repay loans associated with stock options granted
to them as well as the interest thereon. In addition, we received approximately
$3.7 million (ZAR 26.7 million) from the proceeds of stock options exercises.
During fiscal 2007 the other shareholders of SmartSwitch Nigeria lent $3.5
million (ZAR 25.6 million) to the entity under the terms of the shareholders
agreement. We also used approximately $1.0 million (ZAR 7.21 million) to
repurchase 40,100 shares of our common stock under our stock repurchase program.

Off-Balance Sheet Arrangements

We have no off-balance sheet
arrangements.

Capital Expenditures

Capital expenditures for the
years ended June 30, 2009, 2008 and 2007 were as follows:

Table 24
      
      Year ended June 30,2009
      
      
      2008
      
      
      20072009
      
      
      2008
      
      
      2007
      
      
      ZAR
      
      
      ZAR
      
      
      ZAROperating Segment
      
      $000
      
      
      $000
      
      
      $000
      
      
      000
      
      
      000
      
      
      000Transaction-based activities
      
      3,161
      
      
      2,774
      
      
      3,093
      
      
      28,258
      
      
      20,222
      
      
      22,301Smart card accounts
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Financial services
      
      751
      
      
      562
      
      
      279
      
      
      6,714
      
      
      4,097
      
      
      2,012Hardware, software and relatedtechnology sales
      
      858
      
      
      227
      
      
      373
      
      
      7670
      
      
      1,655
      
      
      2,689Corporate / Eliminations
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -**Consolidated total**
      
      4,770
      
      
      3,563
      
      
      3,745
      
      
      42,642
      
      
      25,974
      
      
      27,002


We operate in an environment
where our contracts for the payment of social welfare grants require substantial
capital investment to establish our 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.

64

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Our capital expenditures for
fiscal 2009, 2008 and 2007, 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, 2009 related mainly to
computer equipment ordered in order to maintain and expand activities. We
anticipate that capital spending for the first quarter of fiscal 2010 will
relate primarily to on-going replacement of equipment used to administer and
distribute social welfare grants and provide a switching service through
EasyPay. 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 25
      
      **Payments due by Period, as of June 30,
        2009(in $ 000s)** ****Less
      
      
      
      
      
      
      
      
      Morethan 1
      
      
      1-3
      
      
      3-5
      
      
      than 5Total
      
      
      year
      
      
      years
      
      
      years
      
      
      yearsInterest bearingliabilities
      
      4,185
      
      
      -
      
      
      -
      
      
      -
      
      
      4,185Operating lease
      
      
      
      
      
      
      
      
      
      
      
      
      
      -obligations
      
      4,668
      
      
      2,023
      
      
      2,383
      
      
      262Purchase obligations
      
      1,065
      
      
      1,065
      
      
      -
      
      
      -
      
      
      -Capital commitments
      
      41
      
      
      41
      
      
      -
      
      
      -Total
      
      9,959
      
      
      3,129
      
      
      2,383
      
      
      262
      
      
      4,185


65

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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 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 South African rand, on the one hand, and the US
dollar and the euro, on the other hand. As of June 30, 2009 and 2008, our
outstanding foreign exchange contracts were as follows:

As of June 30, 2009Fair 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, 2009As of June 30, 2008Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityEUR
      1,995
      
      ZAR
      12.3688
      
      ZAR
      12.4508
      
      July 7, 2008EUR
      6,000
      
      ZAR
      12.0701
      
      ZAR
      12.4508
      
      July 7, 2008EUR
      2,400
      
      ZAR
      12.5100
      
      ZAR
      12.4618
      
      July 11, 2008EUR
      689,200
      
      ZAR
      12.1065
      
      ZAR
      12.4782
      
      July 17, 2008EUR
      1,995
      
      ZAR
      12.1772
      
      ZAR
      12.5085
      
      July 28, 2008EUR
      32,331
      
      ZAR
      12.4862
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      140,000
      
      ZAR
      12.4730
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      140,000
      
      ZAR
      11.9793
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      (140,000)
      
      ZAR
      12.3395
      
      ZAR
      12.4319
      
      July 31, 2008EUR
      8,750
      
      ZAR
      12.0207
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      245,250
      
      ZAR
      12.1800
      
      ZAR
      12.5573
      
      August 15, 2008EUR
      4,550
      
      ZAR
      12.6757
      
      ZAR
      12.5842
      
      August 25, 2008USD
      542,500
      
      ZAR
      7.9100
      
      ZAR
      7.9484
      
      August 28, 2008EUR
      86,178
      
      ZAR
      12.6631
      
      ZAR
      12.6057
      
      September 2, 2008EUR
      1,470
      
      ZAR
      12.7000
      
      ZAR
      12.6277
      
      September 10, 2008USD
      24,600
      
      ZAR
      8.0090
      
      ZAR
      8.0405
      
      October 10, 2008EUR
      82,400
      
      ZAR
      12.2199
      
      ZAR
      12.7685
      
      October 31, 2008EUR
      (82,400)
      
      ZAR
      12.5773
      
      ZAR
      12.6764
      
      October 31, 2008EUR
      82,400
      
      ZAR
      12.7820
      
      ZAR
      12.8456
      
      November 28, 2008


**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.

66

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**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.

**Micro-lending Credit
Risk**

We are exposed to credit risk in
our microlending activities, which provides unsecured short-term loans to
qualifying customers. We manage 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 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. On March 1, 2009, we acquired 20% of
the issued share capital of Finbond, which are exchange-traded equity
securities. The fair value of these securities as of June 30, 2009, represented
approximately 1% 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,
2009. The effects of a hypothetical 10% increase and a 10% decrease in market
prices as of June 30, 2009 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, 2009 | 
|---------------------------------- |  | ------------------- | 
|Table 26                           |  |                     | 
|                                   |  |                     | 
|                                   |  |                     | 
|                                   |  |                     | 
|                                   |  | Fair                | 
|                                   |  | value               | 
|                                   |  | ($ 000)            | 
|Exchange-traded equity securities. |  | 6,979               | 
|                                   |  |                     | 

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-49 of this Annual Report on Form
10-K.

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

Not applicable.

67

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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, 2009.

*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 accounting principles generally
accepted in the United States of America (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, 2009. 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 BGS from our
annual assessment of the effectiveness of internal control over financial
reporting for the year ended June 30, 2009, the year of acquisition. As of June
30, 2009, BGS total assets represented approximately 23% of our consolidated
total assets, approximately 4% of consolidated total current assets and
constituted approximately 8% of our consolidated revenue for the year ended June
30, 2009.

*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, 2009, 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 BGS from our annual assessment of the
effectiveness of internal control over financial reporting for the year ended
June 30, 2009, the year of acquisition. Management continues to evaluate BGS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,
2009, excluded the operations of BGS. If we are not able to integrate BGS
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.

68

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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, 2009, based on criteria established
in Internal ControlIntegrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. As described in Item 9A.
Controls and Procedures, management excluded from its assessment the internal
control over financial reporting at BGS Smartcard Systems Aktiengesellschaft,
which was acquired on August 27, 2008 and whose financial statements constitute
approximately 23% of the consolidated total assets, 4% of consolidated total
current assets and 8% of the consolidated revenue for the year ended June 30,
2009. Accordingly, our audit did not include the internal control over financial
reporting at BGS Smartcard Systems Aktiengesellschaft. 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 the accompanying report in the Form 10-K. 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, 2009, 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, 2009 of the Company and our report dated August 27, 2009,
expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche (South Africa) Chartered
Accountants (SA)Johannesburg, Republic of South AfricaAugust 27, 2009

ITEM 9B. OTHER
INFORMATION

Not applicable.

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 2009, 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 2009, entitled
Compensation Discussion and Analysis, Summary Compensation Table, Grants of
Plan-Based Awards, Outstanding Equity Awards at 2009 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 Form10-K.

ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDERS
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 2009, entitled
Outstanding Equity Awards at 2009 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 2009, 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 2009, 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-49

| | Report of the Independent Registered Public Accounting
      Firm  Deloitte & Touche (South Africa)                  | F-2
| | --------------------------------------------------------------------------------------------------------------------- | ---
| | Consolidated Balance Sheets  as of June 30, 2009
      and 2008                                                      | F-3
| | Consolidated Statements of Operations  for the years
      ended June 30, 2009, 2008 and 2007                        | F-4
| | Consolidated Statements of Movements in Shareholders
      Equity  for the years ended June 30, 2009, 2008 and 2007 | F-5
| | Consolidated Statements of Cash Flows  for the years
      ended June 30, 2009, 2008 and 2007                        | F-7
| | Notes to the Consolidated Financial Statements                                                                        | F-8

****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  |                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                       
|2.1     | Agreement, dated
        as of March 3, 2006, between Net 1 Applied Technologies South Africa Limited
        and Prism Holdings Limited, as amended (incorporated by reference to Exhibit
        2.1 to our Form 8-K/A (SEC File No. 000-31203)), filed on April 7, 2006                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                       
|2.2     | Second Addendum,
        dated as of August 29, 2006 to the Implementation Agreement, dated as
        of March 3, 2006, between Net 1 Applied Technologies South Africa Limited
        and Prism Holdings Limited (incorporated by reference to Exhibit 2.1 to
        Net 1 UEPS Technologies Form 8-K filed on August 31, 2006 (SEC File
        No. 000- 31203))
|        |                                                                                                                                                                                                                                                                                                                                                                       
|2.3     | Share Purchase
        Agreement between ARDES Netherlands B.V. and each of the other Sellers
        specified therein and Net 1 UEPS Technologies, Inc. (incorporated by reference
        to Exhibit 2.12 to Net 1 UEPS Technologies Form 10-Q filed on November
        6, 2008 (SEC File No. 000-31203))                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                       
|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 August 30, 2007 (SEC File No. 000-31203)).                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                       
|4.1     | Form of common
        stock certificate (Incorporated by reference to Exhibit 4.1 to our Registration
        Statement on Form S-1 filed June 17, 2005)                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                       
|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-4 filed 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
        10.11 to our Registration Statement on Form S-1/A filed August 1, 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))                                                   

71

---

|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
        10.17 to our Registration Statement on Form S-1/A filed August 1, 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 August
        1, 2005 (Commission File No. 333- 125273))                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.8  | Patent and Technology Agreement by
        and between Net 1 Investment Holdings (Proprietary) Limited and Nedcor
        Bank Limited (Incorporated by reference to Exhibit 10.18 to our Registration
        Statement on Form S-1/A filed August 1, 2005 (Commission File No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.9  | Patent and Technology Agreement by
        and between Net 1 Holdings S.a.r.l. and 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 August 1, 2005
        (Commission File No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.10 | Agreement between Nedbank Limited and
        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 August 1, 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 August 1, 2005 (Commission
        File No. 333-125273))
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.12 | Amendment No. 1 to the Stock Purchase
        Agreement dated as of August 11, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.13 | Banking Facility between Nedbank Limited
        and Net 1 Applied Technology Holdings Limited (Incorporated by reference
        to Exhibit 10.13 to our Registration Statement on Form S-1/A filed August
        1, 2005 (Commission File No. 333-125273))                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.14 | Facility between Cash Paymaster Services
        Eastern Cape and Nedbank Limited (Incorporated by reference to Exhibit
        10.14 to our Registration Statement on Form S-1/A filed August 1, 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 10.15 to our Registration Statement on Form S-1/A filed August
        1, 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 Net 1 UEPS
        Technologies Form 10-Q filed on February 7, 2007 (SEC File No. 000-31203))                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|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 Net 1 UEPS
        Technologies Form 10-K filed on August 28, 2008 (SEC File No. 000-31203))                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|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 10.12
        to our Registration Statement on Form S-1/A filed August 1, 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 Net 1 UEPS
        Technologies Form 10-Q filed on February 7, 2007 (SEC File No. 000-31203))                                                                                                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|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 Net 1 UEPS
        Technologies Form 10-K filed on August 28, 2008 (SEC File No. 000-31203))                                                                                                                                                                                                                                                                                                                                                              

72

---

|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 Net 1 UEPS Technologies Form 10-Q
        filed on February 7, 2007 (SEC File No. 000-31203))
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|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 Net 1 UEPS Technologies Form 10-K filed on August 28, 2008
        (SEC File No. 000-31203))                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|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 Net 1 UEPS Technologies Form 10-Q filed on February 7,
        2007 (SEC File No. 000-31203))                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|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 Net 1 UEPS Technologies Form 10-K filed on August 28, 2008
        (SEC File No. 000-31203))                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|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 Net 1 UEPS Technologies Form 10-Q filed on February
        7, 2007 (SEC File No. 000-31203))              
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|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 Net 1 UEPS Technologies Form 10-K filed on August
        28, 2008 (SEC File No. 000-31203))                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.30* | Amended and
        Restated 2004 Stock Incentive Plan of Net 1 UEPS Technologies, Inc. (incorporated
        by reference to Exhibit A to Proxy Statement filed on October 27, 2006)                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|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 Net 1 UEPS Technologies Form 10-Q
        filed on November 8, 2006 (SEC File No. 000-31203))                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.32* | 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
        99.3 to Form S-8 filed on January 17, 2007 (SEC File No. 000-31203))                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.33* | Restricted Stock
        Agreement by and between Net 1 UEPS Technologies, Inc. and Serge Christian
        Pierre Belamant (incorporated by reference to Exhibit 10.36 to Net 1 UEPS
        Technologies Form 10-K filed on August 29, 2007 (SEC File No. 000-31203))                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.34* | Restricted Stock
        Agreement by and between Net 1 UEPS Technologies, Inc. and Herman Gideon
        Kotze (incorporated by reference to Exhibit 10.37 to Net 1 UEPS Technologies
        Form 10-K filed on August 29, 2007 (SEC File No. 000-31203))                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.35* | Restricted Stock
        Agreement by and between Net 1 UEPS Technologies, Inc. and Nitin Soma
        (incorporated by reference to Exhibit 10.39 to Net 1 UEPS Technologies
        Form 10-K filed on August 29, 2007 (SEC File No. 000-31203))                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.36* | 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 Net 1 UEPS Technologies Form 10-K filed on August 29, 2007
        (SEC File No. 000-31203))                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.37* | 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 Net 1 UEPS Technologies Form 10-Q filed on May
        8, 2008 (SEC File No. 000-31203))                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                  
|10.38* | 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
        Net 1 UEPS Technologies Form 10-Q filed on May 8, 2008 (SEC File
        No. 000-31203))                                                                                                                

73

---

|10.39   | 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 Net 1 UEPS Technologies Form 10-Q
        filed on November 6, 2008 (SEC File No. 000-31203))                                                      
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.40   | 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 Net 1 UEPS Technologies Form 10-Q filed on November 6, 2008 (SEC
        File No. 000-31203))                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.41   | 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 Net 1 UEPS Technologies Form 10-Q filed on November 6,
        2008 (SEC File No. 000-31203))                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.42   | 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 Net 1 UEPS Technologies Form 10-Q filed on November 6,
        2008 (SEC File No. 000-31203))                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.43   | 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 Net 1 UEPS Technologies Form 10-Q
        filed on November 6, 2008 (SEC File No. 000-31203))                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.44*  | 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 Net 1 UEPS Technologies Form 10-Q filed on November
        6, 2008 (SEC File No. 000-31203))                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.45*  | 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
        Net 1 UEPS Technologies Form 10-Q filed on November 6, 2008 (SEC
        File No. 000-31203))                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.46*  | 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 Net 1 UEPS Technologies Form 10-Q filed on November 6,
        2008 (SEC File No. 000-31203))
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.47  | Interim agreement
        entered into between SASSA and Cash Paymaster Services (Proprietary) Limited
        dated March 25, 2009 (incorporated by reference to Exhibit 10.49 to Net
        1 UEPS Technologies Form 10-Q filed on May 7, 2009 (SEC File No.
        000-31203))                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|10.48** | Stock
        Repurchase Agreement by and between Net 1 UEPS Technologies, Inc., South
        African Private Equity Fund III, L.P. and Brait International Limited                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|14      | Amended and
        Restated Code of Ethics (incorporated by reference to Exhibit 14 to Net
        1 UEPS Technologies Form 8-K filed on August 27, 2009 (SEC File
        No. 000-31203))                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                            
|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. 
  * 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 27, 2009

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           
|---------------------------------- | ----------------------------------------------------------- | ---------------
|                                   |                                                             |                
|                                   | Chief Executive Officer and Chairman of the Board
      and | August 27, 2009
|/s/ Serge C.P. Belamant            | Director (Principal Executive Officer)                      |                
|Serge C.P. Belamant                |                                                             |                
|                                   |                                                             |                
|                                   | Chief Financial Officer, Treasurer and Secretary
      and  | August 27, 2009
|/s/ Herman Gideon Kotzé            | Director (Principal Financial and Accounting Officer)       |                
|Herman Gideon Kotzé                |                                                             |                
|                                   |                                                             |                
|/s/ Antony Charles Ball            | Director                                                    | August 27, 2009
|Antony Charles Ball                |                                                             |                
|                                   |                                                             |                
|/s/ Christopher Stefan Seabrooke   | Director                                                    | August 27, 2009
|Christopher Stefan Seabrooke       |                                                             |                
|                                   |                                                             |                
|/s/ Alasdair Jonathan Kemsley Pein | Director                                                    | August 27, 2009
|Alasdair Jonathan Kemsley Pein     |                                                             |                
|                                   |                                                             |                
|/s/ Paul Edwards                   | Director                                                    | August 27, 2009
|Paul Edwards                       |                                                             |                
|                                   |                                                             |                
|/s/ Tom Tinsley                    | Director                                                    | August 27, 2009
|Tom Tinsley                        |                                                             |                

75

---

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, 2009 and 2008                                                            | F-3
|                                                                                                                    |    
|Consolidated statements of operations for the years ended
      June 30, 2009, 2008 and 2007                        | F-4
|                                                                                                                    |    
|Consolidated statements of movements in shareholders
      equity for the years ended June 30, 2009, 2008 and 2007 | F-5
|                                                                                                                    |    
|Consolidated statements of cash flows for the years ended
      June 30, 2009, 2008 and 2007                        | F-7
|                                                                                                                    |    
|Notes to the consolidated financial statements                                                                      | F-8

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, 2009 and 2008 and the related consolidated
  statements of operations, of movements in shareholders equity and cash
  flows for each of the three years in the period ended June 30, 2009. 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, 2009 and 2008, the results of their operations and their cash flows
  for each of the three years in the period ended June 30, 2009 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, 2009, 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 27, 2009, expressed an unqualified opinion
  on the Company's internal control over financial reporting.

/s/ Deloitte & Touche (South Africa)



Chartered Accountants (SA)Johannesburg, Republic of South Africa 
  August 27, 2009

F-2

---

NET 1 UEPS TECHNOLOGIES, INC. 
  CONSOLIDATED BALANCE SHEETS 
  as of June 30, 2009 and 2008

|                                                                                  |   | 2009                              |   |   | 2008    |  
|--------------------------------------------------------------------------------- | - | --------------------------------- | - | - | ------- | -
|                                                                                  |   | (In thousands, except share data) |  
|ASSETS                                                                            |   |                                   |   |   |         |  
|CURRENT ASSETS                                                                    |   |                                   |   |   |         |  
|Cash and cash equivalents                                                         | $ | 220,786                           |   | $ | 272,475 |  
|Pre-funded
      social welfare grants receivable (Note 4)                        |   | 4,930                             |   |   | 35,434  |  
|Accounts receivable, net (Note 5)                                                 |   | 42,475                            |   |   | 21,797  |  
|Finance
      loans receivable, net (Note 5)                                      |   | 2,563                             |   |   | 4,301   |  
|Deferred expenditure on smart cards (Note 6)                                      |   | 8                                 |   |   | 78      |  
|Inventory
      (Note 7)                                                          |   | 7,250                             |   |   | 6,052   |  
|Deferred income taxes (Note 15)                                                   |   | 12,282                            |   |   | 5,597   |  
|Total current assets                                                              |   | 290,294                           |   |   | 345,734 |  
|OTHER LONG-TERM ASSETS, including available
      for sale securities (Note 8)    |   | 7,147                             |   |   | 207     |  
|PROPERTY, PLANT AND EQUIPMENT, net (Note 9)                                       |   | 7,376                             |   |   | 6,291   |  
|EQUITY-ACCOUNTED INVESTMENTS (Note 8)                                             |   | 2,583                             |   |   | 2,685   |  
|GOODWILL (Note 10)                                                                |   | 116,197                           |   |   | 76,938  |  
|INTANGIBLE ASSETS, net (Note 10)                                                  |   | 75,890                            |   |   | 22,216  |  
|TOTAL ASSETS                                                                      |   | 499,487                           |   |   | 454,071 |  
|LIABILITIES                                                                       |   |                                   |   |   |         |  
|CURRENT LIABILITIES                                                               |   |                                   |   |   |         |  
|Accounts payable                                                                  |   | 5,481                             |   |   | 4,909   |  
|Other
      payables (Note 11)                                                    |   | 61,454                            |   |   | 57,432  |  
|Income taxes payable                                                              |   | 10,874                            |   |   | 14,162  |  
|Total current liabilities                                                         |   | 77,809                            |   |   | 76,503  |  
|DEFERRED INCOME TAXES (Note 15)                                                   |   | 41,737                            |   |   | 33,474  |  
|INTEREST BEARING LIABILITIES  outside shareholders loans                         |   | 4,185                             |   |   | 3,766   |  
|COMMITMENTS AND CONTINGENCIES                                                     |   | -                                 |   |   | -       |  
|TOTAL LIABILITIES                                                                 |   | 123,731                           |   |   | 113,743 |  
|MINORITY INTERESTS                                                                |   | 2,539                             |   |   | -       |  
|SHAREHOLDERS EQUITY                                                              |   |                                   |   |   |         |  
|COMMON STOCK (Note 12)                                                            |   |                                   |   |   |         |  
|Authorized
      shares: 200,000,000 with $0.001 par value;                       |   |                                   |   |   |         |  
|Issued and outstanding shares: 2009: 58,434,003; 2008: 53,423,552                 |   | 59                                |   |   | 52      |  
|SPECIAL CONVERTIBLE PREFERRED STOCK (Note 12)                                     |   |                                   |   |   |         |  
|Authorized shares: 50,000,000 with $0.001 par value;                              |   |                                   |   |   |         |  
|Issued
      and outstanding shares: 2009: -; 2008: 4,882,429                     |   | -                                 |   |   | 5       |  
|B CLASS PREFERENCE SHARES (Note 12)                                               |   |                                   |   |   |         |  
|Authorized
      shares: 330,000,000 with $0.001 par value;                       |   |                                   |   |   |         |  
|Issued and outstanding shares (net of shares held by the Company):
      2009: -; |   |                                   |   |   |         |  
|2008:
      35,975,818                                                            |   | -                                 |   |   | 6       |  
|ADDITIONAL PAID-IN CAPITAL                                                        |   | 126,914                           |   |   | 119,283 |  
|TREASURY SHARES, AT COST: 2009: 3,927,516; 2008: 306,269 (Note
      12)          |   | (48,637                           | ) |   | (7,950  | )
|ACCUMULATED OTHER COMPREHENSIVE LOSS                                              |   | (58,472                           | ) |   | (37,820 | )
|RETAINED EARNINGS                                                                 |   | 353,353                           |   |   | 266,752 |  
|TOTAL SHAREHOLDERS EQUITY                                                        |   | 373,217                           |   |   | 340,328 |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                        | $ | 499,487                           |   | $ | 454,071 |  

See accompanying notes to consolidated financial statements.

F-3

---

NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended June 30, 2009, 2008 and 2007

|                                                               |   | 2009                                  |   |   | 2008    |   |   | 2007    | 
|-------------------------------------------------------------- | - | ------------------------------------- | - | - | ------- | - | - | ------- | 
|                                                               |   | (In thousands, except per share data) |  
|                                                               |   |                                       |   |   |         |   |   |         | 
|REVENUE (Note 13)                                              | $ | 246,822                               |   | $ | 254,056 |   | $ | 223,968 | 
|Sale of goods                                                  |   | 47,003                                |   |   | 39,021  |   |   | 27,716  | 
|Loan-based interest and
      fees received                    |   | 5,659                                 |   |   | 8,585   |   |   | 11,460  | 
|Services rendered                                              |   | 194,160                               |   |   | 206,450 |   |   | 184,792 | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|EXPENSE                                                        |   |                                       |   |   |         |   |   |         | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|Cost of goods sold, IT processing, servicing
      and support |   | 70,091                                |   |   | 67,486  |   |   | 54,417  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|Selling, general and administration                            |   | 64,833                                |   |   | 65,362  |   |   | 61,625  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|Depreciation and amortization                                  |   | 17,082                                |   |   | 10,822  |   |   | 11,050  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|PROFIT ON SALE OF MICROLENDING BUSINESS                        |   | 455                                   |   |   | -       |   |   | -       | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|IMPAIRMENT OF GOODWILL (Note 10)                               |   | 1,836                                 |   |   | -       |   |   | -       | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|OPERATING INCOME                                               |   | 93,435                                |   |   | 110,386 |   |   | 96,876  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|FOREIGN EXCHANGE GAIN RELATED TO SHORT-TERM                    |   |                                       |   |   |         |   |   |         | 
|INVESTMENT                                                     |   | 26,657                                |   |   | -       |   |   | -       | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|INTEREST INCOME, net                                           |   | 10,828                                |   |   | 15,722  |   |   | 4,401   | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|INCOME BEFORE INCOME TAXES                                     |   | 130,920                               |   |   | 126,108 |   |   | 101,277 | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|INCOME TAX EXPENSE (Note 15)                                   |   | 42,744                                |   |   | 39,192  |   |   | 37,574  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|NET INCOME BEFORE MINORITY INTEREST AND (LOSS)
      EARNINGS  |   |                                       |   |   |         |   |   |         | 
|FROM EQUITY-ACCOUNTED INVESTMENTS                              |   | 88,176                                |   |   | 86,916  |   |   | 63,703  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|MINORITY INTEREST                                              |   | 701                                   |   |   | (815    | ) |   | 205     | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|(LOSS) EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS (Note 8)     |   | (874                                  | ) |   | (1,036  | ) |   | 181     | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|NET INCOME                                                     | $ | 86,601                                |   | $ | 86,695  |   | $ | 63,679  | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|Net income per share(Note 16)                                  |   |                                       |   |   |         |   |   |         | 
|                                                               |   |                                       |   |   |         |   |   |         | 
|Basic earnings  common stock and
      linked units, in $     |   | 1.55                                  |   |   | 1.52    |   |   | 1.12    | 
|Diluted earnings 
      common stock and linked units, in $   |   | 1.54                                  |   |   | 1.50    |   |   | 1.11    | 

See accompanying notes to consolidated financial statements.

F-4

---

NET 1 UEPS Technologies, Inc.CONSOLIDATED STATEMENTS OF MOVEMENTS IN SHAREHOLDERS' EQUITY 
  for the years ended June 30, 2009, 2008 and 2007

Special Convertible
      
      
      B ClassCommon Stock
      
      
      Preferred Stock
      
      
      Preference Shares
      
      
      
      
      
      AccumulatedNumber
      
      
      
      
      
      Number
      
      
      
      
      
      Additional
      
      
      Number
      
      
      
      
      
      Number
      
      
      
      
      
      
      
      
      Otherof
      
      
      
      
      
      of treasury
      
      
      Treasury
      
      
      Paid-in
      
      
      of
      
      
      
      
      
      of
      
      
      
      
      
      Retained
      
      
      Comprehensive
      
      
      
      
      
      ComprehensiveShares
      
      
      Amount
      
      
      shares
      
      
      shares
      
      
      Capital
      
      
      Shares
      
      
      Amount
      
      
      Shares
      
      
      **Amount**
      
      
      Earnings
      
      
      Income (loss)
      
      
      Total
      
      
      Income (loss)'000
      
      
      
      
      
      '000
      
      
      '000
      
      
      
      
      
      '000
      
      
      '000
      
      
      
      
      
      '000
      
      
      '000
      
      
      '000
      
      
      '000Balance - July 1, 2006
      49,744,852
      
      $
      50
      
      
      (147,973
      )
      $
      (3,958
      )
      $
      105,792
      
      
      7,315,099
      
      $
      7
      
      
      53,900,752
      
      $
      9
      
      $
      116,873
      
      $
      (9,763
      )
      $
      209,010Net Income
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      63,679
      
      
      
      
      
      63,679
      
      $
      63,679Exercise of options by holders
      326,706
      
      
      
      
      
      
      
      
      
      
      
      3,723
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      3,723Shares withheld by the Company onautomatic exercise of employee stockoptions
      
      
      
      
      
      
      (111,748
      )
      
      (2,837
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (2,837
      )Settlement of loan noteconsideration for stock issuedin accordance with 2004 StockIncentive Plan
      
      
      
      
      
      
      
      
      
      
      
      
      551
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      551Loan note consideration forstock issued in accordance with2004 Stock Incentive Plan
      
      
      
      
      
      
      
      
      
      
      
      
      (528
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (528
      )Stock compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      1,126
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      1,126Reversal of stock compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      (216
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (216
      )Income tax benefits from options soldby employees
      
      
      
      
      
      
      
      
      
      
      
      
      1,717
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      1,717Conversion from specialconvertible preferred stock tocommon stock and cession of Bclass preference shares and Bclass loans to Net 1 as a result oftrigger events
      1,658,989
      
      
      2
      
      
      
      
      
      
      
      
      2
      
      
      (1,658,989
      )
      
      (2
      )
      
      (12,224,127
      )
      
      (2
      )
      
      
      
      
      
      
      
      -Acquisition of treasury sharesat market value
      
      
      
      -
      
      
      (40,100
      )
      
      (1,000
      )
      
      -
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (1,000
      )Movement in Foreign CurrencyTranslation Reserve
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      5,848
      
      
      5,848
      
      
      5,848Balance - June 30, 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
      
      
      69,527Adoption of FIN 48 - adjustment toopening retained earnings
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (495
      )
      
      
      
      
      (495
      )Net Income
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      86,695
      
      
      
      
      
      86,695
      
      
      86,695Restricted stock granted
      594,782Exercise of options by holders
      324,542
      
      
      
      
      
      
      
      
      
      
      
      2,919
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,919Shares withheld by the Company onautomatic exercise of employee stockoptions
      
      
      
      
      
      
      (6,448
      )
      
      (155
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (155
      )Settlement of loan noteconsideration for stock issuedin accordance with 2004 StockIncentive Plan
      
      
      
      
      
      
      
      
      
      
      
      
      544
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      544Loan note consideration forstock issued in accordance with2004 Stock Incentive Plan
      
      
      
      
      
      
      
      
      
      
      
      
      (463
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (463
      )Stock compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      4,257
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      4,257Reversal of stock compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      (286
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (286
      )Income tax benefits from options soldby employees
      
      
      
      
      
      
      
      
      
      
      
      
      144
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      144Conversion from specialconvertible preferred stock tocommon stock and cession of Bclass preference shares and Bclass loans to Net 1 as a result oftrigger events
      773,681
      
      
      
      
      
      
      
      
      
      
      
      1
      
      
      (773,681
      )
      
      
      
      
      (5,700,807
      )
      
      (1
      )
      
      
      
      
      
      
      
      -Movement in Foreign CurrencyTranslation 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
      
      
      52,790


See accompanying notes to consolidated financial statements.

F-5

---

NET 1 UEPS Technologies, Inc.CONSOLIDATED STATEMENTS OF MOVEMENTS IN SHAREHOLDERS' EQUITY (continued)
  
  for the years ended June 30, 2009, 2008 and 2007

Special Convertible
      
      
      B ClassCommon Stock
      
      
      Preferred Stock
      
      
      Preference Shares
      
      
      
      
      
      AccumulatedNumber
      
      
      
      
      
      Number
      
      
      
      
      
      Additional
      
      
      Number
      
      
      
      
      
      Number
      
      
      
      
      
      
      
      
      Otherof
      
      
      
      
      
      of treasury
      
      
      Treasury
      
      
      Paid-in
      
      
      of
      
      
      
      
      
      of
      
      
      
      
      
      Retained
      
      
      Comprehensive
      
      
      
      
      
      ComprehensiveShares
      
      
      Amount
      
      
      shares
      
      
      shares
      
      
      Capital
      
      
      Shares
      
      
      Amount
      
      
      Shares
      
      
      Amount
      
      
      Earnings
      
      
      Income (loss)
      
      
      Total
      
      
      Income (loss)'000
      
      
      
      
      
      '000
      
      
      '000
      
      
      
      
      
      '000
      
      
      
      
      
      '000
      
      
      '000
      
      
      '000
      
      
      '000
      
      
      '000Balance - 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
      )
      $
      340,328Net Income
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      86,601
      
      
      
      
      
      86,601
      
      
      86,601Stock granted pursuant to the BGSacquisition
      40,134
      
      
      -
      
      
      
      
      
      
      
      
      981
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      981Restricted stock granted
      3,474
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      -Exercise of options by holders
      84,414
      
      
      1
      
      
      
      
      
      
      
      
      253
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      254Settlement of loan noteconsideration for stock issuedin accordance with 2004 StockIncentive Plan
      
      
      
      
      
      
      
      
      
      
      
      
      20
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      20Loan note consideration forstock issued in accordance with2004 Stock Incentive Plan
      
      
      
      
      
      
      
      
      
      
      
      
      (3
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (3
      )Stock compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      5,239
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      5,239Reversal of stock compensation charge
      
      
      
      
      
      
      
      
      
      
      
      
      (213
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (213
      )Income tax benefits from options sold byemployees
      
      
      
      
      
      
      
      
      
      
      
      
      1,350
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      1,350Conversion from specialconvertible preferred stock tocommon stock and cession of Bclass preference shares and Bclass loans to Net 1 as a result oftrigger events
      4,882,429
      
      
      6
      
      
      
      
      
      
      
      
      4
      
      
      (4,882,429
      )
      
      (5
      )
      
      (35,975,818
      )
      
      (6
      )
      
      
      
      
      
      
      
      (1
      )Acquisition of treasury shares at marketvalue
      
      
      
      
      
      
      (3,621,247
      )
      
      (40,687
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (40,687
      )Other comprehensive loss:Net unrealized loss on asset for sale
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (1,611
      )
      
      (1,611
      )
      
      (1,611
      )Movement in Foreign CurrencyTranslation Reserve
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (19,041
      )
      
      (19,041
      )
      
      (19,041
      )Balance - June 30, 2009
      58,434,003
      
      $
      59
      
      
      (3,927,516
      )
      $
      (48,637
      )
      $
      126,914
      
      
      -
      
      $
      0
      
      
      -
      
      $
      0
      
      $
      353,353
      
      $
      (58,472
      )
      $
      373,217
      
      $
      65,949


See accompanying notes to consolidated financial statements.

F-6

---

NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended June 30, 2009, 2008 and 2007

|                                                                                   |   | 2009           |   |   | 2008    |   |   | 2007    |  
|---------------------------------------------------------------------------------- | - | -------------- | - | - | ------- | - | - | ------- | -
|                                                                                   |   | (In thousands) |  
|Cash flows from operating activities                                               |   |                |   |   |         |   |   |         |  
|Net income                                                                         | $ | 86,601         |   | $ | 86,695  |   | $ | 63,679  |  
|Adjustments to reconcile net income to net
      cash provided by operating        |   |                |   |   |         |   |   |         |  
|activities:                                                                        |   |                |   |   |         |   |   |         |  
|Depreciation and amortization                                                      |   | 17,082         |   |   | 10,822  |   |   | 11,050  |  
|Loss (earnings) from equity-accounted investments                                  |   | 874            |   |   | 1,036   |   |   | (181    | )
|Fair value adjustment                                                              |   | (4,402         | ) |   | (269    | ) |   | 186     |  
|Interest payable                                                                   |   | 425            |   |   | 434     |   |   | 234     |  
|Facility fee amortized                                                             |   | 1,100          |   |   | -       |   |   | -       |  
|Loss (Profit) on disposal of property,
      plant and equipment                   |   | 85             |   |   | (110    | ) |   | (286    | )
|Loss on disposal of equity-accounted
      investment                              |   | -              |   |   | -       |   |   | 586     |  
|Profit on disposal of business                                                     |   | (455           | ) |   | -       |   |   | -       |  
|Minority interest                                                                  |   | 701            |   |   | (815    | ) |   | 205     |  
|Stock compensation charge, net of forfeitures                                      |   | 5,026          |   |   | 3,971   |   |   | 910     |  
|Impairment of goodwill                                                             |   | 1,836          |   |   | -       |   |   | -       |  
|Decrease (Increase) in accounts receivable,
      pre-funded social welfare        |   |                |   |   |         |   |   |         |  
|grants receivable and finance
      loans receivable                               |   | 14,639         |   |   | (9,983  | ) |   | (9,469  | )
|Decrease in deferred expenditure on smart
      cards                              |   | 50             |   |   | 416     |   |   | 155     |  
|Increase in inventory                                                              |   | (81            | ) |   | (1,138  | ) |   | (2,203  | )
|(Decrease) Increase in accounts payable
      and other payables                   |   | (8,788         | ) |   | 24,353  |   |   | (1,470  | )
|(Decrease) Increase in
      taxes payable                                         |   | (3,339         | ) |   | 1,369   |   |   | 268     |  
|(Decrease) Increase in deferred taxes                                              |   | (4,586         | ) |   | 1,979   |   |   | 1,802   |  
|Net cash provided
      by operating activities                                    |   | 106,768        |   |   | 118,760 |   |   | 65,466  |  
|Cash flows from investing activities                                               |   |                |   |   |         |   |   |         |  
|Capital expenditures                                                               |   | (4,770         | ) |   | (3,563  | ) |   | (3,745  | )
|Proceeds from disposal of property, plant and equipment                            |   | 159            |   |   | 160     |   |   | 685     |  
|Acquisition of available for sale securities                                       |   | (3,422         | ) |   | -       |   |   | -       |  
|Proceeds from disposal of equity-accounted investment                              |   | -              |   |   | -       |   |   | 2,301   |  
|Long-term receivables and loan to equity-accounted
      investment repaid         |   | -              |   |   | -       |   |   | 1,622   |  
|Acquisition of BGS, net of cash acquired                                           |   | (97,992        | ) |   | -       |   |   | -       |  
|Acquisition of RMT, net of cash acquired                                           |   | (1,381         | ) |   | -       |   |   | -       |  
|Acquisition of Prism Holdings Limited and remaining 25.1% of
      EasyPay, net of |   |                |   |   |         |   |   |         |  
|cash acquired                                                                      |   | -              |   |   | -       |   |   | (92,043 | )
|Acquisition of and advance of loans to equity-accounted investments                |   | (450           | ) |   | (500    | ) |   | (360    | )
|Net cash used in investing
      activities                                        |   | (107,856       | ) |   | (3,903  | ) |   | (91,540 | )
|Cash flows from financing activities                                               |   |                |   |   |         |   |   |         |  
|Proceeds from issue of common stock                                                |   | 271            |   |   | 2,845   |   |   | 909     |  
|Acquisition of treasury stock (Note 18)                                            |   | (39,412        | ) |   | -       |   |   | (1,000  | )
|Proceeds from short-term loan facility                                             |   | 110,000        |   |   |         |   |   |         |  
|Repayment of short-term loan facility                                              |   | (110,000       | ) |   |         |   |   |         |  
|Payment of facility fee                                                            |   | (1,100         | ) |   |         |   |   |         |  
|Proceeds from bank overdraft                                                       |   | 2,843          |   |   | 1,462   |   |   | 84,657  |  
|Repayment of bank overdraft                                                        |   | (2,850         | ) |   | (1,443  | ) |   | (84,854 | )
|Proceeds from interest bearing liabilities                                         |   | -              |   |   | -       |   |   | 3,513   |  
|Net cash (used in) provided
      by financing activities                          |   | (40,248        | ) |   | 2,864   |   |   | 3,225   |  
|Effect of exchange rate changes on cash                                            |   | (10,353        | ) |   | (16,973 | ) |   | 4,841   |  
|Net (decrease) increase in cash and cash
      equivalents                         |   | (51,689        | ) |   | 100,748 |   |   | (18,008 | )
|Cash and cash equivalents  beginning of year                                      |   | 272,475        |   |   | 171,727 |   |   | 189,735 |  
|Cash and cash equivalents at end of year                                           | $ | 220,786        |   | $ | 272,475 |   | $ | 171,727 |  

See accompanying notes to consolidated financial statements.

F-7

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(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 3.5 million beneficiaries in five of South Africas
  nine provinces, processes nearly 65% of retail payment transactions through
  its EasyPay system and provides mobile telephone top-up transactions for two
  of South Africas three 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.

In June 2004, Net1 acquired Net
  1 Applied Technology Holdings Limited (Aplitec), a South African
  public company. Aplitec shareholders obtained a majority voting interest in
  Net1 in that transaction and, in accordance with generally accepted accounting
  principles, the transaction was accounted for as a reverse acquisition the (Aplitec
  transaction). As a result, although Net1 was the legal acquirer, Aplitec
  was treated as the acquiring company for financial reporting purposes.

On August 27, 2008, the Company
  acquired 80.1% of BGS Smartcard Systems AG (BGS), an Austrian private
  company, and on July 3, 2006, the Company acquired 100% of Prism Holdings Limited
  (Prism), a South African public company. The Companys fiscal
  2009 transactions are discussed in more detail in Note 3.

**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.

Financial Accounting Standards
  Board Interpretation No. 46R, Consolidation of Variable Interest Entities,
  an Interpretation of ARB 51, Revised December 2003(FIN 46R),
  clarifies the application of Accounting Research Bulletin No. 51, Consolidated
  Financial Statementsto certain entities in which equity investors do not
  have the characteristics of a controlling financial interest or do not have
  sufficient equity at risk for the entity to finance its activities without additional
  subordinated financial support. As required by FIN 46R the Company, if it is
  the primary beneficiary, consolidates entities which are considered to be Variable
  Interest Entities (VIE). FIN 46R considers the primary beneficiary
  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 the requirements of FIN 46R during
  the years ended June 30, 2009 and 2008.

**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.

F-8

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

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 years 
| | ---------------------- | -------------
| | Office equipment       | 3 to 6 years 
| | Vehicles               | 4 to 8 years 
| | Furniture and fittings | 5 to 10 years
| | Plant and equipment    | 5 to 10 years

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 year ended June 30, 2009,
  the income tax rate was 28%, but upon distribution an additional tax (STC)
  of 10.0% 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, 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%
  . The income tax rate during the year ended June 30, 2007 was 29%, and the STC
  rate was 12.5%, which resulted in a combined rate of 36.89% .

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.

F-9

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

If the carrying amount of the reporting
  unit goodwill exceeds the implied fair value of that goodwill, an impairment
  loss is recorded in net income. 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 and are amortized over their useful lives,
  which vary between one and 20 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 shareholders
  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 income for the period.

F-10

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(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;
- Collectability is reasonably assured.

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

***Fees
  and commissions***

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 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.

***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 applies the guidance in American Institute of Certified Public Accountants
  Statement of Position 97-2, Software Revenue Recognition, as amended
  (SOP 97-2). This requires consideration of 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-11

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(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 in terms of SOP 97-2.
  If not, the Company applies the separation provisions of the Emerging Issues
  Task Force (EITF) consensus on Issue No. 00-21, Revenue Arrangements
  with Multiple Deliverables(EITF 00-21). The provisions of EITF
  00-21 require the Company to unbundle 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 enrolled in its merchant retail application. 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, 2009, 2008 and 2007, the Company incurred research and development
  expenditures of $8.9 million, $5.7 million and $4.9 million, respectively.

**Computer software development**

Costs in respect of the development
  of software intended for sale to licensees is accounted for in accordance with
  Statement of Financial Accounting Standard (SFAS) No. 86, Accounting
  for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed(FAS
  86). FAS 86 requires product development costs to be charged to
  expenses as incurred until technological feasibility is attained. Technological
  feasibility is attained when the Companys 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
  is generally short with immaterial amounts of development costs incurred during
  this period.

F-12

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(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 accounted for in accordance
  with Statement of Position 98-1 Accounting for the Costs of Computer Software
  Developed or Obtained for Internal Use(SOP 98-1), issued by
  the American Institute of Certified Public Accountants. SOP 98-1 requires these
  costs to be 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.

**Loan provisions and allowance
  for doubtful debts**

***Traditional
  microlending***

A specific provision is established
  for all traditional microlending loans where it is considered likely that all
  or a portion of the principal amount of the loan or interest thereon will not
  be repaid by the borrower. Default is considered likely after a specified period
  of repayment default, which is generally not more than 150 days. The provision
  is 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.

***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.

***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
  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 to employees. 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 employee 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 employees respective functions.

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).

F-13

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Recent accounting pronouncements
  adopted**

Effective July 1, 2008, the Company
  adopted Financial Accounting Standards Board (FASB) SFAS No. 157,
  Fair Value Measurements (FAS 157) for financial assets and
  liabilities, which provides a single definition of fair value, establishes a
  framework for the measurement of fair value and expands disclosure about the
  use of fair value to measure assets and liabilities; however, it does not require
  any new fair value measurements.

FAS 157 establishes a hierarchy
  for information and valuations used in measuring fair value that is broken down
  into three levels based on its reliability. Level 1 valuations are based on
  quoted prices in active markets for identical assets or liabilities that the
  Company has the ability to access. Level 2 valuations are based on quoted prices
  in markets that are not active or for which all significant inputs are observable,
  directly or indirectly. Level 3 valuations are based on information that is
  unobservable and significant to the overall fair value measurement.

In October 2008, the FASB issued
  FASB Staff Position (FSP) No. 157-3, Determining the Fair Value
  of a Financial Asset When the Market for That Asset Is Not Active (FSP
  157-3) which clarifies the application of FAS 157 in a market that is
  not active and provides an example to illustrate key considerations in determining
  the fair value of a financial asset when the market for that financial asset
  is not active. FAS 157-3 was effective upon issuance.

In April 2009, the FASB issued
  FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity
  for the Asset or Liability Have Significantly Decreased and Identifying Transactions
  That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4 provides
  additional guidance for estimating fair value in accordance with FAS 157, when
  the volume and level of activity for the asset or liability have significantly
  decreased. FSP FAS 157-4 also includes guidance on identifying circumstances
  that indicate a transaction is not orderly. FSP FAS 157-4 is effective for interim
  and annual reporting periods ending after June 15, 2009, and has been adopted
  for the year ended 30 June, 2009.

The adoption of FAS 157, FSP 157-3
  and FSP 157-4 for financial assets and liabilities has not had a material effect
  on the Companys results of operations or financial position.

Effective July 1, 2008, the Company
  adopted SFAS No.159, The Fair Value Option for Financial Assets and Financial
  Liabilities (FAS 159). FAS 159 expands the use of fair value
  accounting to eligible financial assets and liabilities. The Company evaluated
  its existing financial instruments and elected not to adopt the fair value option
  on its financial instruments. However, because the FAS 159 election is based
  on an instrument-by-instrument election at the time the Company first recognizes
  an eligible item or enters into an eligible firm commitment, the Company may
  decide to exercise the option on new items when business reasons support doing
  so in future. As a result, the adoption of FAS 159 has not had a material effect
  on the Companys results of operations or financial position.

In March 2008, the Company adopted
  FASB SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities
   an amendment of FASB Statement No. 133(FAS 161).FAS 161
  expands the current disclosure requirements of FASB SFAS No. 133, Accounting
  for Derivative Instruments and Hedging Activities(FAS 133) such
  that entities must now provide enhanced disclosures on an interim and annual
  basis regarding how and why the entity uses derivatives; how derivatives and
  related hedged items are accounted for under FAS 133 and how derivatives and
  related hedged items affect the entitys consolidated financial position,
  statement of operations and cash flow. Pursuant to the transition provisions
  of the FAS 161, the Company adopted the SFAS on January 1, 2009. The required
  disclosures are presented in Note 8. This Statement does not impact the consolidated
  financial results as it is disclosure-only in nature.

F-14

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

**Recent accounting pronouncements
  adopted (continued)**

In June 2009, the Company adopted
  FASB SFAS No. 165, Subsequent Events (FAS 165). FAS 165 establishes
  general standards of accounting for and disclosure of events that occur after
  the balance sheet date but before financial statements are issued or are available
  to be issued. Specifically, FAS 165 provides: the period after the balance sheet
  date during which management should evaluate events or transactions that may
  occur for potential recognition or disclosure in the financial statements; the
  circumstances under which an entity should recognize events or transactions
  occurring after the balance sheet date in its financial statements; and the
  disclosures that an entity should make about events or transactions that occurred
  after the balance sheet date. FAS 165 is effective prospectively for the interim
  and annual periods ending after June 15, 2009. The adoption of FAS 165 did not
  have an impact on the Companys consolidated financial position, statement
  of operations or cash flows. The Company has evaluated the subsequent events
  from July 1, 2009 to August 27, 2009, which is the date when the financial statements
  were issued.

**Recent accounting pronouncements
  not yet adopted as of June 30, 2009**

In December 2007, the FASB issued
  SFAS No. 141(revised 2007), Business Combinations (FAS 141R).
  FAS 141R replaces SFAS No. 141, Business Combinations, (FAS 141).
  FAS 141R retains the fundamental requirements in FAS 141 that the acquisition
  method of accounting (defined in FAS 141 as the purchase method) be used for
  all business combinations and for an acquirer to be identified for each business
  combination. FAS 141R requires the acquiring entity in a business combination
  to recognize the assets acquired and liabilities assumed at the acquisition
  date. FAS 141R also requires acquisition-related costs to be recognized separately
  from the business combination. FAS 141R 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 Company is currently
  assessing FAS 141R and has not yet determined the impact that the adoption of
  this standard will have on its financial position or results of operations.

In December 2007, the FASB issued
  SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements
  (FAS 160). FAS 160 establishes a single method of accounting for
  changes in a parents ownership interest in a subsidiary that does not
  result in deconsolidation. FAS 160 clarifies that all of those transactions
  are equity transactions if the parent retains its controlling financial interest
  in the subsidiary. FAS 160 is effective for fiscal years, and interim periods
  within those fiscal years, beginning on or after December 15, 2008. Earlier
  adoption is prohibited. However, FAS 160 shall be applied prospectively as of
  the beginning of the fiscal year in which it is initially applied, except for
  the presentation and disclosure requirements. The presentation and disclosure
  requirements shall be applied retrospectively for all periods presented. The
  Company is currently assessing FAS 160 and has not yet determined the impact
  that the adoption of this standard will have on its financial position or results
  of operations.

In May 2008, the FASB issued SFAS
  No. 162, The Hierarchy of Generally Accepted Accounting Principles (FAS
  162). FAS 162 identifies the sources of accounting principles and the
  framework for selecting the principles to be used in the preparation of financial
  statements under GAAP. FAS 162 is effective 60 days following the SECs
  approval of the Public Company Accounting Oversight Board amendments to AU Section
  411, The Meaning of Present Fairly in Conformity With Generally Accepted
  Accounting Principles. It is not expected that FAS 162 will change
  current practice.

In February 2008, the FASB issued
  FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP
  FAS 157-2) which delays the effective date of FAS 157 for all nonrecurring
  fair value measurements of nonfinancial assets and nonfinancial liabilities
  until fiscal years beginning after November 15, 2008. Entities are encouraged
  to adopt FAS 157 for measurements of nonfinancial assets and nonfinancial liabilities
  in its entirety as long as they have not yet issued financial statements during
  that year. An entity that chooses to adopt FAS 157 in its entirety must do so
  for all nonfinancial assets and nonfinancial liabilities within its scope. The
  Company is currently reviewing the impact of the adoption of FAS No. 157 for
  all non-financial assets and liabilities on its financial statements.

F-15

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(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, 2009 (continued)**

In April 2008, the FASB issued
  FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets
  (FSP FAS 142-3). This FSP amends the factors that should be considered
  in developing renewal or extension assumptions used to determine the useful
  life of a recognized intangible asset under FASB Statement No. 142, Goodwill
  and Other Intangible Assets (FAS 142). The intent of FSP FAS
  142-3 is to improve the consistency between the useful life of an intangible
  asset determined under FAS 142 and the period of expected cash flows used to
  measure the fair value of the asset under FAS 141. FSP FAS 142-3 is effective
  for financial statements issued for fiscal years beginning after December 15,
  2008, and interim periods within those fiscal years. Early adoption is prohibited.
  The Company is currently assessing FSP FAS 142-3 and has not yet determined
  the impact that the adoption of this standard will have on its financial position
  or results of operations.

In June 2008, the FASB issued FSP
  EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
  Transactions Are Participating Securities(FSP EITF 03-6-1).
  Under the FSP, unvested share-based payment awards 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 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. FSP EITF 03-6-1 is effective
  for financial statements issued for fiscal years beginning after December 15,
  2008, and interim periods within those fiscal years. The Company is currently
  assessing FSP EITF 03-6-1 and has not yet determined the impact that the adoption
  of this standard will have on its earnings per share.

In April 2009, the FASB issued
  FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed
  in a Business Combination That Arise from Contingencies (FSP FAS 141R-1).
  Under FSP FAS 141R-1 an acquirer is required to recognize at fair value an asset
  acquired or liability assumed in a business combination that arises from a contingency
  if the acquisition-date fair value of that asset or liability can be determined
  during the measurement period. If the acquisition-date fair value cannot be
  determined, the acquirer applies the recognition criteria in SFAS No. 5, Accounting
  for Contingencies, and Interpretation 14 to determine whether the contingency
  should be recognized as of the acquisition date or after it. Like FAS141R, FSP
  FAS 141R-1 is effective for business combinations whose acquisition date is
  on or after the beginning of the first annual reporting period beginning on
  or after December 15, 2008. The Company is currently assessing FSP FAS 141R-1
  and has not yet determined the impact that the adoption of this standard will
  have on its financial position or results of operations.

In June 2009, the FASB issued SFAS
  No. 167, Amendments to FASB Interpretation No. 46(R) (FAS 167).
  FAS 167 is a revision of FIN46R, and 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. FAS 167 will also require
  a reporting entity to provide additional disclosures about its involvement with
  variable interest entities and any significant changes in risk exposure due
  to that involvement. FAS 167 is effective for financial statements issued for
  fiscal years and interim periods within those fiscal years beginning after November
  15, 2009. Early adoption is not permitted. The Company is currently evaluating
  the impact of the adoption of FAS 167.

In June 2009, the FASB issued SFAS
  No. 168, The FASB Accounting Standards CodificationTM
  and the Hierarchy of Generally Accepted Accounting Principles, (FAS
  168). FAS 168 establishes the FASB Accounting Standards CodificationTM(Codification) as the single source of authoritative US GAAP
  recognized by the FASB to be applied by nongovernmental entities. When effective,
  the Codification will supersede all existing non-SEC accounting and reporting
  standards. Following FAS 168, the FASB will issue new guidance in the form of
  Accounting Standards Updates. FAS 168 and the Codification are effective for
  financial statements issued for interim and annual periods ending after September
  15, 2009.

F-16

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

3. ACQUISITIONS

**2009 Acquisitions**

***BGS***

On August 27, 2008, the Company
  acquired 80.1% of the issued share capital of BGS 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 BGS shareholders. As described in note
  21, 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 has been set as August 31, 2008.

BGS provides smart card-based payment
  systems to banks, enterprises and government authorities in Russia, Ukraine,
  Uzbekistan, India and Oman. BGS system, Dual Universal Electronic Transactions
  (DUET), was developed by BGS as a derivative of the first version
  of the Companys UEPS technology that the Company licensed to BGS in 1993.
  BGS largest customer is Sberbank, the largest financial institution in
  Russia, which owns the remaining 19.9% of BGS. The Company believes the acquisition
  of BGS provides it with opportunity to increase revenue and operating income,
  enhance the Companys product offering, increasing the depth of management
  with the addition of experienced executives and accelerating the rollout of
  the UEPS in Russia and other members of the Commonwealth of Independent States.

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

|Cash paid to former BGS shareholders                                                             | $ | 103,517 | 
|------------------------------------------------------------------------------------------------ | - | ------- | 
|40,134 shares of Net1 common stock valued at $24.46 per share
      issued to certain former BGS |   |         | 
|shareholders                                                                                     |   | 982     | 
|Costs directly related to the acquisition                                                        |   | 2,915   | 
|Total purchase price                                                                             | $ | 107,414 | 

The following table sets forth
  the allocation of the purchase price:

|Cash and cash equivalents              | $ | 6,283    | 
|-------------------------------------- | - | -------- | 
|Accounts receivable, net               |   | 3,218    | 
|Inventory                              |   | 740      | 
|Property, plant and equipment          |   | 350      | 
|Intangible assets (see Note 10)        |   | 68,859   | 
|Trade and other payables               |   | (7,181)  | 
|Other long-term liabilities            |   | (631)    | 
|Deferred tax assets                    |   | 10,657   | 
|Deferred tax liabilities (see Note 15) |   | (17,214) | 
|Minority interests                     |   | (1,838)  | 
|Goodwill (see Note 10)                 |   | 44,171   | 
|Total purchase price                   | $ | 107,414  | 

F-17

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

3. ACQUISITIONS (continued)

**2009 Acquisitions (continued)**

***BGS
  (continued)***

The results of BGS operations
  are reflected in the Companys financial statements from September 1, 2008.
  The following pro forma consolidated results of operations have been prepared
  as if the acquisition of BGS had occurred on July 1, 2008 and 2007, respectively:

Year endedJune 30,Pro forma
      
      
      Pro forma2009
      
      
      2008Revenue(1)
      $
      248,180
      
      $
      278,100Net income from continuing operations before
      
      85,593
      
      
      76,566minority interest and loss from equity-accountedinvestments(1)Net income(1)
      $
      84,081
      
      $
      76,345Earnings per share  basic (in cents)
      $
      150.3
      
      $
      133.5Earnings per share  diluted (in cents)
      $
      149.8
      
      $
      132.4Weighted-average number of outstanding shares
        of
      
      55,959,418
      
      
      57,196,061common stock and linked units used to calculatebasic earnings per shareWeighted-average number of outstanding shares
        of
      
      56,146,181
      
      
      57,675,466common stock and linked units used to calculatediluted earnings per share


(1) Revenue, net income from continuing
  operations before minority interest and loss from equity-accounted investments
  and net income have been translated from the functional currencies, primarily
  ZAR and euro, to US dollar, using the average exchange rate applicable for the
  period. The average US dollar/ ZAR exchange rate for the years ended June 30,
  2009 and 2008, was $1:9.0484 and $1:7.3123, respectively. The average US dollar/
  € exchange rate for the years ended June 30, 2009 and 2008, was $1:0.7311
  and $1:0.6819, respectively. The significant fluctuation in the US dollar/ ZAR
  exchange rates has negatively impacted the Companys reported results.

The unaudited pro forma financial
  information above reflects the following pro forma adjustments applied using
  the principles of Article 11 of Regulation S-X under the Securities Exchange
  Act of 1934:

a) An adjustment to reduce interest
  income on the Companys cash reserves for the year ended June 30, 2009
  and 2008, as a result of the payment of the cash portion of the purchase price
  of $107.4 million, at an assumed pre-tax South African interest rate of 10.8%
  and 10.9% respectively. This adjustment also assumes that the cash had been
  paid out 50 days after the beginning of the period presented, rather than at
  the beginning of the period, because the Company financed the cash portion of
  the purchase price with the proceeds of a loan facility that was repaid in full
  50 days after closing of the acquisition, and thus, continued to earn interest
  on these cash reserves for the first 50 days of the period until the loan was
  repaid in full. The adjustment has been tax-effected using a fully-distributed
  rate for the year ended June 30, 2009 and 2008, of 34.55% and 35.45%, respectively;

b) An adjustment to decrease interest
  income, net for each of the years ended June 30, 2009 and 2008, for the interest
  on the short-term facility of $0.8 million and the facility fee of $1.1 million,
  respectively. The interest and facility fee are not deductible for taxation
  purposes;

F-18

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

3. ACQUISITIONS (continued)

**2009 Acquisitions (continued)**

***BGS
  (continued)***

c) An adjustment to increase amortization
  expense based on the estimated fair value of the identifiable intangible asset
  from the purchase price allocation, which are being amortized over its estimated
  useful life of seven years, of approximately $9.2 million and $9.8 million for
  the year ended June 30, 2009 and 2008, as well as the related adjustment to
  deferred tax of $2.3 million and $2.5 million, respectively.

***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

As of June 30, 2009, pre-funded
  social welfare grants receivable represents amounts pre-funded by the Company
  to certain merchants participating in the merchant acquiring system. The July
  2009 payment service commenced during the last two days of June 2009 and was
  offered at merchant locations only.

As of June 30, 2008, pre-funded
  social welfare grants receivable represented amounts due from provincial governments,
  as the Company pre-funded social welfare grant payments on behalf of the government
  in certain provinces and pre-funding provided to certain merchants participating
  in the merchant acquiring system. The pre-funded amounts were typically reimbursed
  to the Company within two weeks after the disbursement of the grants. The grant
  payment service normally commenced during the week before the start of a calendar
  month at government pay points and merchant locations. In March 2009, the Company
  signed a contract with the South Africa Social Security Agency (SASSA)
  which, commencing in May 2009, relieved the Company from its obligation to pre-fund
  social welfare grants in the two provinces in which the Company provided this
  service.

F-19

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

5. ACCOUNTS RECEIVABLE AND FINANCE LOANS RECEIVABLE, net

|                                                                     |   | 2009   |   |  |  |   | 2008   |   | 
|-------------------------------------------------------------------- | - | ------ | - |  |  | - | ------ | - | 
|Accounts receivable, trade, net                                      | $ | 31,286 |   |  |  | $ | 13,693 |   | 
|Accounts receivable, trade, gross                                    |   | 31,681 |   |  |  |   | 13,953 |   | 
|Allowance for doubtful accounts
      receivable, end of year        |   | 395    |   |  |  |   | 260    |   | 
|Allowance for doubtful accounts
      receivable, beginning of year  |   |        |   |  |  |   |        |   | 
|re-measured
      at year end rates                                  |   | 262    |   |  |  |   | 496    |   | 
|Allowance (reversed) charged
      to statement of operations, re-   |   |        |   |  |  |   |        |   | 
|measured
      at year end rates                                     |   | 209    |   |  |  |   | (172   | ) | 
|Amount utilized, re-measured
      at year end rates                 |   | (76    | ) |  |  |   | (64    | ) | 
|                                                                     |   |        |   |  |  |   |        |   | 
|Prepaid establishment costs related to Grindrod opportunity          |   | 501    |   |  |  |   | 568    |   | 
|Other receivables                                                    |   | 10,688 |   |  |  |   | 7,536  |   | 
|Total accounts receivable, net                                       | $ | 42,475 |   |  |  |   | 21,797 |   | 
|                                                                     |   |        |   |  |  |   |        |   | 
|Finance loans receivable, net                                        |   |        |   |  |  |   |        |   | 
|UEPS-based lending                                                   | $ | 2,560  |   |  |  |   | 2,444  |   | 
|Traditional microlending  net                                       |   | 3      |   |  |  |   | 1,857  |   | 
|Traditional
      microlending  gross                               |   | 229    |   |  |  |   | 2,864  |   | 
|Allowance for doubtful microlending
      loans, end of year         |   | 226    |   |  |  |   | 1,007  |   | 
|Allowance
      for doubtful microlending loans, beginning of year   |   |        |   |  |  |   |        |   | 
|re-measured
      at year end rates                                  |   | 1,017  |   |  |  |   | 2,464  |   | 
|Sale
      of traditional microlending business, re-measured at year |   |        |   |  |  |   |        |   | 
|end rates                                                            |   | (1,259 | ) |  |  |   | -      |   | 
|Allowances
      charged to the statement of operations, re-         |   |        |   |  |  |   |        |   | 
|measured at
      year end rates                                     |   | 468    |   |  |  |   | 371    |   | 
|Amounts
      utilized, re-measured at year end rates                |   | -      |   |  |  |   | (1,828 | ) | 
|                                                                     |   |        |   |  |  |   |        |   | 
|Total finance loans receivable, net                                  | $ | 2,563  |   |  |  | $ | 4,301  |   | 

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. During the year ended June 30, 2008, the
  Company reversed approximately $0.3 million from the allowance for doubtful
  accounts receivable to the consolidated statement of operations as a result
  of amounts recovered from customers which the Companys management previously
  considered unrecoverable as of June 30, 2007.

Accounts receivable, trade, also
  includes amounts due by customers from the sale of hardware, software licenses
  and SIM cards.

In January 2007, the Company entered
  into 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 invest $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, 2009 and 2008, and the remaining portion of
  these funds is $0.5 million and $0.6 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-20

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

6. DEFERRED EXPENDITURE ON SMART CARDS

The deferred expenditure on smart
  cards represents amounts paid for smart cards used in the administration and
  distribution of grants to beneficiaries. These expenditures are deferred and
  written off over the period of the contract, including mutually-agreed extension
  periods, with the provincial government.

7. INVENTORY

The Companys inventory comprised
  of the following categories as of June 30, 2009 and 2008.

|               |   | 2009  |  |   | 2008  | 
|-------------- | - | ----- |  | - | ----- | 
|               |   |       |  |   |       | 
|Raw materials  | $ | 153   |  | $ | 111   | 
|Finished goods |   | 7,097 |  |   | 5,941 | 
|               | $ | 7,250 |  | $ | 6,052 | 

8. 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 our 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, 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-21

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

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

***Risk
  management (continued)***

*Currency
  exchange risk (continued)*

As of June 30, 2008

Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityEUR
      1,995
      
      ZAR
      12.3688
      
      ZAR
      12.4508
      
      July 7, 2008EUR
      6,000
      
      ZAR
      12.0701
      
      ZAR
      12.4508
      
      July 7, 2008EUR
      2,400
      
      ZAR
      12.5100
      
      ZAR
      12.4618
      
      July 11, 2008EUR
      689,200
      
      ZAR
      12.1065
      
      ZAR
      12.4782
      
      July 17, 2008EUR
      1,995
      
      ZAR
      12.1772
      
      ZAR
      12.5085
      
      July 28, 2008EUR
      32,331
      
      ZAR
      12.4862
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      140,000
      
      ZAR
      12.4730
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      140,000
      
      ZAR
      11.9793
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      (140,000)
      
      ZAR
      12.3395
      
      ZAR
      12.4319
      
      July 31, 2008EUR
      8,750
      
      ZAR
      12.0207
      
      ZAR
      12.5167
      
      July 31, 2008EUR
      245,250
      
      ZAR
      12.1800
      
      ZAR
      12.5573
      
      August 15, 2008EUR
      4,550
      
      ZAR
      12.6757
      
      ZAR
      12.5842
      
      August 25, 2008USD
      542,500
      
      ZAR
      7.9100
      
      ZAR
      7.9484
      
      August 28, 2008EUR
      86,178
      
      ZAR
      12.6631
      
      ZAR
      12.6057
      
      September 2, 2008EUR
      1,470
      
      ZAR
      12.7000
      
      ZAR
      12.6277
      
      September 10, 2008USD
      24,600
      
      ZAR
      8.0090
      
      ZAR
      8.0405
      
      October 10, 2008EUR
      82,400
      
      ZAR
      12.2199
      
      ZAR
      12.7685
      
      October 31, 2008EUR
      (82,400)
      
      ZAR
      12.5773
      
      ZAR
      12.6764
      
      October 31, 2008EUR
      82,400
      
      ZAR
      12.7820
      
      ZAR
      12.8456
      
      November 28, 2008


As of June 30, 2007

Fair marketNotional amount
      
      Strike price
      
      value price
      
      MaturityUSD
      102,000
      
      ZAR
      7.1600
      
      ZAR
      7.1180
      
      August 31, 2007EUR
      572,900
      
      ZAR
      9.7360
      
      ZAR
      9.6639
      
      September 14, 2007


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

F-22

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

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

***Risk
  management (continued)***

*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 is 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 20% of the issued share capital of Finbond, which are
  exchange-traded equity securities. The fair value of these securities as of
  June 30, 2009, represented approximately 1% 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.

**Financial instruments**

The Company adopted FAS 157 on
  July 1, 2008, for all financial assets and liabilities and nonfinancial assets
  and liabilities that are recognized or disclosed at fair value in its financial
  statements on a recurring basis (at least annually). FAS 157 defines fair value,
  establishes a framework for measuring fair value, and expands disclosures about
  fair value measurements.

FAS 157 defines fair value 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.

F-23

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

**Financial instruments (continued)**

In addition to defining fair value,
  FAS 157 expands the disclosure requirements around fair value and establishes
  a fair value hierarchy for valuation inputs. The hierarchy 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 in the common stock of Finbond Property Finance Limited (Finbond).
  The Company received 41,137,375 shares in Finbond as consideration for the sale
  of its traditional microlending business and acquired, for cash, a further 43,495,150
  shares in Finbond for $3.4 million. The Companys ownership interest in
  Finbond, as of March 31, 2009 is approximately 20%. 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, and consequently are within the scope of FAS No. 115, Accounting
  for Certain Investments in Debt and Equity Securities; the Company has designated
  such shares as available for sale investments. Pursuant to FSP 157-3, however,
  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 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 assets 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, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

8. 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 identical assets and liabilities to determine fair
  value. The Company has no derivatives that require fair value measurement under
  level 1 and 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, 2009:

|                                             |  | Quoted      |  |   |             |  |   |              |  |   |       | 
|-------------------------------------------- |  | ----------- |  | - | ----------- |  | - | ------------ |  | - | ----- | 
|                                             |  | Price in    |  |   |             |  |   |              |  |   |       | 
|                                             |  | Active      |  |   | Significant |  |   |              |  |   |       | 
|                                             |  | Markets for |  |   | Other       |  |   | Significant  |  |   |       | 
|                                             |  | Identical   |  |   | Observable  |  |   | Unobservable |  |   |       | 
|                                             |  | Assets      |  |   | Inputs      |  |   | Inputs       |  |   |       | 
|                                             |  | (Level 1)   |  |   | (Level 2)   |  |   | (Level )     |  |   | 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     | 

***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.

In accordance with the provisions
  of APB No. 18, The Equity Method of Accounting for Investments in Common
  Stock, 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 based on valuation techniques 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 determined that there was not a decline
  in the fair value below cost of the equity-accounted investments during the
  reporting periods presented herein, and therefore has not recorded an impairment
  charge during year ended June 30, 2009.

F-25

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

**Financial instruments (continued)**

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

The Company owns 50% of the ordinary
  shares in, and loans extended to, each of SmartSwitch Namibia (Proprietary)
  Limited (SmartSwitch Namibia), SmartSwitch Botswana (Proprietary)
  Limited (SmartSwitch Botswana) and VTU De Colombia S.A. (VTU Colombia).
  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 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).
  In May 2007, the Company disposed of its 43% interest in Permit Group 2 (Proprietary)
  Limited to Permits other shareholder for $2.3 million and incurred a loss
  of approximately $0.6 million on the sale.

The Company has sold hardware,
  software and/or licenses to SmartSwitch Namibia, SmartSwitch Botswana and VTU
  Colombia and defers recognition of 50% of the net income after tax related to
  these sales until SmartSwitch Namibia, SmartSwitch Botswana and VTU Colombia
  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, the functional currency of Vinapay is the Vietnamese
  dong, and the functional currency of Permit is the South African rand.

Summarized below is the Companys
  interest in equity-accounted investments as of June 30, 2009 and 2008:

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


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

F-26

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

**Financial instruments (continued)**

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

EarningsEquity
      
      
      
      Loans
      
      
      
      (Loss)
      
      
      
      Elimination
      
      
      
      TotalBalance as of June 30, 2007
      $
      1,189
      
      
      $
      3,577
      
      
      $
      (791
      )
      
      $
      (983
      )
      
      $
      2,992Share capital acquired/ loansextended
      
      928
      
      
      
      -
      
      
      
      -
      
      
      
      -
      
      
      
      928Share capital acquired  VinaPay
      
      428
      
      
      
      -
      
      
      
      -
      
      
      
      -
      
      
      
      428Share capital acquired 
        VTUColombia
      
      500
      
      
      
      -
      
      
      
      -
      
      
      
      -
      
      
      
      500(Loss) Earnings from equity-accounted investments
      
      -
      
      
      
      -
      
      
      
      (1,608
      )
      
      
      572
      
      
      
      (1,036
      )SmartSwitch Namibia(1)
      
      -
      
      
      
      -
      
      
      
      (289
      )
      
      
      304
      
      
      
      15SmartSwitch Botswana(1)
      
      -
      
      
      
      -
      
      
      
      (365
      )
      
      
      268
      
      
      
      (97
      )VTU Colombia
      
      -
      
      
      
      -
      
      
      
      (792
      )
      
      
      -
      
      
      
      (792
      )VinaPay
      
      -
      
      
      
      -
      
      
      
      (162
      )
      
      
      -
      
      
      
      (162
      )Foreign currency adjustment(2)
      
      (133
      )
      
      
      (265
      )
      
      
      104
      
      
      
      95
      
      
      
      (199
      )Balance as of June 30, 2008
      $
      1,984
      
      
      $
      3,312
      
      
      $
      (2,295
      )
      
      $
      (316
      )
      
      $
      2,685


(1)  includes the recognition
  of realized net income as described below.

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

There were no significant sales
  to these investees during the years ended June 30, 2009 and 2008. During the
  year ended June 30, 2007, the Company sold a license to VTU Colombia and sold
  hardware and software to SmartSwitch Botswana. The Company recognizes this net
  income from these hardware and software sales during the period in which the
  hardware and software it has sold to SmartSwitch Namibia, SmartSwitch Botswana
  and VTU Colombia are utilized in its operations, or has been sold to third party
  customers, as the case may be.

9. PROPERTY, PLANT AND EQUIPMENT, net

2009
      
      
      2008Cost:Computer equipment
      $
      19,495
      
      $
      15,912Furniture and office equipment
      
      5,912
      
      
      5,275Motor vehicles
      
      7,943
      
      
      7,640Plant and equipment
      
      2,195
      
      
      2,21735,545
      
      
      31,044Accumulated depreciation:Computer equipment
      
      15,473
      
      
      13,162Furniture and office equipment
      
      3,651
      
      
      3,169Motor vehicles
      
      7,070
      
      
      6,761Plant and equipment
      
      1,975
      
      
      1,66128,169
      
      
      24,753Carrying amount:Computer equipment
      
      4,022
      
      
      2,750Furniture and office equipment
      
      2,261
      
      
      2,106Motor vehicles
      
      873
      
      
      879Plant and equipment
      
      220
      
      
      556$
      7,376
      
      $
      6,291


F-27

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

10. GOODWILL AND INTANGIBLE ASSETS, net

**Goodwill**

Summarized below is the movement
  in the carrying value of goodwill for the years ended June 30, 2009 and 2008:

CarryingvalueBalance as of July 1, 2007
      $
      85,871Foreign currency adjustment (1)
      
      (8,933
      )Balance as of June 30, 2008
      
      76,938Acquisition of BGS as of August 31, 2008
      
      44,171BGS 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
      $
      116,197


(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.

The goodwill associated with the
  acquisition of BGS represents the excess of cost over the fair value of acquired
  net assets. A portion of the goodwill 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 BGS has been allocated to the Companys
  hardware, software and related technology sales segment on August 31, 2008 (see
  note 3).

The Company recorded a deferred
  tax asset as of the acquisition date, related to a license right for Austrian
  tax purposes (see note 15). 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 has recorded an adjustment against
  goodwill.

During the three months ended December
  31, 2008, 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.

As required by FAS 141 goodwill
  has been allocated to the Companys reportable segments as follows:

2009
      
      
      2008Transaction-based activities
      $
      35,362
      
      $
      34,997Smart card accounts
      
      -
      
      
      -Financial services
      
      -
      
      
      4,455Hardware, software and related technology sales
      
      80,835
      
      
      37,486Total
      $
      116,197
      
      $
      76,938


F-28

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

10. GOODWILL AND INTANGIBLE ASSETS, net (continued)

**Intangible assets, net**

Summarized below is the fair value
  of intangible asset acquired, translated at the exchange rate applicable as
  of the BGS acquisition date of August 31, 2008, and the weighted-average amortization
  period:

|                               |   |            |  |  | Weighted-    | 
|------------------------------ | - | ---------- |  |  | ------------ | 
|                               |   | Fair value |  |  | Average      | 
|                               |   | as of      |  |  | Amortization | 
|                               |   | August 31, |  |  | period (in   | 
|                               |   | 2008       |  |  | years)       | 
|Finite-lived intangible asset: |   |            |  |  |              | 
|Customer relationships         | $ | 68,859     |  |  | 7            | 

A deferred tax liability of $17.2
  million, at exchange rates applicable as of August 31, 2008, was recognized
  at the Austrian statutory tax rate of 25% on August 31, 2008, related to the
  intangible asset acquired.

Summarized below is the carrying
  value and accumulated amortization of intangible assets as of June 30, 2009
  and 2008:

|                                           |   | As
      of June 30, 2009 |  |   | As
      of June 30, 2008 |  
|------------------------------------------ | - | ------------------------- |  | - | ------------------------- | -
|                                           |   | Gross                     |  |   |                           |  
|                                           |   | carrying                  |  |   | Accumulated               |  
|                                           |   | value                     |  |   | amortization              |  
|Finite-lived intangible assets:            |   |                           |  |   |                           |  
|Customer relationships                     | $ | 83,824                    |  | $ | (12,306                   | )
|Software and unpatented technology         |   | 10,079                    |  |   | (10,079                   | )
|FTS patent                                 |   | 4,861                     |  |   | (4,333                    | )
|Exclusive licenses                         |   | 4,506                     |  |   | (3,293                    | )
|Trademarks                                 |   | 3,656                     |  |   | (1,025                    | )
|Customer contracts                         |   | 114                       |  |   | (114                      | )
|Total finite-lived
      intangible assets | $ | 107,040                   |  | $ | (31,150                   | )

The Company obtained its customer
  relationships intangible asset on the acquisition of BGS on August 27, 2008,
  RMT in April 2009, and Prism and EasyPay in fiscal 2007. On acquisition, the
  customer relationships intangible asset represented the fair value of relationships
  developed with customers of BGS, RMT, Prism and EasyPay in the information and
  communications technology, prepaid electricity and financial services industries
  as valued by the Companys management. The customer relationships are amortized
  over one to 15 years. Aggregate amortization expense of the customer relationships
  for the years ended June 30, 2009, 2008 and 2007, was approximately $9.1 million,
  $1.4 million and $1.4 million, respectively. The EasyPay customer relationships
  of $0.1 million were fully amortized as of June 30, 2009, and the gross carrying
  value and accumulated amortization are included in the table above.

The Company obtained its software
  and unpatented technology intangible asset on the acquisition of Prism and EasyPay
  during fiscal 2007. The software and unpatented technology was valued by Prisms
  technical team and includes the development of software across all divisions
  within Prism and EasyPay. The software and unpatented technology is amortized
  over three years. Aggregate amortization expense on the software and unpatented
  technology for the years ended June 30, 2009, 2008 and 2007, was approximately
  $3.0 million, $3.6 million and $3.6 million, respectively. The software and
  unpatented technology were fully amortized as of June 30, 2009 and the gross
  carrying value and accumulated amortization are included in the table above.

F-29

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

10. GOODWILL AND INTANGIBLE ASSETS, net (continued)

**Intangible assets, net
  (continued)**

The Company obtained its FTS patent
  on its acquisition of Net 1 Investment Holdings (Proprietary) Limited (Net
  1 Holdings) on July 12, 2000. 100% of Net 1 Holdings issued share
  capital was acquired for a historical cost of approximately $3.2 million (or
  $3.3 million at the year end exchange rate of $1: ZAR7.88), which was satisfied
  through the issuance of 9,750,000 shares of the Companys common stock.
  In addition, a deferred taxation adjustment was required to increase the historical
  carrying value to $1.6 million (or $1.6 million at the year end exchange rate
  of $1:ZAR7.88) . Net 1 Holdings was a holding company that did not generate
  significant revenues or expenses and did not have significant assets or liabilities
  other than the FTS patent rights for South Africa and surrounding territories,
  on which the Companys smart card applications are based. The FTS patent
  is amortized over ten years. Aggregate amortization expense on the FTS patent
  for the years ended June 30, 2009, 2008 and 2007, was approximately $0.4 million,
  $0.5 million and $0.5 million, respectively.

The Company obtained its trademarks
  on the acquisition of Prism and EasyPay during fiscal 2007. These trademarks
  were valued by the Companys management. The trademarks are amortized over
  five to 20 years. Aggregate amortization expense on the trademarks for the years
  ended June 30, 2009, 2008 and 2007, was approximately $0.3 million, $0.4 million
  and $0.4 million, respectively.

As a result of the accounting for
  the Aplitec transaction as a reverse acquisition, the assets and liabilities
  of the Company were valued in accordance with the requirements of FAS 141. The
  customer contracts and exclusive licenses were valued at approximately $0.1
  million and $4.5 million, respectively, with estimated useful lives of five
  and seven years respectively. Amortization expense for the customer contracts
  for each of the years ended June 30, 2009, 2008 and 2007, respectively, was
  $0.02 million. The customer contracts were fully amortized as of June 30, 2009
  and the gross carrying value and accumulated amortization is included in the
  table above. Amortization expense for the exclusive licenses for each of the
  years ended June 30, 2009, 2008 and 2007, respectively, was $0.6 million.

Future annual amortization expense
  is estimated at $10.5 million per annum. Actual annual amortization expense
  to be reported in future periods could differ from this estimate as a result
  of new intangible asset acquisitions, changes in useful lives, exchange rate
  fluctuations and other relevant factors.

11. OTHER PAYABLES

2009
      
      
      2008Participating merchants settlement obligation
      $
      23,368
      
      $
      29,597Payroll-related payables
      
      1,300
      
      
      1,759Accruals
      
      4,985
      
      
      7,364Value-added tax payable
      
      2,027
      
      
      1,539Other
      
      17,958
      
      
      9,713Provisions
      
      11,816
      
      
      7,460$
      61,454
      
      $
      57,432


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

The Companys balance sheet
  as of June 30, 2009, reflects one class of equity, namely common stock. The
  Companys balance sheet as of June 30, 2008, reflects two classes of equity
  - common stock and linked units. The linked units were created in connection
  with the Aplitec transaction in 2004. Effective October 2008, the linked units
  (which included a right to the Companys special convertible preferred
  stock as well as B Class preference shares and B Class loans of a subsidiary
  of the Company) were all converted to common stock as a result of the listing
  of the Companys common stock on the JSE and the linked units no longer
  exist.

F-30

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

**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 Company common stock
  are not subject to redemption.

**Common stock repurchases**

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. The Company repurchased
  40,100 shares during the year ended June 30, 2007, for approximately $1 million.

**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 in accordance with FAS 150, Accounting
  for Certain Financial Instruments with Characteristics of Both Equity and 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.

F-31

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

**Linked units (continued)**

***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.

*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
  rata to 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 passu
  with 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.

F-32

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

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

**Linked units (continued)**

*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 passu with 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.

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.

F-33

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

12. 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)*

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.

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.

13. REVENUE

|                                                     |   | 2009    |  |   | 2008    |  |   | 2007    | 
|---------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                                     |   |         |  |   |         |  |   |         | 
|Sale of goods  comprising mainly hardware
      and |   |         |  |   |         |  |   |         | 
|software sales                                       | $ | 47,003  |  | $ | 39,021  |  | $ | 27,716  | 
|Loan-based interest and fees received                |   | 5,659   |  |   | 8,585   |  |   | 11,460  | 
|Services rendered  comprising mainly fees and       |   |         |  |   |         |  |   |         | 
|commissions
      and contract variation fees        |   | 194,160 |  |   | 206,450 |  |   | 184,792 | 
|                                                     | $ | 246,822 |  | $ | 254,056 |  | $ | 223,968 | 

During the years ended June 30,
  2009 and 2007, the Company had no revenue recognized using the percentage of
  completion method.

System implementation revenue,
  arising from the contract with the Central Bank of Ghana amounted $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.

14. 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. 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-34

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

14. STOCK-BASED COMPENSATION (continued)

**Amended and Restated 2004
  Stock Incentive Plan (continued)**

The total number of shares of common
  stock issuable under the Plan is 5,752,580. 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, 2014, the tenth anniversary of the effective date of the Plan, but awards
  granted before such tenth anniversary may extend beyond that date.

***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. The table below presents the range of assumptions
  used to value options granted during the years ended June 30, 2009, 2008 and
  2007:

|                         | 2009       |  | 2008(1) |  | 2007      
|------------------------ | ---------- |  | ------- |  | ----------
|Expected volatility      | 30  45%   |  |        |  | 2535%    
|Expected dividends       | 0%         |  |        |  | 0%        
|Expected life (in years) | 2 – 6      |  |        |  | 1-6       
|Risk-free rate           | 2.0 – 4.5% |  |        |  | 4.8  4.9%

(1)  no stock options were granted during the year ended
  June 30, 2008.

***Restricted
  Stock***

*General
  Terms of Awards*

Restricted stock are considered
  to be non-vested equity shares under FAS 123R. 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 vest 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-35

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

14. STOCK-BASED COMPENSATION (continued)

**Amended and Restated 2004
  Stock Incentive Plan (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.

One-third of the award shares will
  vest on each of September 1, 2009, 2010 and 2011; however, vesting of the award
  shares is conditioned upon each recipients continuous service through
  the applicable vesting date and the Company achieving the financial performance
  target set for that vesting date. Specifically, the financial performance targets
  was set as a 20% increase, compounded annually, in fundamental diluted earnings
  per share (expressed in South African rand) (Fundamental EPS) above
  the Fundamental EPS for the fiscal year ended June 30, 2007; provided, however,
  that in the case of Dr. Belamant and Mr. Kotze, the annual required increase
  is 25% rather than 20%. For this purpose, Fundamental EPS are 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 in the discretion of the Remuneration
  Committee, and assuming a constant tax rate of 30%. If the Fundamental EPS for
  the specified fiscal year do not equal or exceed the Fundamental EPS target
  for such year, no award shares will become vested or nonforfeitable on the corresponding
  vesting date. Any award shares that do not become vested and nonforfeitable
  because the Fundamental EPS target is not met for the specified fiscal year
  remain outstanding and 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 our 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-36

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

14. STOCK-BASED COMPENSATION (continued)

**Stock option and restricted
  stock activity**

***Options***

The following table summarizes
  stock option activity for the years ended June 30, 2009, 2008 and 2007:

Weighted
      
      
      
      
      
      WeightedAverage
      
      
      
      
      
      AverageWeighted
      
      
      Remaining
      
      
      Aggregate
      
      
      Grantaverage
      
      
      Contractual
      
      
      Intrinsic
      
      
      Date FairNumber of
      
      
      exercise
      
      
      Term
      
      
      Value
      
      
      Valueshares
      
      
      price
      
      
      (in years)
      
      
      ($000)
      
      
      ($000)Outstanding  July 1, 2006
      
      832,727
      
      $
      9.66
      
      
      8.36
      
      $
      22,775
      
      
      -Options granted  Prism
      
      904,674
      
      
      22.51
      
      
      10.00
      
      
      -
      
      $
      2,201Options granted
        under Plan
      
      569,120
      
      
      22.51
      
      
      10.00
      
      
      -
      
      
      2,928Exercised
      
      (326,706
      )
      
      -
      
      
      -
      
      
      4,565
      
      
      -Forfeitures
      
      (605,272
      )
      
      -
      
      
      -
      
      
      -
      
      
      -Outstanding  June 30, 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
      
      
      -
      
      $
      5,786Exercised
      
      (84,414
      )
      
      -
      
      
      -
      
      
      1,731
      
      
      -Forfeitures
      
      (91,970
      )
      
      -
      
      
      -
      
      
      -
      
      
      -Outstanding  June 30, 2009
      
      1,896,994
      
      $
      19.03
      
      
      8.30
      
      $
      1,576
      
      
      -


During the years ended June 30,
  2009, 2008 and 2007, employee resignations and terminations resulted in forfeitures
  of approximately 91,970, 96,623, 405,000 options, respectively.

|Exercisable |  | 582,954 |  | $ | 18.67 |  |  | 6.9 |  | $ | 1,335 |  | 
|----------- |  | ------- |  | - | ----- |  |  | --- |  | - | ----- |  | 

During each of the years ended
  June 30, 2009, 2008 and 2007, approximately 264,000, 430,000 and 537,000, respectively,
  stock options became exercisable.

Options granted to certain employees
  on August 24, 2006, were automatically exercised on May 8, 2008 and 2007, 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 and 111,748
  shares were withheld from these employees to settle the exercise price. These
  6,448 and 111,748 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,
  2009, 2008 and 2007, respectively, the Company received approximately $0.3 million,
  $2.3 million and $3.7 million from stock option exercises and approximately
  $0.003 million, $0.5 million and $0.6 million from repayment of stock option-related
  loans.

F-37

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

14. 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, 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
      
      
      -


The fair value of restricted stock
  vested during the year ended June 30, 2009, was 0.02 million (2008: Nil).

**Stock-based compensation
  charge and unrecognized compensation cost**

The Company has recorded a net
  stock compensation charge of $5.0 million, $4.0 million and $0.9 million for
  the year ended June, 2009, 2008 and 2007, respectively, which comprised:

|                                                                        |   |            |   |   | Allocated to      |   |   |                |  
|----------------------------------------------------------------------- | - | ---------- | - | - | ----------------- | - | - | -------------- | -
|                                                                        |   |            |   |   | cost of goods     |   |   |                |  
|                                                                        |   |            |   |   | sold, IT          |   |   | Allocated to   |  
|                                                                        |   | Total      |   |   | processing,       |   |   | selling,       |  
|                                                                        |   | charge     |   |   | servicing         |   |   | general and    |  
|                                                                        |   | (reversal) |   |   | and
      support |   |   | administration |  
|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          |  
|                                                                        |   |            |   |   |                   |   |   |                |  
|Year ended June 30, 2007                                                |   |            |   |   |                   |   |   |                |  
|Stock-based compensation charge                                         | $ | 1,126      |   | $ | 272               |   | $ | 854            |  
|Benefit of stock compensation charge related to options forfeited       |   | (216       | ) |   | -                 |   |   | (216           | )
|Total  year ended June 30, 2007                                        | $ | 910        |   | $ | 272               |   | $ | 638            |  

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-38

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

14. STOCK-BASED COMPENSATION (continued)

**Stock-based compensation
  charge and unrecognized compensation cost (continued)**

As of June 30, 2009, the total
  unrecognized compensation cost related to stock options was approximately $5.2
  million, which the Company expects to recognize over approximately five years.
  As of June 30, 2009, the total unrecognized compensation cost related to restricted
  stock awards was approximately $7.3 million, which the Company expects to recognize
  over approximately three years. As of June 30, 2009, interest due from employees
  related to loans extended to fund stock option exercises was approximately $0.05
  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 $0.6 million and $0.4 million, respectively,
  for the years ended June 30, 2009 and 2008, 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.

15. INCOME TAXES

**Income tax provision**

The table below presents the components
  of income before income taxes as of June 30, 2009, 2008 and 2007:

|                           |   | 2009    |   |   | 2008    |   |  | 2007    |  
|-------------------------- | - | ------- | - | - | ------- | - |  | ------- | -
|                           |   |         |   |   |         |   |  |         |  
|South Africa               | $ | 143,680 |   | $ | 126,439 |   |  | 108,376 |  
|United States              |   | (31,048 | ) |   | 1,459   |   |  | (4,437  | )
|Other                      |   | 18,288  |   |   | (1,790  | ) |  | (2,662  | )
|Income before income taxes | $ | 130,920 |   | $ | 126,108 |   |  | 101,277 |  

Presented below is the provision
  for income taxes by location of the taxing jurisdiction for each of the years
  ended June 30:

|                                              |   | 2009    |   |  |   | 2008   |   |  |   | 2007   |  
|--------------------------------------------- | - | ------- | - |  | - | ------ | - |  | - | ------ | -
|                                              |   |         |   |  |   |        |   |  |   |        |  
|Current income tax                            | $ | 100,289 |   |  | $ | 45,520 |   |  | $ | 40,778 |  
|South Africa                                  |   | 50,092  |   |  |   | 44,330 |   |  |   | 40,778 |  
|United States                                 |   | 49,542  |   |  |   | 1,190  |   |  |   | -      |  
|Other                                         |   | 655     |   |  |   | -      |   |  |   | -      |  
|Deferred taxation charge (benefit)            |   | (1,460  | ) |  |   | (931   | ) |  |   | (805   | )
|South Africa                                  |   | (916    | ) |  |   | (1,056 | ) |  |   | 812    |  
|United States                                 |   | 928     |   |  |   | (61    | ) |  |   | (1,259 | )
|Other                                         |   | (1,472  | ) |  |   | 186    |   |  |   | (358   | )
|Change in tax rate                            |   | (3,003  | ) |  |   | (5,397 | ) |  |   | -      |  
|Foreign tax credits generated  United States |   | (53,082 | ) |  |   | -      |   |  |   | (2,399 | )
|Income tax provision                          | $ | 42,744  |   |  | $ | 39,192 |   |  | $ | 37,574 |  

F-39

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

15. 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, 2009, 2008 and 2007 is as follows:

|Income tax rate reconciliation                            |          |  |         |  |        
|--------------------------------------------------------- | -------- |  | ------- |  | -------
|Income taxes at fully distributed South African tax rates | 34.55%   |  | 35.45%  |  | 36.89% 
|Permanent items                                           | 1.60%    |  | 0.02%   |  | 0.40%  
|Foreign tax credits                                       | (40.09)% |  | -%      |  | (2.57)%
|Taxation on deemed dividends in the United
      States   | 41.58%   |  | -%      |  | -%     
|Movement in valuation allowance                           | (0.41)%  |  | (0.11)% |  | 2.38%  
|Prior year adjustments                                    | (2.28)%  |  | -%      |  | -%     
|Change in tax rate                                        | (2.29)%  |  | (4.28)% |  | -%     
|Income tax provision                                      | 32.66%   |  | 31.08%  |  | 37.10% 

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. There were no changes to the enacted tax rate in the year ended June
  30, 2007.

During the year ended June 30,
  2009, Net1 submitted amended tax returns in the United States to amend the inclusion
  of so called sub-part F income. Net1 filed these amended returns based on the
  Companys management determining that its South African operations trade
  in a high tax jurisdiction, as defined under US tax rules. Accordingly, during
  the year ended June 30, 2009, the Company recorded the reversal of the utilization
  of net operating losses generated on or before June 30, 2007 and applied these
  net operating losses against taxable income in its June 30, 2008, tax return
  filed with the US tax authorities. In addition, some of these net operating
  losses generated on or before June 30, 2007, were applied against taxable income
  for the year ended June 30, 2009. The impact of these adjustments is reflected
  in the prior year adjustments in the reconciliation of income taxes for the
  year ended June 30, 2009.

Net1 included actual dividends
  received from New Aplitec as well as deemed dividends arising for the repayment
  of the B Class Preference Shares and A and B Class Loans from New Aplitec in
  its year ended June 30, 2009, 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, 2009.

**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:

|                                                            |   | 2009    |   |   | 2008   |  
|----------------------------------------------------------- | - | ------- | - | - | ------ | -
|Total deferred tax assets                                   |   |         |   |   |        |  
|                                                            |   |         |   |   |        |  
|Net operating
      loss carryforwards                      | $ | 2,837   |   | $ | 2,502  |  
|Provisions and accruals                                     |   | 1,941   |   |   | 2,453  |  
|FTS patent                                                  |   | 1,834   |   |   | 1,987  |  
|Intangible assets                                           |   | 25,825  |   |   | 682    |  
|Foreign tax
      credits                                   |   | 8,385   |   |   | 2,399  |  
|Other                                                       |   | 3,136   |   |   | 2,429  |  
|Total deferred tax assets before valuation allowance        |   | 43,958  |   |   | 12,452 |  
|Valuation allowances                                        |   | (21,386 | ) |   | (4,872 | )
|Total deferred tax assets, net
      of valuation allowance |   | 22,572  |   | $ | 7,580  |  

F-40

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

15. INCOME TAXES (continued)

**Deferred tax assets and
  liabilities (continued)**

Total deferred tax liabilities:

|Intangible assets                    | $ | 20,518 |  | $ | 7,769  | 
|------------------------------------ | - | ------ |  | - | ------ | 
|STC liability, net of STC credits    |   | 31,381 |  |   | 26,820 | 
|FIN 48 related adjustments           |   | -      |  |   | 426    | 
|Other                                |   | 128    |  |   | 442    | 
|Total deferred
      tax liabilities |   | 52,027 |  |   | 35,457 | 
|                                     |   |        |  |   |        | 
|Reported as                          |   |        |  |   |        | 
|Current deferred tax assets          |   | 12,282 |  |   | 5,597  | 
|Long term deferred tax liabilities   |   | 41,737 |  |   | 33,474 | 
|                                     |   |        |  |   |        | 
|Net deferred income tax liabilities  | $ | 29,455 |  | $ | 27,877 | 

***Increase
  in total deferred tax assets  intangible assets***

Included in total deferred tax
  assets  intangible assets as of June 30, 2009, is an intangible asset
  related to license rights in BGS. The license rights previously held by BGS
  Switzerland were transferred to the BGS as of June 30, 2006, as a result of
  the liquidation of BGS Switzerland. 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 year ended June 30, 2009, BGS utilized approximately $0.7 million
  of these license rights against its taxable income and reversed $0.7 million
  of the deferred tax asset against goodwill  see note 10. As of June 30,
  2009, the gross carrying value of this deferred tax asset is approximately $14.3
  million.

Net1 Applied Technologies Austria
  Gmbh (Net1Austria) generated tax deductible goodwill related to
  the acquisition of BGS 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, 2009, approximately $0.8
  million was available for deduction against Net1 Austria taxable income. This
  amount was not used during the year ended June 30, 2009 and has been included
  in net operating loss carryforwards. As of June 30, 2009, the value of this
  goodwill deferred tax asset is approximately $11.3 million.

***Increase
  in total deferred tax liabilities  intangible assets***

A deferred tax liability was recognized
  at the Austrian statutory tax rate of 25% related to the intangible asset acquired
   see notes 3 and 10. The carrying value of this deferred tax liability
  as of June 30, 2009, was $14.5 million.

***Valuation
  allowance***

At June 30, 2009, the Company had
  deferred tax assets of $22.6 million (2008: $7.6 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, 2009, the Company had
  a valuation allowance of $21.4 million (2008: $4.9 million) to reduce its deferred
  tax assets to estimated realizable value. The valuation allowances at June 30,
  2009 and 2008, relate to net operating loss carryforwards (2009: $1.7 million,
  2008: $2.5 million), the FTS patent (2009: $0.8 million, 2008: $1.4 million),
  intangible assets including tax deductible goodwill (2009: $17.5 million, 2008:
  $0) and other (2009: $1.4 million, 2008: $1.0 million).

F-41

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

15. INCOME TAXES (continued)

**Deferred tax assets and
  liabilities (continued)**

***Net
  operating loss carryforwards and foreign tax credits***

As of June 30, 2009, the Company
  had net operating loss carryforwards that will expire, if unused, as follows:

Year of expiration
      
      US netoperating losscarryforwards2021
      $
      1892022
      
      1662023
      
      2822024
      
      4,532$
      5,169


The foreign tax credits recognized
  as of June 30, 2008, were reversed as a result of the filing of the amended
  returns discussed above. During the year ended June 30, 2009, Net1 generated
  additional foreign tax credits related to the cash dividend received and deemed
  dividend for tax reporting purposes. Net1 has unused foreign tax credits of
  $8.4 million as of June 30, 2009, which its management believes will be utilized
  in future periods. The unused foreign tax credits generated expire after ten
  years in 2019.

**Uncertain tax positions**

As of June 30, 2009 and 2008, respectively
  the Company has unrecognized tax benefits of $1.1 million and 0.8 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, 2009, 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, 2005. 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 $0.5 million during the year ended June 30, 2009. The following
  is a reconciliation of the total amounts of unrecognized tax benefits for the
  year ended June 30, 2009 and 2008:

2009
      
      
      2008Unrecognized tax benefits - opening balance
      $
      813
      
      $
      496Gross increases - tax positions in current period
      
      510
      
      
      417Lapse of statute limitations
      
      (272
      )
      
      -Foreign currency adjustment
      
      9
      
      
      (100
      )Unrecognized tax benefits - closing balance
      $
      1,060
      
      $
      813


As of each of June 30, 2009 and
  2008, the Company had accrued interest related to uncertain tax positions of
  approximately $0.1 million and on its balance sheet.

F-42

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

16. 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. As discussed in note 12, 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 and 2007, 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; 2007: 56.9 million) of weighted average
  common stock (2008: 52.3 million; 2007: 51.3 million) and special convertible
  preferred stock (2008: 4.9 million; 2007: 5.6 million) in issue. 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 for the year ended June 30, 2009 and 2008, 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 as of June
  30, 2009 and 2008, the vesting conditions in respect of a portion of the awards
  had been satisfied. The vesting conditions are discussed in note 14  Stock-based
  compensation.

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, 2009, 2008 and 2007.

|                                                                                      |  | 2009   |  |  | 2008   |  |  | 2007   | 
|------------------------------------------------------------------------------------- |  | ------ |  |  | ------ |  |  | ------ | 
|                                                                                      |  | 000   |  |  | 000   |  |  | 000   | 
|Weighted average number of outstanding shares
      of common stock and linked units |  |        |  |  |        |  |  |        | 
|basic                                                                                 |  | 55,953 |  |  | 57,237 |  |  | 56,936 | 
|Weighted average effect of dilutive securities:
      employee stock options          |  | 187    |  |  | 375    |  |  | 503    | 
|Weighted average number of outstanding shares of common stock
      and linked units  |  |        |  |  |        |  |  |        | 
| diluted                                                                             |  | 56,140 |  |  | 57,612 |  |  | 57,439 | 

17. COMPREHENSIVE INCOME (LOSS)

The Companys comprehensive
  income (loss) consists of net income, fair value adjustments to equity securities
  and foreign currency translation gains and losses which, under GAAP, are excluded
  from net income. Total comprehensive income (loss) for each of the three years
  ended June 30, 2009 was:

|                                                       |   | 2009    |   |   | 2008    |   |   | 2007   | 
|------------------------------------------------------ | - | ------- | - | - | ------- | - | - | ------ | 
|Net income                                             | $ | 86,601  |   | $ | 86,695  |   | $ | 63,679 | 
|Fair value adjustment to available for sale securities |   | (1,611  | ) |   | -       |   |   | -      | 
|Foreign currency translation adjustments               |   | (19,041 | ) |   | (33,905 | ) |   | 5,848  | 
|                                                       | $ | 65,949  |   | $ | 52,790  |   | $ | 69,527 | 

F-43

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

18. SUPPLEMENTAL CASH FLOW INFORMATION

**Supplemental cash flow
  information:**

The following table presents the
  supplemental cash flow disclosures for the years ended June 30, 2009, 2008 and
  2007:

|                            |   | 2009   |  |   | 2008   |  |   | 2007   | 
|--------------------------- | - | ------ |  | - | ------ |  | - | ------ | 
|Cash received from interest | $ | 20,375 |  | $ | 27,366 |  | $ | 16,139 | 
|Cash paid for interest      | $ | 7,982  |  | $ | 11,255 |  | $ | 11,462 | 
|Cash paid for income taxes  | $ | 52,520 |  | $ | 35,384 |  | $ | 29,520 | 

***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
  is included in accounts payable on the Companys consolidated balance sheet
  as of June 30, 2009.

As discussed in Note 13, during
  the years ended June 30, 2008 and 2007, the Company acquired 6,448 and 111,748
  of the Companys common stock at $24.00 and $25.39 per share, respectively,
  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 and 2007.

19. OPERATING SEGMENTS

The Company discloses segment information
  in accordance with FASB SFAS 131, Disclosures about Segments of an Enterprise
  and Related Information, which requires companies to determine and review
  their segments as reflected in the management information systems reports that
  their managers use in making decisions and to report certain entity-wide disclosures
  about products and services, major customers, and the material countries in
  which the entity holds assets and reports 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. The operations of BGS have been allocated
  to the Hardware, software and related technology sales segment.

The Transaction-based activities
  segment currently consists mainly of a state pension and welfare benefit distribution
  service provided to provincial governments in South Africa and transaction processing
  for retailers, utilities and banks. 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, 2009, there were two such customers, providing 31%
  and 15% of total revenue (2008: three such customers, providing 31%, 16% and
  10% of total revenue; 2007: three such customers, providing 31%, 17% and 11%
  of total revenue).

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 has 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.

F-44

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

19. OPERATING SEGMENTS (continued)

The Hardware, software-related
  and 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 BGS,
  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.

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, |  
|----------------------------------------------------- | - | -------- | -
|                                                      |   | 2009     |  
|                                                      |   |          |  
|Revenues                                              |   |          |  
|Transaction-based activities                          | $ | 148,399  |  
|Smart card accounts                                   |   | 29,576   |  
|Financial services                                    |   | 5,430    |  
|Hardware, software and
      related technology sales |   | 63,417   |  
|Total                                                 |   | 246,822  |  
|Inter-company Revenues                                |   |          |  
|Transaction-based activities                          |   | 3,499    |  
|Smart card accounts                                   |   | -        |  
|Financial services                                    |   | -        |  
|Hardware, software and
      related technology sales |   | 2,557    |  
|Total                                                 |   | 6,056    |  
|Operating income                                      |   |          |  
|Transaction-based activities                          |   | 83,509   |  
|Smart card accounts                                   |   | 13,442   |  
|Financial services                                    |   | (34      | )
|Hardware, software and
      related technology sales |   | 5,498    |  
|Corporate/ Eliminations                               |   | (8,980   | )
|Total                                                 |   | 93,435   |  
|Interest earned                                       |   |          |  
|Transaction-based activities                          |   | -        |  
|Smart card accounts                                   |   | -        |  
|Financial services                                    |   | -        |  
|Hardware, software and related technology
      sales |   | -        |  
|Corporate/ Eliminations                               |   | 20,290   |  
|Total                                                 |   | 20,290   |  
|Interest expense                                      |   |          |  
|Transaction-based activities                          |   | 7,368    |  
|Smart card accounts                                   |   | -        |  
|Financial services                                    |   | -        |  
|Hardware, software and
      related technology sales |   | 197      |  
|Corporate/ Eliminations                               |   | 1,897    |  
|Total                                                 | $ | 9,462    |  

F-45

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

19. OPERATING SEGMENTS (continued)

|                                                      |   | June 30, |  
|----------------------------------------------------- | - | -------- | -
|                                                      |   | 2009     |  
|                                                      |   |          |  
|Depreciation and amortization                         |   |          |  
|Transaction-based activities                          | $ | 4,461    |  
|Smart card accounts                                   |   | -        |  
|Financial services                                    |   | 434      |  
|Hardware, software and related
      technology sales |   | 11,020   |  
|Corporate/ Eliminations                               |   | 1,167    |  
|Total                                                 | $ | 17,082   |  
|Income taxation expense                               |   |          |  
|Transaction-based activities                          |   | 21,966   |  
|Smart card accounts                                   |   | 3,764    |  
|Financial services                                    |   | 702      |  
|Hardware, software and related technology sales       |   | 1,547    |  
|Corporate/ Eliminations                               |   | 14,765   |  
|Total                                                 |   | 42,744   |  
|Net income                                            |   |          |  
|Transaction-based activities                          |   | 54,179   |  
|Smart card accounts                                   |   | 9,678    |  
|Financial services                                    |   | (711     | )
|Hardware, software and related
      technology sales |   | 3,905    |  
|Corporate/ Eliminations                               |   | 19,550   |  
|Total                                                 |   | 86,601   |  
|Expenditures for long-lived assets                    |   |          |  
|Transaction-based activities                          |   | 3,161    |  
|Smart card accounts                                   |   | -        |  
|Financial services                                    |   | 751      |  
|Hardware, software and related technology sales       |   | 858      |  
|Corporate/ Eliminations                               |   | -        |  
|Total                                                 | $ | 4,770    |  

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:

|              |   | 2009    |  |   | 2008    |  |   | 2007    | 
|------------- | - | ------- |  | - | ------- |  | - | ------- | 
|              |   |         |  |   |         |  |   |         | 
|South Africa  | $ | 220,408 |  | $ | 238,905 |  | $ | 223,968 | 
|Europe        |   | 19,560  |  |   | -       |  |   | -       | 
|Rest of world |   | 6,854   |  |   | 15,151  |  |   | -       | 
|Total         | $ | 246,822 |  | $ | 254,056 |  | $ | 223,968 | 

F-46

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

20. COMMITMENTS AND CONTINGENCIES

**Operating lease commitments**

The Company leases certain premises.
  At June 30, 2009, the future minimum payments under operating leases consist
  of:

Due within 1 year
      $
      2,023Due within 2 years
      
      1,570Due within 3 years
      
      813Due within 4 years
      
      262Due within 5 years
      $
      -


Operating lease payments related
  to the premises and equipment were $4.1 million, $4.2 million and $4.0 million,
  respectively, for the years ended June 2009, 2008 and 2007, respectively.

**Capital commitments**

As of June 30, 2009 and 2008, the
  Company had outstanding capital commitments of approximately $0.04 million and
  $1.3 million, respectively.

**Purchase obligations**

As of June 30, 2009 and 2008, the
  Company had purchase obligations totaling $1.1 million and $6.9 million, respectively.

**Guarantees**

In 2001, Aplitec issued a guarantee
  of $3.2 million (R20 million) to Nedbank Limited, regarding the guarantee provided
  by Nedbank to the Eastern Cape provincial government. The guarantee was required
  by the provincial government to assure that Cash Paymaster Services (Proprietary)
  Limited, a wholly owned subsidiary of Aplitec, would perform under the contract
  for the provision of welfare grants to beneficiaries in the province. The maximum
  potential amount that Aplitec could pay is $2.5 million (R20 million), re-measured
  at the year end exchange rate of $1:ZAR7.88. This bank guarantee is in respect
  of the Companys own performance of the contract and the Company is not
  guaranteeing the performance of any other party.

**Contingencies**

The Company is subject to a variety
  of insignificant claims and suits that arise from time to time in the ordinary
  course of our business.

Management of the Company currently
  believes that the resolution of these matters, individually or in the aggregate,
  will not have a material adverse impact on our financial position or our results
  of operations.

21. SHORT-TERM FACILITIES

As of June 30, 2009, the Company
  had short-term facilities in South African Rand of approximately $63.4 million,
  translated at exchange rates applicable as of June 30, 2009. As of June 30,
  2009 the overdraft rate on these facilities was 9.85% . In addition, BGS has
  short-term facilities of approximately $1.4 million, translated at exchange
  rates applicable as of June 30, 2009, 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, 2009, the Company had utilized none of its South African short-term
  facilities. The Companys management believes its current short-term facilities
  are sufficient in order to meet its future obligations as they arise.

F-47

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

21. SHORT-TERM FACILITIES (continued)

**Short-term loan facility
  obtained to fund the BGS acquisition**

The Company obtained a $110 million
  six month bank loan facility to fund the cash portion of the purchase price
  for the BGS 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% .

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.

22. RELATED PARTY TRANSACTIONS

A South African trust was created
  in connection with the Aplitec transaction to hold the linked units. As described
  in note 12, as of October 16, 2008, the linked units ceased to exist. The Company
  does not have any interests in the trust nor does it have any involvement in
  the day-to-day operations of the trust. The Company paid the expenses of the
  trust which comprise mainly the administrative costs related to the conversion
  by linked unit holders to Net1 common stock. During the years ended June 30,
  2009, 2008 and 2007, the Company incurred expenses of approximately $0.03 million,
  $0.1 million and $0.2 million, respectively, related to these administrative
  costs. In August 2009, the trustee of the trust received written confirmation
  from the Master of the Court that the trust had been deregistered.

23. 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 21, 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.

24. COSTS RELATED TO JSE LISTING

The Company completed its inward
  listing, a secondary listing, on the JSE Limited (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 12). 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, | 
|---------------------------------------- | - | -------- | 
|                                         |   | 2009     | 
|Advisory fee to sponsor                  | $ | 122      | 
|Legal fees                               |   | 174      | 
|Regulatory and filing fees               |   | 93       | 
|Printing                                 |   | 47       | 
|Accounting fees                          |   | 27       | 
|Other                                    |   | 32       | 
|Total costs
      related to JSE listing | $ | 495      | 

F-48

---

|NET 1 UEPS TECHNOLOGIES, INC.                                                            
|-----------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                           
|for the years ended June 30, 2009, 2008 and 2007                                         
|(All amounts stated
      in thousands of United States Dollars, unless otherwise stated)

25. UNAUDITED QUARTERLY RESULTS

The following tables contain selected
  unaudited consolidated statements of income for each quarter of fiscal 2009
  and 2008:

Three months endedJun 30,
      
      
      Mar 31,
      
      
      Dec 31,
      
      
      Sep 30,
      
      
      Total2009
      
      
      2009
      
      
      2008
      
      
      2008
      
      
      YTD(In thousands except per share data)Revenue
      $
      61,621
      
      $
      55,878
      
      $
      61,388
      
      $
      67,935
      
      $
      246,822Operating income
      
      22,479
      
      
      20,873
      
      
      22,805
      
      
      27,278
      
      
      93,435Net income
      
      18,216
      
      
      14,379
      
      
      27,762
      
      
      26,244
      
      
      86,601Earnings per share (common stock and linked units (1))Basic earnings per share, in $
      
      0.33
      
      
      0.26
      
      
      0.49
      
      
      0.46
      
      
      1.55Diluted earnings per share, in $
      $
      0.33
      
      $
      0.26
      
      $
      0.49
      
      $
      0.45
      
      $
      1.54


(1)  the remaining linked
  units were converted to common stock in October 2008.

Three months endedJun 30,
      
      
      Mar 31,
      
      
      Dec 31,
      
      
      Sep 30,
      
      
      Total2008
      
      
      2008
      
      
      2007
      
      
      2007
      
      
      YTD(In thousands except per share data)Revenue
      $
      62,231
      
      $
      63,066
      
      $
      68,500
      
      $
      60,259
      
      $
      254,056Operating income
      
      27,604
      
      
      28,650
      
      
      28,226
      
      
      25,906
      
      
      110,386Net income
      
      21,482
      
      
      26,967
      
      
      20,318
      
      
      17,928
      
      
      86,695Earnings per share (common stock and linked units)Basic earnings per share, in $
      
      0.38
      
      
      0.47
      
      
      0.36
      
      
      0.31
      
      
      1.52Diluted earnings per share, in $
      $
      0.38
      
      $
      0.47
      
      $
      0.35
      
      $
      0.31
      
      $
      1.50


26. SUBSEQUENT EVENTS

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).

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F-49

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