UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~December 31, 2015~~

September 30, 2016

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
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	(IRS Employer
of incorporation or organization)	Identification No.)

President Place, 4^th Floor, Cnr. Jan Smuts Avenue and Bolton Road
Rosebank, Johannesburg 2196, South Africa
(Address of principal executive offices, including zip code)

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

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

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):

[ ] Large accelerated filer	[X ] Accelerated filer

[ ] Non-accelerated filer	[ ] Smaller reporting company
~~(do~~ (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[ X ]

As of ~~February 3,~~November 2, 2016 (the latest practicable date), ~~46,965,134~~52,521,345 shares of the registrant’s common stock, par value $0.001 per share, net of treasury shares, were outstanding.

Form 10-Q

NET 1 UEPS TECHNOLOGIES, INC.

Table of Contents

			Page No.

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets at ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015~~ 2016	2
		Unaudited Condensed Consolidated Statements of Operations for the ~~Three and Six~~three months ended ~~December 31,~~September 30, 2016 and 2015 ~~and 2014~~	3
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the ~~Three and Six~~three months ended ~~December 31,~~September 30, 2016 and 2015 ~~and 2014~~	4
		Unaudited Condensed Consolidated Statement of Changes in Equity for the ~~Three and Six~~three months ended ~~December 31, 2015~~September 30, 2016	5
		Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Three and Six~~three months ended ~~December 31,~~September 30, 2016 and 2015 ~~and 2014~~	6
		Notes to Unaudited Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4036
	Item 4.	Controls and Procedures	4137
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	4238
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4239
	Item 6.	Exhibits	4239
Signatures		~~Signatures~~	4339
		EXHIBIT ~~10.30~~31.1
		EXHIBIT ~~31.1~~31.2
		~~EXHIBIT 31.2~~
	EXHIBIT 32

Part I. Financial Information

Item 1. Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Balance Sheets

		Unaudited			(A)			Unaudited			(A)
		December 31,			June 30,			September 30,			June 30,
		2015			2015			2016			2016
		(In thousands, except share data)						(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	101,417		$	117,583		$	205,329		$	223,644
Pre-funded social welfare grants receivable (Note 2)		2,503			2,306			1,738			1,580
Accounts receivable, net of allowances of – December: $3,407; June: $1,956		149,005			148,768
Finance loans receivable, net of allowances of – December: $4,555; June: $4,227		43,036			40,373
Accounts receivable, net of allowances of – September: $1,453; June: $1,669								108,088			107,805
Finance loans receivable, net of allowances of – September: $3,919; June: $4,494								38,941			37,009
Inventory (Note 3)		10,636			12,979			10,694			10,004
Deferred income taxes		4,937			7,298			7,484			6,956
Total current assets before settlement assets		311,534			329,307			372,274			386,998
Settlement assets (Note 4)		321,812			661,916			593,503			536,725
Total current assets		633,346			991,223			965,777			923,723
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – December: $95,537; June: $94,014		53,216			52,320
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of – September: $112,336; June: $99,969								53,338			54,977
EQUITY-ACCOUNTED INVESTMENTS		14,626			14,329			25,560			25,645
GOODWILL (Note 6)		152,312			166,437			187,875			179,478
INTANGIBLE ASSETS, net (Note 6)		38,686			47,124			47,611			48,556
OTHER LONG-TERM ASSETS, including reinsurance assets (Note 5 and Note 7)		11,286			14,997			45,089			31,121
TOTAL ASSETS		903,472			1,286,430			1,325,250			1,263,500

LIABILITIES
CURRENT LIABILITIES
Short-term credit facilities (Note 8)								-			-
Accounts payable		13,541			21,453			13,956			14,097
Other payables		43,125			45,595			42,535			37,479
Current portion of long-term borrowings (Note 9)		8,503			8,863			9,078			8,675
Income taxes payable		3,092			6,287			16,572			5,235
Total current liabilities before settlement obligations		68,261			82,198			82,141			65,486
Settlement obligations (Note 4)		321,812			661,916			593,503			536,725
Total current liabilities		390,073			744,114			675,644			602,211
DEFERRED INCOME TAXES		8,483			10,564			11,397			12,559
LONG-TERM BORROWINGS (Note 9)		50,091			50,762			18,156			43,134
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities (Note 7)		1,321			2,205			2,793			2,376
TOTAL LIABILITIES		449,968			807,645			707,990			660,280
COMMITMENTS AND CONTINGENCIES (Note 17)

EQUITY
COMMON STOCK (Note 10) Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - December: 46,573,489; June: 46,679,565		64			64
PREFERRED STOCK Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury: December: -; June: -		-			-
COMMON STOCK (Note 10) Authorized: 200,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury - September: 52,521,345; June: 55,271,954								74			74
PREFERRED STOCK Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares, net of treasury: September: -; June: -								-			-
ADDITIONAL PAID-IN-CAPITAL		219,416			213,896			222,637			223,978
TREASURY SHARES, AT COST: December: 18,806,441; June: 18,057,228		(225,706	)		(214,520	)
ACCUMULATED OTHER COMPREHENSIVE LOSS		(199,324	)		(139,181	)
TREASURY SHARES, AT COST: September: 23,621,541; June: 20,483,932								(273,238	)		(241,627	)
ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 11)								(167,842	)		(189,700	)
RETAINED EARNINGS		657,546			617,868			724,954			700,322
TOTAL NET1 EQUITY		451,996			478,127			506,585			493,047
REDEEMABLE COMMON STOCK								107,672			107,672
NON-CONTROLLING INTEREST		1,508			658			3,003			2,501
TOTAL EQUITY		453,504			478,785			617,260			603,220

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	903,472		$	1,286,430		$	1,325,250		$	1,263,500

(A) – Derived from audited financial statements

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Operations

										Three months ended
		Three months ended				Six months ended				September 30,
		December 31,				December 31,				2016		2015
		2015		2014		2015		2014		(In thousands, except per share data)
		(In thousands, except per share data)				(In thousands, except per share data)
REVENUE	$	150,281	$	154,131	$	304,754	$	310,572	$	155,633	$	154,473

EXPENSE

Cost of goods sold, IT processing, servicing and support		78,668		71,774		156,050		146,180		74,780		77,382

Selling, general and administration		36,248		41,385		72,009		80,121		38,468		35,761

Depreciation and amortization		10,586		10,157		20,701		20,331		10,204		10,115

OPERATING INCOME		24,779		30,815		55,994		63,940		32,181		31,215

INTEREST INCOME		3,664		3,587		7,939		7,677		4,304		4,275

INTEREST EXPENSE		1,054		1,107		2,028		2,419		796		974

INCOME BEFORE INCOME TAX EXPENSE		27,389		33,295		61,905		69,198		35,689		34,516

INCOME TAX EXPENSE (Note 16)		10,593		10,203		21,490		21,851		11,103		10,897
NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		16,796		23,092		40,415		47,347

NET INCOME BEFORE EARNINGS FROM EQUITY-ACCOUNTED

INVESTMENTS										24,586		23,619

EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS		388		76		576		168		659		188

NET INCOME		17,184		23,168		40,991		47,515		25,245		23,807

LESS NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST		526		794		1,313		1,052		613		787

NET INCOME ATTRIBUTABLE TO NET1	$	16,658	$	22,374	$	39,678	$	46,463	$	24,632	$	23,020

Net income per share, in U.S. dollars(Note 13)

Basic earnings attributable to Net1 shareholders	$	0.35	$	0.48	$	0.84	$	0.99	$	0.46	$	0.49
Diluted earnings attributable to Net1 shareholders	$	0.35	$	0.48	$	0.84	$	0.99	$	0.46	$	0.49

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Comprehensive Income

		Three months ended						Six months ended						Three months ended
		December 31,						December 31,						September 30,
		2015			2014			2015			2014			2016			2015
		(In thousands)						(In thousands)						(In thousands)

Net income	$	17,184		$	23,168		$	40,991		$	47,515		$	25,245		$	23,807

Other comprehensive income (loss)
Net unrealized income (loss) on asset available for sale, net of tax		-			-			50			(226	)
Net unrealized income on asset available for sale, net of tax														-			50
Movement in foreign currency translation reserve		(16,960	)		(16,401	)		(60,656	)		(37,586	)		22,302			(43,696	)
Total other comprehensive loss, net of taxes		(16,960	)		(16,401	)		(60,606	)		(37,812	)
Total other comprehensive income (loss), net of taxes														22,302			(43,646	)

Comprehensive income (loss)		224			6,767			(19,615	)		9,703			47,547			(19,839	)
Less comprehensive income attributable to non-controlling interest		(345	)		(771	)		(850	)		(1,003	)		(1,057	)		(505	)
Comprehensive (loss) income attributable to Net1	$	(121	)	$	5,996		$	(20,465	)	$	8,700
Comprehensive income (loss) attributable to Net1													$	46,490		$	(20,344	)

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPSTECHNOLOGIES, INC.

UnauditedCondensedConsolidatedStatement ofChanges in Equity for the ~~six~~ threemonths ended ~~December 31, 2015~~September 30, 2016 (dollaramounts inthousands)

Net 1 UEPS Technologies, Inc. Shareholders
Accumulated
Number of Number of Additional other Non-
Number of Treasury Treasury shares, net of Paid-In Retained comprehensive Total Net1 controlling
Shares Amount Shares Shares treasury Capital Earnings loss Equity Interest Total
Balance – July 1, 2015 64,736,793 $ 64 (18,057,228 ) $ (214,520 ) 46,679,565 $ 213,896 $ 617,868 $ (139,181 ) $ 478,127 $ 658 $ 478,785
Repurchase of common stock (Note 10) (749,213 ) (11,186 ) (749,213 ) (11,186 ) (11,186 )
Restricted stock granted (Note 12) 319,492 319,492 - -
Exercise of stock option (Note 12) 323,645 - - - 323,645 3,762 3,762 3,762
Stock-based compensation charge (Note 12) 1,691 1,691 1,691
Income tax benefit from vested stock awards 67 67 67
Net income 39,678 39,678 1,313 40,991
Other comprehensive loss (Note 11) (60,143 ) (60,143 ) (463 ) (60,606 )
Balance – December 31, 2015 65,379,930 $ 64 (18,806,441 ) $ (225,706 ) 46,573,489 $ 219,416 $ 657,546 $ (199,324 ) $ 451,996 $ 1,508 $ 453,504

							Net 1 UEPS Technologies, Inc. Shareholders
				Number													Accumulated
	Number			of					Number of			Additional					other			Total			Redeemable		Non-
	of			Treasury			Treasury		shares, net of			Paid-In			Retained		comprehensive			Net1			common		controlling
	Shares		Amount	Shares			Shares		treasury			Capital			Earnings		(loss) income			Equity			stock		Interest			Total

Balance – July 1, 2016	75,755,886	$	74	(20,483,932	)	$	(241,627	)	55,271,954		$	223,978		$	700,322	$	(189,700	)	$	493,047		$	107,672	$	2,501		$	603,220

Repurchase of common stock (Note 10)				(3,137,609	)		(31,611	)	(3,137,609	)										(31,611	)							(31,611	)

Restricted stock granted (Note 12)	387,000								387,000											-								-

Stock-based compensation charge (Note 12)												503								503								503

Reversal of stock comp charge (Note 12)												(1,827	)							(1,827	)							(1,827	)

Income tax benefit from vested stock awards												(17	)							(17	)							(17	)

Dividends paid to non-controlling interest																				-					(555	)		(555	)

Net income															24,632					24,632					613			25,245

Other comprehensive income (Note 11)																	21,858			21,858					444			22,302

Balance – September 30, 2016	76,142,886	$	74	(23,621,541	)	$	(273,238	)	52,521,345		$	222,637		$	724,954	$	(167,842	)	$	506,585		$	107,672	$	3,003		$	617,260

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows

		Three months ended						Six months ended						Three months ended
		December 31,						December 31,						September 30,
		2015			2014			2015			2014			2016			2015
		(In thousands)						(In thousands)						(In thousands)
Cash flows from operating activities
Net income	$	17,184		$	23,168		$	40,991		$	47,515		$	25,245		$	23,807
Depreciation and amortization		10,586			10,157			20,701			20,331			10,204			10,115
Earnings from equity-accounted investments		(388	)		(76	)		(576	)		(168	)		(659	)		(188	)
Fair value adjustments		1,567			(234	)		3,000			179			(83	)		1,433
Interest payable		645			140			1,354			1,299			32			709
Loss (Profit) on disposal of property, plant and equipment		11			(109	)		(84	)		(231	)		66			(95	)
Stock-based compensation charge		965			1,035			1,691			1,951
Stock-based compensation (reversal) charge, net (Note 12)														(1,324	)		726
Facility fee amortized		35			52			69			134			36			34
(Increase) Decrease in accounts receivable, pre- funded social welfare grants receivable and finance loans receivable		(13,847	)		(7,315	)		(31,125	)		2,155
Decrease (Increase) in inventory		776			(622	)		(155	)		(2,745	)
Decrease in accounts payable and other payables		(5,418	)		(1,456	)		(2,046	)		(12,389	)
(Decrease) Increase in taxes payable		(8,859	)		(9,963	)		(1,035	)		(3,352	)
Increase (Decrease) in deferred taxes		789			(168	)		(637	)		(558	)
Decrease (Increase) in accounts receivable, pre-funded social welfare grants receivable and finance loans receivable														7,766			(17,278	)
Increase in inventory														(104	)		(931	)
Increase in accounts payable and other payables														3,040			2,972
Increase in taxes payable														10,956			7,824
Decrease in deferred taxes														(1,632	)		(1,026	)
Net cash provided by operating activities		4,046			14,609			32,148			54,121			53,543			28,102

Cash flows from investing activities
Capital expenditures		(9,947	)		(9,137	)		(20,645	)		(18,515	)		(3,423	)		(10,698	)
Proceeds from disposal of property, plant and equipment		269			373			617			614			69			348
Proceeds from sale of business (Note 14)		-			-			-			1,895
Other investing activities		-			(29	)		-			(29	)
Net change in settlement assets		264,404			241,652			242,829			198,598
Net cash provided by investing activities		254,726			232,859			222,801			182,563

Investment in MobiKwik														(15,347	)		-
Dividends received from equity accounted investments														370			-
Net change in settlement assets (Note 4)														(37,394	)		(23,496	)
Net cash used in by investing activities														(55,725	)		(33,846	)
Cash flows from financing activities
Acquisition of treasury stock (Note 10)		(11,186	)		-			(11,186	)		(9,151	)		(32,081	)		-
Repayment of long-term borrowings (Note 9)														(26,669	)		-
Dividends paid to non-controlling interest														(555	)		-
Long-term borrowings utilized (Note 9)														247			720
Proceeds from issue of common stock		-			-			3,762			989			-			3,762
Long-term borrowings utilized		711			1,081			1,431			2,178
Repayment of long-term borrowings (Note 9)		-			(14,128	)		-			(14,128	)
Sale of equity to non-controlling interest (Note 10)		-			-			-			1,407
Net change in settlement obligations		(264,404	)		(241,652	)		(242,829	)		(198,598	)
Net cash used in financing activities		(274,879	)		(254,699	)		(248,822	)		(217,303	)

Net change in settlement obligations (Note 4)														37,394			23,496
Net cash (used in) provided by financing activities														(21,664	)		27,978
Effect of exchange rate changes on cash		(8,086	)		(2,973	)		(22,293	)		(7,072	)		5,531			(14,207	)
Net (decrease) increase in cash and cashequivalents		(24,193	)		(10,204	)		(16,166	)		12,309
Net (decrease) increase in cash and cash equivalents														(18,315	)		8,027
Cash and cash equivalents – beginning of period		125,610			81,185			117,583			58,672			223,644			117,583
Cash and cash equivalents – end of period	$	101,417		$	70,981		$	101,417		$	70,981		$	205,329		$	125,610

See Notes to Unaudited Condensed Consolidated Financial Statements

NET 1 UEPS TECHNOLOGIES, INC.
~~NET 1 UEPS TECHNOLOGIES, INC.~~
Notes to the Unaudited Condensed Consolidated Financial Statements
~~for the three and six months ended December 31, 2015 and 2014~~
~~(All amounts in tables stated in thousands or thousands of U.S. Dollars, unless otherwise stated)~~

for the three months ended September 30, 2016 and 2015
(All amounts in tables stated in thousands or thousands of U.S. Dollars, unless otherwise stated)

1.	Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements include all majority-owned subsidiaries over which the Company exercises control and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for quarterly reports on Form 10-Q and include all of the information and disclosures required for interim financial reporting. The results of operations for the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ are not necessarily indicative of the results for the full year. The Company believes that the disclosures are adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2015.~~2016. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

References to the “Company” refer to Net1 and its consolidated subsidiaries, unless the context otherwise requires. References to Net1 are references solely to Net 1 UEPS Technologies, Inc.

Recent accounting pronouncements adopted

~~There were no accounting pronouncements adopted during~~In February 2015, the ~~three months ended December 31, 2015.~~FASB issued guidance regardingAmendments to the Consolidation Analysis. This guidance amends both the variable interest entity and voting interest entity consolidation models. The requirement to assess an entity under a different consolidation model may change previous consolidation conclusions. The guidance is effective for the Company beginning July 1, 2016. The adoption of this guidance did not have a material impact on the Company’s financial statements.

Recent accounting pronouncements not yet adopted as of ~~December 31, 2015~~September 30, 2016

In May 2014, the FASB issued guidance regardingRevenue from Contracts with Customers. This guidance requires an entity to recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance was to be effective for the Company beginning July 1, 2017, however this date has been extended as per subsequent guidance issued by the FASB. Early adoption is not permitted. The Company expects that this guidance may have a material impact on its financial statements and is currently evaluating the impact of this guidance on its financial statements on adoption.

Inin August 2015, the FASB issued guidance regardingRevenue from Contracts with Customers, Deferral of the Effective Date. This guidance defers the required implementation date specified inRevenue from Contracts with Customers to December 2017. Public companies may elect to adopt the standard along the original timeline. The Company expects that this guidance may have a material impact on its financial statements and is currently evaluating the impact of this guidance on its financial statements on adoption.

In August 2014, the FASB issued guidance regardingDisclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance requires an entity to perform interim and annual assessments of its ability to continue as a going concern within one year of the date that its financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for the Company beginning July 1, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In ~~February 2015, the FASB issued guidance regarding~~~~Amendments to the Consolidation Analysis~~. This guidance amends both the variable interest entity and voting interest entity consolidation models. The requirement to assess an entity under a different consolidation model may change previous consolidation conclusions. The guidance is effective for the Company beginning July 1, 2016. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

1.	~~Basis of Presentation and Summary of Significant Accounting Policies (continued)~~

~~Recent accounting pronouncements not yet adopted as of December 31, 2015 (continued)~~

In July 2015, the FASB issued guidance regardingSimplifying the Measurement of Inventory. This guidance requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures). The guidance will not apply to inventories that are measured by using either the last-in, first-out (“LIFO”) method or the retail inventory method (“RIM”). The guidance is effective for the Company beginning July 1, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

1.	Basis of Presentation and Summary of Significant Accounting Policies (continued)

Recent accounting pronouncements not yet adopted as of September 30, 2016 (continued)

In November 2015, the FASB issued guidance regardingBalance Sheet Classification of Deferred Taxes. This guidance requires that deferred tax liabilities and assets are to be classified as non-current in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update. This guidance is effective for the Company beginning July 1, 2017, with early adoption permitted on a prospective or retrospective basis. The Company is currently assessing the impact of this guidance on its financial statements disclosures.

In January 2016, the FASB issued guidance regardingRecognition and Measurement of Financial Assets and Financial Liabilities. The guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the guidance clarifies the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This guidance is effective for the Company beginning July 1, 2018, and early adoption is not permitted, with certain exceptions. The amendments are required to be applied by means of a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In February 2016, the FASB issued guidance regardingLeases. The guidance increases transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. The amendments to current lease guidance includes the recognition of assets and liabilities by lessees for those leases currently classified as operating leases. The guidance also requires disclosures to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for the Company beginning July 1, 2019. Early adoption is permitted. The Company expects that this guidance may have a material impact on its financial statements and is currently evaluating the impact of this guidance on its financial statements on adoption.

In March 2016, the FASB issued guidance regardingImprovements to Employee Share-Based Payment Accounting. The guidance simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for the Company beginning July 1, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In June 2016, the FASB issued guidance regardingMeasurement of Credit Losses on Financial Instruments. The guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, an entity is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company beginning July 1, 2020. Early adoption is permitted beginning July 1, 2019. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

In June 2016, the FASB issued guidance regardingClassification of Certain Cash Receipts and Cash Payments. The guidance is intended to reduce diversity in practice and explains how certain cash receipts and payments are presented and classified in the statement of cash flows, including beneficial interests in securitization, which would impact the presentation of the deferred purchase price from sales of receivables. This guidance is effective for the Company beginning July 1, 2018, and must be applied retrospectively. Early adoption is permitted. The Company is currently assessing the impact of this guidance on its financial statements disclosure.

2.	Pre-funded social welfare grants receivable

Pre-funded social welfare grants receivable represents amounts pre-funded by the Company to certain merchants participating in the merchant acquiring system. The ~~January~~October 2016 payment service commenced on ~~January~~October 1, 2016, but the Company pre-funded certain merchants participating in the merchant acquiring system on the last two days of ~~December 2015.~~September 2016.

Inventory

The Company’s inventory comprised the following ~~categories~~category as of ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015.~~2016.

December 31, June 30,
2015 2015
Finished goods $ 10,636 $ 12,979
$ 10,636 $ 12,979

		September 30,		June 30,
		2016		2016
Finished goods	$	10,694	$	10,004
	$	10,694	$	10,004

4.	Settlement assets and settlement obligations

Settlement assets comprise (1) cash received from the South African government that the Company holds pending disbursement to recipient beneficiaries of social welfare grants and (2) cash received from customers on whose behalf the Company processes payroll payments that the Company will disburse to customer employees, payroll-related payees and other payees designated by the customer.

Settlement obligations comprise (1) amounts that the Company is obligated to disburse to recipient ~~beneficiaries~~cardholders of social welfare grants, and (2) amounts that the Company is obligated to pay to customer employees, payroll-related payees and other payees designated by the customer.

The balances at each reporting date may vary widely depending on the timing of the receipts and payments of these assets and obligations.

8Net change in settlement assets and net change in settlement assets included in the unaudited condensed consolidated statement of cash flows for the three months ended September 30, 2015, have been increased by $1.9 million as a result of the restatement described in Note 2—(Significant accounting policies—Settlement assets and settlement obligations) to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2016.

5.	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.

Risk management

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

Currency exchange risk

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

Translation risk

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

Interest rate risk

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

5.
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~~BBB- or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings.

UEPS-based microlending credit risk

The Company is exposed to credit risk in its UEPS-based microlending activities, which provides unsecured short-term loans to qualifying customers. The Company manages this risk by performing an affordability test for each prospective customer and assigns a “creditworthiness score”, which takes into account a variety of factors such as 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. 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.

5.	~~Fair value of financial instruments (continued)~~

Financial instruments

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

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 applies 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 are 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.

~~Asset measured at fair value using significant unobservable inputs – investment in Finbond Group Limited (“Finbond”)~~

The Company's Level 3 asset represents an investment of 156,788,712 shares of common stock of Finbond, which are exchange-traded equity securities. Finbond’s shares are traded on the Johannesburg Stock Exchange (“JSE”) and the Company has designated such shares as available for sale investments. The Company has concluded that the market for Finbond shares is not active and consequently has employed alternative valuation techniques in order to determine the fair value of such stock. Finbond issues financial products and services under a mutual banking licence and also has a microlending offering. In determining the fair value of Finbond, the Company has considered amongst other things Finbond’s historical financial information (including its most recent public accounts), press releases issued by Finbond and its published net asset value. The Company believes that the best indicator of fair value of Finbond is its published net asset value and has used this value to determine the fair value.

The fair value of these securities as of December 31, 2015, 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.

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 derivative transactions. Substantially all of the Company’s derivative exposures are with counterparties that have long-term credit ratings of ~~BBB~~BBB- or better. The Company uses quoted prices in active markets for similar assets and liabilities to determine fair value (Level 2). The Company has no derivatives that require fair value measurement under Level 1 or 3 of the fair value hierarchy.

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

As of ~~December 31, 2015~~September 30, 2016

					Fair market
Notional amount		Strike price			value price			Maturity
EUR ~~526,663~~393,675.00		ZAR ~~15.6625~~16.2911			ZAR ~~17.1150~~15.5206	~~January~~		October 20, 2016
EUR ~~308,132~~302,368.50	~~ZAR 15.5555~~	~~ZAR 17.3414~~	~~March 22, 2016~~
~~EUR 820,758~~	~~ZAR 15.6514~~	~~ZAR 17.4525~~	~~April 20, 2016~~
~~EUR 757,096~~	~~ZAR 15.7501~~	~~ZAR 17.5708~~	~~May 20, 2016~~
~~EUR 739,848~~	~~ZAR 15.8548~~	~~ZAR 17.6930~~	~~June 20, 2016~~
~~EUR 573,765~~	~~ZAR 15.9587~~	~~ZAR 17.8143~~	~~July 20, 2016~~
~~EUR 554,495~~	~~ZAR 16.0643~~	~~ZAR 17.9385~~	~~August 19, 2016~~
~~EUR 465,711~~	~~ZAR 16.1798~~	~~ZAR 18.0710~~	~~September 20, 2016~~
~~EUR 393,675~~	~~ZAR 16.2911~~	~~ZAR 18.2015~~	~~October 20, 2016~~
~~EUR 302,369~~	ZAR 16.4085			ZAR ~~18.3475~~15.6389			November 21, 2016

5.	Fair value of financial instruments (continued)

	~~Financial instruments (continued)~~

Financial instruments (continued)

As of June 30, ~~2015~~2016

				Fair market
Notional amount		Strike price		value price	Maturity
EUR ~~526,263.00~~573,765.00		ZAR ~~15.1145~~15.9587		ZAR ~~13.6275~~16.3393	July 20, ~~2015~~2016
EUR ~~526,263.00~~554,494.50		ZAR ~~15.2025~~16.0643		ZAR ~~13.7062~~16.4564	August ~~20, 2015~~19, 2016
EUR ~~526,263.00~~465,711.00		ZAR ~~15.2944~~16.1798		ZAR ~~13.7898~~16.582	September ~~21, 2015~~20, 2016
EUR ~~526,263.00~~393,675.00		ZAR ~~15.3809~~16.2911		ZAR ~~13.8683~~16.7017	October 20, ~~2015~~2016
EUR ~~509,516.00~~302,368.50		ZAR ~~15.4728~~16.4085		ZAR ~~13.9540~~16.8301	November ~~20, 2015~~21, 2016
~~EUR 529,865.00~~	~~ZAR 15.5654~~	~~ZAR 14.0397~~	~~December 21, 2015~~
~~EUR 526,663.00~~	~~ZAR 15.6625~~	~~ZAR 14.1239~~	~~January 20, 2016~~

~~The following table presents the Company’s assets measured at fair value on a recurring basis as of December 31, 2015, according to the fair value hierarchy:~~

Quoted
Price in
Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total
Assets
   Related to insurance business (included in
other long-term assets):
Cash and cash equivalents $ 1,757 $ - $ - $ 1,757
   Investment in Finbond (available for sale
    assets included in other long-term assets) - - 5,973 5,973
   Other - 36 - 36
Total assets at fair value $ 1,757 $ 36 $ 5,973 $ 7,766

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of ~~June~~September 30, ~~2015,~~2016, according to the fair value hierarchy:

Quoted
Price in
Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
(Level 1) (Level 2) (Level 3) Total
Assets
   Related to insurance business (included in
   other long-term assets):
Cash and cash equivalents $ 1,640 $ - $ - $ 1,640
Investment in Finbond (available for sale
   assets included in other long-term assets) - - 7,488 7,488
Other - 1,259 - 1,259
Total assets at fair value $ 1,640 $ 1,259 $ 7,488 $ 10,387
Liabilities
Foreign exchange contracts $ - $ 452 $ - $ 452
Total liabilities at fair value $ - $ 452 $ - $ 452

		Quoted
		price in
		active		Significant
		markets for		other		Significant
		identical		observable		unobservable
		assets		inputs		inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Related to insurance business (included in other long-term assets):
Cash and cash equivalents	$	562	$	-	$	-	$	562
Other		-		38		-		38
Total assets at fair value	$	562	$	38	$	-	$	600
Liabilities
Foreign exchange contracts	$	-	$	39	$	-	$	39
Total liabilities at fair value	$	-	$	39	$	-	$	39

11The following table presents the Company’s assets measured at fair value on a recurring basis as of June 30, 2016, according to the fair value hierarchy:

5.	~~Fair value of financial instruments (continued)~~

	~~Financial instruments (continued)~~

		Quoted
		price in
		active		Significant
		markets for		other		Significant
		identical		observable		unobservable
		assets		inputs		inputs
		(Level 1)		(Level 2)		(Level 3)		Total
Assets
Related to insurance business (included in other long-term assets):
Cash and cash equivalents	$	533	$	-	$	-	$	533
Foreign exchange contracts		-		62		-		62
Other		-		37		-		37
Total assets at fair value	$	533	$	99	$	-	$	632

Changes in the Company’s investment in Finbond Group Limited, or Finbond, (Level 3 that are measured at fair value on a recurring basis) were insignificant during the three ~~and six~~ months ended ~~December 31,~~September 30, 2015, ~~and 2014,~~ respectively. There have been no transfers in or out of Level 3 during the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively.

5.
Fair value of financial instruments (continued)

Assets and liabilities measured at fair value on a nonrecurring basis

The Company measures its assets at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The Company has no liabilities that are measured at fair value on a nonrecurring basis. The Company reviews the carrying values of its assets 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 assets are determined using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost of the assets exceeds its fair value and the excess is determined to be other-than-temporary. The Company has not recorded any impairment charges during the reporting periods presented herein.

6.	Goodwill and intangible assets, net

Goodwill

Summarized below is the movement in the carrying value of goodwill for the ~~six~~three months ended ~~December 31, 2015:~~September 30, 2016:

Accumulated Carrying
Gross value impairment value
Balance as of June 30, 2015 $ 166,437 $ - $ 166,437
Foreign currency adjustment⁽¹⁾ (14,125 ) - (14,125 )
Balance as of December 31, 2015 $ 152,312 $ - $ 152,312

				Accumulated		Carrying
		Gross value		impairment		value
Balance as of June 30, 2016	$	179,478	$	-	$	179,478
Foreign currency adjustment⁽¹⁾		8,397		-		8,397
Balance as of September 30, 2016	$	187,875	$	-	$	187,875

⁽¹⁾ – ~~The foreign currency adjustment represents~~Represents the effects of the fluctuations between the South African rand, Euro and the Korean won, and the U.S. dollar on the carrying value.

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

South Financial
African International inclusion and
transaction transaction applied Carrying
processing processing technologies value
Balance as of June 30, 2015 $ 24,579 $ 115,519 $ 26,339 $ 166,437
Foreign currency adjustment⁽¹⁾ (5,148 ) (4,671 ) (4,306 ) (14,125 )
Balance as of December 31, 2015 $ 19,431 $ 110,848 $ 22,033 $ 152,312

		South				Financial
		African		International		inclusion and
		transaction		transaction		applied		Carrying
		processing		processing		technologies		value
Balance as of June 30, 2016	$	20,425	$	136,185	$	22,868	$	179,478
Foreign currency adjustment⁽¹⁾		1,357		5,907		1,133		8,397
Balance as of September 30, 2016	$	21,782	$	142,092	$	24,001	$	187,875

6.	~~Goodwill and intangible assets, net (continued)~~

Intangible assets, net

Carrying value and amortization of intangible assets

Summarized below is the carrying value and accumulated amortization of the intangible assets as of ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015:~~2016:

As of December 31, 2015 As of June 30, 2015
Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying
value amortization value value amortization value
Finite-lived intangible assets:
Customer relationships $ 82,181 $ (45,631 ) $ 36,550 $ 88,109 $ (45,312 ) $ 42,797
     Software and unpatented
      technology 27,778 (27,778 ) - 29,964 (28,323 ) 1,641
FTS patent 2,465 (2,465 ) - 3,119 (3,119 ) -
Exclusive licenses 4,506 (4,506 ) - 4,506 (4,506 ) -
Trademarks 5,450 (3,314 ) 2,136 6,094 (3,408 ) 2,686
     Total finite-lived intangible
      assets $ 122,380 $ (83,694 ) $ 38,686 $ 131,792 $ (84,668 ) $ 47,124

		As of September 30, 2016							As of June 30, 2016
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships	$	97,992	$	(55,956	)	$	42,036	$	94,529	$	(51,557	)	$	42,972
Software and unpatented
technology		32,502		(30,009	)		2,493		31,452		(28,791	)		2,661
FTS patent		2,764		(2,764	)		-		2,592		(2,592	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		6,986		(3,904	)		3,082		6,685		(3,762	)		2,923
Total finite-lived intangible assets	$	144,750	$	(97,139	)	$	47,611	$	139,764	$	(91,208	)	$	48,556

Aggregate amortization expense on the finite-lived intangible assets for the three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ was approximately ~~$2.5~~$2.9 million and ~~$3.9~~$3.3 million, respectively. ~~Aggregate amortization expense on the finite-lived intangible~~

Intangible assets, ~~for the six months ended December 31, 2015 and 2014, was approximately $5.9 million and $7.7 million, respectively.~~net (continued)

Future estimated annual amortization expense for the next five fiscal years and thereafter, assuming exchange rates that prevailed on ~~December 31, 2015,~~September 30, 2016, is presented in the table below. Actual amortization expense in future periods could differ from this estimate as a result of acquisitions, changes in useful lives, exchange rate fluctuations and other relevant factors.

2016 $ 10,157
2017 8,010
2018 8,008
2019 7,709
2020 7,538
Thereafter $ 3,055

2017	$	12,607
2018		11,692
2019		11,061
2020		10,352
2021		4,453
Thereafter	$	368

7.	Reinsurance assets and policy holder liabilities under insurance and investment contracts

Reinsurance assets and policy holder liabilities under insurance contracts

Summarized below is the movement in reinsurance assets and policy holder liabilities under insurance contracts during the ~~six~~three months ended ~~December 31, 2015:~~September 30, 2016:

Reinsurance Insurance
assets (1) contracts (2)
Balance as of June 30, 2015 $ 183 $ (567 )
Increase in policy holder benefits under insurance contracts 15 (131 )
Foreign currency adjustment⁽³⁾ (38 ) 119
Balance as of December 31, 2015 $ 160 $ (579 )

~~(1) Included in other long-term assets.~~
Reinsurance Insurance
assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2016 $ 171 $ (1,078 )
Increase in policy holder benefits under insurance contracts 231 (754 )
Claims and policyholders’ benefits under insurance contracts (229 ) 682
Foreign currency adjustment⁽³⁾ 12 (71 )
Balance as of September 30, 2016 $ 185 $ (1,221 )

~~(2) Included in other long-term liabilities.~~
~~(3) The foreign currency adjustment represents~~
⁽¹⁾
Included in other long-term assets.
⁽²⁾
Included in other long-term liabilities.
⁽³⁾
Represents the effects of the fluctuations between the ZAR against the U.S. dollar.

The Company has agreements with reinsurance companies in order to limit its losses from large insurance contracts, however, if the reinsurer is unable to meet its obligations, the Company retains the liability.

7.	~~Reinsurance assets and policy holder liabilities under insurance and investment contracts (continued)~~

	~~Reinsurance assets and policy holder liabilities under insurance contracts (continued)~~

~~Policyholders’ liabilities~~The Company determines its reserves for future policy benefits under its life insurance ~~contracts are derived from actual~~products using a model which estimates claims ~~submitted which had~~incurred that have not been ~~settled~~reported at the balance sheet date. This model includes best estimate assumptions of experience plus prescribed margins, as ~~of December 31, 2015~~required in the markets in which these products are offered, namely South Africa. The best estimate assumptions include those assumptions related to mortality, morbidity and ~~June 30, 2015, respectively,~~claim reporting delays, and ~~represents management’s estimate of~~ the ~~net present value of~~main assumptions used to calculate the reserve for future ~~claims~~policy benefits include (i) mortality and ~~benefits under existing insurance contracts, offset by probable future premiums to be received (net of expected service cost).~~morbidity assumptions reflecting the Company’s most recent experience and (ii) claim reporting delays reflecting Company specific and industry experience.

Assets and policy holder liabilities under investment contracts

Summarized below is the movement in assets and policy holder liabilities under investment contracts during the ~~six~~three months ended ~~December 31, 2015:~~September 30, 2016:

Investment
Assets (1) contracts (2)
Balance as of June 30, 2015 $ 593 $ (593 )
Foreign currency adjustment⁽³⁾ (124 ) 124
Balance as of December 31, 2015 $ 469 $ (469 )

~~(1) Included in other long-term assets.~~
Investment
Assets⁽¹⁾ contracts⁽²⁾
Balance as of June 30, 2016 $ 528 $ (528 )
Foreign currency adjustment⁽³⁾ 35 (35 )
Balance as of September 30, 2016 $ 563 $ (563 )

~~(2) Included in other long-term liabilities.~~
~~(3) The foreign currency adjustment represents~~
⁽¹⁾
Included in other long-term assets.
⁽²⁾
Included in other long-term liabilities.
⁽³⁾
Represents the effects of the fluctuations between the ZAR against the U.S. dollar.

The Company does not offer any investment products with guarantees related to capital or returns.

8.	Short-term credit ~~facility~~facilities

The Company’s short-term credit facilities are described in Note 12 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2015.~~2016.

South Africa

The aggregate amount of the Company’s short-term South African credit facility with Nedbank Limited is up to ZAR 400 million ($28.8 million) and consists of (i) a primary amount of up to ZAR 200 million ($14.4 million), which is immediately available, and (ii) a secondary amount of up to ZAR 200 million ($14.4 million), which is not immediately available (all amounts denominated in ZAR and translated at exchange rates applicable as of September 30, 2016). The primary amount comprises an overdraft facility of up to ZAR 50 million ($3.6 million) and indirect and derivative facilities of up to ZAR 150 million ($10.8 million), which include letters of guarantee, letters of credit and forward exchange ~~contracts.~~contracts (all amounts denominated in ZAR and translated at exchange rates applicable as of September 30, 2016). As of ~~December 31, 2015, the interest rate on the overdraft facility was 8.60% . On January, 28~~September 30, 2016, the interest rate on the overdraft facility was ~~increased~~9.35% . The Company has ceded its investment in Cash Paymaster Services Proprietary Limited as security for its repayment obligations under the facility.

A commitment fee of 0.35% per annum is payable on the monthly unutilized amount of the overdraft portion of the primary amount. The Company is required to ~~9.10% due~~comply with customary non-financial covenants, including, without limitation, covenants that restrict its ability to ~~an increase~~dispose of or encumber its assets, incur additional indebtedness or engage in ~~the South Africa repurchase rate by 0.50% .~~ certain business combinations.

As of ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015,~~2016, respectively, the Company had not utilized any of its overdraft facility. As of ~~December 31, 2015,~~September 30, 2016, the Company had utilized approximately ZAR ~~137.1~~131.1 million ($~~8.8~~9.5 million, translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016) of its ZAR 150 million indirect and derivative facilities to obtain foreign exchange contracts from the bank and to enable the bank to issue guarantees, including stand-by letters of credit, in order for the Company to honor its obligations to third parties requiring such guarantees (refer to Note 17). As of June 30, ~~2015,~~2016, the Company had utilized approximately ZAR ~~139.6~~131.1 million ($~~11.4~~8.9 million, translated at exchange rates applicable as of June 30, ~~2015)~~2016) of its ZAR 150 million indirect and derivative facilities.

Korea

The Company had not utilized any of its KRW 10 billion ($~~8.5~~9.1 million, translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016) overdraft facility as of ~~December 31, 2015 and~~September 30, 2016 or June 30, ~~2015.~~2016. As of ~~December 31, 2015,~~September 30, 2016, the interest rate on the overdraft facility was ~~3.62%~~3.31% . The facility ~~expired in January 2016 and has been renewed and now~~ expires in January 2017.

9.	Long-term borrowings

The Company’s Korean senior secured loan facility is described in Note 13 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2015.~~2016. The current carrying value as of ~~December 31, 2015,~~September 30, 2016, is ~~$58.6~~$27.2 million. As of ~~December 31, 2015,~~September 30, 2016, the carrying amount of the long-term borrowings approximated fair value. The interest rate in effect on ~~December 31, 2015,~~September 30, 2016, was ~~4.67%~~4.46% .

On July 29, 2016, the Company utilized approximately KRW 0.3 billion ($0.2 million) of its Facility C revolving credit facility to pay interest due. On the same day, the Company made unscheduled payments of KRW 20 billion ($17.8 million) towards its Facility A loan and KRW 10 billion ($8.9 million) towards its Facility C revolving credit facility. The next scheduled principal payment of ~~$8.5~~$9.1 million (translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016) will be made on April 29, ~~2016.~~2017.

9.	~~Long-term borrowings (continued)~~

Interest expense incurred during the three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ was ~~$0.7~~$0.5 million and ~~$0.9 million, respectively. Interest expense incurred during the six months ended December 31, 2015 and 2014, was $1.4 million and $1.8~~$0.7 million, respectively. Prepaid facility fees amortized during each of the three months ended ~~December 31,~~September 30, 2016, and 2015, ~~and 2014,~~ was $0.04 ~~million~~ and ~~$0.1~~$0.03 million, respectively. ~~Prepaid facility fees amortized during the six months ended December 31, 2015, and 2014, was $0.1 million and $0.5 million, respectively.~~

10.	Capital structure

The following table presents reconciliation between the number of shares, net of treasury, presented in the unaudited condensed consolidated statement of changes in equity during the ~~six~~three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively, and the number of shares, net of treasury, excluding non-vested equity shares that have not vested during the ~~six~~three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively:

December 31, December 31,
2015 2014

Number of shares, net of treasury:
Statement of changes in equity 46,573,489 46,547,153
Less: Non-vested equity shares that have not vested (Note 12) (589,447 ) (524,863 )
Number of shares, net of treasury excluding non-vested
equity shares that have not vested 45,984,042 46,022,290

	September 30,		September 30,
	2016		2015

Number of shares, net of treasury:
Statement of changes in equity	52,521,345		47,322,702
Less: Non-vested equity shares that have not vested (Note 12)	(904,356	)	(589,447	)
Number of shares, net of treasury excluding non-vested equity shares that have not vested	51,616,989		46,733,255

Common stock repurchases ~~and transaction with non-controlling interests~~

Executed under share repurchase authorizations

In February 2016, the Company’s Board of Directors approved the replenishment of its share repurchase authorization to repurchase up to an aggregate of $100 million of common stock. The authorization has no expiration date. On June 29, 2016, the Company adopted a Rule 10b5-1 trading plan for the purpose of repurchasing approximately $50 million of its common stock, which was included within the original share repurchase authorization. During the three ~~and six~~ months ended ~~December 31, 2015,~~September 30, 2016, the Company repurchased ~~749,213~~3,137,609 shares for approximately ~~$11.2~~$31.6 million under its share repurchase authorization. The Company did not repurchase any of its shares during the three ~~and six~~ months ended December 31, 2014, under its share repurchase authorization. However, on August 27, 2014, the Company entered into a Subscription and Sale of Shares Agreement with Business Venture Investments No 1567 Proprietary Limited (RF) (“BVI”), one of the Company’s BEE partners, in preparation for any new potential SASSA tender. Pursuant to the agreement: (i) the Company repurchased BVI’s remaining 1,837,432 shares of the Company’s common stock for approximately ZAR 97.4 million in cash ($9.2 million translated at exchange rates prevailing as of August 27, 2014) and (ii) BVI has subscribed for new ordinary shares of Cash Paymaster Services (Pty) Ltd (“CPS”) representing 12.5% of CPS’ ordinary shares outstanding after the subscription for ZAR 15.0 million in cash (approximately $1.4 million translated at exchange rates prevailing as of August 27, 2014). In connection with transactions described above, the CPS shareholder agreement that was negotiated as part of the original December 2013 Relationship Agreement became effective.September 30, 2015.

11.	Accumulated other comprehensive loss

The table below presents the change in accumulated other comprehensive (loss) income per component during the ~~six~~three months ended ~~December 31, 2015:~~September 30, 2016:

Six months ended
December 31, 2015
Accumulated
Net
unrealized
Accumulated income on
Foreign asset
currency available for
translation sale, net of
reserve tax Total

Balance as of June 30, 2015 $ (140,221 ) $ 1,040 $ (139,181 )
Movement in foreign currency translation reserve (60,193 ) - (60,193 )
Unrealized gain on asset available for sale, net of tax of $11 - 50 50
Balance as of December 31, 2015 $ (200,414 ) $ 1,090 $ (199,324 )

					Three months ended
					September 30, 2016
					Accumulated
					net
					unrealized
		Accumulated			income on
		foreign			asset
		currency			available for
		translation			sale, net of
		reserve			tax		Total

Balance as of June 30, 2016	$	(189,700	)	$	-	$	(189,700	)
Movement in foreign currency translation reserve		21,858			-		21,858
Balance as of September 30, 2016	$	(167,842	)	$	-	$	(167,842	)

There were no reclassifications from accumulated other comprehensive loss to comprehensive (loss) income during the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 or 2015, ~~or 2014,~~ respectively.

12.	Stock-based compensation

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the ~~six~~three months ended ~~December 31, 2015~~September 30, 2016 and ~~2014:~~2015:

Weighted Weighted
Weighted Average Average
average Remaining Aggregate Grant
exercise Contractual Intrinsic Date Fair
Number of price Term Value Value
shares ($) (in years) ($’000) ($)

Outstanding – June 30, 2015 2,401,169 15.34 4.74 11,516
Exercised (323,645 ) 11.62 2,669
Outstanding – December 31, 2015 2,077,524 15.92 4.08 3,623

Outstanding – June 30, 2014 2,710,392 14.16 5.38 3,909
Granted under Plan: August 2014 464,410 11.23 10.00 2,113 4.55
Exercised (688,633 ) 8.24 3,697
Outstanding – December 31, 2014 2,486,169 15.24 5.20 1,842

				Weighted
			Weighted	average		Weighted
			average	remaining	Aggregate	average
			exercise	contractual	intrinsic	grant date
	Number of		price	term	value	fair value
	shares		($)	(in years)	($’000)	($)

Outstanding – June 30, 2016	2,077,524		15.92	3.65	926
Expired unexercised	(474,443	)	22.51
Outstanding – September 30, 2016	1,603,081		13.98	4.50	452

Outstanding – June 30, 2015	2,401,169		15.34	4.74	11,516
Exercised	(323,645	)	11.62		2,669
Outstanding – September 30, 2015	2,077,524		15.92	4.33	7,509

No stock options were awarded during the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 or 2015. 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 Company’s 250 day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were granted options with similar terms. The Company has estimated no forfeitures for options awarded in August 2014.

~~The table below presents the range of assumptions used to value options granted during the six months ended December 31, 2015 and 2014:~~

Six months ended
December 31,
2015 2014
Expected volatility n/a 60%
Expected dividends n/a 0%
Expected life (in years) n/a 3
Risk-free rate n/a 1.0%

There were no forfeitures during the three ~~and six~~ months ended ~~December 31, 2015~~September 30, 2016 or ~~2014.~~2015; however, during the three months ended September 30, 2016, 474,443 stock options awarded in August 2006, expired unexercised.

The following table presents stock options vested and expecting to vest as of ~~December 31, 2015:~~September 30, 2016:

Weighted
Weighted Average
average Remaining Aggregate
exercise Contractual Intrinsic
Number of price Term Value
shares ($) (in years) ($’000)
Vested and expecting to vest – December 31, 2015 2,077,524 15.92 4.08 3,623

Weighted

average

remaining

Aggregate

exercise

contractual

intrinsic

Number of

price

term

value

($)

(in years)

($’000)

Vested and expecting to vest – September 30, 2016

1,603,081

13.98

4.50

452

These options have an exercise price range of $7.35 to $24.46.

~~12.~~	~~Stock-based compensation (continued)~~

	~~Stock option and restricted stock activity (continued)~~

The following table presents stock options that are exercisable as of ~~December 31, 2015:~~September 30, 2016:

Weighted
Weighted Average
average Remaining Aggregate
exercise Contractual Intrinsic
Number of price Term Value
shares ($) (in years) ($’000)
Exercisable – December 31, 2015 1,764,931 16.93 3.31 2,619

Weighted

average

remaining

Aggregate

exercise

contractual

intrinsic

Number of

price

term

value

($)

(in years)

($’000)

Exercisable – September 30, 2016

1,448,278

14.28

4.11

452

~~No stock options became exercisable during the three months ended December 31, 2015.~~ During the three months ended ~~December 31, 2014, 57,334 stock options became exercisable. During the six months ended December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively, ~~373,435~~154,803 and 330,967 stock options became exercisable. No stock options were exercised during the three months ended ~~December 31, 2015 and 2014, respectively. During the six months ended December 31, 2015, the~~September 30, 2016. The Company received approximately $3.8 million from the exercise of 323,645 stock ~~options. During~~options, during the ~~six~~three months ended December 31, 2014, the Company received approximately $1.0 million from the exercise of 116,395 stock options. The remaining 572,238 stock options were exercised through recipients delivering 336,584 shares of the Company’s common stock to the Company on September ~~9, 2014, to settle the exercise price due.~~30, 2015. The Company issues new shares to satisfy stock option exercises.

12.
Stock-based compensation (continued)
Stock option and restricted stock activity (continued)

Restricted stock

The following table summarizes restricted stock activity for the ~~six~~three months ended ~~December 31, 2015~~September 30, 2016 and ~~2014:~~2015:

Weighted
Number of Average
Shares of Grant Date
Restricted Fair Value
Stock ($’000)
Non-vested – June 30, 2015 341,529 1,759
Granted – August 2015 319,492 6,406
Vested – August 2015 (71,574 ) 1,435
Non-vested – December 31, 2015 589,447 7,622

Non-vested – June 30, 2014 385,778 3,534
Granted – August 2014 141,707 581
Granted – November 2014 71,530 229
Vested – August 2014 (74,152 ) 828
Non-vested – December 31, 2014 524,863 3,795

		Number of		Weighted
		shares of		average grant
		restricted		date fair value
		stock		($’000)
Non-vested – June 30, 2016		589,447		7,622
Granted – August 2016		387,000		4,145
Vested – August 2016		(72,091	)	735
Non-vested – September 30, 2016		904,356		11,142

Non-vested – June 30, 2015		341,529		1,759
Granted – August 2015		319,492		581
Vested – August 2015		(71,574	)	1,435
Non-vested – September 30, 2015	��	589,447		7,622

The August 2016 grants comprise 350,000 and 37,000 shares of restricted stock awarded to executive officers and non-employee directors, respectively. The shares of restricted stock awarded to executive officers in August 2016 are subject to time-based and performance-based vesting conditions. In order for any of the shares to vest, the recipient must remain employed by the Company on a full-time basis on the date that it files its Annual Report on Form 10-K for the fiscal year ended June 30, 2019. If that condition is satisfied, then the shares will vest based on the level of Fundamental EPS the Company achieves for the fiscal year ended June 30, 2019 (“2019 Fundamental EPS”), as follows:

	•	One-third of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.60;
	•	Two-thirds of the shares will vest if the Company achieves 2019 Fundamental EPS of $2.80; and
	•	All of the shares will vest if the Company achieves 2019 Fundamental EPS of $3.00.

At levels of 2019 Fundamental EPS greater than $2.60 and less than $3.00, the number of shares that will vest will be determined by linear interpolation relative to 2019 Fundamental EPS of $2.80. Any shares that do not vest in accordance with the above-described conditions will be forfeited. All shares of restricted stock have been valued utilizing the closing price of shares of the Company’s common stock quoted on The Nasdaq Global Select Market on the date of grant.

The August 2015 grants comprise 301,537 and 17,955 shares of restricted stock awarded to employees and non-employee directors, respectively. The shares of restricted stock awarded to employees in August 2015 are subject to time-based and performance-based vesting conditions. In order for any of the shares to vest, the recipient must remain employed by the Company on a full-time basis on the date that it files its Annual Report on Form 10-K for the fiscal year ended June 30, 2018. If that condition is satisfied, then the shares will vest based on the level of Fundamental EPS the Company achieves for the fiscal year ended June 30, 2018 (“2018 Fundamental EPS”), as follows:

	•	One-third of the shares will vest if the Company achieves 2018 Fundamental EPS of $2.88;
	•	Two-thirds of the shares will vest if the Company achieves 2018 Fundamental EPS of $3.30; and
	•	All of the shares will vest if the Company achieves 2018 Fundamental EPS of $3.76.

~~12.~~	~~Stock-based compensation (continued)~~

	~~Stock option and restricted stock activity (continued)~~

~~Restricted stock (continued)~~

At levels of 2018 Fundamental EPS greater than $2.88 and less than $3.76, the number of shares that will vest will be determined by linear interpolation relative to 2018 Fundamental EPS of $3.30. Any shares that do not vest in accordance with the above-described conditions will be forfeited. All shares of restricted stock have been valued utilizing the closing price of shares of the Company’s common stock quoted on The Nasdaq Global Select Market on the date of grant.

The ~~August 2014 grants comprise 127,626 and 14,081~~Company has reversed the stock-based compensation charge recognized to date related to the 301,537 shares of restricted stock ~~awarded~~because it believes that it is unlikely that the 2018 Fundamental EPS target will be achieved due to ~~employees and non-employee directors, respectively. All~~the dilutive impact on the fundamental EPS calculation as a result of issuance of the ~~November 2014 grants were awarded~~approximate 10 million shares to ~~employees. The 127,626~~the IFC in May 2016.

12.	Stock-based compensation (continued)

Stock option and ~~71,530 shares of~~ restricted stock ~~will vest in full only on the date, if any, the following conditions are satisfied: (1) the closing price of shares of the Company’s common~~activity (continued)

Restricted stock equals or exceeds $19.41 (subject to appropriate adjustment for any stock split or stock dividend) for a period of 30 consecutive trading days during a measurement period commencing on the date that the Company files its Annual Report on Form 10-K for the fiscal year ended 2017 and ending on December 31, 2017 and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The $19.41 price target represents a 20% increase, compounded annually, in the price of shares of the Company’s common stock on Nasdaq over the $11.23 closing price on August 27, 2014.

The 127,626 and 71,530 shares of restricted stock are effectively forward starting knock-in barrier options with a strike price of zero. The fair value of these shares of restricted stock was calculated utilizing an adjusted Monte Carlo simulation discounted cash flow model which was developed for the purpose of the valuation of these shares. For each simulated share price path, the market share price condition was evaluated to determine whether or not the shares would vest under that simulation. The “adjustment” to the Monte Carlo simulation model incorporates a “jump diffusion” process to the standard Geometric Brownian Motion simulation, in order to capture the discontinuous share price jumps observed in the Company’s share price movements on stock exchanges on which it is listed. Therefore, the simulated share price paths capture the idiosyncrasies of the observed Company share price movements.

In scenarios where the shares do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share price on vesting date. The value of the grant is the average of the discounted vested values. The Company used an expected volatility of 76.01%, an expected life of approximately three years, a risk-free rate of 1.27% and no future dividends in its calculation of the fair value of the 127,626 shares of restricted stock. The Company used an expected volatility of 63.73%, an expected life of approximately three years, a risk-free rate of 1.21% and no future dividends in its calculation of the fair value of the 71,530 shares of restricted stock. Estimated expected volatility was calculated based on the Company’s 30 day VWAP share price using the exponentially weighted moving average of returns.(continued)

The fair value of restricted stock vesting during the ~~six~~three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively, was ~~$1.4~~$0.7 million and ~~$0.8~~$1.4 million.

Stock-based compensation charge and unrecognized compensation cost

The Company has recorded a stock-based compensation (reversal) charge, net of ~~$1.0~~($1.3 million) and $0.7 million, respectively, during ~~each of~~ the three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ which comprised:

Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Three months ended December 31, 2015
Stock-based compensation charge $ 965 $ - $ 965
Total – Three months ended December 31, 2015 $ 965 $ - $ 965

Three months ended December 31, 2014
Stock-based compensation charge $ 1,035 $ - $ 1,035
Total – Three months ended December 31, 2014 $ 1,035 $ - $ 1,035

~~12.~~	~~Stock-based compensation (continued)~~

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

~~The Company has recorded a stock-based compensation charge of $1.7 million and $2.0 million, respectively, during the six months ended December 31, 2015 and 2014, which comprised:~~

Allocated to cost
of goods sold, IT Allocated to
processing, selling, general
Total servicing and and
charge support administration
Six months ended December 31, 2015
Stock-based compensation charge $ 1,691 $ - $ 1,691
Total –six months ended December 31, 2015 $ 1,691 $ - $ 1,691

Six months ended December 31, 2014
Stock-based compensation charge $ 1,951 $ - $ 1,951
Total –six months ended December 31, 2014 $ 1,951 $ - $ 1,951

					Allocated to cost
					of goods sold, IT		Allocated to
					processing,		selling, general
		Total			servicing and		and
		charge			support		administration
Three months ended September 30, 2016
Stock-based compensation charge	$	503		$	-	$	503
Reversal of stock compensation charge related to restricted stock		(1,827	)		-		(1,827	)
Total – three months ended September 30, 2016	$	(1,324	)	$	-	$	(1,324	)

Three months ended September 30, 2015
Stock-based compensation charge	$	726		$	-	$	726
Total – three months ended September 30, 2015	$	726		$	-	$	726

The stock-based compensation charges have been allocated to selling, general and administration based on the allocation of the cash compensation paid to the employees.

As of ~~December 31, 2015,~~September 30, 2016, the total unrecognized compensation cost related to stock options was approximately ~~$1.3~~$0.6 million, which the Company expects to recognize over approximately ~~two years.~~one year. As of ~~December 31, 2015,~~September 30, 2016, the total unrecognized compensation cost related to restricted stock awards was approximately ~~$1.6~~$4.5 million, which the Company expects to recognize over approximately two years. This amount excludes the total unrecognized compensation cost as of September 30, 2016, related to restricted stock awards that the Company expects will not vest due to it not achieving the 2018 Fundamental EPS of approximately $6.0 million. As of September 30, 2016, the cumulative unrecorded stock-based compensation charge related to these awards of restricted stock that the Company has determined are expected not to vest and has not expensed in its consolidated statement of operations is approximately $2.5 million (which amount includes the $1.8 million reversed).

As of ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015,~~2016, respectively, the Company has recorded a deferred tax asset of approximately ~~$1.6~~$1.5 million and 1.8 million related to the stock-based compensation charge recognized related to employees and directors of Net1 as it is able to deduct the grant date fair value for taxation ~~purposes in the U.S.~~purposes.

13.	Earnings per share

The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is reflected in basic earnings per share using the two-class method. There were no redemptions of common stock, or adjustments to the carrying value of the redeemable common stock during the three months ended September 30, 2016 or 2015. Accordingly the two-class method presented below does not include the impact of any redemption. The Company’s redeemable common stock is described in Note 14 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2016.

Basic earnings per share include shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic earnings per share have been calculated using the two-class method and basic earnings per share for the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ reflects only undistributed earnings. The computation below of basic earnings per share excludes the net income attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator.

13.	Earnings per share (continued)

Diluted earnings per share have been calculated to give effect to the number of shares of additional common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and are not considered to be participating securities as the stock options do not contain non-forfeitable dividend rights. The calculation of diluted earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in ~~February 2012,~~ August 2013, August 2014, November 2014, August 2015 and August ~~2015~~2016, as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for awards made in August 2016 and August 2015 are discussed in Note 12 and the vesting conditions for all other awards are discussed in Note 18 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2015.~~2016.

~~13.~~

~~Earnings per share (continued)~~

The following table presents net income attributable to Net1 (income from continuing operations) and the share data used in the basic and diluted earnings per share computations using the two-class method:

Three months ended Six months ended
December 31, December 31,
2015 2014 2015 2014
(in thousands except percent (in thousands except percent
and and
per share data) per share data)
Numerator:
Net income attributable to Net1 $ 16,658 $ 22,374 $ 39,678 $ 46,463
Undistributed earnings 16,658 22,374 39,678 46,463
     Percent allocated to common shareholders
     (Calculation 1) 99% 99% 99% 99%
     Numerator for earnings per share: basic and
     diluted $ 16,426 $ 22,102 $ 39,177 $ 45,947

Denominator:
     Denominator for basic earnings per share:
     weighted-average common shares outstanding 46,429 45,953 46,413 46,352
Effect of dilutive securities:
          Stock options 314 125 387 117
               Denominator for diluted earnings per
               share: adjusted weighted average
               common shares outstanding and
               assumed conversion 46,743 46,078 46,800 46,469

Earnings per share:
Basic $ 0.35 $ 0.48 $ 0.84 $ 0.99
Diluted $ 0.35 $ 0.48 $ 0.84 $ 0.99

(Calculation 1)
     Basic weighted-average common shares
     outstanding (A) 46,429 45,953 46,413 46,352
     Basic weighted-average common shares
     outstanding and unvested restricted shares
     expected to vest (B) 47,086 46,519 47,007 46,873
     Percent allocated to common shareholders
     (A) / (B) 99% 99% 99% 99%

		Three months ended
		September,
		2016		2015
		(in thousands except percent
		and
		per share data)
Numerator:
Net income attributable to Net1	$	24,632	$	23,020
Undistributed earnings		24,632		23,020
Percent allocated to common shareholders (Calculation 1)		99%		99%
Numerator for earnings per share: basic and diluted	$	24,276	$	22,817

Denominator:
Denominator for basic earnings per share: weighted-average common shares outstanding		53,053		46,209
Effect of dilutive securities:
Stock options		91		460
Denominator for diluted earnings per share: adjusted weighted average common shares outstanding and assumed conversion		53,144		46,669

Earnings per share:
Basic	$	0.46	$	0.49
Diluted	$	0.46	$	0.49

(Calculation 1)
Basic weighted-average common shares outstanding (A)		53,053		46,209
Basic weighted-average common shares outstanding and unvested restricted shares expected to vest (B)		53,832		46,620
Percent allocated to common shareholders (A) / (B)		99%		99%

Options to purchase ~~874,443~~812,919 shares of the Company’s common stock at prices ranging from ~~$22.51~~$10.59 to $24.46 per share were outstanding during the three ~~and six~~ months ended ~~December 31, 2015,~~September 30, 2016, but were not included in the computation of diluted earnings per share because the options’ exercise price were greater than the average market price of the Company’s common stock. The options, which expire at various dates through August 27, ~~2018,~~2024, were still outstanding as of ~~December 31, 2015.~~September 30, 2016.

14.	Supplemental cash flow information

The following table presents supplemental cash flow disclosures for the three ~~and six~~ months ended ~~December 31, 2015~~September 30, 2016 and ~~2014:~~2015:

Three months ended Six months ended
December 31, December 31,
2015 2014 2015 2014
Cash received from interest $ 3,656 $ 3,577 $ 7,921 $ 7,740
Cash paid for interest $ 1,112 $ 1,195 $ 2,051 $ 2,413
Cash paid for income taxes $ 20,256 $ 20,393 $ 24,322 $ 25,553

		Three months ended
		September 30,
		2016		2015
Cash received from interest	$	4,285	$	4,265
Cash paid for interest	$	1,076	$	939
Cash paid for income taxes	$	1,503	$	4,066

2019

14.	Supplemental cash flow information (continued)

~~The sale of~~Treasury shares, at cost included in the Company’s ~~NUETS business is described in Note 19 to its audited~~condensed consolidated ~~financial statements included in its Annual Report on Form 10-K for the year ended~~balance sheet as of June 30, ~~2015. The Company received cash sale proceeds of $1.9 million related to this transaction in July 2014.~~

~~As discussed in Note 12, during the six months ended December 31, 2014, employees exercised stock options through the delivery 336,584~~2016, includes 47,056 shares of the Company’s common stock atacquired for approximately $0.5 million which were paid for on July 1, 2016. The liability for this payment was included in accounts payable on the ~~closing price on December 9, 2014 or $13.93 under~~Company’s condensed consolidated balance sheet as of June 30, 2016. The payment of approximately $0.5 million is included in acquisition of treasury stock in the ~~terms~~Company’s condensed consolidated statement of ~~their option agreements.~~cash flows for the three months ended September 30, 2016.

15.	Operating segments

The Company discloses segment information as reflected in the management information systems reports that its chief operating decision maker uses in making decisions and to report certain entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets or reports material revenues. A description of the Company’s operating segments is contained in Note 23 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, ~~2015.~~2016.

The reconciliation of the reportable segments revenue to revenue from external customers for the three months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively, is as follows:

Revenue
From
Reportable Inter- external
Segment segment customers

South African transaction processing $ 52,764 $ 3,350 $ 49,414
International transaction processing 40,836 - 40,836
Financial inclusion and applied technologies 65,686 5,655 60,031
Total for the three months ended December 31, 2015 159,286 9,005 150,281

South African transaction processing 58,427 5,437 52,990
International transaction processing 40,466 - 40,466
Financial inclusion and applied technologies 67,531 6,856 60,675
Total for the three months ended December 31, 2014 $ 166,424 $ 12,293 $ 154,131

~~The reconciliation of the reportable segments revenue to revenue from external customers for the six months ended December 31, 2015 and 2014, respectively, is as follows:~~

Revenue
From
Reportable Inter- external
Segment segment customers
South African transaction processing $ 108,403 $ 6,977 $ 101,426
International transaction processing 82,065 - 82,065
Financial inclusion and applied technologies 133,046 11,783 121,263
Total for the six months ended December 31, 2015 323,514 18,760 304,754

South African transaction processing 118,679 10,558 108,121
International transaction processing 83,670 - 83,670
Financial inclusion and applied technologies 132,728 13,947 118,781
Total for the six months ended December 31, 2014 $ 335,077 $ 24,505 $ 310,572

~~15.~~

~~Operating segments (continued)~~

		Revenue
						From
		Reportable		Inter-		external
		Segment		segment		customers
South African transaction processing	$	57,568	$	5,401	$	52,167
International transaction processing		46,190		-		46,190
Financial inclusion and applied technologies		63,542		6,266		57,276
Total for the three months ended September 30, 2016	$	167,300	$	11,667	$	155,633

South African transaction processing	$	55,639	$	3,627	$	52,012
International transaction processing		41,229		-		41,229
Financial inclusion and applied technologies		67,360		6,128		61,232
Total for the three months ended September 30, 2015	$	164,228	$	9,755	$	154,473

The Company does not allocate interest income, interest expense or income tax expense to its reportable segments. The Company evaluates segment performance based on segment operating income before acquisition-related intangible asset amortization which represents operating income before acquisition-related intangible asset amortization and allocation of expenses allocated to Corporate/Eliminations, all under GAAP. The reconciliation of the reportable segments measure of profit or loss to income before income taxes for the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ respectively, is as follows:

Three months ended Six months ended
December 31, December 31,
2015 2014 2015 2014
Reportable segments measure of profit or loss $ 29,839 $ 36,453 $ 66,447 $ 75,048
     Operating income: Corporate/Eliminations (5,060 ) (5,638 ) (10,453 ) (11,108 )
     Interest income 3,664 3,587 7,939 7,677
     Interest expense (1,054 ) (1,107 ) (2,028 ) (2,419 )
          Income before income taxes $ 27,389 $ 33,295 $ 61,905 $ 69,198

		Three months ended
		September 30,
		2016			2015
Reportable segments measure of profit or loss	$	34,548		$	36,608
Operating income: Corporate/Eliminations		(2,367	)		(5,393	)
Interest income		4,304			4,275
Interest expense		(796	)		(974	)
Income before income taxes	$	35,689		$	34,516

15.	Operating segments (continued)

The following tables summarize segment information which is prepared in accordance with GAAP for the three ~~and six~~ months ended ~~December 31, 2014~~September 30, 2016 and ~~2013:~~2015:

Three months ended Six months ended
December 31, December 31,
2015 2014 2015 2014
Revenues
South African transaction processing $ 52,764 $ 58,427 $ 108,403 $ 118,679
International transaction processing 40,836 40,466 82,065 83,670
Financial inclusion and applied technologies 65,686 67,531 133,046 132,728
Total 159,286 166,424 323,514 335,077

Operating income (loss)
South African transaction processing 12,080 12,883 25,591 26,522
International transaction processing 4,240 5,743 10,783 13,092
Financial inclusion and applied technologies 13,519 17,827 30,073 35,434
          Subtotal: Operating segments 29,839 36,453 66,447 75,048
               Corporate/Eliminations (5,060 ) (5,638 ) (10,453 ) (11,108 )
                    Total 24,779 30,815 55,994 63,940

Depreciation and amortization
South African transaction processing 1,600 1,823 3,395 3,545
International transaction processing 6,063 4,292 10,759 8,664
Financial inclusion and applied technologies 332 203 572 382
          Subtotal: Operating segments 7,995 6,318 14,726 12,591
               Corporate/Eliminations 2,591 3,839 5,975 7,740
                    Total 10,586 10,157 20,701 20,331

Expenditures for long-lived assets
South African transaction processing 1,096 1,482 2,543 2,164
International transaction processing 8,205 7,279 16,243 15,606
Financial inclusion and applied technologies 646 376 1,859 745
          Subtotal: Operating segments 9,947 9,137 20,645 18,515
               Corporate/Eliminations - - - -
                    Total $ 9,947 $ 9,137 $ 20,645 $ 18,515

		Three months ended
		September,
		2016			2015
Revenues
South African transaction processing	$	57,568		$	55,639
International transaction processing		46,190			41,229
Financial inclusion and applied technologies		63,542			67,360
Total		167,300			164,228
Operating income (loss)
South African transaction processing		13,548			13,511
International transaction processing		5,817			6,543
Financial inclusion and applied technologies		15,183			16,554
Subtotal: Operating segments		34,548			36,608
Corporate/Eliminations		(2,367	)		(5,393	)
Total		32,181			31,215
Depreciation and amortization
South African transaction processing		1,157			1,795
International transaction processing		5,836			4,696
Financial inclusion and applied technologies		337			240
Subtotal: Operating segments		7,330			6,731
Corporate/Eliminations		2,874			3,384
Total		10,204			10,115
Expenditures for long-lived assets
South African transaction processing		407			1,447
International transaction processing		2,799			8,038
Financial inclusion and applied technologies		217			1,213
Subtotal: Operating segments		3,423			10,698
Corporate/Eliminations		-			-
Total	$	3,423		$	10,698

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.

16.	Income tax

Income tax in interim periods

For the purposes of interim financial reporting, the Company determines the appropriate income tax provision by first applying the effective tax rate expected to be applicable for the full fiscal year to ordinary income. This amount is then adjusted for the tax effect of significant unusual or extraordinary items, for instance, changes in tax law, valuation allowances and non-deductible transaction-related expenses that are reported separately, and have an impact on the tax charge. The cumulative effect of any change in the enacted tax rate, if and when applicable, on the opening balance of deferred tax assets and liabilities is also included in the tax charge as a discrete event in the interim period in which the enactment date occurs.

For the three ~~and six~~ months ended ~~December 31,~~September 30, 2016, the tax charge was calculated using the expected effective tax rate for the year. The Company’s effective tax rate for the three months ended September 30, 2016, was 31.1% and was higher than the South African statutory rate as a result of additional taxes payable resulting from the finalization of a tax review in South Korea, non-deductible expenses and the tax impact attributable to distributions from our South African subsidiary.

16.	Income tax (continued)

Income tax in interim periods (continued)

For the three months ended September 30, 2015, the tax charge was calculated using the expected effective tax rate for the year. The Company’s effective tax rate for the three ~~and six~~ months ended ~~December 31,~~September 30, 2015, was ~~38.7% and 34.7%, respectively,~~31.6% and was higher than the South African statutory rate as a result of a valuation allowance for foreign tax credits and non-deductible expenses (including consulting and legal fees) ~~and the~~.

Uncertain tax ~~impact, including withholding taxes, of distributions from subsidiary companies in foreign jurisdictions.~~positions

The ~~Company’s effective~~Company utilized approximately $0.3 million of its unrecognized tax ~~rate for~~benefits during the three ~~and six~~ months ended ~~December 31, 2014, was 30.6% and 31.6%, respectively, and was higher than the South African statutory rate primarily~~September 30, 2016 as a result of ~~non-deductible expenses (including consulting and legal fees, interest expense related to~~ the ~~Company’s long-term Korean borrowings and stock-based compensation charges).~~

~~Uncertain~~finalization of a tax ~~positions~~

~~The Company increased its unrecognized tax benefits by approximately $0.1 million and $0.2 million, respectively, during the three and six months ended December 31, 2015.~~review in South Korea. As of ~~December 31, 2015,~~September 30, 2016, the Company had accrued interest related to uncertain tax positions of approximately ~~$0.3~~$0.1 million on its balance sheet.

The Company does not expect changes related to its unrecognized tax benefits will have a significant impact on its results of operations or financial position in the next 12 months.

As of ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015,~~2016, the Company has unrecognized tax benefits of ~~$1.9~~$1.7 million and ~~$2.3~~$1.9 million, respectively, all of which would impact the Company’s effective tax rate. The Company files income tax returns mainly in South Africa, South Korea, India, the United Kingdom, Botswana and in the U.S. federal jurisdiction. As of ~~December 31, 2015,~~September 30, 2016, 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, ~~2011.~~2012. The Company is subject to income tax in other jurisdictions outside South Africa, none of which are individually material to its financial position, results of operations or cash flows.

17.	Commitments and contingencies

Guarantees

The South African Revenue Service and certain of the Company’s customers, suppliers and other business partners have asked the Company to provide them with guarantees, including standby letters of credit, issued by a South African bank. The Company is required to procure these guarantees for these third parties to operate its business.

Nedbank has issued guarantees to these third parties amounting to ZAR ~~128.4~~127.4 million ($~~8.3~~9.2 million, translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016) and thereby utilizing part of the Company’s short-term facility. The Company in turn has provided nonrecourse, unsecured counter-guarantees to Nedbank for ZAR ~~128.4~~127.4 million ($~~8.3~~9.2 million, translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016). The Company pays commission of between ~~0.2%~~0.4% per annum to 2.0% per annum of the face value of these guarantees and does not recover any of the commission from third parties.

The Company has not recognized any obligation related to these counter-guarantees in its consolidated balance sheet as of ~~December 31, 2015~~September 30, 2016 and June 30, ~~2015.~~2016. The maximum potential amount that the Company could pay under these guarantees is ZAR ~~128.4~~127.4 million ($~~8.3~~9.2 million, translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016). The guarantees have reduced the amount available for borrowings under the Company’s short-term credit facility described in Note 8.

~~17.~~

~~Commitments and contingencies~~

Contingencies

~~U.S. securities litigation~~

On September 16, 2015, the U.S. District Court for the Southern District of New York dismissed the purported securities class action litigation originally filed on December 24, 2013, against the Company, our Chief Executive Officer and our Chief Financial Officer. In its opinion, the District Court provided plaintiff with 30 days to file a second amended complaint. This deadline passed without plaintiff taking any action. Accordingly, the case has been closed. The plaintiff did not appeal and the Company considers this litigation over.

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

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

18.	Subsequent events

Sale of common stock

On October 6, 2016, the Company entered into stock purchase agreements with two investors under which the Company agreed to sell each of the investors 2.5 million shares of the its common stock at a price of $9.00 per share, for aggregate gross proceeds to the Company of $45.0 million. Closing of the transactions is scheduled to occur on or about November 9, 2016.

18.	Subsequent events (continued)

Strategic investments

Blue Label Telecoms

On October 4, 2016, the Company entered into a Share Subscription Agreement (the “Blue Label Subscription Agreement”) with Blue Label Telecoms Limited (“Blue Label”), a JSE-listed company which is a leading provider of prepaid electricity and airtime in South Africa. Pursuant to the Blue Label Subscription Agreement, the Company will purchase approximately 117.9 million ordinary shares of Blue Label at a price of ZAR 16.96 per share, for an aggregate purchase price of ZAR 2.0 billion ($144.3 million, translated at exchange rates applicable as of September 30, 2016) in cash. The Company expects that the proceeds from its investment in Blue Label will be used to partially fund Blue Label’s acquisition of a 45% shareholding in Cell C (Proprietary) Limited, a leading mobile provider in South Africa. Closing of the Company’s investment in Blue Label is subject to closing conditions and is expected to occur simultaneously with the closing of Blue Label’s Cell C investment.

The Company expects to fund the transaction through a combination of cash on hand, a portion of a ZAR 1.4 billion loan facility to be provided to Net1 Applied Technologies South Africa (Pty) Ltd (“Net1 SA”) from FirstRand Bank Limited (acting through its Rand Merchant Bank division) (“RMB”) as described below and the sale of common stock referred to above.

Finbond

On October 7, 2016, the Company provided a loan of ZAR 139.2 million to Finbond in order for Finbond to partially finance its expansion strategy in the United States. Finbond expects to conclude a rights offering during the first quarter of calendar 2017 and the Company has provided an irrevocable undertaking to participate in the rights offering and convert the ZAR 139.2 million loan to Finbond shares as part of this process.

RMB Loan Facilities

On October 20, 2016, Net1 SA entered into a Common Terms Agreement, a Senior Facility A Agreement, Senior Facility B Agreement, Senior Facility C Agreement, Subordination Agreement, Security Cession & Pledge and certain ancillary loan documents (collectively, the “Loan Documents”) with RMB, pursuant to which, among other things, Net1 SA may borrow up to an aggregate of ZAR 1.4 billion ($101.0 million, translated at exchange rates applicable as of September 30, 2016) to finance a portion of its working capital requirements and a portion of its investment in Blue Label. The amounts available under these loans and an escrow deposit of ZAR 600 million ($43.3 million, translated at exchange rates applicable as of September 30, 2016) made by Net1 SA serve as security for a guarantee issued by RMB in favor or Blue Label (the “Guarantee”). Net1 and certain of the Company’s other subsidiaries have agreed to guarantee the obligations of Net1 SA to RMB and subordinate any claims they may have against Net1 SA and certain of its subsidiaries to RMB’s claims against such persons. The Loan Documents provide for a Facility A term loan of up to ZAR 500 million ($36.1 million), a Facility B term loan of up to ZAR 900 million ($64.9 million), amounts translated at exchange rates applicable as of September 30, 2016, and a Facility C term loan in an amount equal to the aggregate amount of voluntary prepayments of the outstanding principal amount of the Facility A loan.

Interest on the loans is payable monthly based on the Johannesburg Interbank Agreed Rate (“JIBAR”) in effect from time to time plus a margin of 1.35% for the Facility A and Facility C loans and 2.75% for the Facility B loan. The JIBAR rate was 7.1% on October 20, 2016.

Principal repayments on the Facility A and Facility B loans are due in eight equal quarterly installments, beginning on January 31, 2017, and all of the loans mature on October 20, 2018. Principal repayment on the Facility C loan is due in quarterly installments to be determined by RMB subject to the date of borrowing thereunder. Voluntary prepayments are permitted without early repayment fees or penalties.

The loans are secured by a pledge by Net1 SA of its entire equity interest in Blue Label. The Loan Documents contain customary covenants that require Net1 SA to maintain a specified total net leverage ratio and restrict the ability of Net1 SA, and certain of its subsidiaries to make certain distributions with respect to their capital stock, prepay other debt, encumber their assets, incur additional indebtedness, make investment above specified levels, engage in certain business combinations and engage in other corporate activities.

18.	Subsequent events (continued)

Acquisitions

C4U Malta

In November 2016, the Company acquired ~~the remaining 56%~~a 100% interest in C4U Malta (“C4U”), a licensed Maltese Financial Services Authority-supervised electronic money institution, for approximately $3.9 million. C4U’s license has been passported across all member states of the ~~issued~~European Union. The Company intends to apply for a principal membership with the major card associations as soon as possible and ~~outstanding ordinary shares~~to integrate a robust and reliable issuing and acquiring processing platform in C4U to enable the issuance of ~~Transact24 Limited (“T24“) for $3 million in cash~~electronic money instruments, such as electronic money accounts, prepaid cards and ~~through~~virtual cards, after a transitional period of integration and technology adaption. The Company plans to build and reinforce C4U such that it operates as its principal regulated electronic money institution with the ~~issue of 391,645 shares~~ability to cover all of the Company’s ~~common stock. T24 is a specialist Hong Kong-based payment~~financial services ~~company~~activities and ~~is now a wholly-owned subsidiary. The Company acquired approximately 44% of T24 in May 2015. Philip Meyer, Managing Director of T24 and an industry veteran~~business in the ~~international payments and transaction processing industries, has become an executive officer of the Company.~~

The Company elected to settle part of the purchase price in shares in order to appropriately align the T24 management team with the Company and its global strategy. The parties have agreed that 50% of the Company’s shares issued in the transaction are contractually restricted as to resale until after June 30, 2016, and the remaining 50% of the shares are so restricted until after June 30, 2017.European Union.

The purchase price allocation has not been finalized, as management has not yet analyzed in detail the assets acquired and liabilities assumed. The Company expects to finalize the purchase price allocation on or before June 30, ~~2016.~~ 2017.

Pros Software (Pty) Ltd

In October 2016, the Company acquired a 100% interest in Pros Software (Pty) Ltd (“Pros Software”), a software development and consulting services based near Johannesburg, South Africa, for ZAR 25.0 million ($1.8 million, translated at exchange rates applicable as of September 30, 2016). Pros Software performs software development and consulting services for a number of clients, including for the Company.

Pro forma results of operations have not been presented because the effect of the ~~T24 acquisition,~~C4U and Pros Software acquisitions, individually and in the aggregate, ~~was~~were not material to the Company’s results of operations. The Company has incurred transaction-related expenditures of approximately $0.1 million to date related to this acquisition and expects to incur additional such expenses duringCompany. During the three months ~~ending March 31, 2016. The~~ended September 30, 2016, the Company ~~is currently unable~~incurred acquisition-related expenditure of $0.1 million related to ~~quantify the amount of~~ these ~~additional expenditures.~~acquisitions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, ~~2015,~~2016, and the unaudited condensed consolidated financial statements and the accompanying notes included in this Form 10-Q.

Forward-looking statements

Some of the statements in this Form 10-Q constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking statements. Such factors include, among other things, those listed under Item 1A.—“Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended June 30, ~~2015.~~2016 and in this Quarterly Report on Form 10-Q. 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.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual events or results may differ materially. We undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this Form 10-Q and the documents that we reference herein and the documents we have filed as exhibits hereto and thereto and which we have filed with the Securities and Exchange Commission completely and with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Recent Developments

~~Introduction~~Progress of ~~EasyPay Everywhere “EPE” and EPE ATMs~~financial inclusion initiatives in South Africa

~~In June 2015, we began the rollout of EPE our business-to-consumer, or B2C, offering in South Africa and have continued to sustain a rapid pace of enrolling new customers.~~ At ~~January 31,~~October 26, 2016, we had more than ~~830,000~~1.6 million active EPE accounts, compared to ~~350,000~~1.4 million at ~~October 31, 2015.~~August 18, 2016. EPE is a fully transactional account created to serve the needs of South Africa’s unbanked and under-banked population, and is available to all consumers regardless of their financial or social ~~status.~~status or whether they are SASSA recipients. The EPE account offers customers a comprehensive suite of financial and various financial inclusion services, such as prepaid products, in an economical, convenient and secure solution. EPE provides account holders with a UEPS-EMV debit MasterCard, mobile and internet banking services, ATM and POS services, as well as loans, insurance and other financial products and value-added services. However, SASSA is challenging the ability of beneficiaries to freely transact with the grants that they receive. See Part II, Item 1.—“Legal Proceedings— Litigation Regarding Legality of Debit Orders under Social Assistance Act Regulations” for additional details.

In order for us to address the sizeable opportunity for EPE and related financial inclusion services in South Africa, we have had to expand our brick-and-mortar financial services branch infrastructure and supplement our nationwide distribution with a UEPS/EMV-enabled ATM network, as well as a dedicated sales force. ~~Such investments have accelerated through the first half of fiscal~~At September 30, 2016, ~~and at December 31, 2015,~~ we had ~~113~~142 branches, ~~798~~909 ATMs, and ~~1,923~~2,096 dedicated employees.

Our deployed ATMs, which are both EMV-and UEPS-compliant, provide biometric verification as well as proof of life functionality, in South Africa. We place these ATMs with our merchant partners and within our own branches, creating a new delivery channel for our products and services that did not previously exist. The ATM rollout has continued to make a positive contribution to our reported results and we have been able to expand our customer base because our ATMs accept all South African issued bank cards. We will continue to expand our ATM footprint during the remainder of fiscal 2016.

~~The graph below presents the growth of the number of EPE cards issued since July 2015:~~

~~Growth in lending book and ongoing scaling up of Smart Life~~

We have experienced a 40% sequential increase in our lending book during the second quarter of fiscal 2016 as compared to the first quarter of fiscal 2016, with a particularly strong uptake in December 2015. We believe that this increase is primarily due to the convenience to our customers of our expanded brick and mortar branch infrastructure and the provision of our new ATMs in these locations.

In September 2015, we resumed marketing and business development activities in selected areas for the distribution of our simple, low-cost life insurance products and have sold approximately ~~25,000~~215,500 new policies ~~though December 31, 2015,~~through October 30, 2016, in addition to the basic life insurance policy provided with every EPE ~~card issued.~~account opened. We ~~recruited~~continue to recruit additional and often-times specialized staff to expand our insurance activities during fiscal 2017.

We experienced higher year-over-year growth in the ~~second quarter of fiscal 2016, and expect the investment in Smart Life staff to continue through the third quarter of fiscal 2016.~~

~~ZAZOO~~

~~WorldRemit~~

ZAZOO has entered into an agreement with WorldRemit, a global money transfer services provider, to enable South Africans to instantly receive international money transfers directly into their personal bank accounts. WorldRemit’s has developed an application, or app, that enables people to transfer money to friends and family using a smartphone, tablet or computer at any time or from anywhere. ZAZOO will enable WorldRemit to offer this servicedemand for our loans. Tougher economic conditions in South Africa, aggravated by ~~using technology developed~~rising food prices as a result of widespread drought conditions and ~~customized by FIHRST,~~a weakening currency, has had an ~~authorized systems operator~~impact on the number of clients who qualify for our loan products.

The graph below presents the growth of the number of EPE cards and ~~third-party processor. FIHRST’s technology streamlines~~Smart Life policies:

Strategic investment

We have signed a subscription agreement with One MobiKwik Systems Private Limited, or MobiKwik, in India. MobiKwik is India's largest independent mobile payments network, with over 35 million users and 100,000 retailers. MobiKwik’s current shareholders include Sequoia Capital, Tree Line Asia, American Express, Cisco Investments, GMO Payment Gateway and MediaTek, as well as Bipin Preet Singh and Upasana Taku, the ~~relationship between the payer~~founders and ~~payee and ensures data integrity using sophisticated encryption routines with secure dedicated lines to South Africa’s major banks.~~

~~South Africans receive inbound remittances of more than USD 1 billion per year. According~~executive officers. Pursuant to the~~Remittance Prices Worldwide~~ ~~report published by~~ subscription agreement, we have agreed to make an equity investment of up to $40.0 million in MobiKwik over the ~~World Bank,~~next 24 months. We made an agreed initial $15.0 million investment under this subscription agreement in August 2016. In addition, through a technology agreement, our Virtual Card technology will be integrated across all MobiKwik wallets in order to provide ubiquity across all merchants in India.

Acquisition of a strategic stake in Blue Label Telecoms

On October 5, 2016 we entered into a share subscription agreement with Blue Label Telecoms Limited, or Blue Label, to subscribe for approximately 117.9 million shares in Blue Label, at a subscription price of ZAR 16.96 per share, representing a 10% discount to ZAR 18.84, being the 30-day volume weighted average ~~global cost for remittances~~price of a Blue Label share traded on the Johannesburg Stock Exchange to September 29, 2016. The aggregate subscription consideration payable is ~~7.68%~~ZAR 2.0 billion ($144.3 million, translated at exchange rates applicable as of September 30, 2016). Following implementation of the ~~transaction value, with Sub-Saharan Africa listed as~~subscription, we will own approximately 15% of the ~~most expensive region~~issued ordinary shares in Blue Label. We will settle the ~~world~~subscription consideration through a combination of cash resources, debt instruments and an equity issuance of five million shares of common stock, at ~~9.74% . These numbers emphasize~~an issue price of $9.00 per share. Following implementation of the ~~opportunity that exists~~subscription, which is subject to the approval of Blue Label shareholders, we will be entitled to nominate a director to Blue Label’s board.

Blue Label, which operates in South Africa, Mexico and India, is listed in the Telcoms – Mobile Telcoms sector of the Main Board of the JSE, and is a market leading virtual and physical distributor of secure electronic tokens of value as well as a provider of transactional and value added services. Blue Label is in the process of acquiring a 45% interest in Cell C, one of South Africa’s three major licensed mobile network operators. For the fiscal year ended May 31, 2016, Blue Label reported revenue of ZAR 26.2 billion ($1.9 billion), EBITDA of ZAR 1.24 billion ($90.0 million) and earnings per share of ZAR 1.04 ($0.08), all amounts translated at exchange rates applicable as of September 30, 2016.

We expect that this strategic investment will assist us, Blue Label and Cell C to ~~attract customers~~accelerate the growth of our combined customer bases, and facilitate cross selling opportunities between ourselves. The combination of our and Blue Label’s infrastructures is expected to envelop all areas of South Africa through ~~the introduction of highly efficient financial technology, namely lowering cost~~our combined physical and ~~increasing accessibility.~~

In addition, unbanked recipients have the option of opening an EPE account. Should a recipient select to receive their funds into their EPE account, ZAZOO will enable that recipient to make use of its Mobilemobile branches, associations with merchant stores and virtual distribution services via USSD, voice, internet and social media linked with traditional payment systems including EFTs, debit and credit cards and our Virtual Card ~~or MVC, technology to create a virtual MasterCard to spend digitally for any online purchase in South Africa.~~solution.

In India, we are a shareholder in MobiKwik and Blue Label is a shareholder in Oxigen, ~~Services India Pvt. Ltd~~

~~ZAZOO has recently entered into an agreement with Oxigen, a~~and we believe that there are compelling opportunities for us to extend our collaboration through the provision of innovative payment solutions, ~~provider in India,~~enabling universal acceptance and value to seamlessly integrate its MVC technology to power Visa Prepaid into Oxigen Wallet in association with RBL Bank as sponsor bank and co-branding partner. The Oxigen Wallet will use ZAZOO’s MVC technology to power the Visa Prepaid card securely and off-line for card-not-present transactions, such as e-commerce or m-commerce purchases. The MVC technology runs as an app on any mobile phone, transforming it into a cashless, secure and convenient electronic payment device that eliminates the riskscustomers of theft, phishing, skimming, spoofing and other fraudulent activities. Oxigen Wallet customers will be able to use the app to make any purchases or bill payments at online merchants, or send virtual gift cards to friends and family.

Secular trends strongly support robust growth in India’s mobile commerce industry. Accordingly to TRACXN!, digital transactions are expected to account for 27% of total transactions in India by 2020. Smartphone adoption is rapidly increasing, which in turn drives internet usage as more than 60%two of India’s roughly 350 million internet users access the web from their mobile phone, according to IAMAI. It is estimated that it took over a decade for India’s internet user base to grow from 10 million to 100 million, three years to cross 200 million,leading digital wallet providers who also have highly developed online and ~~last year alone reached 300 million. Similarly, a Goldman Sachs report states that Indians spend approximately $20 billion annually online which~~offline infrastructure and capabilities. Our alliance with Blue Label is expected to ~~grow 15-fold~~further enhance the marketing of our international remittances, virtual cards and merchant financing strategies. In addition, the POS infrastructure that Blue Label has deployed in Mexico opens up new and real potential to ~~$300 billion by 2030.~~participate in, acquiring, bill payments and remittances when combined with our technology and relationships in North America.

~~Regulatory change~~User access security enhancements to ~~merchant fees~~prepaid products

User security remains of paramount importance to us and, as we continue to evaluate and introduce non-PIN based security enhancements to our product offerings, this can, in ~~South Korea~~

~~Korean regulators have recently~~certain cases, result in an initial drop off while the technology is rolled out, understood and adopted. We introduced ~~specific regulations governing~~our new biometric-linking feature during the fees that may be charged on card transactions, as is the case in most other developed economies, that have a direct impact on card issuers in Korea. Consistent with global practices, we expect the card issuers to renegotiate their fees with VAN companies including KSNET, and if successful, such actions may have an adverse impact on KSNET's financial performance. Transaction processors and acquirers in other international markets facing similar regulation have successfully navigated through this cycle, and we believe we are also well positioned to accommodate these changes and additionally implement initiatives that would further diversify KSNET's existing business model.

~~Share Repurchases~~

~~During the second~~first quarter of fiscal ~~2016, we repurchased 749,213 shares~~2017, which has reduced the number of ~~our common stock for approximately $11.2 million under our share repurchase program.~~transacting users as the adoption rate scales. This in turn therefore impacted volume in prepaid sales vouchers on Umoja Manje during the quarter.

~~Closure of cases by Hawks~~

~~During 2012, shortly after~~We believe that the ~~award~~adverse impact of the ~~SASSA tender to us, certain media reports appeared~~new security on sales volumes will rectify itself over time as we further entrench ourselves as the most secure, convenient and cost effective service provider in the ~~South African press~~market. Our biometric security enhancements provide the leadership in solving an industry-wide endemic of unauthorized transactions by providing non-repudiatable transaction authorizations. Our mobile vending channel now incorporates biometry - which ~~alleged or implied~~makes it the first of its kind, and will facilitate the launch of further digital services that ~~the SASSA tender process was tainted by corruption through bribes by or on behalf of our subsidiary, Cash Paymaster Service (Pty) Ltd.~~incorporate dual authorization-and-identification factors.

On February 14, 2013, we filed an application pursuant to Section 34 of the South African Prevention of Corrupt Activities Act in South Africa with the South African Police Service. Section 34 deals with the reporting of suspected fraud, theft, extortion and forgery. Matters reported under Section 34 are usually referred for investigation to the Serious Economic Offences Unit of the South African Police Service’s Directorate for Priority Crime Investigation, or Hawks. We filed the Section 34 application after we conducted our own internal investigation into the allegations contained in the South African press articles. We found no evidence substantiating any of the press allegations. We then filed the Section 34 application to prompt the Hawks to conduct a wider investigation into the allegations because we did not have access to the personal financial records of the alleged perpetrators. A separate but similar complaint was lodged by the Democratic Alliance, the official opposition political party in South Africa.

On November 12, 2015, we announced that we had received a written notice from the Hawks, stating that both cases were investigated and brought before two separate prosecutors for decisions. As both prosecutors declined to prosecute these matters, the Hawks have closed the investigations and regard the matters as finalized.

Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 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.

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially may result in materially different results under different assumptions and conditions. Management has identified the following critical accounting policies that are described in more detail in our Annual Report on Form 10-K for the year ended June 30, ~~2015:~~2016:

	•	Business combinations and the recoverability of goodwill;
	•	Intangible assets acquired through acquisitions;
	•	Deferred taxation;
	•	Stock-based compensation and equity instrument issued pursuant to BEE transaction;
	•	Accounts receivable and allowance for doubtful accounts receivable; and
	•	Research and development.

Recent accounting pronouncements adopted

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements adopted, including the dates of adoption and the effects on our condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted as of ~~December 31, 2015~~September 30, 2016

Refer to Note 1 to our unaudited condensed consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of ~~December 31, 2015,~~September 30, 2016, including the expected dates of adoption and effects on our financial condition, results of operations and cash flows.

Currency Exchange Rate Information

Actual exchange rates

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

Table 1	Three months ended		Six months ended		Year ended	Three months ended		Year ended
	December 31,		December 31,		June 30,	September 30,		June 30,
	2015	2014	2015	2014	2015	2016	2015	2016
ZAR : $ average exchange rate	14.2261	11.2236	13.6072	10.9909	11.4494	14.0890	12.9702	14.5062
Highest ZAR : $ rate during period	15.8939	11.6941	15.8939	11.6941	12.5779	14.8114	14.0282	16.8231
Lowest ZAR : $ rate during period	12.1965	10.8651	12.1965	10.5128	10.5128	13.3000	12.1965	12.1965
Rate at end of period	15.5419	11.6088	15.5419	11.6088	12.2854	13.8630	14.0282	14.7838

KRW : $ average exchange rate	1,164	1,088	1,164	1,057	1,078	1,121	1,169	1,173
Highest KRW : $ rate during period	1,203	1,122	1,203	1,122	1,139	1,163	1,203	1,245
Lowest KRW : $ rate during period	1,122	1,048	1,122	1,009	1,009	1,092	1,118	1,122
Rate at end of period	1,176	1,098	1,176	1,098	1,128	1,102	1,196	1,153

ZAR: US $ Exchange Rates

KRW: US $ Exchange Rates

Translation exchange rates for financial reporting purposes

We are required to translate our results of operations from ZAR and KRW to U.S. dollars on a monthly basis. Thus, the average rates used to translate this data for the three ~~and six~~ months ended ~~December 31,~~September 30, 2016 and 2015, ~~and 2014,~~ 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:

Table 2	Three months ended		Six months ended		Year ended	Three months ended		Year ended
	December 31,		December 31,		June 30,	September 30		June 30,
	2015	2014	2015	2014	2015	2016	2015	2016
Income and expense items: $1 = ZAR .	14.1196	11.2066	13.4906	10.9688	11.4275	14.1048	12.9583	14.3842
Income and expense items: $1 = KRW	1,161	1,051	1,165	1,036	1,073	1,127	1,167	1,172

Balance sheet items: $1 = ZAR	15.5419	11.6088	15.5419	11.6088	12.2854	13.8630	14.0282	14.7838
Balance sheet items: $1 = KRW	1,176	1,098	1,176	1,098	1,128	1,102	1,196	1,153

Results of operations

The discussion of our consolidated overall results of operations is based on amounts as reflected in our unaudited condensed consolidated financial statements which are prepared in accordance with U.S. GAAP. We analyze our results of operations both in U.S. 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 U.S. dollar and ZAR on our reported results and because we use the U.S. 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.

The first quarter of fiscal 2017 includes the results of Masterpayment and T24 for the entire quarter. The first quarter of fiscal 2016 does not include Masterpayment or T24.

Our operating segment revenue presented in “—Results of operations by operating segment” represents total revenue per operating segment before inter-segment eliminations. Reconciliation between total operating segment revenue and revenue presented in our unaudited condensed consolidated financial statements is included in Note 15 to those statements.

We analyze our business and operations in terms of three inter-related but independent operating segments: (1) South African transaction processing, (2) International transaction processing and (3) Financial inclusion and applied technologies. 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.

~~Second~~First quarter of fiscal ~~2016~~2017 compared to ~~second~~first quarter of fiscal ~~2015~~2016

The following factors had a significant influence on our results of operations during the ~~second~~first quarter of fiscal ~~2016~~2017 as compared with the same period in the prior year:

	•	*Unfavorable impact from the strengthening of the U.S. dollar against ~~primary functional currencies:~~ZAR:*The U.S. dollar appreciated by ~~26%~~9% against the ZAR ~~and 10% against the KRW~~ during the ~~second~~first quarter of fiscal ~~2016,~~2017, which negatively impacted our reported results;
	•	*~~Continued growth~~Growth in ~~financial inclusion services:~~lending and insurance businesses:*We continued to ~~grow~~experience volume growth and operating efficiencies in our ~~financial inclusion services offerings~~lending and insurance businesses during the ~~second~~first quarter of fiscal ~~2016,~~2017, which has resulted in ~~higher~~an improved contribution to our financial inclusion revenue and operating income;
	•	*Impact of changes in specific regulations in South Korea governing fees charged on card transactions:* Recently introduced regulations governing the fees that may be charged on card transactions have adversely impacted our revenues and operating income ~~primarily from more sales~~in South Korea;
	•	*Reversal of ~~low-margin prepaid airtime and~~stock-based compensation charge of $1.8 million:*We have determined that awards of restricted stock subject to performance conditions granted in fiscal 2016 are not likely to vest due to an increase in ~~transaction fees.~~ the weighted average number of shares outstanding resulting from the issuance of approximately 10 million shares of our common stock to the IFC Investors;
	•	*Lower prepaid sales resulting from improved security features to our Manje products:*The ~~significant growth in~~introduction of our ~~lending book during December 2015 resulted in a substantial increase in~~new biometric-linking feature was implemented this quarter and adversely impacted the ~~allowance for doubtful finance loans receivable, in accordance with~~number of transacting users purchasing prepaid products through our ~~policy of providing for doubtful finance loans receivable at the time that a loan is originated;~~mobile channel; and
	•	*Ongoing contributions from EPE ~~and Smart Life and expansion of branch network:~~offering:*Our EPE ~~and Smart Life offerings~~offering contributed to an increase in revenue ~~in ZAR,~~and operating income as ~~well as an associated increase in establishment costs for~~we further expanded our ~~branch network;~~
	•	*~~Increased contribution by KSNET:~~*~~Our results were positively impacted by growth in~~customer base utilizing our ~~Korean operations; and~~
	•	*~~Tax impact of dividends from South African subsidiary:~~*Our income tax expense includes approximately $2.4 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary during October 2015, which helped reduce the impact of a weakened ZAR on our reported cash balances. The conversion of a significant portion of our ZAR cash reserves to USD negatively impacted our interest income due the material difference between ZAR and USD deposit rates.ATM infrastructure.

Consolidated overall results of operations

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

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

	In U.S. Dollars				In U.S. Dollars
Table 3	(U.S. GAAP)				(U.S. GAAP)
	Three months ended December 31,				Three months ended September 30,
	2015	2014	$ %		2016	2015	$ %
	$ ’000	$ ’000	change		$ ’000	$ ’000	change
Revenue	150,281	154,131	(2%	)	155,633	154,473	1%
Cost of goods sold, IT processing, servicing and support	78,668	71,774	10%		74,780	77,382	(3%	)
Selling, general and administration	36,248	41,385	(12%	)	38,468	35,761	8%
Depreciation and amortization	10,586	10,157	4%		10,204	10,115	1%
Operating income	24,779	30,815	(20%	)	32,181	31,215	3%
Interest income	3,664	3,587	2%		4,304	4,275	1%
Interest expense	1,054	1,107	(5%	)	796	974	(18%	)
Income before income tax expense	27,389	33,295	(18%	)	35,689	34,516	3%
Income tax expense	10,593	10,203	4%		11,103	10,897	2%
Net income before earnings from equity-accounted investments	16,796	23,092	(27%	)	24,586	23,619	4%
Earnings from equity-accounted investments	388	76	411%		659	188	251%
Net income	17,184	23,168	(26%	)	25,245	23,807	6%
Less net income attributable to non-controlling interest	526	794	(34%	)	613	787	(22%	)
Net income attributable to us	16,658	22,374	(26%	)	24,632	23,020	7%

	In South African Rand
Table 4	(U.S. GAAP)
	Three months ended September 30,
	2016	2015
	ZAR	ZAR	ZAR %
	’000	’000	change
Revenue	2,195,171	2,001,708	10%
Cost of goods sold, IT processing, servicing and support	1,054,755	1,002,739	5%
Selling, general and administration	542,583	463,402	17%
Depreciation and amortization	143,926	131,073	10%
Operating income	453,907	404,494	12%
Interest income	60,707	55,397	10%
Interest expense	11,227	12,621	(11%	)
Income before income tax expense	503,387	447,270	13%
Income tax expense	156,606	141,207	11%
Net income before earnings from equity-accounted investments	346,781	306,063	13%
Earnings from equity-accounted investments	9,295	2,436	282%
Net income	356,076	308,499	15%
Less net income attributable to non-controlling interest	8,646	10,198	(15%	)
Net income attributable to us	347,430	298,301	16%

In South African Rand
Table 4 (U.S. GAAP)
Three months ended December 31,
2015 2014
ZAR ZAR ZAR %
’000 ’000 change
Revenue 2,121,908 1,727,284 23%
Cost of goods sold, IT processing, servicing and support 1,110,761 804,342 38%
Selling, general and administration 511,807 463,785 10%
Depreciation and amortization 149,470 113,825 31%
Operating income 349,870 345,332 1%
Interest income 51,734 40,198 29%
Interest expense 14,882 12,406 20%
Income before income tax expense 386,722 373,124 4%
Income tax expense 149,569 114,341 31%
Net income before earnings from equity-accounted investments 237,153 258,783 (8% )
Earnings from equity-accounted investments 5,478 852 543%
Net income 242,631 259,635 (7% )
Less net income attributable to non-controlling interest 7,427 8,898 (17% )
Net income attributable to us 235,204 250,737 (6% )

~~The~~In ZAR, the increase in revenue ~~in ZAR~~ was primarily due to more fees generated from our EPE and ATM offerings, improved lending and insurance activities, higher ~~prepaid airtime~~ad hoc terminal sales, the inclusion of T24 and Masterpayment’s businesses, more low-margin transaction fees generated from cardholders using the South African National Payment System, ~~more fees generated from our new EPE~~ and ~~ATM offerings,~~ an increase in the number of SASSA UEPS/EMV beneficiaries paid, which was partially offset by lower prepaid airtime sales and a ~~higher~~lower contribution from KSNET ~~and more ad hoc terminal sales, offset by lower lending service fees.~~due to regulatory changes in South Korea.

~~The~~In ZAR, the increase in cost of goods sold, IT processing, servicing and support was primarily due to higher expenses incurred from increased usage of the South African National Payment System by beneficiaries, expenses incurred to ~~roll-out~~operate our ~~new~~ EPE and ATM offerings and expanding our branch network, and ~~more~~the inclusion of T24 and Masterpayment’s businesses, which was partially offset by fewer prepaid airtime ~~sold.~~sales.

In ZAR, our selling, general and administration expense increased primarily due to ~~an increase in our allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in the last lending cycle of calendar 2015,~~ a higher staff complement resulting from our EPE roll-out in fiscal 2016, the impact of October 2015 annual salary increases for our South African and UK-based employees, as well as increases in goods and services purchased from third ~~parties.~~parties, which was partially offset by the reversal of stock-based compensation charges related to awards of restricted stock with performance conditions which we believe will not be achieved.

Our operating income margin for ~~second~~first quarter of fiscal 2017 and 2016 ~~and 2015~~ was ~~16%~~21% and 20% respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The ~~decrease is~~increase was primarily attributable tothe reversal of stock-based compensation charges, which was partially offset by the higher cost of goods sold, IT processing, servicing and support referred to above and an increase in depreciation expenses. Specifically, the majority of the expenses incurred to grow our new offerings are fixed and we expect that these expenses will impact on our margin in the short-term until we scale these new businesses sufficiently to offset the effect of these investments.expense.

~~In ZAR, depreciation~~Depreciation and amortization ~~were higher~~increased primarily ~~as a result of~~due to an increase in depreciation related to more ATMs in South Africa and terminals used to provide transaction processing in Korea as well as an increase in acquisition-related intangible asset amortization resulting from the T24 and ~~the roll-out of EPE ATMs,~~Masterpayment transactions. These increases were partially offset by lower overall amortization of intangible assets that are fully ~~amortized.~~amortized and tangible assets that are fully depreciated.

~~Interest~~In ZAR, interest on surplus cash increased to ~~$3.7~~$4.3 million (ZAR ~~51.7~~60.7 million) from ~~$3.6~~$4.3 million (ZAR ~~40.2~~55.4 million), due primarily to higher average daily ZAR cash balances and ZAR interest rates, partially offset by the lower interest earned on the ~~USD~~U.S. dollar cash reserves that we converted from ZAR through distributions from our South African subsidiary.

~~In USD, interest~~Interest expense decreased to ~~$1.05~~$0.8 million (ZAR ~~14.9~~11.2 million) from ~~$1.11~~$1.0 million (ZAR ~~12.4~~12.6 million), due to a lower average long-term debt balance on our South Korean debt and a lower interest rate.

Fiscal ~~2016~~2017 tax expense was ~~$10.6~~$11.1 million (ZAR ~~149.6~~156.6 million) compared to ~~$10.2~~$10.9 million (ZAR ~~114.3~~141.2 million) in fiscal ~~2015.~~2016. Our effective tax rate for fiscal ~~2016,~~2017, was ~~38.7%~~31.1% and was higher than the South African statutory rate as a result of non-deductible expenses ~~(including consulting and legal fees)~~ and the tax impact ~~including withholding taxes, of approximately $2.4 million~~ attributable to ~~a distribution~~distributions from our South African ~~subsidiary, which were intended to help reduce the impact of a weakening ZAR on our reported cash balances.~~subsidiary. Our effective tax rate for fiscal ~~2015,~~2016, was ~~30.6%~~31.6% and was higher than the South African statutory rate as a result of a valuation allowance for foreign tax credits and non-deductible expenses (including consulting and legal ~~fees,~~fees).

Earnings from equity-accounted investments for the ~~interest expense related~~first quarter of fiscal 2017, has increased primarily due to the inclusion of our ~~long-term South Korean borrowings~~portion of Finbond’s net income. Finbond is listed on the Johannesburg Stock Exchange and ~~stock-based compensation charges).~~reports its six month results during our first quarter and its annual results during our fourth quarter. We have included our portion of its interim net income in our first quarter 2017 results and expect to record the last six months of its fiscal year ended February 2017 net income in our third quarter of fiscal 2017 results.

Results of operations by operating segment

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

Table 5	*In U.S. Dollars (U.S. GAAP)*										*In U.S. Dollars (U.S. GAAP)*
	Three months ended December 31,										Three months ended September 30,
	2015		% of		2014		% of		%		2016		% of		2015		% of		%
Operating Segment	$ ’000		total		$ ’000		total		change		$ ’000		total		$ ’000		total		change
Revenue:
South African transaction processing	52,764		35%		58,427		38%		(10%	)	57,568		37%		55,639		36%		3%
International transaction processing	40,836		27%		40,466		26%		1%		46,190		30%		41,229		27%		12%
Financial inclusion and applied technologies	65,686		44%		67,531		44%		(3%	)	63,542		41%		67,360		44%		(6%	)
Subtotal: Operating segments	159,286		106%		166,424		108%		(4%	)	167,300		108%		164,228		107%		2%
Intersegment eliminations	(9,005	)	(6%	)	(12,293	)	(8%	)	(27%	)	(11,667	)	(8%	)	(9,755	)	(7%	)	20%
Consolidated revenue	150,281		100%		154,131		100%		(2%	)	155,633		100%		154,473		100%		1%
Operating income (loss):
South African transaction processing	12,080		49%		12,883		42%		(6%	)	13,548		42%		13,511		43%		-
International transaction processing	4,240		17%		5,743		19%		(26%	)	5,817		18%		6,543		21%		(11%	)
Financial inclusion and applied technologies	13,519		55%		17,827		58%		(24%	)	15,183		47%		16,554		53%		(8%	)
Subtotal: Operating segments	29,839		121%		36,453		119%		(18%	)	34,548		107%		36,608		117%		(6%	)
Corporate/Eliminations	(5,060	)	(21%	)	(5,638	)	(19%	)	(10%	)	(2,367	)	(7%	)	(5,393	)	(17%	)	(56%	)
Consolidated operating income	24,779		100%		30,815		100%		(20%	)	32,181		100%		31,215		100%		3%

Table 6	*In South African Rand (U.S. GAAP)*										*In South African Rand (U.S. GAAP)*
	Three months ended December 31,										Three months ended September 30,
	2015				2014						2016				2015
	ZAR		% of		ZAR		% of		%		ZAR		% of		ZAR		% of		%
Operating Segment	’000		total		’000		total		change		’000		total		’000		total		change
Revenue:
South African transaction processing	745,007		35%		654,768		38%		14%		811,985		37%		720,987		36%		13%
International transaction processing	576,588		27%		453,486		26%		27%		651,501		30%		534,258		27%		22%
Financial inclusion and applied technologies	927,460		44%		756,793		44%		23%		896,247		41%		872,871		44%		3%
Subtotal: Operating segments	2,249,055		106%		1,865,047		108%		21%		2,359,733		108%		2,128,116		107%		11%
Intersegment eliminations	(127,147	)	(6%	)	(137,763	)	(8%	)	(8%	)	(164,562	)	(8%	)	(126,408	)	(7%	)	30%
Consolidated revenue	2,121,908		100%		1,727,284		100%		23%		2,195,171		100%		2,001,708		100%		10%
Operating income (loss):
South African transaction processing	170,565		49%		144,375		42%		18%		191,092		42%		175,080		43%		9%
International transaction processing	59,867		17%		64,360		19%		(7%	)	82,048		18%		84,786		21%		(3%	)
Financial inclusion and applied technologies	190,883		55%		199,780		58%		(4%	)	214,153		47%		214,512		53%		-
Subtotal: Operating segments	421,315		121%		408,515		119%		3%		487,293		107%		474,378		117%		3%
Corporate/Eliminations	(71,445	)	(21%	)	(63,183	)	(19%	)	13%		(33,386	)	(7%	)	(69,884	)	(17%	)	(52%	)
Consolidated operating income	349,870		100%		345,332		100%		1%		453,907		100%		404,494		100%		12%

South African transaction processing

In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction revenue as a result of increased ~~ATM transactions,~~usage of our ATMs, more low-margin transaction fees generated from card holders using the South African National Payment System, increased inter-segment transaction processing activities, and ana modest increase in the number of social welfare grants ~~distributed, offset by fewer inter-segment transaction processing activities.~~distributed.

Our operating income margin for each of the ~~second~~first quarter of fiscal 2017 and 2016 ~~and 2015~~ was ~~23% and 22%, respectively, and was higher primarily due to~~24%. Our fiscal 2017 margin includes higher EPE revenue as a result of increased ATM transactions, an increase in inter-segment transaction processing activities, an increase in the number of beneficiaries paid in the first quarter of fiscal ~~2016~~2017 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System, which was partially offset by annual salary increases granted to our South African employees.

International transaction-based activities

~~Revenue~~South Korean regulators have recently introduced specific regulations governing the fees that may be charged on card transactions, as is the case in most other developed economies. These regulations have a direct impact on card issuers in South Korea and consistent with global practices, card issuers have renegotiated their fees with South Korean VAN companies, including KSNET, which has had an adverse impact on KSNET’s financial performance.

Segment revenue increased ~~in constant currency~~during the first quarter of fiscal 2017, primarily due to ~~higher transaction volume at~~the inclusion of T24 and Masterpayment; however, this growth was partially offset by a lower contribution from KSNET ~~during~~due to the ~~second quarter of fiscal 2016.~~regulatory changes described above. Operating income during the ~~second~~first quarter of fiscal ~~2016~~2017 was lower due toa decrease in revenue and an increase in depreciation expenses at KSNET and ongoing ZAZOO start-up costs in the UK and India, ~~but~~which was partially offset by ~~increase in revenue contribution from KSNET and~~ a positive contribution by T24 and XeoHealth.

Operating income ~~and~~ margin for the first quarter of fiscal 2017 and 2016 was 13% and 16%, respectively.

Masterpayment has commenced implementing its expansion plan and we expect to incur additional expenses in the second quarter of fiscal 2015, was negatively impacted by ad hoc incentives provided to staff due to the strong operating performance of KSNET during calendar 2014. Operating income margin for the second quarter of fiscal 2016 and 2015 was 10% and 14%, respectively.2017 as it enters new markets.

Financial inclusion and applied technologies

In ZAR, Financial inclusion and applied technologies revenue and operating income increased primarily due to ~~higher prepaid airtime~~from increased volumes and ~~other value-added services sales, more ad hoc terminal~~improved operating efficiencies in our lending and ~~card sales~~insurance businesses, and, in ZAR, an increase in inter-segment revenues, more ad hoc terminal and card sales, which was offset by ~~lower lending service fees. Operating income for~~fewer prepaid airtime and other value-added services sales. These sales were specifically impacted this quarter by the ~~second quarter~~introduction of ~~fiscal 2016, was~~our new biometric-linking feature which adversely impacted ~~by an increase in~~the number of transacting users purchasing prepaid products through our allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in the last lending cycle of calendar 2015 and establishment costs for Smart Life and expansion of our branch network.

The South African National Credit Act, or NCA, made certain industry-wide amendments, which became effective March 13, 2015. These amendments were introduced primarily to address over-indebtedness of South African consumers and require lenders to perform a stricter affordability assessment. Compliance with the amended legislation initially had a modest negative impact on our lending businesses in late fiscal 2015 and early fiscal 2016. However, we have experienced an increase in our lending book towards the end of the second quarter of fiscal 2016. We expect this growth in our lending book to translate to higher revenue and operating income in the third quarter of fiscal 2016.mobile channel.

Operating income margin for the Financial inclusion and applied technologies segment was ~~21%~~24% and ~~26%, respectively,~~25% during the ~~second~~first quarter of fiscal 2017 and 2016, ~~and 2015,~~respectively, and has decreased primarily due to the increase in branch infrastructure and staff compliment, which was partially offset by improved revenues from our ~~allowance for doubtful finance loans receivable, the sale of more low-margin prepaid airtime~~lending and ~~establishment costs for Smart Life, expansion of our branch network~~insurance businesses and ~~annual salary increases for our South African employees.~~an increase in inter-segment revenues.

Corporate/Eliminations

Our corporate expenses generally include acquisition-related intangible asset amortization; expenditure related to compliance with the Sarbanes-Oxley Act of 2002; non-employee directors’ fees; employee and executive bonuses; stock-based compensation; legal fees; audit fees; directors and officers insurance premiums; telecommunications expenses; property-related expenditures including utilities, rental, security and maintenance; and elimination entries.

~~In USD, our~~Our corporate expenses have decreased primarily due to reversal of stock-based compensation charges, the impact of the stronger ~~USD~~U.S. dollar on goods and services procured in other currencies, primarily the ZAR, and lower amortization costs, partially offset by modest increases in ~~USD~~U.S. dollar denominated goods and services purchased from third parties and directors’ fees.

~~First half of fiscal 2016 compared to first half of fiscal 2015~~

~~The following factors had a significant influence on our results of operations during the first half of fiscal 2016 as compared with the same period in the prior year:~~

	•	*~~Unfavorable impact from the strengthening of the U.S. dollar against primary functional currencies:~~*~~The U.S. dollar appreciated by 23% against the ZAR and 13% against the KRW during the first half of fiscal 2016, which negatively impacted our reported results;~~
	•	*~~Continued growth in financial inclusion services:~~*We continued to grow our financial inclusion services offerings during the first half of fiscal 2016, which has resulted in higher revenues and operating income, primarily from more sales of low-margin prepaid airtime and an increase in transaction fees. The significant growth in our lending book during December 2015 resulted in a substantial increase in the allowance for doubtful finance loans receivable, in accordance with our policy of providing for future doubtful finance loans receivable at the time that a loan is originated;
	•	*~~Launch of EPE and Smart Life:~~*During the first half of fiscal 2016 we launched our EPE and Smart Life offerings, which contributed to a marginal increase in revenue in ZAR, as well as an associated increase in establishment costs for our branch network;
	•	*~~Increased contribution by KSNET:~~*~~Our results were positively impacted by growth in our Korean operations; and~~
	•	*~~Tax impact of dividends from South African subsidiary:~~*Our income tax expense includes approximately $2.9 million related to the tax impact, including withholding taxes, resulting from distributions from our South African subsidiary which helped reduce the impact of a weakened ZAR on our reported cash balances. The conversion of a significant portion of our ZAR cash reserves to USD negatively impacted our interest income due the material difference between ZAR and USD deposit rates.

~~Consolidated overall results of operations~~

~~This discussion is based on the amounts which were prepared in accordance with U.S. GAAP.~~

~~The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR:~~

In U.S. Dollars
Table 7 (U.S. GAAP)
Six months ended December 31,
2015 2014 $ %
$ ’000 $ ’000 change
Revenue 304,754 310,572 (2% )
Cost of goods sold, IT processing, servicing and support 156,050 146,180 7%
Selling, general and administration 72,009 80,121 (10% )
Depreciation and amortization 20,701 20,331 2%
Operating income 55,994 63,940 (12% )
Interest income 7,939 7,677 3%
Interest expense 2,028 2,419 (16% )
Income before income tax expense 61,905 69,198 (11% )
Income tax expense 21,490 21,851 (2% )
Net income before earnings from equity-accounted investments 40,415 47,347 (15% )
Earnings from equity-accounted investments 576 168 243%
Net income 40,991 47,515 (14% )
Less net income attributable to non-controlling interest 1,313 1,052 25%
Net income attributable to us 39,678 46,463 (15% )

In South African Rand
Table 8 (U.S. GAAP)
Six months ended December 31,
2015 2014
ZAR ZAR ZAR %
’000 ’000 change
Revenue 4,111,315 3,406,601 21%
Cost of goods sold, IT processing, servicing and support 2,105,208 1,603,419 31%
Selling, general and administration 971,445 878,830 11%
Depreciation and amortization 279,269 223,006 25%
Operating income 755,393 701,346 8%
Interest income 107,102 84,207 27%
Interest expense 27,359 26,534 3%
Income before income tax expense 835,136 759,019 10%
Income tax expense 289,913 239,679 21%
Net income before earnings from equity-accounted investments 545,223 519,340 5%
Earnings from equity-accounted investments 7,771 1,843 322%
Net income 552,994 521,183 6%
Less net income attributable to non-controlling interest 17,713 11,539 54%
Net income attributable to us 535,281 509,644 5%

The increase in revenue in ZAR was primarily due to higher prepaid airtime sales, more low-margin transaction fees generated from cardholders using the South African National Payment System, more fees generated from our new EPE and ATM offerings, an increase in the number of SASSA UEPS/ EMV beneficiaries paid, a higher contribution from KSNET and more ad hoc terminal sales, offset by lower UEPS-loans fees.

The increase in cost of goods sold, IT processing, servicing and support was primarily due to higher expenses incurred from increased usage of the South African National Payment System by beneficiaries, expenses incurred to roll-out our new EPE and ATM offerings and expanding our branch network, and more prepaid airtime sold.

In ZAR, our selling, general and administration expense increased due to an increase in our allowance for doubtful finance loans receivable resulting from a commensurate increase in our lending book in the last lending cycle of calendar 2015, a higher staff complement resulting from our EPE roll-out, as well as increases in goods and services purchased from third parties.

Our operating income margin for first half of fiscal 2016 and 2015 was 18% and 21% respectively. We discuss the components of operating income margin under “—Results of operations by operating segment.” The decrease is primarily attributable to the higher cost of goods sold, IT processing, servicing and support referred to above and an increase in depreciation expenses.

In ZAR, depreciation and amortization were higher primarily as a result of an increase in depreciation related to more terminals used to provide transaction processing in Korea and the roll-out of EPE ATMs.

Interest on surplus cash increased to $7.9 million (ZAR 107.1 million) from $7.7 million (ZAR 84.2 million), due primarily to higher average daily ZAR cash balances, partially offset by the lower interest earned on the USD cash reserves that we converted from ZAR through distributions from our South African subsidiary.

~~Interest expense decreased to $2.0 million (ZAR 27.4 million) from $2.4 million (ZAR 26.5 million), due to a lower average long-term debt balance on our South Korean debt and a lower interest rate.~~

Fiscal 2016 tax expense was $21.5 million (ZAR 289.9 million) compared to $21.9 million (ZAR 239.7 million) in fiscal 2015. Our effective tax rate for the first half of fiscal 2016, was 34.7% and was higher than the South African statutory rate as a result of non-deductible expenses (including consulting and legal fees) and the tax impact, including withholding taxes, of approximately $2.9 million attributable to distributions from our South African subsidiary. Our effective tax rate for fiscal 2015, was 31.6% and was higher than the South African statutory rate as a result of non-deductible expenses (including consulting and legal fees, the interest expense related to our long-term South Korean borrowings and stock-based compensation charges).

~~Results of operations by operating segment~~

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

Table 9 In U.S. Dollars (U.S. GAAP)
Six months ended December 31,
2015 % of 2014 % of %
Operating Segment $ ’000 total $ ’000 total change
Revenue:
South African transaction processing 108,403 36% 118,679 38% (9% )
International transaction processing 82,065 27% 83,670 27% (2% )
Financial inclusion and applied technologies 133,046 44% 132,728 43% -
Subtotal: Operating segments 323,514 107% 335,077 108% (3% )
Intersegment eliminations (18,760 ) (7% ) (24,505 ) (8% ) (23% )
               Consolidated revenue 304,754 100% 310,572 100% (2% )
Operating income (loss):
South African transaction processing 25,591 46% 26,522 41% (4% )
International transaction processing 10,783 19% 13,092 20% (18% )
Financial inclusion and applied technologies 30,073 54% 35,434 55% (15% )
Subtotal: Operating segments 66,447 119% 75,048 116% (11% )
Corporate/Eliminations (10,453 ) (19% ) (11,108 ) (16% ) (6% )
               Consolidated operating income 55,994 100% 63,940 100% (12% )

Table 10 In South African Rand (U.S. GAAP)
Six months ended December 31,
2015 2014
ZAR % of ZAR % of %
Operating Segment ’000 total ’000 total change
Revenue:
South African transaction processing 1,462,422 36% 1,301,766 38% 12%
International transaction processing 1,107,106 27% 917,759 27% 21%
Financial inclusion and applied technologies 1,794,870 44% 1,455,867 43% 23%
Subtotal: Operating segments 4,364,398 107% 3,675,392 108% 19%
Intersegment eliminations (253,083 ) (7% ) (268,791 ) (8% ) (6% )
               Consolidated revenue 4,111,315 100% 3,406,601 100% 21%
Operating income (loss):
South African transaction processing 345,238 46% 290,915 41% 19%
International transaction processing 145,469 19% 143,604 20% 1%
Financial inclusion and applied technologies 405,703 54% 388,668 55% 4%
Subtotal: Operating segments 896,410 119% 823,187 116% 9%
Corporate/Eliminations (141,017 ) (19% ) (121,841 ) (16% ) 16%
               Consolidated operating income 755,393 100% 701,346 100% 8%

~~South African transaction processing~~

In ZAR, the increase in segment revenue was primarily due to more low-margin transaction fees generated from card holders using the South African National Payment System and an increase in the number of social welfare grants distributed, offset by fewer inter-segment transaction processing activities.

Our operating income margin for the first half of fiscal 2016 and 2015 was 24% and 22%, respectively, and has increased primarily due to an increase in the number of beneficiaries paid in fiscal 2016 and a modest increase in the margin of transaction fees generated from cardholders using the South African National Payment System.

~~International transaction-based activities~~

Revenue increased in constant currency primarily due to higher transaction volume at KSNET during the first half of fiscal 2016. Operating income during the first quarter of fiscal 2016 was higher due to increase in revenue contribution from KSNET and a positive contribution by XeoHealth, but was partially offset by an increase in depreciation expense and ongoing ZAZOO start-up costs in the UK and India. Operating income margin for the first half of fiscal 2016 and 2015 was 13% and 16%, respectively.

~~Financial inclusion and applied technologies~~

In ZAR, Financial inclusion and applied technologies revenue and operating income increased primarily due to higher prepaid airtime and other value-added services sales, more ad hoc terminal and card sales and, in ZAR, an increase in inter-segment revenues, offset by lower lending service fees. Operating income for the first half of fiscal 2016, was adversely impacted by the commensurate increase in our allowance for doubtful finance loans receivable and establishment costs for Smart Life and expansion of our branch network.

Operating income margin for the Financial inclusion and applied technologies segment was 23% and 27%, respectively, during the first half of fiscal 2016 and 2015, and has decreased primarily due to the increase in our allowance for doubtful finance loans receivable, the sale of more low-margin prepaid airtime and establishment costs for Smart Life and expansion of our branch network.

~~Corporate/ Eliminations~~

In USD, our corporate expenses have decreased primarily due to the impact of the stronger USD on goods and services procured in other currencies, primarily the ZAR, and lower amortization costs, partially offset by modest increases in USD denominated goods and services purchased from third parties and directors’ fees.

Liquidity and Capital Resources

At ~~December 31, 2015,~~September 30, 2016, our cash balances were ~~$101.4~~$205.3 million, which comprised mainly ZAR-denominated balances of ZAR ~~755.9 million~~1.2 billion ($~~48.6~~87.1 million), U.S. dollar-denominated balances of ~~$38.8~~$73.2 million, KRW-denominated balances of KRW ~~8.2~~35.8 billion ($~~7.0~~32.5 million) and other currency deposits, primarily euros, ~~and British pounds~~ of ~~$6.9~~$12.5 million. The decrease in our cash balances from June 30, ~~2015,~~2016, was primarily due to repurchase of shares of our common stock, unscheduled repayments of our Korean debt, the ~~strengthening~~investment in MobiKwik and capital expenditures, which was partially offset by the expansion of most of our core businesses, and the weakening of the U.S. dollar against our primary functional ~~currencies, repurchase of shares of our common stock, growth in our lending book, provisional tax payments and capital expenditures, offset by the expansion of all of our core businesses.~~currencies.

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

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 U.S. dollar denominated money market accounts. We have invested surplus cash in Korea in short-term investment accounts at Korean banking institutions.

Historically, we have financed most of our operations, research and development, working capital, capital expenditures and acquisitions through our internally generated cash. When considering whether to borrow under our financing facilities, we consider the cost of capital, cost of financing, opportunity cost of utilizing surplus cash and availability of tax efficient structures to moderate financing costs. For instance, in October 2016, we obtained loan facilities from RMB to fund a portion of our working capital requirements and a portion of the Blue Label investment. Refer to Note 18 to our unaudited condensed consolidated financial statements for the three months ended September 30, 2016 for additional information related to these loan facilities.

We have a short-term South African credit facility with Nedbank Limited of ZAR 400 million ($~~25.7~~28.8 million), which consists of (i) a primary amount of up to ZAR 200 million, which is immediately available, and (ii) a secondary amount of up to ZAR 200 million, which is not immediately available. The primary amounts ~~comprises~~comprise an overdraft facility of up to ZAR 50 million and indirect and derivative facilities of up to ZAR 150 million, which includes letters of guarantee, letters of credit and forward exchange contracts. As of ~~December 31, 2015,~~September 30, 2016, we have used none of the overdraft and ZAR ~~137.1~~131.1 million ($~~8.9~~9.5 million) of the indirect and derivative facilities to obtain foreign exchange contracts and to support guarantees issued by Nedbank to various third parties on our behalf. Refer to Note 12 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, ~~2015,~~2016, for additional information related to our short-term facilities.

As of ~~December 31, 2015,~~September 30, 2016, we had outstanding long-term debt of KRW ~~68.9~~30.0 billion (approximately ~~$58.6~~$27.2 million translated at exchange rates applicable as of ~~December 31, 2015)~~September 30, 2016) under credit facilities with a group of South Korean banks. The loans bear interest at the South Korean CD rate in effect from time to time ~~(1.64%~~(1.36% as of ~~December 31, 2015)~~September 30, 2016) plus a margin of 3.10% for one of the term loan facilities and the revolver. Scheduled remaining repayments of the term loans and loan under the revolving credit facility are as follows: April ~~2016,~~ 2017 and 2018 (KRW 10 billion each) and October 2018 (KRW 3010 billion plus all outstanding loans under our revolving credit facility). Refer to Note 13 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, ~~2015, for additional information related to our long-term borrowings~~2016 and Note 9 to our unaudited condensed consolidated financial statements for the three ~~and six~~ months ended ~~December 31, 2015,~~September 30, 2016, for additional information related to our long-term borrowings.

Cash flows from operating activities

~~Second~~First quarter ~~of fiscal 2016~~

Net cash provided by operating activities for the ~~second~~first quarter of fiscal ~~2016~~2017 was ~~$4.0~~$53.5 million (ZAR ~~57.1~~755.2 million) compared to ~~$14.6~~$28.1 million (ZAR ~~163.7~~364.2 million) for the ~~second~~first quarter of fiscal ~~2015.~~2016. Excluding the impact of interest received, interest paid under our Korean debt and taxes presented in the table below, in ZAR, the ~~decrease~~increase in cash from operating activities resulted from ~~the expansion of our lending book, offset by cash inflows from~~ improved trading activity during fiscal ~~2016.~~2017.

During the ~~second~~first quarter of fiscal 2017, we made an additional tax payment of $1.2 million (ZAR 16.7 million) related to our 2016 tax year in South Africa and received a refund of approximately $1.2 million (ZAR 16.6 million) related to taxes overpaid in previous tax years in South Africa. We paid dividend withholding taxes of $1.5 million (ZAR 21.3 million) during the first quarter of fiscal 2017. During the first quarter of fiscal 2016, we ~~paid South African~~made an additional tax payment of ~~$15.8~~$3.4 million (ZAR ~~238.1~~46.8 million) related to our ~~2016~~2015 tax year in South Africa. We paid dividend withholding taxes of ~~$1.8 million~~$0.8million (ZAR 25.0 million) during the second quarter of fiscal 2016. We also paid taxes totaling $2.6 million in other tax jurisdictions, primarily South Korea. During the second quarter of fiscal 2015, we paid South African tax of $18.8 million (ZAR 215.7 million) related to our 2015 tax year. We also paid taxes totaling $1.9 million in other tax jurisdictions, primarily South Korea.

~~Taxes paid during the second quarter of fiscal 2016 and 2015 were as follows:~~

Table 11 Three months ended December 31,
2015 2014 2015 2014
$ $ ZAR ZAR
‘000 ‘000 ‘000 ‘000
First provisional payments 15,841 18,775 238,127 215,677
Taxation paid related to prior years - - - 3
Taxation refunds received - (243 ) - (2,700 )
Dividend withholding taxation 1,821 - 25,000 -
Total South African taxes paid 17,662 18,532 263,127 212,980
Foreign taxes paid, primarily South Korea 2,594 1,861 37,524 20,645
Total tax paid 20,256 20,393 300,651 233,625

~~First half of fiscal 2016~~

Net cash provided by operating activities for the first half of fiscal 2016 was $32.1 million (ZAR 433.7 million) compared to $54.1 million (ZAR 593.6 million) for the first half of fiscal 2015. Excluding the impact of interest received, interest paid under our Korean debt and taxes presented in the table below, the decrease in cash from operating activities resulted from the expansion of our lending book, offset by cash inflows from improved trading activity during fiscal 2016.

During the first half of fiscal 2016, we paid South African tax of $15.8 million (ZAR 238.1 million) related to our 2016 tax year and $3.4 million (ZAR 46.8 million) related to prior tax years. We paid dividend withholding taxes of $2.6 million (ZAR 35.010 million) during the first ~~half~~quarter of fiscal 2016. We also paid taxes totaling $2.6 million in other tax jurisdictions, primarily South Korea. During the first half of fiscal 2015, we paid South African tax of $18.8 million (ZAR 215.7 million) related to our 2015 tax year and $2.4 million (ZAR 26.4 million) related to prior tax years. We also paid taxes totaling $4.6 million in other tax jurisdictions, primarily South Korea.

Taxes paid during the first ~~half~~quarter of fiscal ~~2016~~2017 and ~~2015~~2016 were as follows:

Table 12	Six months ended December 31,
Table 7									Three months ended September 30,
	2015		2014		2015		2014		2016		2015		2016		2015
	$		$		ZAR		ZAR		$		$		ZAR		ZAR
	‘000		‘000		‘000		‘000		‘000		‘000		‘000		‘000
First provisional payments	15,841		18,775		238,127		215,677
Taxation paid related to prior years	3,436		2,408		46,840		26,395		1,186		3,436		16,708		46,840
Taxation refunds received	(176	)	(277	)	(2,402	)	(3,065	)	(1,203	)	(176	)	(16,563	)	(2,402	)
Dividend withholding taxation	2,610		-		35,000		-		1,471		789		21,300		10,000
Total South African taxes paid	21,711		20,906		317,565		239,007		1,454		4,049		21,445		54,438
Foreign taxes paid: primarily Korea	2,611		4,647		37,756		50,815
Foreign taxes paid									49		17		691		232
Total tax paid	24,322		25,553		355,321		289,822		1,503		4,066		22,136		54,670

Cash flows from investing activities

~~Second~~First quarter ~~of fiscal 2016~~

Cash used in investing activities for the ~~second~~first quarter of fiscal 2017 includes capital expenditure of $3.4 million (ZAR 48.3 million), primarily for the acquisition of payment processing terminals in Korea. Our Korean capital expenditures have declined due to regulatory changes in South Korea which now prohibit the provision of payment equipment to the majority of merchants. We also paid approximately $15.3 million for a 7.5% interest in MobiKwik.

Cash used in investing activities for the first quarter of fiscal 2016 includes capital expenditure of ~~$9.9~~$10.7 million (ZAR ~~141.5~~138.8 million), primarily for the acquisition of payment processing terminals in Korea and the rollout of ATMs in South Africa.

Cash ~~used in investing~~flows from financing activities ~~for~~

First quarter

During the ~~second~~first quarter of fiscal ~~2015 includes capital expenditure~~2017, we paid approximately $31.6 million to repurchase 3,137,609 shares of ~~$9.1~~our common stock and also paid $0.5 million, ~~(ZAR 102.6 million), primarily for~~on July 1, 2016, related to settlement of amounts outstanding related to the ~~acquisition~~repurchases at the end of ~~payment processing terminals in Korea.~~

~~First half of fiscal 2016~~

Cash used in investing activities for the first half of fiscal 2016 includes capital expenditure of $20.6 million (ZAR 280.9 million), primarily for the acquisition of payment processing terminals in Korea and the rollout of ATMs in South Africa.

Cash used in investing activities for the first half of fiscal 2015 includes capital expenditure of $18.5 million (ZAR 203.5 million), primarily for the acquisition of payment processing terminals in Korea.June 2016. We also ~~received~~made a $26.7 million unscheduled repayment of our Korean debt and utilized approximately ~~$1.9~~$0.5 million ~~resulting from the sale~~ of ~~NUETS business.~~

~~Cash flows from financing activities~~

~~Second quarter~~our Korean facility to pay a portion of ~~fiscal 2016~~our quarterly interest due. In addition, we paid a dividend of approximately $0.6 million to certain of our non-controlling interests.

During the ~~second~~first quarter of fiscal 2016, we ~~acquired 749,213 shares~~received approximately $3.8 million from the exercise of ~~our common~~ stock ~~for approximately $11.2 million~~options and utilized approximately $0.7 million of our Korean borrowings to pay quarterly interest due.

During the second quarter of fiscal 2015, we made a scheduled Korean debt repayment of $14.1 million utilizing available cash reserves. We also utilized approximately $1.1 million of our Korean borrowings to pay quarterly interest due.

~~First half of fiscal 2016~~

During the first half of fiscal 2016, we received approximately $3.8 million from the exercise of stock options, acquired 749,213 shares of our common stock for approximately $11.2 million, and utilized approximately $1.4 million of our Korean borrowings to pay quarterly interest due.

During the first half of fiscal 2015, we made a scheduled Korean debt repayment of $14.1 million, repurchased BVI’s remaining 1,837,432 shares of our common stock for approximately $9.2 million and received $1.4 million from BVI for 12.5% of CPS’ issued and outstanding ordinary shares. We also utilized approximately $2.2 million of our Korean borrowings to pay quarterly interest due and received approximately $1.0 million from the exercise of stock options during the first quarter of fiscal 2015.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

3835

Capital Expenditures

We expect capital spending for the ~~third~~second quarter of fiscal ~~2016~~2017 to primarily include the acquisition of payment terminals for the expansion of our operations in Korea and expansion of ~~ATMs~~our ATM infrastructure and branch network in South Africa.

Our historical capital expenditures for the ~~second~~first quarter of fiscal ~~2016~~2017 and ~~2015~~2016 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 ~~December 31, 2015,~~September 30, 2016, of ~~$0.8~~$0.9 million related mainly to the procurement of ATMs. We expect to fund these expenditures through internally-generated funds.

Contingent Liabilities, Commitments and Contractual Obligations

The following table sets forth our contractual obligations as of ~~December 31, 2015:~~September 30, 2016:

Table 13	Payments due by Period, as of December 31, 2015 (in $ ’000s)
Table 8						Payments due by Period, as of September 30, 2016 (in $ ’000s)
		Less			More		Less			More
		than 1	1-3	3-5	than 5		than 1	1-3	3-5	than 5
	Total	year	years	years	years	Total	year	years	years	years
Long-term debt obligations (A)	62,250	2,972	20,552	38,726	-	29,264	10,396	18,868	-	-
Operating lease obligations	9,156	4,802	4,205	149	-	9,671	5,641	3,657	373	-
Purchase obligations	8,218	8,218	-	-	-	2,569	2,569	-	-	-
Capital commitments	803	803	-	-	-	931	931	-	-	-
Other long-term obligations (B)(C)	1,321	-	-	-	1,321	2,793	-	-	-	2,793
Total	81,748	16,795	24,757	38,875	1,321	45,228	19,537	22,525	373	2,793

	(A)	– Includes ~~$58.6~~$27.2 million of long-term debt and interest payable at the rate applicable on ~~December 31, 2015,~~September 30, 2016, under our Korean debt facility.

	(B)	– Includes policy holder liabilities of ~~$1.0~~$1.8 million related to our insurance business.

	(C)	– We have excluded cross-guarantees in the aggregate amount of ~~$8.8~~$9.2 million issued as of ~~December 31, 2015,~~September 30, 2016, to Nedbank to secure guarantees it has issued to third parties on our behalf as the amounts that will be settled in cash are not known and the timing of any payments is uncertain. We have also excluded contractual commitments to investment approximately $25 million in MobiKwik, subject to the achievement of certain contractual conditions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In addition to the tables below, see Note 5 to the unaudited condensed consolidated financial statements for a discussion of market risk.

The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of ~~December 31, 2015,~~September 30, 2016, as a result of changes in the Korean CD rate. The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in each of the Korean CD rate as of ~~December 31, 2015,~~September 30, 2016, are shown. The selected 1% hypothetical change does not reflect what could be considered the best or worst case scenarios.

As of December 31, 2015

As of September 30, 2016

Table 14

Estimated annual

Table 9

Estimated annual

expected interest

Annual

Hypothetical

charge after

Annual

Hypothetical

charge after

expected

change in

hypothetical change in

expected

change in

hypothetical change in

interest

Korean CD

Korean CD rate, as

interest

Korean CD

Korean CD rate, as

charge

rate, as

appropriate

charge

rate, as

appropriate

($ ’000)

appropriate

($ ’000)

appropriate

($ ’000)

Interest on Korean long-term debt

2,736

3,322

1,215

1,487

(1%

)

2,150

(1%

)

942

3936

The following table summarizes our exchange-traded equity securities with equity price risk as of December 31, 2015. The effects of a hypothetical 10% increase and a 10% decrease in market prices as of December 31, 2015, is also shown. The selected 10% hypothetical change does not reflect what could be considered the best or worst case scenarios.

As of December 31, 2015
Table 15
Hypothetical
Estimated fair Percentage
value after Increase
Fair hypothetical (Decrease) in
value Hypothetical change in price Shareholders’
($ ’000) price change ($ ’000) Equity
Exchange-traded equity securities 5,973 10% 6,570 0.13%
(10% ) 5,376 (0.13% )

Item 4. 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) promulgated under the Securities Exchange Act of 1934, as amended, as of ~~December 31, 2015.~~September 30, 2016. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the chief executive officer and the chief financial officer concluded that our disclosure controls and procedures were effective as of ~~December 31, 2015.~~September 30, 2016.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the fiscal quarter ended ~~December 31, 2015,~~September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4037

Part II. Other Information

Item 1. Legal Proceedings

~~U.S. securities litigation~~Litigation Regarding Legality of Debit Orders under Social Assistance Act Regulations

On ~~September 16, 2015,~~June 3, 2016, we filed for a declaratory order with the ~~U.S. District~~High Court of the Republic of South Africa Gauteng Division, Pretoria, to provide certainty to us, as well as other industry stakeholders, on the interpretation of the Assistance Act and recent Regulations promulgated in terms thereof (the “Regulations”). The Regulations limit direct deductions from social grants paid to beneficiaries. We interpret the meaning of the word “deductions” to be specific to the practice of deducting amounts, historically limited to life insurance premiums from grants, before the grants are paid to social welfare beneficiaries’ bank accounts, and are of the opinion that the legislature did not intend to curtail the right of beneficiaries to transact freely once the money is deposited into their bank accounts. The matter was heard by the Court on October 17 and 18, 2016, and it has reserved judgment. We cannot predict how or when the Court will rule on our declaratory order application.

Item 1A. Risk Factors

See “Item 1A RISK FACTORS” in Part I of our Annual Report on Form 10-K for the ~~Southern District~~fiscal year ended June 30, 2016, for a discussion of ~~New York dismissed~~risk factors relating to (i) our business, (ii) operating in South Africa and other foreign markets, (iii) government regulation, and (iv) our common stock. Except as set forth below, there have been no material changes from the ~~purported securities class action litigation originally filed~~risk factors previously disclosed in our Annual Report on ~~December 24, 2013, against~~Form 10-K for the fiscal year ended June 30, 2016.

We may not achieve the expected benefits from our strategic investment in Blue Label Telecoms.

As more fully described in Part I of this Quarterly Report under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments,” we recently announced our intention to acquire approximately 15% of the outstanding shares of Blue Label for a purchase price of ZAR 2.0 billion ($144.3 million, translated at exchange rates applicable as of September 30, 2016). Closing of the transaction is subject to approval by Blue Label’s shareholders. We expect that Blue Label will use the proceeds from our investment to help fund its acquisition of a 45% interest in Cell C Proprietary Limited, a leading mobile network operator in South Africa. Blue Label’s investment in Cell C is subject to a number of closing conditions. We believe that our investment in Blue Label and Blue Label’s investment in Cell C together should create business opportunities and synergies for us, both in South Africa and elsewhere.

We may not achieve some or all or the benefits that we expect to achieve from our ~~Chief Executive Officer~~investment in Blue Label. First, our investment in Blue Label is not conditioned on Blue Label’s investment in Cell C and, if the Blue Label/Cell C transaction is not completed, Blue Label’s share price may decline. Even if the Blue Label/Cell C transaction is completed, it is possible that Blue Label may not successfully execute its strategy with respect to its investment in Cell C. Furthermore, we may not be successful in cross-selling our ~~Chief Financial Officer. In its opinion,~~products and services to Blue Label’s and Cell C’s customers (and vice versa). Also, although we will be entitled to appoint one member of Blue Label’s board of directors, as a minority shareholder, our influence on Blue Label will be limited, and it is possible that Blue Label may take actions that are not in our interest. Finally, we expect to utilize the ~~District Court provided plaintiff with 30 days~~bulk of our South African cash reserves and a portion of the proceeds from new loan facilities to ~~file a second amended complaint. This deadline passed without plaintiff taking any action. Accordingly,~~fund the ~~case has been closed. The plaintiff did~~Blue Label investment. These lending facilities include customary financial covenants and undertakings that restrict us from freely operating our business, particularly in South Africa. To the extent that we do not ~~appeal~~achieve the expected benefits from our investment, our business, financial condition and ~~we consider this litigation over.~~results of operations may be materially and adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below presents information relating to purchases of shares of our common stock during the ~~second~~first quarter of fiscal ~~2016:~~2017:

Table 16 (c) (d)
Total number Maximum
of shares dollar value
purchased as of shares that
(b) part of may yet be
(a) Average price publicly purchased
Total number paid per announced under the
of shares share plans or plans or
Period purchased (US dollars) programs programs⁽¹⁾
October 2015 - - - 100,000,000
November 2015 500,000 15.43 500,000 92,286,565
December 2015 249,213 13.93 249,213 88,814,277
Total 749,213 749,213

Table 10

(c)

(d)

Total number

Maximum

of shares

dollar value

purchased as

of shares that

(b)

part of

may yet be

(a)

Average price

publicly

purchased

Total number

paid per

announced

under the

of shares

plans or

Period

purchased

(US dollars)

programs

programs⁽¹⁾

July 2016

853,464

10.04

853,464

75,508,538

August 2016

2,026,638

10.14

2,026,638

54,952,474

September 2016

257,507

9.65

257,507

52,468,000

Total

3,137,609

⁽¹⁾ On ~~August 21, 2013,~~February 3, 2016, our Board of Directors approved ~~this~~the replenishment of our authorization to repurchase back up to an aggregate of ~~up to~~ $100 ~~million.~~million of common stock. The authorization has no expiration date.

Item 6. Exhibits

The following exhibits are filed as part of this Form 10-Q:

Incorporated by Reference Herein

Exhibit

Included

No.

Description of Exhibit

Herewith

Form

Exhibit

Filing Date

10.30*

~~Amended and Restated Stock Incentive Plan of Net 1 UEPS Technologies, Inc.~~

~~14A~~

~~September 25, 2015~~

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act

Certification pursuant to 18 USC Section 1350

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

* Indicates a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~February 4,~~November 3, 2016.

NET 1 UEPS TECHNOLOGIES, INC.

By: /s/ ~~Dr.~~ Serge C.P. Belamant

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

By: /s/ Herman ~~Gideon~~G. Kotzé

Herman ~~Gideon~~G. Kotzé
Chief Financial Officer, Treasurer and Secretary, Director

4239

		As of December 31, 2015							As of June 30, 2015
		Gross					Net		Gross					Net
		carrying		Accumulated			carrying		carrying		Accumulated			carrying
		value		amortization			value		value		amortization			value
Finite-lived intangible assets:
Customer relationships	$	82,181	$	(45,631	)	$	36,550	$	88,109	$	(45,312	)	$	42,797
Software and unpatented technology		27,778		(27,778	)		-		29,964		(28,323	)		1,641
FTS patent		2,465		(2,465	)		-		3,119		(3,119	)		-
Exclusive licenses		4,506		(4,506	)		-		4,506		(4,506	)		-
Trademarks		5,450		(3,314	)		2,136		6,094		(3,408	)		2,686
Total finite-lived intangible assets	$	122,380	$	(83,694	)	$	38,686	$	131,792	$	(84,668	)	$	47,124

		Reinsurance			Insurance
		assets (1)			contracts (2)
Balance as of June 30, 2015	$	183		$	(567	)
Increase in policy holder benefits under insurance contracts		15			(131	)
Foreign currency adjustment⁽³⁾		(38	)		119
Balance as of December 31, 2015	$	160		$	(579	)

		Reinsurance			Insurance
		assets⁽¹⁾			contracts⁽²⁾
Balance as of June 30, 2016	$	171		$	(1,078	)
Increase in policy holder benefits under insurance contracts		231			(754	)
Claims and policyholders’ benefits under insurance contracts		(229	)		682
Foreign currency adjustment⁽³⁾		12			(71	)
Balance as of September 30, 2016	$	185		$	(1,221	)

	⁽¹⁾	Included in other long-term assets.
	⁽²⁾	Included in other long-term liabilities.
	⁽³⁾	Represents the effects of the fluctuations between the ZAR against the U.S. dollar.

					Investment
		Assets (1)			contracts (2)
Balance as of June 30, 2015	$	593		$	(593	)
Foreign currency adjustment⁽³⁾		(124	)		124
Balance as of December 31, 2015	$	469		$	(469	)

		Six months ended
		December 31, 2015
					Accumulated
					Net
					unrealized
		Accumulated			income on
		Foreign			asset
		currency			available for
		translation			sale, net of
		reserve			tax		Total

Balance as of June 30, 2015	$	(140,221	)	$	1,040	$	(139,181	)
Movement in foreign currency translation reserve		(60,193	)		-		(60,193	)
Unrealized gain on asset available for sale, net of tax of $11		-			50		50
Balance as of December 31, 2015	$	(200,414	)	$	1,090	$	(199,324	)

Table 11	Three months ended December 31,
	2015	2014		2015	2014
	$	$		ZAR	ZAR
	‘000	‘000		‘000	‘000
First provisional payments	15,841	18,775		238,127	215,677
Taxation paid related to prior years	-	-		-	3
Taxation refunds received	-	(243	)	-	(2,700	)
Dividend withholding taxation	1,821	-		25,000	-
Total South African taxes paid	17,662	18,532		263,127	212,980
Foreign taxes paid, primarily South Korea	2,594	1,861		37,524	20,645
Total tax paid	20,256	20,393		300,651	233,625