Operating Margin

The Company’s operating margin for the fourth quarter was 43.4%, as compared to 39.2% in the fourth quarter of 2009. Operating margin for the full year 2010 was 41.4%, as compared to an operating margin of 32.1% for the full year 2009. The year-over-year operating margin improvements for the fourth quarter of 2010 and fiscal year 2010 were primarily due to the fact that the increase in net revenues outpaced that in the operating expenses, especially general and administrative (G&A) expenses, due to the efficiency resulted from economies of scale.

Operating cost and expenses for the fourth quarter of 2010, including cost of revenues, selling expenses, G&A expenses and other operating income, were US$7.9 million, a year-over-year increase of 139.1% from US$3.3 million in the fourth quarter of 2009. Operating cost and expenses for the full year 2010 were US$22.2 million, up 124.4% from US$9.9 million in 2009.

Cost of revenues for the fourth quarter of 2010 totaled US$2.6 million, a year-over-year increase of 165.7% from US$1.0 million in the fourth quarter of 2009. Cost of revenues for the full year 2010 totaled US$6.6 million, representing a 161.9% increase from US$2.5 million for the full year 2009. The year-over-year increases in the cost of revenues for the fourth quarter of 2010 and fiscal year 2010 were primarily due to an increase in compensation expenses paid to relationship managers.

Selling expenses for the fourth quarter of 2010 were US$3.5 million, a year-over-year increase of 213.1% from US$1.1 million in the fourth quarter of 2009. Selling expenses as a percentage of net revenues for the quarter were 25.2%, representing an increase from 20.7% in the fourth quarter of 2009. Selling expenses were US$8.5 million in the full year 2010, an increase from US$3.2 million in the full year 2009. The year-over-year increases in selling expenses for the fourth quarter of 2010 and fiscal year 2010 were primarily due to increases in personnel expenses, client service expenses and rental expenses as a result of the Company’s network expansion.

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