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Business Description We are the largest retail drugstore chain in China based on the number of directly operated stores. As of September 30, 2007, our store network was comprised of 1,791 directly operated drugstores located in 62 cities in China, and we believe that we have the leading market position in a number of the most developed cities in China, including Shenzhen, Guangzhou, Dalian, Hangzhou, Ningbo, Suzhou and Kunming, in terms of store count. According to the China Drugstore Magazine, we had the highest revenue among all directly operated retail drugstore chains in China in 2004, 2005 and 2006. As the drugstore industry in China is highly fragmented, we estimate that our share of the retail market of pharmaceutical products in China was less than 0.5% of the total transaction value in each of these three years. We provide our customers with high-quality, professional and convenient pharmacy services and a wide variety of other merchandise, including over-the-counter, or OTC, drugs, nutritional supplements, herbal products, personal care products, family care products, as well as convenience products including consumable, seasonal and promotional items. Unlike most other drugstores and retail drugstore chains in China, we also offer products under our own brand names, which we refer to as private label products. We believe our private label product offering distinguishes our company from our key competitors. We launched our first private label product in September 2005 and currently offer 1,108 private label products. Sales of our private label products accounted for 17.5% and 17.6% of our revenue and 34.6% and 31.2% of our gross profit in 2006 and the six months ended June 30, 2007, respectively. Since our inception in 1995, we have rapidly expanded our operations, primarily through organic growth. The numbers of our directly operated drugstores increased from 668 as of December 31, 2004 to 1,115 as of December 31, 2005 and to 1,446 as of December 31, 2006. Our stores are generally located in well established residential communities and prime retail locations in major cities in China's coastal and adjoining provinces. As of September 30, 2007, we had 1,791 directly operated drugstores. Our revenue increased from RMB842.9 million in 2004 to RMB1,313.2 million in 2005 and to RMB1,732.4 million (US$227.6 million) in 2006, representing a compound annual growth rate, or CAGR, of 43.4% from 2004 to 2006. In the six months ended June 30, 2007, our revenue amounted to RMB946.3 million (US$124.3 million), representing an increase of 18.4% over the same period in 2006. --- Our principal executive offices are located at 6th Floor, Tower B, Xinnengyuan Building, Nanhai Road, Nanshan District, Shenzhen, Guangdong Province 518054, People’s Republic of China. Our telephone number at this address is (86) 755-2643-3366 and our fax number is (86) 755-2640-1549. Investor inquiries should be directed to us at the address and telephone number of our principal executive offices set forth above. Our website is www.nepstar.cn.