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Use of Proceeds We will receive net proceeds from this offering of approximately US$302.7 million, or approximately US$349.3 million if the underwriters exercise their option to purchase additional ADSs in full, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds we will receive from this offering for the following purposes: • approximately US$52.0 million to open new stores; • approximately US$27.0 million to set up two new distribution centers; and • approximately US$11.0 million to upgrade our information management and inventory control system. We may also use the remaining portion of the net proceeds we receive from this offering for other general corporate purposes and for potential acquisitions of retail drugstore chains or independently operated drugstores in cases where they complement our existing store network or help us establish a presence in new markets. In particular, we plan to grow in cities such as Beijing and Shanghai through acquisitions, where local regulations prohibit the opening of new drugstores within certain distances of an existing drugstore, and in cities that are close to our distribution centers in order to gain operational efficiencies in distribution and leverage our information technology infrastructure over a broader store base. We are not currently engaged in any discussions or negotiations for any acquisitions. The foregoing use of our net proceeds from this offering represents our current intentions based upon our present plans and business condition. The amounts and timing of any expenditure will vary depending on the amount of cash generated by our operations, competitive developments and the rate of growth, if any, of our business. Accordingly, our management will have significant discretion in the allocation of the net proceeds we will receive from this offering. Depending on future events and other changes in the business climate, we may determine at a later time to use the net proceeds for different purposes. Pending their use, we intend to place our net proceeds in short-term bank deposits. In utilizing the proceeds from this offering, as an offshore holding company, we are permitted, under PRC laws and regulations, to provide funding to our consolidated PRC entities only through loans or capital contributions and to other entities only through loans. Subject to satisfaction of applicable government registration and approval requirements, we may extend inter-company loans to our consolidated PRC entities or make additional capital contributions to our consolidated PRC entities to fund their capital expenditures or working capital. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all.