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Dear Shareholder,

National HealthCare Corporation has the distinct privilege


of caring for more than 10,000 patients every day
who are part of what has been called The Greatest
Generation. In the first few pages of this annual
report, we are honored to present just a few of these
distinguished ladies and gentlemen and to share their
stories of one of the most challenging periods in
American history. We owe a deep dept of gratitude to
this generation for their dedication and sacrifice, which
secured our freedom and preserved democracy.
On behalf of more than 10,000 partners who serve our
patients and residents every day, I want to thank you, our
shareholder, for your trust and confidence in NHC. Our
founder, Dr. Carl Adams, was a part of this Greatest
Generation, and his vision lives on in our commitment
to providing care and services to our patients.

Our occupancy and census mix continue to be strong at


our health care centers. In 2007 our occupancy was 92.5%.
Private pay and Medicare revenue accounted for 68% of
our total revenue in 2007 compared to 67% in 2006.
Dividends
NHC increased its dividend on common stock by 17%
in the second quarter of 2007. The current quarterly
dividend is $0.21 per common share. We will continue
to evaluate common dividends for appropriateness. In
addition, shareholders of NHCs Series A convertible
preferred stock receive a dividend at the rate of $0.80
per share per year.

As a provider of senior care services, we have many


opportunities. From fighting for adequate reimbursement,
as determined by federal and state agencies, to
combating the epidemic of frivolous lawsuits that plague
our industry, we must constantly advocate for those
who are entrusted to our care.
As our mission statement reflects, we are determined to
be a leader in customer and investor satisfaction. Our
occupancy levels, customer and partner satisfaction
scores, quality of care indicators and earnings per share
are among the best in the long term care industry. I know
that you, like me, are proud to be a part of this great
company providing service to a Great generation.

Future
In 2008 NHC has already completed acquisition of
Holston Health and Rehabilitation Center in Knoxville,
Tennessee, and has been engaged to manage McKendree
Village, Inc., in Hermitage, Tennessee. We have started
construction of a 60-bed addition to NHC North
Augusta in North Augusta, South Carolina, and plan to
start construction on a new 120-bed health care center
in South Carolina later this year. We continue to evaluate
expansion opportunities in all areas of senior care and also
expect to break ground on a new assisted living/dementia
care center in 2008.

Earnings and Financial Position


Net income for the year ended December 31, 2007,
was $45,449,000 or $3.47 per share basic compared
to $36,740,000 or $2.99 per share basic for the year
ended December 31, 2006. This is an an increase of
23.7% and 16.0%, respectively. Revenues in 2007 were
$598,034,000 compared to $562,958,000 in 2006.

Thank you for your continued trust and investment in


NHC. We will remain steadfast in our commitment to you,
our investors, to our partners and most importantly to
the patients we care for each and every day.

Highlights in 2007 include the merger with National


Health Realty, Inc., which increased shareholder equity by
$170,555,000, and the completion of a $75,000,000
Revolving Credit Agreement that will help fund further
growth strategies. Our net income for 2007 (includes
net of applicable income taxes) $6,665,000 of gains on
the sale of assets, $6,000,000 recognition of deferred
gain from National and an $8,143,000 recovery of
notes receivable.

Sincerely,

Robert G. Adams
President