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It handles EPUB and will display PDF (but not in an entirely satisfactory way). If the PDF is formatted for a large page it won't reflow into the screen size.
But for a cheap bookreader and a good clear screen it is excellent. I would hate to be without mine. It's not the wi-fi version but I don't miss this feature. It has made a big difference to my reading for a university course as I can read anywhere, anytime without having to drag a ton of books around with me.
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