Under this agreement Nepstar, the largest drugstore chain in China, will install TransCard POS equipment in all its Shenzhen outlets to enable customers to make purchases with, and recharge, their TransCards. The TransCard service is said to add a unique convenience to a customer’s shopping experience at Nepstar stores in Shenzhen, and has the potential to generate more sales for these outlets.

TransCard is similar to the Oyster card used in London and the Octopus card used in Hong Kong, is a rechargeable contact-less stored value smart card used to transfer electronic payments via online or offline systems in Shenzhen. At present, it is mainly used by cardholders to pay for public transportation in Shenzhen.

TransCard was launched in Shenzhen in April 2006, with the support of the Shenzhen municipal government. By the end of 2007, over two million cards had been sold, driving 1.8 million transactions per day. Currently, one in every five residents in Shenzhen holds a TransCard. Shenzhen Tong TransCard, the issuer and operator of the TransCard service, estimates that an additional four million cards will be sold in 2008.

Nepstar is the operator of one the largest drugstore chains in Shenzhen, with 311 outlets as of December 31, 2007. The Company planned to begin the installation of TransCard POS readers in its outlets in May and expects to equip 100 stores with the TransCard POS readers by the end of June. All of Nepstar’s Shenzhen stores are expected to provide TransCard service by the end of September 2008.

Jiannong Qian, CEO of China Nepstar, said, “The Shenzhen TransCard program is another example of our dedication to offering customers the best possible service and convenience. Our ability to leverage China Nepstar’s broad network of stores and develop partnerships with key public vendors, such as Shenzhen Tong TransCard, to increase traffic flow to our stores is a testament to the brand strength we have built and our constant drive for innovation. We are seeking similar opportunities with municipal transit authorities in other cities in China where we have already established an extensive presence. Our goal is to fully integrate China Nepstar

into the daily life of urban residents throughout China.”

Ian Wade, co-CEO of China Nepstar, said, “This acquisition represents the initial step for China Nepstar to enter into the Beijing market, which we believe to have significant development potential. This is also our first chance to showcase Beijing customers our wide product offerings and advanced store management. We plan to continue to expand in Beijing through gradual ramp-up in new store openings and high quality acquisitions”.

The deal, which gives China Nepstar its first retail presence in Beijing, is expected to be completed in August.