Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)

Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See "Forward-Looking Information." In evaluating our business, you should carefully consider the information provided under the caption "Item 3. Key Information-D. Risk Factors" in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

We are a global high-growth value retailer offering a variety of trendy lifestyle products featuring distinctive IP designs. We have built our flagship brand "MINISO" as a globally recognized retail brand and established a store network worldwide. Observing an emerging pop toy culture, we introduced the "TOP TOY" brand with the goal of entering into the pop toy market and it has established a fully integrated platform across the pop toy value chain. In 2025, we launched an average of around 1,600 SKUs under the "MINISO" brand per month, and offered consumers a wide selection of SKUs, the vast majority of which are under the "MINISO" brand. Our MINISO product offerings are organized across three core pillars: lifestyle, beauty and toys. Under the TOP TOY brand, we offered around 17,000 SKUs as of December 31, 2025 across major pop toy categories that include model figures, 3D building blocks, vinyl plush toys and others. Our highly effective approach to retail, which mainly encompasses dynamic product development, an efficient supply chain and deep operational know-how backed by digitalization, is critical to the success and forms the backbone of our business.

We have three reportable segments: (i) MINISO brand - Chinese Mainland, including mainly the design, purchasing and sale of lifestyle products,（ii）Miniso brand - Overseas, including mainly the design, purchasing and sale of lifestyle products, and (iii) TOP TOY brand, including mainly the design, purchasing and sale of pop toys.

Our revenue was RMB11,473.2 million in the fiscal year ended 2023, RMB5,266.9 million and RMB7,632.5 million in the six months ended December 31, 2022 and 2023, and RMB13,838.8 million, RMB16,994.0 million and RMB21,443.8 million (US$3,066.4 million) in the years ended December 31, 2023, 2024 and 2025, respectively. Our gross profit was RMB4,443.1 million in the fiscal year ended 2023, RMB1,985.7 million and RMB3,241.0 million in the six months ended December 31, 2022 and 2023, and RMB5,698.4 million, RMB7,637.1 million and RMB9,648.1 million (US$1,379.7 million) in the years ended December 31, 2023, 2024 and 2025, respectively. We recorded a profit of RMB1,781.8 million in the fiscal year ended June 30, 2023, RMB763.9 million and RMB1,256.1 million in the six months ended December 31, 2022 and 2023, and RMB2,274.0 million, RMB2,635.4 million and RMB1,209.8 million (US$173.0 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

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Major Factors Affecting Our Results of Operations

Our business and results of operations are affected by a number of general factors that impact the overall consumption and market for lifestyle and pop toy products, including overall economic trends and their impact on consumer behavior, production and procurement costs and the competitive environment. Unfavorable changes in any of these general conditions could materially and adversely affect our results of operations.

While our business is influenced by these general factors, our results of operations are more directly affected by the following company-specific factors.

Store network expansion in Chinese Mainland

Our ability to expand our store network in Chinese mainland is one of the key drivers of our revenue growth. Our revenue generated from China was RMB7,650.8 million in the fiscal year ended June 30, 2023, RMB3,360.2 million and RMB4,843.1 million in the six months ended December 31, 2022 and 2023, and RMB9,133.8 million, RMB10,312.1 million and RMB12,577.5 million (US$1,798.6 million) in the years ended December 31, 2023, 2024 and 2025, respectively. As of December 31, 2025, apart from 18 directly operated MINISO stores and 35 directly operated TOP TOY stores, substantially all of our MINISO and TOP TOY stores in Chinese Mainland were operated under our Retail Partner model. Our store network expansion in Chinses mainland is primarily sustained by our continued success in encouraging our retail partners to open more MINISO stores at optimal locations. As a result, the number of MINISO stores in Chinese Mainland increased from over 3,600 as of June 30, 2023 to over 3,900 as of December 31, 2023, to 4,386 as of December 31, 2024, and further to 4,568 as of December 31, 2025. Additionally, the fast growth of our new brand TOP TOY since December 2020 has also contributed to the expansion of our store network in China. As of December 31, 2025, we had opened 304 TOP TOY stores in Chinese Mainland.

Globalization strategy

Our results of operations are affected by our ability to execute our globalization strategy, which primarily involves expanding into new international markets and growing our store network overseas. Our revenue from markets outside of Chinese Mainland was RMB3,822.4 million in the fiscal year ended June 30, 2023, RMB1,906.7 million and RMB2,789.3 million in the six months ended December 31, 2022 and 2023, and RMB4,705.0 million, RMB6,681.9 million and RMB8,866.4 million (US$1,267.9 million) in the years ended December 31, 2023, 2024 and 2025, accounting for 33.3%, 36.2%, 36.5%, 34.0%, 39.3% and 41.3%, of our total revenue for the same periods, respectively. In the majority of the international markets, we expand our store network by using the distributor model. Depending on factors such as market environment and local regulations, we also utilize the Retail Partner model for international store network expansion in an asset-light manner and the direct operation model. The significant revenue contribution from international markets demonstrates the appeal of our "MINISO" brand across geographical and cultural boundaries. The number of MINISO stores outside of Chinese Mainland increased from approximately 2,200 as of June 30, 2023, to approximately 2,500 as of December 31, 2023, to over 3,100 as of December 31, 2024 and further to around 3,600 as of December 31, 2025.

Revenue per MINISO store

Revenue per MINISO store is one of the metrics that affect our results of operation. Our revenue per MINISO store, which is calculated by dividing (a) revenue of MINISO brand by (b) the average number of stores at the beginning and the end of the relevant period, has fluctuated significantly historically, and may continue to fluctuate in future periods. As a global high-growth value retailer offering a variety of trendy lifestyle products featuring distinctive IP designs, we expect to continue to face intense competition in a variety of the markets we operate. Our ability to take a disciplined approach in store network expansion while we keep penetrating into more lower-tier cities in Chinese mainland and expand internationally using a distributor, self-operating or retail partner model, and to develop efficient supply chains and deepen customer engagement in these new regions, will affect our revenue per MINISO store and our results of operations. Our revenue per MINISO store was RMB1.2 million in the six months ended December 31, 2023, and RMB2.2 million, RMB2.3 million and RMB2.5 million (US$0.4 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Change in fiscal year-over-year same-store GMV

While we continue to expand our store network, our number of stores continues to grow and our results of operations are also affected by same-store GMV, which refers to GMV generated by those stores that opened prior to the beginning of the comparative periods and remained open as of the end of the comparative periods and closed for less than 30 days during both comparative periods, has fluctuated significantly historically, and may continue to fluctuate in future periods. As a global high-growth value retailer offering a variety of trendy lifestyle products featuring distinctive IP designs, we expect to continue to face intense competition in a variety of the markets we operate. Our ability to take a disciplined approach in store network improvement, to provide products that are favored by our customers, as well as to provide efficient in-store operation and satisfying customers experience, will affect our same-store GMV and our results of operations.

The following table breaks down our same-store GMV growth/(decline) by MINISO brand and TOP TOY brand, as well as geographic regions of MINISO brand for the periods presented:

Note:

Product value propositions

We primarily generate revenues from sales of high-quality and affordable lifestyle and pop toy products that are responsive to the evolving tastes and needs of consumers. Our product managers identify market trends and collaborate closely with our designers and suppliers to develop and roll out products that balance appeal, quality and price. Furthermore, our co-branding collaborations with IP licensors owning popular brands unlock new product design possibilities and elevate our brand awareness. Further, we identify and cultivate new IPs and co-develop them with independent design artists into popular IP products, mostly under our TOP TOY brand. As a result of our distinctive approach to product design and development, our flagship brand "MINISO" are organized across three core pillars of products, with an average of around 1,600 SKUs launched per month in the year ended December 31, 2025. Under the fast-growing TOP TOY brand, we offered around 17,000 SKUs as of December 31, 2025 across major pop toy categories such as model figures, 3D building blocks, vinyl plush toys and others.

Efficient supply chain

Our ability to manage an integrated and seamless supply chain significantly impacts the results of our operations, as cost-effective procurement sets the foundation for our competitive product pricing, and efficient planning affects our speed to market. Leveraging China's large supply chain in the lifestyle product sector, we source from qualified suppliers who are able to meet our demands. As part of our efforts to optimize supply chain, we build mutually beneficial relationships with our suppliers by procuring products in large volumes, being punctual with our payments to them in the ordinary course of business and guiding them towards better production efficiency and enhanced cost control. In addition, we digitally integrate suppliers through our supply chain management system to better coordinate with them and streamline the supply chain process for enhanced productivity. These strengths of our supply chain have led to sustained advantages in both procurement cost and efficiency, which allows us to price competitively.

Key Components of Our Results of Operations

Revenue

We primarily derive our revenue from sales of lifestyle and pop toy products through sales to Retail Partners, sales to offline distributors, retail sales in directly operated stores and through online channels. Other sources of revenue mainly include license fees from Retail Partners and distributors, and sales-based royalties and sales-based management and consultation service fees income from Retail Partners. The following table sets forth the components of our revenue by amounts and percentages of our total revenue broken down by revenue source for the periods presented:

The following table breaks down our revenue by geographic region for the periods presented:

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Cost of sales

Our cost of sales mainly consists of cost of inventories. Cost of inventories accounted for 97.6% of our total cost of sales for the fiscal year ended June 30, 2023, 97.4% and 97.8% for the six months ended December 31, 2022 and 2023, and 97.7%, 97.2% and 97.8% for the years ended December 31, 2023, 2024 and 2025, respectively. Cost of inventories comprises carrying amount of inventories sold and inventory write-down. Other than cost of inventories, cost of sales also include logistics expenses and depreciation and amortization expense. Logistics expenses mainly represent shipping expenses for the products sold to customers through e-commerce channels. Our cost of sales was RMB7,030.2 million in the fiscal year ended June 30, 2023, RMB3,281.2 million and RMB4,391.4 million in the six months ended December 31, 2022 and 2023, and RMB8,140.4 million, RMB9,357.0 million and RMB11,795.7 million (US$1,686.8 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Gross profit and margin

The following table sets forth our gross profit and gross margin for the periods presented:

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Other income

Other income consists of tax refund, government grants and income from depositary bank. Government grants mainly represented unconditional cash awards granted by the local authorities in China. There is no assurance that we will continue to receive any government grants in the future.

Selling and distribution expenses

Selling and distribution expenses primarily consist of (i) payroll and employee benefits, which cover salaries, wages and bonus, contributions to social security contribution plan, welfare expenses, and equity-settled share-based payment expenses, (ii) rental and related expenses, (iii) depreciation and amortization expenses, (iv) promotion and advertising expenses, (v) licensing expenses, (vi) logistics expenses, and (vii) travelling expenses. Our selling and distribution expenses were RMB1,716.1 million in the fiscal year ended June 30, 2023, RMB798.1 million and RMB1,363.1 million in the six months ended December 31, 2022 and 2023, and RMB2,281.1 million, and RMB3,519.5 million and RMB5,265.8 million (US$753.0 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

General and Administrative Expenses

General and administrative expenses primarily consist of (i) payroll and employee benefits, which cover salaries, wages and bonus, contributions to social security contribution plan, welfare expenses, and equity-settled share-based payment expenses, (ii) depreciation and amortization expenses, (iii) travelling expenses, (iv) IT service fees, and (v) professional service fees. Our general and administrative expenses were RMB633.6 million in the fiscal year ended June 30, 2023, RMB313.9 million and RMB357.7 million in the six months ended December 31, 2022 and 2023, and RMB677.4 million, RMB931.7 million and RMB1,225.4 million (US$175.2 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Other net income

Other net income mainly consists of (i) net foreign exchange gain/(loss), (ii) investment income from other investments, and (iii) net change in fair value of other investments. Our other net income were RMB114.1 million in the fiscal year ended June 30, 2023, RMB72.9 million and RMB21.1 million in the six months ended December 31, 2022 and 2023, and RMB62.4 million, RMB114.7 million and RMB195.6 million (US$28.0 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Net finance income/(costs)

Net finance income or costs mainly consist of finance income that mainly include interest income, and finance costs that mainly include (i) interest on loans and borrowings, (ii) interest on lease liabilities, and (iii) interest on the 2032 Securities. Our net finance income were RMB110.6 million in the fiscal year ended June 30, 2023, RMB48.3 million and RMB98.8 million in the six months ended December 31, 2022 and 2023, RMB161.0 million and RMB25.8 million in the years ended December 31, 2023 and 2024, respectively. Our net finance costs were RMB326.5 million (US$46.7 million) in the year ended December 31, 2025

Share of profit/(loss) of equity-accounted investees, net of tax

Share of profit of equity-accounted investees, net of tax were RMB268.0 thousand in the six months ended December 31 2023, and RMB268.0 thousand, RMB6.0 million in the years ended December 31, 2023 and 2024. Share of loss of equity-accounted investees, net of tax was RMB834.5 million (US$119.3 million) in the year ended December 31, 2025.

Other expenses

Other expenses were mainly attributable to loss from fair value change of derivatives under mark-to-market impact and issuance cost of derivatives. Our other expenses were RMB70.3 million (US$10.1 million) in the year ended December 31, 2025.

Changes in fair value of redemption liabilities

Changes in fair value of redemption liabilities were RMB158.5 million (US$22.7 million) in the year ended December 31, 2025, which was a loss arising from preferred shares issued by TOP TOY in connection with its strategic financing in 2025.

Taxation

Our income tax expense represented a significant portion of our profit for the year/period for the fiscal year ended June 30, 2023, the six months ended December 31, 2022 and 2023 and the years ended December 31, 2023, 2024 and 2025, primarily because of the occurrence of non-deductible losses at the consolidation level in these periods. The effect of unused tax losses not recognized was RMB44.9 million and RMB23.0 million in the fiscal year ended June 30, 2023 and in the six months ended December 31, 2022, respectively, and the effect of utilization of tax losses previously not recognized was RMB8.0 million in the six months ended December 31, 2023. The effect of unused tax losses not recognized was RMB7.9 million and the effect of unused tax losses being utilized was RMB56.3 million and RMB16.5 million (US$2.4 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation.

British Virgin Islands

Our BVI subsidiaries and all dividends, interest, rents, royalties, compensation and other amounts paid by our BVI subsidiaries to persons who are not resident in the BVI and any capital gains realized with respect to any shares, debt obligations, or other securities of our BVI subsidiaries by persons who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.

Hong Kong

Under the current Hong Kong Inland Revenue Ordinance, our Hong Kong subsidiaries generally are subject to Hong Kong Profits Tax at the rate of 16.5% on their taxable income generated from the operations in Hong Kong.

Chinese Mainland

Under the Enterprise Income Tax Law, our subsidiaries established in Chinese Mainland are generally subject to a unified statutory enterprise income tax rate of 25%. One subsidiary of ours established in Hengqin New Area of Zhuhai and another established in Guangzhou Nansha district, both pilot free trade zones in China, met the criteria for a preferential income tax rate of 15%. Furthermore, enterprises that are recognized as high and new technology enterprises in accordance with the Administrative Measures for the Determination of High and New Tech Enterprises issued by the Ministry of Science, the Ministry of Finance and the State Administration of Taxation are entitled to enjoy a preferential income tax rate of 15%. A subsidiary of ours established in Guangzhou obtained the High and New Technology Enterprise qualification and is thus eligible for high and new technology enterprise preferential income tax rate of 15% for the three years ending December 31, 2027. This subsidiary can reapply for such qualification as a High and New Technology Enterprise after the current certificate expires.

United States

Under United States Internal Revenue Code, our subsidiaries established in the United States are subject to a Federal corporate income tax rate of 21% and various state income taxes.

Indonesia

Our subsidiary established in Indonesia is subject to a corporate income tax rate of 22%.

India

Under the Income Tax Act 1961 enacted in India, our subsidiary established in India is subject to a corporate income tax rate of 26% for fiscal year ended March 31, 2022 and 25.17% from fiscal year ended March 31, 2023 and onwards.

Canada

Under the Canadian federal and provincial tax rules, our subsidiaries established in Canada are subject to the combined Canadian federal and provincial statutory income tax rates ranging from 23% to 31% depending on the location of the operation.

Singapore

Under the Income Tax Act enacted in Singapore, the subsidiaries established in Singapore are subject to a tax rate of 17%.

Vietnam

Under the Law on Corporate Income Tax enacted in Vietnam, the subsidiary incorporated in Vietnam is subject to a tax rate of 20%.

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of our total net revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.

Note:

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Year ended December 31, 2024 compared to year ended December 31, 2025

Revenue

Revenue was RMB21,443.8 million (US$3,066.4 million), representing an increase of 26.2% year over year.

Revenue from MINISO brand increased by 22.0% to RMB19,524.9 million (US$2,792.0 million), including (i) an increase of 16.8% in revenue from MINISO brand in Chinese mainland, and (ii) an increase of 29.3% in revenue from MINISO brand in overseas markets. The overseas revenue contributed to 44.2% of revenue from MINISO brand.

Revenue from TOP TOY brand increased by 94.8% to RMB1,915.6 million (US$273.9 million).

During the period, the total number of MINISO stores, including those in China and overseas markets, increased from 7,504 as of December 31, 2024 to 8,151 as of December 31, 2025. Our revenue per MINISO store, however, increased by around 8.5% from RMB2.3 million in 2024 to RMB2.5 million (US$0.4 million) in 2025. Same-store GMV growth of MINISO brand in Chinese mainland in 2025 was mid-single digit, compared to a same-store GMV decline of high-single digit in 2024. Same-store GMV decline of MINISO brand in overseas markets was low-single digit, compared to same-store GMV growth of mid-single digit in 2024. See "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-Our revenue per MINISO store has experienced, and may continue to experience, significant fluctuations from period to period." and "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-Our fiscal year-over-year same-store GMV has experienced, and may continue to experience, significant fluctuations from period to period."

Cost of sales

Our cost of sales was RMB11,795.7 million (US$1,686.8 million), representing an increase of 26.1% year over year.

Gross profit and gross margin

Gross profit was RMB9,648.1 million (US$1,379.7 million), representing an increase of 26.3% year over year. Gross margin was 45.0%, compared to 44.9% last year.

Other income

Our other income was RMB19.4 million (US$2.8million) in 2025, compared to RMB21.6 million in 2024.

Selling and distribution expenses

Our selling and distribution expenses were RMB5,265.8 million (US$753.0 million), compared to RMB3,519.5 million, increased by 49.6% year over year. Excluding share-based compensation expenses, selling and distribution expenses were RMB5,045.7 million (US$721.5 million), increased by 43.9% year over year. The year-over-year increase was mainly attributable to our investments into directly operated stores to pursue the future success of our business, especially in strategic overseas markets such as the U.S. market. As of December 31, 2025, total number of directly operated stores on the Group level was 768, compared to 568 as of December 31, 2024. For the fiscal year ended December 31, 2025, the revenue from directly operated stores increased by 71.3%, while related expenses including rental and related expenses, depreciation and amortization expenses together with payroll excluding share-based compensation expenses increased by 50.2%. Licensing expenses increased by 44.6%, as a percentage of revenue ranging from 2.5% to 2.8% for the fiscal year ended December 31, 2025 and its comparative period, respectively. Promotion and advertising expenses increased by 23.0%, as a percentage of revenue stabilizing at around 3.3% for the fiscal year ended December 31, 2025, compared to 3.4% in its comparative period. Logistics expenses increased by 23.0% year over year.

General and administrative expenses

Our general and administrative expenses were RMB1,225.4 million (US$175.2 million) for the fiscal year ended December 31, 2025, compared to RMB931.7 million for the fiscal year ended December 31, 2024, increased by 31.5% year over year. Excluding equity-settled share-based payment expenses, our general and administrative expenses were RMB1,077.5 million (US$154.1 million) for the fiscal year ended December 31, 2025, compared to RMB859.9 million for the fiscal year ended December 31, 2024, increased by 25.3% year over year.

Other net income

Our other net income was RMB195.6 million (US$28.0 million) for the fiscal year ended December 31, 2025, compared to RMB114.7 million for the fiscal year ended December 31, 2024. The year-over-year increase was mainly due to (i) an increase in fair value of other investments, and (ii) an increase of investment income in wealth management products.

Impairment loss on non-current assets

Our impairment loss on non-current assets was RMB35.6 million (US$5.1 million) for the fiscal year ended December 31, 2025, compared to RMB8.8 million for the fiscal year ended December 31, 2024. We recorded impairment loss on non-current assets of directly operated stores.

Operating profit

As a result of the foregoing, we recorded operating profit of RMB3,303.1 million (US$472.3 million) for the fiscal year ended December 31, 2025, compared to RMB3,315.8 million for the fiscal year ended December 31, 2024.

Net finance costs

Our net finance costs was RMB326.5 million (US$46.7 million) for the fiscal year ended December 31, 2025, compared to net finance income of RMB25.8 million for the fiscal year ended December 31, 2024. The year-over-year increase in net finance costs was due to (i) increased interest expenses in relation to the 2032 Securities and the bank loans used for acquisition of the equity interest of Yonghui Superstores Co., Ltd., both of which have been excluded in non-IFRS financial measures, and (ii) increased interest expenses on lease liabilities corresponding to our investment in directly operated stores.

Share of loss of equity-accounted investee, net of tax

Our share of loss of equity-accounted investees, net of tax was RMB834.5 million (US$119.3 million) for the fiscal year ended December 31, 2025, compared to share of profit of RMB6.0 million for the fiscal year ended December 31, 2024. The year-over-year change was mainly attributable to share of loss of Yonghui Superstores Co., Ltd., which has been excluded in non-IFRS financial measures.

Changes in Fair Value of Redemption Liabilities

Our changes in fair value of redemption liabilities was RMB158.5 million (US$22.7 million) for the fiscal year ended December 31, 2025, compared to nil for the fiscal year ended December 31, 2024, which was a loss arising from preferred shares issued by TOP TOY in connection with its strategic financing in 2025 and has been excluded in non-IFRS financial measures.

Other expenses

Our other expenses were RMB59.1 million (US$8.5 million), mainly attributable to loss from fair value change of derivatives under mark-to-market impact, which was in relation to the Equity Linked Securities and has been excluded in non-IFRS financial measures.

Income tax expense

We recorded income tax expense of RMB703.5 million (US$100.6 million) in 2025, compared to RMB712.1 million for the fiscal year ended December 31, 2024.

Profit for the year

As a result of the foregoing, our profit for the year was RMB1,209.8 million (US$173.0 million) in 2025, compared to RMB2,635.4 million for the fiscal year ended December 31, 2024.

Year ended December 31, 2023 compared to year ended December 31, 2024

Revenue

Revenue was RMB16,994.0 million, representing an increase of 22.8% year over year, primarily driven by an 18.3% year-over-year increase in average store count.

Revenue from MINISO brand increased by 22.0% to RMB16,002.6 million, driven by (i) an increase of 10.9% in revenue from MINISO brand in Chinese Mainland, and (ii) an increase of 41.9% in revenue from MINISO brand in overseas markets. The year-over-year increase was primarily due to an increase of 21.8% in average store count. The overseas revenue contributed 41.7% of revenue from MINISO brand, compared to 35.9% in 2023.

Revenue from TOP TOY brand increased by 44.7% to RMB983.5 million, primarily powered by a low-single digit same-store sales growth and a rapid growth in average store counts.

During the period, the total number of MINISO stores, including those in China and overseas markets, increased from 6,413 as of December 31, 2023 to 7,504 as of December 31, 2024. Our revenue per MINISO store, however, increased by 3.9% from RMB2.2 million in 2023 to RMB2.3 million in 2024. See "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-Our revenue per MINISO store has experienced, and may continue to experience, significant fluctuations from period to period."

Cost of sales

Our cost of sales was RMB9,357.0 million in 2024, which was stable compared to cost of sales of RMB8,140.4 million in 2023.

Gross profit and gross margin

Gross profit increased by 34.0% from RMB5,698.4 million in the year ended December 31, 2023 to RMB7,637.1 million in 2024, and gross margin increased from 41.2% to 44.9% during the same period. The increase in gross profit and gross margin was mainly driven by (i) higher gross margin in overseas markets contributed by product optimization and higher revenue contribution from directly operated markets, and (ii) higher gross margin of TOP TOY due to a shift in product mix towards more profitable products.

Other income

Our other income was RMB21.6 million in 2024, compared to RMB22.6 million in 2023.

Selling and distribution expenses

Our selling and distribution expenses increased by 54.3% from RMB2,281.1 million in 2023 to RMB3,519.5 million in 2024. Excluding equity-settled share-based payment expenses, our selling and distribution expenses increased from RMB2,211.4 million to RMB3,506.1 million during the same period. The year-over-year increase was mainly attributable to our investments into directly operated stores to pursue the future success of our business, especially in strategic overseas markets such as the U.S. market. As of December 31, 2024, total number of directly operated stores in overseas markets was 505, doubling from a year ago. In 2024, revenue from directly operated stores also doubled, while related expenses including rental and related expenses, depreciation and amortization expenses together with payroll excluding share-based compensation expenses increased by 72.2%. Promotion and advertising expenses increased by 37.7% in 2024, as a percentage of revenue stabilizing at around 3% in both comparative periods. Licensing expenses increased by 29.2%, as a percentage of revenue stabilizing at around 2% in both comparative periods. Logistics expenses increased by 51.0%, mainly reflecting the rising freight costs caused by the tension in international shipping.

General and administrative expenses

Our general and administrative expenses increased by 37.5% from RMB677.4 million in 2023 to RMB931.7 million in 2024. Excluding equity-settled share-based payment expenses, our general and administrative expenses increased by 29.4% from RMB664.4 million to RMB859.9 million during the same period, which was primarily due to the increase of personnel-related expenses in relation to the growth of our business.

Other net income

Our other net income was RMB114.7 million in 2024, as compared to other net income of RMB62.4 million in 2023. The year-over-year increase was mainly due to an increase in investment income in wealth management products, and an increase in fair value of an investment, partially offset by a net foreign exchange loss.

Impairment loss on non-current assets

Our impairment loss on non-current assets was RMB8.0 million and RMB8.8 million in 2023 and 2024, respectively. The impairment loss on non-current assets was related to our directly operated stores.

Operating profit

As a result of the foregoing, we recorded operating profit of RMB3,315.8 million in 2024, representing an increase of 17.6% from RMB2,819.6 million in 2023.

Net finance income

Our net finance income was RMB25.8 million, compared to RMB161.0 million in 2023. The year-over-year decrease was mainly due to a decrease in interest income as a result of lower interest rate and reduced bank deposits principal as we reallocated certain resources to wealth management products, coupled with an increase in finance cost due to increased interest expenses on lease liabilities in line with our investment in directly operated stores.

Share of profit/(loss) of equity-accounted investee, net of tax

For the year ended December 31, 2024, our share of loss of an equity-accounted investee, net of tax was RMB6.0 million, which was mainly due to our investment(s) into and share of profit of the associate companies. For the year ended December 31, 2023, our share of profit of an equity-accounted investee, net of tax was RMB0.3 million.

Income tax expense

We recorded income tax expense of RMB712.1 million in 2024, compared to RMB707.0 million in 2023.

Profit for the year

As a result of the foregoing, our profit for the year increased by 15.9% from RMB2,274 million in 2023 to RMB2,635.4 million in 2024.

Six months ended December 31, 2022 compared to six months ended December 31, 2023

Revenue

Our revenue increased by 44.9% from RMB5,266.9 million in the six months ended December 31, 2022 to RMB7,632.5 million in the six months ended December 31, 2023, attributable to (i) an increase of 46.3% in revenue from overseas markets, and (ii) an increase of 44.1% in revenue from China.

Revenue generated from our operations in China was RMB4,843.1 million in the six months ended December 31, 2023, increasing by 44.1% from RMB3,360.2 million in the six months ended December 31, 2022. The increase in revenue from the China market was primarily due to (i) an increase of 44.6% in revenue from MINISO brand in China, and (ii) an increase of 65.8% in revenue from TOP TOY in China.

Revenue generated from overseas markets was RMB2,789.3 million in the six months ended December 31, 2023, increasing by 46.3% from RMB1,906.7 million in the six months ended December 31, 2022.

The total number of MINISO stores, including those in China and overseas markets, increased from 5,440 as of December 31, 2022 to 6,413 as of December 31, 2023. Our revenue per MINISO store increased by 26.6% from RMB0.9 million in the six months ended December 31, 2022 to RMB1.2 million in the six months ended December 31, 2023.

Cost of sales

Our cost of sales increased by 33.8% from RMB3,281.2 million for the six months ended December 31, 2022 to RMB4,391.4 million for the six months ended December 31, 2023.

Gross profit and gross margin

Gross profit increased by 63.2% from RMB1,985.7 million in the six months ended December 31, 2022 to RMB3,241.0 million in the six months ended December 31, 2023, and gross margin increased from 37.7% to 42.5% for the same periods. The increase in gross margin was mainly driven by (i) higher gross margin in overseas markets contributed by product optimization and higher revenue contribution from directly operated markets, (ii) higher gross margin in China contributed by newly launched products in relation to our execution of strategic brand upgrade of MINISO, and the cost-saving measures we adopted to reduce the costs of certain products, and (iii) higher gross margin of TOP TOY due to a shift in product mix towards more profitable products.

Other income

Our other income increased by 32.7% from RMB14.3 million in the six months ended December 31, 2022 to RMB19.0 million in the six months ended December 31, 2023, primarily due to an increase in income from depositary bank.

Selling and distribution expenses

Our selling and distribution expenses increased by 70.8% from RMB798.1 million in the six months ended December 31, 2022 to RMB1,363.1 million in the six months ended December 31, 2023. The increase was primarily attributable to (i) increased personnel-related expenses, logistics expenses and IP licensing expenses in relation to the growth of our business, (ii) increased depreciation expenses of the right-of-use assets in relation to directly operated stores, and (iii) increased promotion and advertising expenses, mainly in connection with our brand upgrade and the opening of new stores in overseas markets.

General and administrative expenses

Our general and administrative expenses increased by 13.9% from RMB313.9 million in the six months ended December 31, 2022 to RMB357.7 million in the six months ended December 31, 2023. This increase was primarily due to increased personnel-related expenses in relation to the growth of our business.

Other net income

Our other net income was RMB21.1 million in the six months ended December 31, 2023, compared to other net income of RMB72.9 million in the six months ended December 31, 2022. The decrease was mainly due to net foreign exchange loss, partially offset by net change in fair value of other investments.

Impairment loss on non-current assets

For the six months ended December 31, 2022, we did not record any impairment loss on non-current assets. For the six months ended December 31, 2023, we recorded impairment loss on non-current assets of RMB4.5 million, which was related to our directly operated stores.

Operating profit

As a result of the foregoing, we recorded operating profit of RMB1,553.7 million in the six months ended December 31, 2023, representing an increase of 62.3% from RMB957.1 million in the six months ended December 31, 2022.

Net finance income

Our net finance income increased by 104.3% from RMB48.3 million in the six months ended December 31, 2022 to RMB98.8 million in the six months ended December 31, 2023, mainly due to an increase in interest income as a result of increased principal in bank deposits.

Income tax expense

We recorded income tax expense of RMB396.7 million in the six months ended December 31, 2023, compared to RMB241.5 million in the six months ended December 31, 2022.

Profit for the period

As a result of the foregoing, our profit for the period increased by 64.4% from RMB763.9 million in the six months ended December 31, 2022 to RMB1,256.1 million in the six months ended December 31, 2023.

Non-IFRS Financial Measure

In evaluating the business, we consider and use adjusted operating profit, adjusted net profit, adjusted EBITDA, adjusted basic and diluted net earnings per ADS as supplemental measures to review and assess our operating performance. We define adjusted operating profit as operating profit for the period excluding equity-settled share-based payment expenses. We also define adjusted net profit as profit excluding equity-settled share-based payment expenses, gain or loss from fair value change of derivatives, issuance cost of derivatives and interest expenses related to equity linked securities, interest expenses related to the bank loans used for acquisition of the equity interest in Yonghui Superstores Co., Ltd., share of profit or loss of Yonghui Superstores Co., Ltd., net of tax, and changes in fair value of redemption liabilities arising from preferred shares. MINISO defines adjusted EBITDA as adjusted net profit plus depreciation and amortization, finance costs excluding interest expenses related to equity linked securities and interest expenses related to the bank loans used for acquisition of the equity interest in Yonghui Superstores Co., Ltd. and income tax expense. MINISO computes adjusted basic and diluted net earnings per ADS by dividing adjusted net profit attributable to the equity shareholders of the Company by the number of ADSs represented by the number of ordinary shares used in the basic and diluted earnings per share calculation on an IFRS basis. MINISO computes adjusted basic and diluted net earnings per share in the same way as it calculates adjusted basic and diluted net earnings per ADS, except that it uses the number of ordinary shares used in the basic and diluted earnings per share calculation on an IFRS basis as the denominator instead of the number of ADSs represented by these ordinary shares.

We present the non-IFRS financial measure because it is used by our management to evaluate our operating performance and formulate business plans. The non-IFRS financial measure enables our management to assess our operating results without considering the impacts of the aforementioned non-cash items that we do not consider to be indicative of our operating performance in the future. Accordingly, we believe that the use of the non-IFRS financial measure provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

The non-IFRS financial measure is not defined under IFRS nor presented in accordance with IFRS. The non-IFRS financial measure has limitations as analytical tools. One of the key limitations of using the non-IFRS financial measure is that it does not reflect all items of income and expense that affect our operations. Further, the non-IFRS financial measure may differ from non-IFRS information used by other companies, including peer companies, and therefore their comparability may be limited.

The non-IFRS financial measure should not be considered in isolation or construed as an alternative to profit or any other measure of performance prepared and presented in accordance with IFRS. Investors are encouraged to review our historical non-IFRS financial measure in light of the most directly comparable IFRS measure, as shown below. The non-IFRS financial measure presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting the usefulness of such measure when analyzing our data comparatively. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

We recorded adjusted operating profit of RMB2,902.4 million, RMB3,401.0 million and RMB3,671.0 million (US$524.9 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

We recorded adjusted net profit of RMB2,356.7 million, RMB2,720.6 million and RMB2,898.2 million (US$414.4 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

We recorded adjusted EBITDA of RMB3,571.4 million, RMB4,334.3 million and RMB4,959.9 million (US$709.3 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

The following table reconciles our adjusted operating profit, adjusted net profit and adjusted EBITDA for the years ended December 31, 2023, 2024 and 2025 to the most directly comparable financial measures calculated and presented in accordance with IFRS, which includes operating profit and profit for the year/period.

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Notes:

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Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with IFRS issued by the IASB, which requires us to make judgments, estimates, and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience, and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. The following descriptions of significant accounting policies, judgments, and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. When reviewing our financial statements, you should consider (i) our selection of significant accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Revenue recognition

Product sales to retail partners. We have entered into a series of agreements with retail partners, which mainly include a license agreement and a sales agreement (collectively "Franchise Agreements"), whereby the retail partners are licensed to operate the retail partners stores and are authorized to sell, in their own retail stores, the products that they have purchased from us.

For product sales to retail partners, we have determined that the retail partners are the customers of us. The retail partners operate retail stores at their own chosen locations under the framework set out under the Franchise Agreements.

The retail partners employ and manage their own staff to operate the stores and serve their customers (i.e. end consumers who visit the stores), and bear the costs associated with the operation. The retail partners' retail stores generally carry a wide range of merchandise that they exercise discretion to select from our array of product categories.

Revenue from sales to these retail partners is recognized at the point when they obtain the legal title of the products and become obliged to pay for the products, which is when the retail partners sell the products to their customers in their own retail stores.

Impairments of property, plant and equipment and right-of-use assets related to self-operated stores

In considering the impairment losses that may be required for certain property, plant and equipment and right-of-use assets related to self-operated stores, recoverable amount of these assets needs to be determined, being the higher of fair value less costs of disposal and value in use. In determining the recoverable amount of these assets, we evaluate market rental rates with the assistant of valuation professionals.

Recent Accounting Pronouncements

A list of recent accounting pronouncements that are relevant to us is included in note 2 to our consolidated financial statements, which are included in this annual report.

Source of Liquidity and Working Capital Sufficiency

Cash flows from operating activities and financing activities have been our primary sources of liquidity. Our cash and cash equivalents were RMB6,489.2 million, RMB6,415.4 million, RMB6,328.1 million and RMB6,817.1 million (US$974.8 million) as of June 30, 2023 and December 31, 2023, 2024 and 2025, respectively. As of December 31, 2025, 44.5%, 41.8%, 0.5% and 13.1% of our cash and cash equivalents were denominated in Renminbi, U.S. dollars, Hong Kong dollars and other currencies, respectively. Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash. As of December 31, 2025, we had unused banking facilities of around RMB3,578.3 million (US$511.7 million).

As of December 31, 2025, we had an outstanding borrowing, including current and non-current loans and borrowings, totaling RMB7,166.4 million (US$1,024.8 million), which mainly represented a loan from commercial banks with a principal amount of RMB3.5 billion used for the acquisition of equity interest of Yonghui Superstores Co., Ltd., and bond components of RMB2.4 billion related to the 2032 Securities.

In January 2025, we issued equity linked securities due 2032, or the 2032 Securities, which are convertible debt securities that shall be settled wholly in cash, with an aggregate principal amount of US$550,000,000 and an expected maturity date on January 14, 2032. The 2032 Securities constitute direct, unconditional, unsubordinated and, subject to the terms and conditions of the 2032 Securities, unsecured obligations of ours and bear interest at a rate of 0.5% per year, payable semiannually in arrears on January 14 and July 14 of each year, beginning on July 14, 2025. Holders of the 2032 Securities may exchange their 2032 Securities for cash at any time on or after the date which is six years after the closing date to the date falling 10 scheduled trading days prior to the maturity date. The 2032 Securities will mature on January 14, 2032, unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date. The exercise price at which the 2032 Securities will be exchanged will initially be HK$64.395 per ordinary share, subject to adjustment upon the occurrence of certain events. Holders may exchange their 2032 Securities for cash: (i) at any time on or after January 14, 2031 to the date falling 70 scheduled trading days prior to the maturity date, or the Initial Exercise Period; and (ii) at any time from the date falling 69 scheduled trading days preceding the maturity date to the date falling 10 scheduled trading days preceding the maturity date, or the Final Exercise Period, in accordance with the terms of the Securities. Upon exercise by a holder of their 2032 Securities, the holder will receive a cash settlement amount in U.S. dollars and equal to the number of cash settled shares underlying the exercised securities (a notional concept calculated by dividing the principal amount of the Securities by the applicable exercise price on the exercise date) multiplied by (i) if exercised during the Initial Exercise Period, the volume weighted average price of an ordinary share over a specified period of trading days; or (ii) if exercised during the Final Exercise Period, the higher of (a) the applicable exercise price of the 2032 Securities, and (b) the volume weighted average price of an ordinary share over a specified period of trading days, calculated in accordance with the terms and conditions of the 2032 Securities. Holders of the 2032 Securities may require us to redeem all or some of such holder's 2032 Securities on January 14, 2028 and January 14, 2030 or in the event of certain fundamental changes. We may redeem the 2032 Securities in the event of certain changes to tax laws or if less than 10% of the aggregate principal amount of the 2032 Securities originally issued remains outstanding at such time.

Based on our current cash and cash equivalents and anticipated cash flows from operations, we believe that we will have sufficient funds to meet our working capital and capital expenditure requirements for at least the next 12 months from December 31, 2025.

In utilizing the proceeds from our offerings, we may make additional capital contributions to our PRC subsidiaries, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, make loans to our PRC subsidiaries, or acquire offshore entities with operations in China in offshore transactions. However, most of these uses are subject to PRC regulations. See "Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-Chinese Mainland regulation of loans to and direct investment in Chinese Mainland entities by offshore holding companies and governmental administration of currency conversion may delay or prevent us from using the proceeds of our offshore offerings to make loans to or make additional capital contributions to our Chinese Mainland subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business."

We may decide to enhance our liquidity position or increase our cash reserve for future investments through additional capital and finance funding. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated:

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Operating activities

Net cash generated from operating activities for the fiscal year ended December 31, 2025 was RMB2,577.9 million (US$368.6 million). This amount was primarily attributable to a profit of RMB1,209.8 million (US$173.0 million) for the year, as adjusted by certain non-cash items, primarily consisting of (i) depreciation and amortization of RMB1,206.3 million (US$172.5 million), and (ii) share of loss of equity-accounted investees, net of tax of RMB834.5 million (US$119.3 million), (iii) income tax of RMB703.5 million (US$100.6 million), and (iv) equity-settled share-based payment expenses of RMB367.9 million (US$52.6 million), which were partially offset by interest income of RMB104.4 million (US$14.9 million), investment income from other investments of RMB103.7 million (US$14.8 million), net change in fair value of other investments of RMB77.2 million (US$11.0 million) and changes in certain working capital accounts that affected operating cash flows, primarily consisting of an increase in trade and other payables of RMB576.2 million (US$82.4 million), partially offset by (i) an increase of trade and other receivables of RMB1,028.8 million (US$ 147.1 million) and (ii) an increase in inventories of RMB916.7 million(US$131.1 million). The increase in trade and other receivables was mainly due to an increase in trade receivables, VAT recoverable, miscellaneous expenses paid on behalf of franchisees, as well as rental deposit. The increase in inventories was mainly due to an increase in the number of stores and precautionary inventory buildup in anticipation of potential tariffs.

Net cash generated from operating activities for the fiscal year ended December 31, 2024 was RMB2,168.3 million. This amount was primarily attributable to a profit of RMB2,635.4 million for the year, as adjusted by certain non-cash items, primarily consisting of (i) depreciation and amortization of RMB808.7 million, and (ii) income tax of RMB712.1 million, which were partially offset by an interest income of RMB118.7 million, and changes in certain working capital accounts that affected operating cash flows, primarily consisting of an increase in trade and other payables of RMB561.4 million, partially offset by (i) an increase in inventories of RMB828.1 million and (ii) an increase in trade and other receivables of RMB836.8 million. The increase in inventory was mainly due to an increase in the number of stores. The increase in trade and other receivables was mainly due to an increase in miscellaneous expenses paid on behalf of franchisees, trade receivables and prepayments for repurchase of shares.

Net cash generated from operating activities for the six months ended December 31, 2023 was RMB1,097.5 million, as compared to a profit for the period of RMB1,256.1 million. The difference was due to the adjustment of certain non-cash items, primarily consisting of (i) depreciation and amortization of RMB285.2 million, and (ii) income tax of RMB396.7 million, which were partially offset by an interest income of RMB124.0 million, and changes in certain working capital accounts that affected operating cash flows, primarily consisting of (i) an increase in inventory of RMB471.7 million, and (ii) an increase in trade and other receivables of RMB316.5 million. The increase in inventory was mainly due to an increase in the number of stores. The increase in trade and other receivables was mainly due to an increase in trade receivable.

Net cash generated from operating activities for the fiscal year ended June 30, 2023 was RMB1,666.0 million. This amount was primarily attributable to a profit of RMB1,781,8 million for the year, as adjusted by certain non-cash items, primarily consisting of (i) depreciation and amortization of RMB391.2 million, and (ii) income tax of RMB551.8 million, which were partially offset by an interest income of RMB145.2 million, and changes in certain working capital accounts that affected operating cash flows, primarily consisting of (i) an increase in inventory of RMB250.9 million, and (ii) an increase in trade and other receivables of RMB185.8 million. The increase in inventory was mainly due to an increase in the number of stores. The increase in trade and other receivables was mainly due to an increase in VAT recoverable.

Investing activities

Net cash used in investing activities for the fiscal year ended December 31, 2025 was RMB7,019.5 million (US$1,003.8 million), consisting primarily of proceeds from disposal of other investments of RMB25.1 billion (US$3.6 billion), partially offset by payments for purchases of other investments of RMB25.1 billion (US$3.6 billion) and payments for investments in equity-accounted investees of RMB6,285.8 million (US$898.9 million).

Net cash used in investing activities for the fiscal year ended December 31, 2024 was RMB533.3 million, consisting primarily of proceeds from disposal of other investments of RMB14.3 billion, partially offset by payments for purchases of other investments of RMB14.1 billion and payments for purchases of property, plant, equipment and intangible assets of RMB762.5 million.

Net cash generated from investing activities for the six months ended December 31, 2023 was RMB177.1 million, consisting primarily of proceeds from disposal of other investments of RMB2,504.0 million, release of term deposits of RMB581.4 million and interest income of RMB122.2 million, partially offset by payment for purchases of other investments of RMB2,554.0 million, payment for purchases of property, plant, equipment and intangible assets of RMB264.8 million and placement of term deposits of RMB210.4 million.

Net cash generated from investing activities for the fiscal year ended June 30, 2023 was RMB293.4 million, consisting primarily of payment for purchases of other investments of RMB7,880.8 million, placement of term deposits of RMB761.4 million and payment for purchases of property, plant, equipment and intangible assets of RMB174.1 million, partially offset by proceeds from disposal of other investment of RMB7,808.4 million, refund of prepayments of RMB200.0 million and release of term deposits of RMB316.5 million.

Financing activities

Net cash generated from financing activities for the fiscal year ended December 31, 2025 was RMB4,969.2 million (US$710.6 million), primarily due to proceeds from loans and borrowings of RMB4,737.1 million (US$677.4 million) and proceeds from issue of equity linked securities, net of issuance costs of RMB3,842.9 million (US$549.5 million), partially offset by dividends paid to equity shareholders of the Company of RMB1,357.7 million (US$194.2 million), payment for purchases of options of RMB1,207.8 million (US$172.7 million), payment of capital element and interest element of lease liabilities of RMB897.5 million (US$128.3 million), repayment of loans and borrowings of RMB595.2 million (US$85.1 million) and payments of repurchase of shares of RMB535.2 million (US$76.5 million).

Net cash used in financing activities for the fiscal year ended December 31, 2024 was RMB1,720.6 million, primarily due to dividends paid to equity shareholders of our company of RMB1,244.3 million, payment of capital element and interest element of lease liabilities of RMB725.1 million and prepayments for repurchase of shares of RMB313.4 million, partially offset by proceeds from loans and borrowings of RMB563.8 million.

Net cash used in financing activities for the six months ended December 31, 2023 was RMB1,320.9 million, primarily due to dividends payment of RMB923.7 million, payment of capital element and interest element of lease liabilities of RMB236.5 million, prepayments for repurchase of shares of RMB87.3 million and payments for repurchase of shares of RMB73.6 million.

Net cash used in financing activities for the fiscal year ended June 30, 2023 was RMB326.0 million, primarily due to proceeds from Hong Kong public offering and exercise of the over-allotment option, net of underwriting commissions and other issuance costs of RMB469.7 million, payment of capital element and interest element of lease liabilities of RMB346.0 million and dividends payment of RMB370.8 million.

Holding company structure

MINISO Group Holding Limited is a holding company with no material operations of its own. We conduct our operations through our subsidiaries. As a result, MINISO Group Holding Limited's ability to pay dividends, to some extent, depends upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiary in China is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our foreign invested subsidiaries in China may pay dividend from the after-tax profit after (i) it sets aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital, and (ii) any losses of such PRC subsidiary from prior fiscal years have been offset. The statutory reserve funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. See "Item 4. Information on the Company-B. Business Overview-Regulations-Chinese Mainland-Regulation related to dividend distribution."

Contingent Liabilities and Treasury Policy

Contingent liabilities

Commitment of tax payments

On October 13, 2020, Mingyou Industrial Investment (Guangzhou) Co., Ltd., or Mingyou, being a subsidiary of our equity-accounted investee prior to October 27, 2021 and a subsidiary of MINISO Group since October 27, 2021, was set up to acquire the land use right of a parcel of land and to establish a new headquarters building for MINISO Group in a district in Guangzhou, the PRC. In connection with the acquisition of the land use right and the construction of new headquarter building by Mingyou, MINISO Guangzhou entered into a letter of intent on November 26, 2020 with the local government of the district where our new headquarters building is located and committed to pay an aggregate amount of tax levies of no less than RMB965.0 million to a local government in Guangzhou for a five-year period starting from January 1, 2021, with RMB160.0 million in 2021, RMB175.0 million in 2022, RMB190.0 million in 2023, RMB210.0 million in 2024 and RMB230.0 million in 2025. If the above entities fail to meet the committed amount for any of the five calendar years, MINISO Guangzhou will be liable to compensate for the shortfall.

We had met the commitments for the five calendar years of 2021, 2022, 2023, 2024 and 2025. Therefore, we were not required to make any compensation to the local government. As such, no provision has been made in respect of this matter as of December 31, 2025.

Securities class action

In August 2022, a putative federal securities class action was filed against our company and certain officers and directors, alleging that we made misleading misstatements or omissions regarding its business operations and financials in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934. The action is captioned In re MINISO Group Holding Limited Securities Litigation, 1:22-cv-09864 (S.D.N.Y.). Lead plaintiff was appointed in November 2022 and filed the operative complaint to the court. We and other defendants filed a motion to dismiss the complaint, and the motion was granted by the court in February 2024, with leave to amend. Plaintiffs filed a motion for reconsideration of the court's decision, which was rejected by the court. Plaintiffs filed a further amended complaint on April 30, 2025. We and other defendants filed a motion to dismiss that complaint, which was granted by the court on March 31, 2026, with prejudice. Plaintiffs have until May 1, 2026 to file a notice to appeal the court decision.

Off-balance sheet arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Treasury policy

We believe we can make better use of our cash by making appropriate investments in short-term investment products, which generate income without interfering with our business operation or capital expenditures. Our investment decisions with respect to financial products are made on a case-by-case basis and after due and careful consideration of a number of factors, including, but not limited to, the market conditions, the economic developments, the anticipated investment conditions, the investment cost, the duration of the investment and the expected benefit and potential loss of the investment. We have established a set of internal control measures which allow us to achieve reasonable returns on our investment while mitigating our exposure to high investment risks. These policies and measures were formulated by our senior management.

In order to make full use of idle funds, improve the utilization rate of surplus funds, and increase our income, under the premise of not affecting our normal business activities, subject to approval from our chief financial officer, we may purchase a certain amount of wealth management products from financial institutions. According to our internal policies, the manager of our treasury department should make proposals to invest in wealth management products to our chief financial officer and such proposals must be reviewed and approved by our chief financial officer. In assessing a proposal to invest in wealth management products, a number of criteria must be met, including but not limited to the following:

Material Cash Requirements

Our material cash requirements as of December 31, 2025 and any subsequent interim period primarily include capital expenditures, purchase of inventories, contractual obligations and obligations under our 2032 Securities, and we intend to fund those requirements with our cash balance. We will continue to make cash commitments, including capital expenditures, to meet the expected growth of our business.

Capital expenditures

Our capital expenditures are primarily incurred for the purposes of building our new headquarters project, purchasing IT systems and renovating MINISO stores that we directly operated. Our capital expenditures were RMB264.8 million in the fiscal year ended June 30, 2023, RMB78.0 million and RMB264.8 million in the six months ended December 31, 2022 and 2023, and RMB360.9 million, RMB762.5 million and RMB997.7 million (US$142.7 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Purchases of inventories

Our purchase of inventories primarily includes lifestyle and pop toy products. Our inventories purchase amount were RMB7,068.7 million in the fiscal year ended June 30, 2023, RMB3,420.5 million and RMB4,721.4 million in the six months ended December 31, 2022 and 2023, and RMB8,369.6 million, RMB9,901.0 million and RMB13,709.2 million (US$1,960.4 million) in the years ended December 31, 2023, 2024 and 2025, respectively.

Contractual obligations

Capital commitments

Our capital commitments mainly include contracted purchases of software, property, construction projects, property improvements. Our capital commitments were RMB982.6 million, RMB837.2 million, RMB633.5 million and RMB394.2 million (US$56.4 million) as of June 30, 2023 and December 31, 2023, 2024 and 2025, respectively. The capital commitments as of December 31, 2025 were mainly attributable to the construction of the headquarters building.

Lease liabilities

Our lease liabilities are in relation to properties that we lease primarily for our office premises, directly operated stores and warehouses. Our lease liabilities were RMB885.7 million, RMB1,245.3 million, RMB2,538.5 million and RMB3,664.6 million (US$524.0 million) as of June 30, 2023 and December 31, 2023, 2024 and 2025, respectively.

2032 Securities obligations

2032 Securities obligations consist of the principal amount and cash interests in connection with our 2032 Securities. The 2032 Securities bear interest at a rate of 0.5% per year, payable semiannually in arrears on January 14 and July 14 of each year, beginning on July 14, 2025. Holders of the 2032 Securities may exchange their 2032 Securities for cash at any time on or after the date which is six years after the closing date to the date falling 10 scheduled trading days prior to the maturity date. Holders of the 2032 Securities may require us to redeem all or some of such holder's 2032 Securities on January 14, 2028 and January 14, 2030 or in the event of certain fundamental changes. We may redeem the 2032 Securities in the event of certain changes to tax laws or if less than 10% of the aggregate principal amount of the 2032 Securities originally issued remains outstanding at such time.

See "Item 4. Information on the Company-B. Business Overview-Technology Capabilities" and "Item 4. Information on the Company-B. Business Overview-Intellectual Property."

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period since January 1, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.

For our critical accounting estimates, see "Item 5. Operating and Financial Review and Prospects-A. Operating Results-Critical Accounting Policies and Estimates."