China Literature Limited has issued a circular proposing significant upward revisions to the annual caps under its Advertisement Cooperation Framework Agreement with Tencent Computer, a wholly owned subsidiary of controlling shareholder Tencent Holdings.

Key revisions • 2026 cap raised to RMB1.10 billion from RMB0.85 billion (+29.4%). • 2027 cap lifted to RMB1.90 billion from RMB1.01 billion (+88.1%). • 2028 cap increased to RMB2.20 billion from RMB1.08 billion (+103.7%).

Historical performance • Commissions received from Tencent grew from RMB246.55 million in 2024 to RMB381.27 million in 2025 (+54.6%). • In the nine months to 30 September 2026, commissions reached RMB566.26 million, already 66.6% of the existing 2026 cap and 88.8% on an annualised basis.

Rationale Management cites rapid growth in advertising cooperation, notably the expansion from online literature to Weixin Mini Programs, short dramas and AI-animated drama works launched in Q2 2026. The ad-based free model is gaining traction across China’s content sector.

Pricing mechanism • Primarily revenue-sharing; China Literature receives not less than 70% of net ad proceeds. • Alternative fixed-fee or hybrid structures may be used, benchmarked against market rates.

Governance • Tencent’s subsidiaries are connected persons; the revised caps constitute continuing connected transactions. • An Extraordinary General Meeting will be held on 9 December 2026 in Hong Kong. Tencent and its associates (holding 57.3% of issued shares) will abstain from voting. • An Independent Board Committee recommends approval, supported by independent adviser Somerley Capital, which deems the terms fair and reasonable.

Internal controls China Literature will benchmark terms against at least two independent third-party quotes where practicable, with quarterly oversight by independent directors and annual review by the auditor to ensure compliance with pricing policies and caps.