Sea
Annual Report 2022

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_______________________FORM 20-F(Mark One)☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2022.OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____________ to ____________OR☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company reportCommission file number: 001-38237Sea Limited(Exact name of Registrant as specified in its charter) _______________________N/A(Translation of Registrant’s name into English)Cayman Islands(Jurisdiction of incorporation or organization)1 Fusionopolis Place, #17-10, GalaxisSingapore 138522(Address of principal executive offices)Yanjun Wang, Esq.Sea Limited1 Fusionopolis Place, #17-10, GalaxisSingapore 138522Tel: +65 6270-8100E-mail: secnotice@sea.com(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each classTrading SymbolName of each exchange on which registeredAmerican Depositary Shares, each representing one Class Aordinary shareSENew York Stock Exchange Class A ordinary shares, par value US$0.0005 per share* * Not for trading, but only in connection with the listing ofAmerican Depositary Shares on the New York Stock Exchange. Securities registered or to be registered pursuant to Section 12(g) of the Act:None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None(Title of Class) Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annualreport.519,231,049 Class A ordinary shares and 45,527,793 Class B ordinary shares, par value US$0.0005 per share, as of December 31, 2022Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934. Yes ☐ No ☒Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. Seedefinition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ☒Accelerated filer ☐Non-accelerated filer ☐Emerging growth company ☐If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected notto use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act.☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filingreflect the correction of an error to previously issued financial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation receivedby any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP ☒ International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.Item 17 ☐ Item 18 ☐If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐ ___________________________† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5, 2012.TABLE OF CONTENTS PageINTRODUCTION4PART I6 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS6 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE6 ITEM 3. KEY INFORMATION6 ITEM 4. INFORMATION ON THE COMPANY47 ITEM 4A. UNRESOLVED STAFF COMMENTS89 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS89 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES110 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS120 ITEM 8. FINANCIAL INFORMATION121 ITEM 9. THE OFFER AND LISTING122 ITEM 10. ADDITIONAL INFORMATION123 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK135 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES136PART II137 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES137 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS137 ITEM 15. CONTROLS AND PROCEDURES137 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT138 ITEM 16B. CODE OF ETHICS139 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES139 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES139 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS139 ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT139 ITEM 16G. CORPORATE GOVERNANCE139 ITEM 16H. MINE SAFETY DISCLOSURE140 ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS140PART III140 ITEM 17. FINANCIAL STATEMENTS140 ITEM 18. FINANCIAL STATEMENTS140 ITEM 19. EXHIBITS141Table of ContentsCONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F Unless otherwise indicated and except where the context otherwise requires: •“2023 convertible notes” refers to our 2.25% convertible senior notes due 2023, which were issued in June 2018; •“2024 convertible notes” refers to our 1.00% convertible senior notes due 2024, which were issued in November 2019; •“2025 convertible notes” refers to our 2.375% convertible senior notes due 2025, which were issued in May 2020; •“2026 convertible notes” refers to our 0.25% convertible senior notes due 2026, which were issued in September 2021; •“active users” in the context of digital entertainment refers to the number of unique accounts that interacted with our mobile and PC online games in aparticular period. A single account that plays more than one online game or in more than one market is counted as more than one active user. “GameQAUs” refers to the aggregate number of active users during the quarterly period; •“ADSs” refers to the American Depositary Shares, each of which represents one of our Class A ordinary shares, par value US$0.0005 per share; •“China” or “PRC” refers to the People’s Republic of China excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau; •“gross merchandise value” or “GMV” refers to the value of orders of products and services on our Shopee marketplace. Our calculation of GMV for oure-commerce platform includes shipping and other charges; •“orders” refers to each confirmed order from a transaction between a buyer and a seller for products and services on our e-commerce platform, even ifsuch order includes multiple items, during the specified period, regardless of whether the transaction is settled or if the item is returned; •“paying users” refers to the number of unique accounts through which a payment is made in our online games in a particular period. A unique accountthrough which payments are made in more than one online game or in more than one market is counted as more than one paying user. “Game QPUs”refers to the aggregate number of paying users during the quarterly period; •“shares” or “ordinary shares” refer to our Class A ordinary shares, par value US$0.0005 per share, and our Class B ordinary shares, par value US$0.0005per share; •“Southeast Asia” refers to Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam; and •“we,” “us,” “our company,” “our group,” “our” or “Sea” refers to Sea Limited, a Cayman Islands company, its consolidated subsidiaries and itsconsolidated affiliated entities, including its variable interest entities, or VIEs, and their subsidiaries and consolidated affiliated entities. Our reporting and functional currency is the U.S. dollar. This annual report contains translations of certain foreign currency amounts into U.S. dollars for theconvenience of the reader. Unless otherwise stated, all translations from Indonesian rupiah into U.S. dollars have been made at the rate of IDR15,592.00 to US$1.00,being the foreign exchange reference rate and the Jakarta interbank spot dollar rate published by the Bank Indonesia in effect as of December 30, 2022, all translationsof New Taiwan dollars, Thai baht, Singapore dollars and Malaysia ringgit into U.S. dollars have been made at the rates of NT$30.7300 to US$1.00, THB34.5900 toUS$1.00, S$1.3404 to US$1.00 and RM4.4002 to US$1.00, respectively, being the noon buying rates in The City of New York for cable transfers in New Taiwan dollars,Thai baht, Singapore dollars and Malaysia ringgit as certified for customs purposes by the Federal Reserve Bank of New York in effect as of December 30, 2022 setforth in the H.10 statistical release of the U.S. Federal Reserve Board for translation into U.S. dollars, and all translations from Vietnamese dong into U.S. dollars madeat the rate of VND23,612 to US$1.00, being the central rate published by The State Bank of Vietnam in effect as of December 31, 2022. We make no representation thatthe Indonesian rupiah, New Taiwan dollar, Vietnamese dong, Thai baht, Singapore dollar or Malaysia ringgit amounts referred to in this annual report could have beenor could be converted into U.S. dollars at any particular rate or at all. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—RisksApplicable Across Multiple Businesses—Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we reportin U.S. dollars.” On March 15, 2023, the Jakarta interbank spot dollar rate for Indonesian rupiah was IDR15,365.00 to US$1.00, the noon buying rate for New Taiwandollars was NT$30.7100 to US$1.00, the central rate for Vietnamese dong was VND23,619 to US$1.00, the noon buying rate for Thai baht was THB34.5800 to US$1.00,the noon buying rate for Singapore dollars was S$1.3518 to US$1.00 and the noon buying rate for Malaysia ringgit was RM4.4800 to US$1.00. Table of ContentsFORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historicalfacts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provision under Section 21E of the Securities Exchange Actof 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties andother factors, including those listed under “Item 3. Key Information—D. Risk Factors,” that may cause our actual results, performance or achievements to be materiallydifferent from those expressed or implied by the forward-looking statements. In some cases, you can identify these forward-looking statements by words or phrases such as “may,” “could,” “will,” “expect,” “anticipate,” “aim,”“estimate,” “intend,” “plan,” “believe,” “likely to,” “potential” or other similar expressions. We have based these forward-looking statements largely on our currentexpectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy andfinancial needs. These forward-looking statements include statements about: •our goals and strategies; •our future business development, financial condition, financial results, and results of operations; •changes in, and market size of, the e-commerce, digital entertainment, and digital financial services industries in the markets where we operate, includingsegments within those industries; •expected changes or guidance in our revenue, costs or expenditures; •our ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; •the expected monetization of our e-commerce, digital entertainment, and digital financial services businesses; •our expectations regarding growth in our user base, level of engagement and monetization; •our ability to continue to develop new technologies and/or upgrade our existing technologies; •our expectation regarding the use of proceeds from our financing activities, including our follow-on equity offerings and convertible notes offerings; •growth and trends of our markets and competition in our industries; •government policies and regulations relating to our industries, including the effects of any government orders or actions on our businesses; •general economic, political, social and business conditions in our markets; and •the impact of widespread health developments, including the COVID-19 pandemic, and the impact of economies reopening further to the COVID-19pandemic. 5Table of ContentsYou should read this annual report with the understanding that our actual future results may be materially different from and worse than what we expect.Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in anevolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors anduncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differmaterially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. You should not rely on forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only toevents or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or reviseany forward-looking statements, whether as a result of new information, future events or otherwise. This annual report also contains statistical data and estimates that we obtained from industry publications and reports generated by government or third-party providers of market intelligence. Although we have not independently verified the data, we believe that the publications and reports are reliable. See “Item 3.Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—Industry data, projections and estimates contained in thisannual report are inherently uncertain and subject to interpretation.” PART I ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3.KEY INFORMATION A.[Reserved] B.Capitalization and Indebtedness Not applicable. C.Reasons for the Offer and Use of Proceeds Not applicable. D.Risk Factors SUMMARY OF RISK FACTORS We believe some of the major risks and uncertainties that may materially and adversely affect us include the following: BUSINESS AND OPERATIONAL RELATED RISKS Risks Applicable Across Multiple Businesses •We may fail to maintain or grow the size of our user base or the level of engagement of our users. •Changes in macro-economic, geopolitical or social conditions or government policies, or government actions or restrictions, globally and in our marketscould have a material adverse effect on our business and operations. •We have a history of net losses and we may not achieve or keep profitability in the future. 6Table of Contents•Our results of operations are subject to fluctuations. •We may fail to monetize our businesses effectively. •The COVID-19 pandemic, including any lockdown and reopening of relevant markets, has affected our business activities and results. Any futureoccurrence of natural disasters, epidemics, pandemics or other outbreaks, or other catastrophic events could also adversely affect our business. •We may not succeed in managing or expanding our business across the expansive and diverse markets in which we operate. •We are subject to extensive and changing laws and government regulations across our business. •We may fail to compete effectively. •Existing or future investments or acquisitions may not be successful. •We have a limited operating history for some of our businesses. •Our businesses involve third parties over whose actions we have no control. •Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars. •We may be subject to intellectual property-related risks. •We may be liable for security breaches and attacks against our or our third-party partners’ platforms and network, particularly with regard to confidentialuser information and personal or other data or any other privacy or data protection compliance issue, and our platforms and games may containunforeseen “bugs” or errors. •We collect, process, transmit, and store personal information in connection with the operation of our businesses and are subject to complex andevolving international laws and regulations regarding privacy and data protection. Risks Related to Our E-Commerce Business •We face uncertainties relating to the growth and profitability of the e-commerce industry in our markets and we may face challenges and uncertainties inimplementing our e-commerce strategy. •We face risks related to logistics and fulfillment. •We may be held liable for actions by our marketplace participants. •We may suffer losses relating to the products we sell on Shopee. Risks Related to Our Digital Entertainment Business •We derive a significant portion of digital entertainment revenue and gross profit from a limited number of online games. •We have a limited track record in game development and global game distribution. •We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with usergenerated content. •Our games are subject to scrutiny regarding the appropriateness of their content. 7Table of ContentsRisks Related to Our Digital Financial Services Business •We face uncertainties and risks relating to our digital financial services business. •We face risks related to our lending and consumer and merchant credit businesses. •Our banking and consumer and merchant credit businesses are subject to credit cycle volatility and risk of credit losses. •Our banking business may subject us to additional material business, operational, financial, legal and compliance requirements and risks. •We face risks related to our insurance business. •We could be held liable if our digital financial services and products are used for fraudulent, illegal or improper purposes. Other Operational Risks •We rely on technology and internet infrastructure, data center and cloud service providers and telecommunications networks in the markets where weoperate. •We may fail to attract, motivate and retain the key members of our management team or other experienced and capable employees. •We face manpower-related risks. •We may be subject to risks related to litigation and regulatory proceedings. •We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do notcomply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements. 8Table of ContentsBUSINESS AND OPERATIONAL RELATED RISKS Risks Applicable Across Multiple Businesses We may fail to maintain or grow the size of our user base or the level of engagement of our users. The size and engagement level of our user base are critical to our success. Our business and financial performance have been and will continue to besignificantly determined by our success in adding, retaining and engaging active users. We invest significant resources to grow and maintain our user base andincrease user engagement, whether through innovation, providing new or improved content or services, marketing efforts or other means. Our user base andengagement levels may not continue growing at satisfactory rates, or at all. Our user base and engagement could be adversely affected if: •we fail to maintain the popularity of our platforms among users; •we are unable to maintain the quality of our existing content and services; •we are unsuccessful in innovating or introducing new, best-in-class content and services; •we fail to adapt to changes in user preferences, market trends or advancements in technology; •technical, regulatory, governmental or other reasons prevent us from delivering our content or services in a timely and reliable manner, or at all, orotherwise affect the user experience; •there are user concerns related to privacy, data protection, safety, fund security or other factors; •monetization and cost reduction measures by us cause users to reduce their activity on our platforms or shift to other platforms; •new games cause players to shift from our existing games without growing the overall size of our user base or online games platform; •there are adverse changes to our platforms or offerings that are mandated by, or that we elect to make, to address legislation, regulation, governmentorders, or litigation, including settlements or consent decrees; •our users fail to accept or comply with our terms of service or the privacy policies that we have implemented or may implement, or we adopt terms,policies, or procedures that are perceived negatively by our users; •our marketing campaigns or promotional strategies fail to achieve the intended effect among users – for example, users may develop negativeperceptions towards our marketing campaigns or promotional strategies; •we are unable to achieve the expected synergies among our businesses, we are unable to achieve synergies in a cost-effective manner, or we fail tobalance the interests of all participants in our ecosystem; •we fail to maintain the brand image of our platforms or our reputation is damaged or changes negatively; or •changes to demographic trends or economic development affect our markets. Our efforts to avoid or address any of these events could require us to incur substantial expenditure to modify or adapt our content, services or platforms.We may not be able to avoid or address such events in a timely or satisfactory manner, or at all. If we fail to retain or grow our user base, or if our users reduce theirengagement with our platforms, our business, financial condition and results of operations could be materially and adversely affected. 9Table of ContentsChanges in macro-economic, geopolitical or social conditions or government policies, or government actions or restrictions, globally and in our markets couldhave a material adverse effect on our business and operations. We have businesses in diverse global markets and are subject to risks associated with doing business internationally and in differing economic, political andregulatory environments. Our business, financial condition and results of operations may be influenced to a significant degree by geopolitical, macro-economic andsocial conditions globally and in our markets. A general slowdown or volatility in the global economy, including recession, inflation or a tightening of credit marketscould adversely affect our business, financial condition and results of operation. A rise in inflation, increases in interest rates including by the United States FederalReserve System, bank failures or limited liquidity in accessing bank deposits globally, in our markets or neighboring regions could negatively affect our liquidity andfinancial healthiness and could have a material adverse effect on our business. Changes in consumer behavior due to adverse economic conditions may alsonegatively impact us as such developments could lead to a decrease in consumer spending and reduction in demand for our products and services, which mayadversely affect our business, financial condition, results of operation or competitive position. The economies in emerging markets generally differ from developed markets in many respects, including the level of government involvement, level ofdevelopment, growth rate, control of foreign exchange, government policy on public order and allocation of resources. In some of our markets, governments continueto play a significant role in regulating industry development by imposing industrial policies. Some local governments also exercise significant control over theeconomic growth and public order in their respective jurisdictions through allocating resources, controlling payment of foreign currency-denominated obligations,setting monetary policies, and providing preferential treatment to particular industries or companies. Governmental actions to control inflation and other policies andregulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports. Our business, financial conditionand results of operations may be adversely affected by changes in government policies or regulations, such as exchange rates and exchange control policies, inflationrates, interest rates, tariff and inflation control policies, price control policies, import duties and restrictions, liquidity of domestic capital and lending markets,electricity rationing tax policies, including royalty, tax increases and retroactive tax claims, and other political, diplomatic, social and economic developments in oraffecting the markets where we operate. Growth of the economy of our various markets has been uneven, both geographically and among various sectors of the economy. Any adverse changes ineconomic conditions in our markets or neighboring regions, or in the policies of the governments or of the laws and regulations in each respective market could have amaterial adverse effect on the overall economic growth of our markets. Such developments could adversely affect our business, financial condition and results ofoperations, lead to a reduction in demand for our products and services, and adversely affect our competitive position. Many of the governments in our markets haveimplemented various measures to encourage economic growth, curb inflation and guide the allocation of resources. Some of these measures may benefit the overalleconomy, but may have a negative effect on us. For example, our business, financial condition and results of operations may be adversely affected by governmentcontrol over foreign capital investments or changes in tax regulations. Some of our markets have historically experienced low growth in their gross domestic product,or GDP, significant inflation and/or shortages of foreign exchange. We are exposed to the risk of cost increases due to potential inflation in the markets in which weoperate. Governments in some of our markets have implemented interest rate adjustments, currency trading band adjustments, exchange rate controls, and othermeasures to control the pace of economic growth or curb inflation. These measures, or the perception that any of them could occur, may cause decreased economicactivity and consumer spending in our markets, which may adversely affect our business, financial condition and results of operations. Some of our markets have experienced, and may in the future experience, geopolitical and social instability, including strikes, demonstrations, protests,marches, other types of civil disorder, war or armed conflict, refugee migration or other types of unrests. For example, the ongoing geopolitical tensions related toRussia’s actions in Ukraine, resulting sanctions imposed by the United States and other countries and retaliatory actions taken by Russia in response to suchsanctions have resulted in significant disruptions to supply chains, logistics and business activities globally. In addition, there have been and remain tensionssurrounding the Taiwan Strait. If such tension intensifies, our business in Taiwan might not be able to operate normally or at all. It is possible that geopolitical, macro-economic and social instability globally and in our markets may negatively impact economic growth, decrease consumer spending, cause uncertainty and volatility inthe financial markets, disrupt supply chains globally and in our markets, and may accordingly affect our business, financial condition and results of operations. Wecannot predict the duration or outcome of these events and actions or whether future developments would have any material adverse impact on our business. Theseand other instabilities and any adverse changes in the political environment could increase our costs, increase our exposure to legal and business risks, disrupt ouroffice operations or the business activities of our ecosystem participants, or affect our ability to expand or retain our user base. 10Table of ContentsIn addition, governments or government agencies in any of our markets could censor, ban or block access to our services, mobile applications, platformsand/or the internet generally for various reasons, including political tensions and wars between countries, content restrictions, national security, data protection orregulatory concerns, or due to some misunderstanding. For example, due to unanticipated government actions, in early 2022, Free Fire was made unavailable in theGoogle Play and iOS app stores in India, and currently remains unavailable. Users generally need to access the internet and/or app stores to access, download or useour services and mobile applications. If governments either directly or indirectly block, limit or otherwise restrict us from publishing or making available our productsand services to users, block, limit or restrict our users from accessing our products, services or mobile applications, prevent us from onboarding new users, preventdata transfers to or from certain markets or services, or take similar actions against us, our business could be negatively impacted, and we could experience loss orslower growth of our user base, financial loss, and our reputation may be adversely affected. Further, any government actions taken against our service providers,partners or other third-party intermediaries on which our business relies could cause our products and services to become unavailable for extended periods of time oreven indefinitely. Governments or government agencies may take legislative, executive, administrative or other measures or implement policies to regulate foreign investments,including applying heightened scrutiny, imposing additional requirements, prohibitions and restrictions on investments by companies based on the place ofincorporation or country of origin of such companies or their shareholders and/or beneficial owners or where companies have employees or service providers, storedata or develop or provide their products and services. Any adverse implementation or changes in foreign investment restrictions or interpretations against us ofsuch restrictions in our markets may affect our ability to operate and maintain our business in such markets. In the event of such restrictions, we may face additionallegal and regulatory compliance costs and risks, lose investments we have made and/or exit such markets, our users may develop a negative perception of us, and ourbusiness, financial condition and results of operations could be negatively affected. We have a history of net losses and we may not achieve or keep profitability in the future. We had net losses of US$1.6 billion, US$2.0 billion and US$1.7 billion in 2020, 2021 and 2022, respectively. Our net losses in 2022 were primarily due to ourinvestments in expanding our businesses, in particular our e-commerce and digital financial services businesses. In 2020, 2021 and 2022, our sales and marketingexpenses equaled 41.8%, 38.5% and 26.3% of our total revenue, respectively. Our operating expenses may increase as we invest in our businesses, including, amongother things, offering user incentives, conducting marketing activities, providing new content and services, and hiring additional headcount. These efforts may becostlier than we expect and our revenue may not increase sufficiently to offset these expenses. While our pivot to focus on efficiency and profitability has delivered positive total net income in the fourth quarter of 2022, we may not sustain thisprofitability given the uncertainty in global markets and future fluctuations in our performance. We may continue to take actions and make investments that do notgenerate immediate positive financial returns and may result in increased operating losses or other losses in the short term with no assurance that we will eventuallyachieve the intended long-term benefits or maintain profitability. These factors, among others set out in this “Item 3. Key Information—D. Risk Factors” section, maynegatively affect our ability to achieve profitability in the near term, if at all. Our results of operations are subject to fluctuations. We are subject to seasonality and other fluctuations in our business. Our revenue is also affected, among other factors, by our promotional and marketingactivities, including the timing of promotions, and our revenue may fluctuate due to changes in user base, user engagement, user behavior and preferences, and otherfactors. In addition, our rapid growth in the past has masked certain fluctuations that otherwise may have been apparent in our results of operations. When ourgrowth stabilizes, the seasonality in our business may become more pronounced. Maintaining our scale may also put strain on our existing resources due to increasedcapital expenditures and operating expenses, including sales and marketing expenses, staff hiring and procurement of infrastructure. See “—Business and OperationalRelated Risks—Risks Applicable Across Multiple Businesses—We may not succeed in managing or expanding our business across the expansive and diversemarkets in which we operate.” 11Table of ContentsOur revenue, profits and other operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside ourcontrol. Factors that may contribute to the fluctuations of our results include, among others, (i) fluctuations and changes in overall consumer demand for our productsand services in certain markets or overall or during certain months and holidays, including calendar year-end holiday season, or due to certain short-lived consumertrends, hypes or other factors; (ii) timing of new products and services releases and monetization rates of our products and services or content enhancements indifferent markets; (iii) increases in sales and marketing and other operating expenses; (iv) timing of promotional and marketing activities; (v) macro-economicconditions including recessionary fears or rising inflation and their effect on consumer spending; (vi) the impact of the COVID-19 pandemic, (vii) geopoliticalconditions; and (viii) other risk factors as described in this annual report. With many economies reopening further in 2022, we have observed ongoing moderation inuser engagement and monetization. For example, our digital entertainment revenue decreased by 10.3% from US$4.3 billion in 2021 to US$3.9 billion in 2022. Thisdecrease was primarily attributable to the ongoing moderation in user engagement and monetization. As a result, our businesses may not continue to grow as fast asin the past years or at all. Should our businesses experience a slowdown in growth, flattening or decrease in scale or profit, there could be material fluctuations in ourfinancial results, which could negatively affect our stock performance. In addition, changes in cash flow generated from our games may not match our revenue trendsdue to revenue recognition policies under U.S. GAAP, which require proceeds from our sales of in-game virtual items to be recorded as deferred revenue andrecognized over a period of time based on estimated service periods. As deferred revenue contributes a significant amount of the revenue we report each quarter, adecrease in bookings in any one quarter may not significantly reduce our revenues for that quarter but could negatively affect our revenues in future quarters orperiods. Accordingly, the effect of declines in our bookings are not fully reflected in our results of operations until future periods. We may fail to monetize our businesses effectively. Our financial performance largely depends on our ability to monetize our businesses, and any failure to adequately increase revenue or contain the relatedcosts could prevent us from attaining or increasing profitability which could materially and adversely affect our business, financial condition and results ofoperations. Our focus for our e-commerce business is to continue to enhance our ecosystem of sellers and buyers, improve the shopping experience and increase ourprofitability. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services,including logistics. If our efforts to monetize our e-commerce business are not successful, revenue generated from monetizing our Shopee marketplace may not offsetits significant operating costs. Moreover, monetization efforts could increase the costs of using our Shopee platform to users, which could render our products orofferings less attractive, negatively affect the number of users and the level of user engagement on our platform. Our monetization efforts may also lead to usersswitching to using platforms offered by our competitors. In order to sustain monetization of our digital entertainment business, we must maintain paying users and convert active game players to paying users andincrease their spending. Spending in our games is discretionary and our users may be price-sensitive, which may negatively affect our ability to monetize ourbusiness. It is crucial to balance creating sufficient in-game monetization opportunities on the one hand, and ensuring our games continue to attract a considerablenumber of users by offering them an enjoyable free-to-play experience on the other. To stimulate in-game spending, we need to continue to ensure that our games areengaging, the in-game items we offer are appealing, our monetization strategies comply with applicable laws and regulations, our prices are attractive and ourmarketing and promotional activities, such as esports events, are effective. We mainly monetize our digital financial services business by charging fees (fees from our mobile wallet services and payment processing services andcommissions from third-party financial institutions which offer financial products or lend to consumers on our platform), by earning interest from our credit andbanking businesses and by earning premium from our insurance business. Our ability to continue to successfully monetize our digital financial services business inthe future will depend significantly on our user base, the number of use cases available, the strengths of our credit modeling and risk management capability, and theavailability of funds for our consumer and merchant credit business, which may not be achieved at the level we anticipate. In addition, we may offer new digitalfinancial services and products or offer existing services and products to new markets. Our monetization efforts or offering of new products to existing or new markets,including credit, digital banking and insurtech, on our digital financial services platform may not succeed or generate revenue at levels we expect, or at all. 12Table of ContentsFor all our businesses, we invest to better understand our users and their preferences. This allows us to introduce content and services that are appealing toour users and to properly deploy and price content and services to enhance our monetization. However, if we fail to properly interpret user preferences or convert ourunderstanding into effective business strategies, our monetization may not be effective. The COVID-19 pandemic, including any lockdown and reopening of relevant markets, has affected our business activities and results. Any future occurrence ofnatural disasters, epidemics, pandemics or other outbreaks, or other catastrophic events could also adversely affect our business. The COVID-19 pandemic and the measures to contain its spread have from time to time resulted in business and manufacturing disruptions in our markets,impacted the business activities of our ecosystem participants, and disrupted the global supply chain including those of our sellers on our platform and merchantpartners. Our users’ spending power may be reduced if the global or local economies continue to be negatively affected. We are unable to predict future developmentswith respect to the COVID-19 pandemic, including any potential future waves of the pandemic due to existing or new variants of the virus, the availability andeffectiveness of vaccines and treatments, and the actions that have been and continue to be taken by authorities and other parties in our ecosystem in response.COVID-19, including lifting of restrictions in relevant markets, has affected and may continue to affect our businesses and our users’ behaviors. We haveobserved ongoing moderation in user engagement and monetization in our businesses. Accordingly, the trends we saw with respect to our revenues and otherfinancial results and operating metrics during COVID-19 impacted periods are not indicative of results for future periods. Similarly, our business, financial condition and results of operations could be materially and adversely affected by severe weather conditions, naturaldisasters, geopolitical events, terrorist attacks, wars, sanctions, the occurrence or re-occurrence of other outbreaks, epidemics or pandemics, including avian influenza,severe acute respiratory syndrome, the influenza A (H1N1) or H7N9, and other catastrophic events that disrupt our operations, adversely affect our markets or theeconomy generally or adversely affect our employees, third-party service providers, business partners or a significant portion of our users. We may not succeed in managing or expanding our business across the expansive and diverse markets in which we operate. Our business has become increasingly complex given the scale of our operations, product offerings and the diverse markets in which we operate. It is costlyto establish, develop and maintain international operations, adapt our business model to new or diverse regulatory environments and to promote our brandinternationally. Our international operations may not become profitable on a sustainable basis, if at all. As our operations continue to expand, our technologyinfrastructure systems and corporate, legal and compliance functions will need to be scaled to support our operations, and if they fail to do so, our business, financialcondition and results of operations may be negatively affected. The markets where we operate or expand to are diverse and unique, with varying levels of economic and infrastructure development and distinct legal andregulatory systems, and do not operate seamlessly across borders as a single or common market. Managing our businesses across these markets requiresconsiderable management attention and resources. Operating across multiple distinct markets also requires certain additional costs, including costs relating tostaffing, logistics, intellectual property protection, regulatory and legal compliance, tariffs and other trade barriers and higher tax rates in certain markets, whereapplicable. We may be less well-known or have fewer local resources and we may be unsuccessful in adapting our business practices, culture and operations. Fromtime to time, we may test the waters for certain businesses in new markets where we believe there may be an opportunity to use our experience in highly diverseenvironments to reach underserved buyers and sellers. We may also exit from certain markets or cease certain operations in certain markets due to a variety of factors. Our operations and expansions in new markets may become subject to risks associated with: 13Table of Contents•user acceptance of a digital economy, especially in the new markets to which we may expand in the future; •lack of experience operating in these new markets, including our ability to understand different user behaviors and/or culture in new markets and roll-outrelevant products and services localized to each market’s needs or preferences; •challenges in adapting our approach and strategies in existing markets to new markets; •recruiting and retaining talented and capable management and employees in various markets; •our ability to appropriately deploy resources and management attention that otherwise would be focused on the development of our existing marketsand businesses; •limited technology infrastructure and low levels of use of the internet; •challenges caused by distance, language and cultural differences, and local and regional competitive landscapes; •providing content and services that appeal to the tastes and preferences of users in a larger number of markets; •implementing our businesses in a manner that complies with local laws and practices, which may differ significantly from market to market, including lawsregarding data protection, privacy, network security, cybersecurity, encryption and payments; •maintaining adequate internal and accounting control across various markets, each with its own accounting principles that must be reconciled to U.S.GAAP upon consolidation; •compliance with privacy laws and data security laws and compliance costs across different legal systems; •currency exchange rate fluctuations; •protectionist laws and business practices that could, among other things, hinder our ability to execute our business strategies and put us at acompetitive disadvantage relative to domestic companies, including restrictions on foreign ownership; •actions by governments or others to restrict access to our products and services, whether these actions are taken for political, security or other reasons,or that may cause us to discontinue our operations in a particular market; •complex local tax regimes; •differing, complex and potentially adverse customs, import/export laws, tax rules and regulations or other trade barriers or restrictions which may beapplicable to transactions conducted through cross-border e-commerce business, related compliance obligations and consequences of non-compliance,and any new developments in these areas; •establishing strategic partnerships, as well as maintaining our relationships with any of our existing or future strategic partners; •potential political, economic and social instability, including the current tension between Russia and Ukraine and other future major geopolitical events,and related actions taken by other countries in response, or perceived, threatened or actual security concerns; and •higher costs associated with doing business in a larger number of markets. 14Table of ContentsAny of the foregoing could negatively affect our business, financial condition and results of operations. As the consumer internet business may be relatively new in certain markets, the relevant regulations are evolving and expanding. We may be regularlysubject to formal and informal reviews, inquiries and investigations by governments and regulatory authorities. Unfavorable regulations, laws, decisions orenforcement actions could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetaryfines), diminish the demand for, or availability of, our products and services, increase our cost of doing business, require us to change our business practices in amanner materially adverse to our business, damage our reputation, impede our growth or monetization strategy, or otherwise have a material adverse effect on ouroperations. We are subject to extensive and changing laws and government regulations across our business. Our business is affected by laws and regulations across multiple jurisdictions that affect the industries in which we operate, and their scope and stringencyhave increased significantly in recent years. We are subject to a variety of regulations, including those relating to game operations, game ratings, e-commerce, socialnetworking, internet applications or content services, digital platforms, marketing, advertising, privacy, personal information, data use, data transfer, data processing,data localization, data storage, data retention and data protection, livestreaming services, antitrust or competition laws, employment and labor laws, national languagerequirements, intellectual property, virtual items, user generated content, loot boxes, national security, nationalization, content restrictions, platform regulations, sale ofregulated or prohibited items, protection of minors, data of minors, consumer protection, pricing, product safety and product liability, prevention of money launderingand financing criminal activity and terrorism, anti-bribery and anti-corruption regulation, economic or other trade prohibitions or sanctions, electronic contracts andother communications, digital financial services regulation, electronic payment services regulation, foreign investment and currency control regulation and regulationsrelated to logistics, insurance, and digital banking. Because the industries in which we operate are relatively new in our markets, the relevant laws and regulations, aswell as their interpretations, are often unclear and evolving. Some of these regulations also implicate licensing requirements, and the variety of potentially applicablelaws and regulations can make it difficult to know or determine which licenses and approvals are necessary, or the processes for obtaining them. For these samereasons, we also cannot be certain that we will be able to maintain the licenses and approvals that we have previously obtained, or that once they expire, we will beable to renew them. We are also uncertain as to whether we will be able to obtain the licenses we apply for in a timely manner or at all. If we fail to obtain, maintain orrenew any required licenses or approvals, comply with the licensing conditions or make any necessary filings, or are found to require licenses or approvals that webelieved were not necessary or we were previously exempted from obtaining, we may be subject to various penalties, such as loss of the revenue or assets that weregenerated through the unlicensed business activities, imposition of fines, suspension or cancelation of the applicable license, written reprimands, termination ofrelevant businesses or offerings, criminal prosecution and the discontinuation or restriction of our operations, or other disputes. Any such penalties or disputes maydisrupt our business operations and materially and adversely affect our business, financial condition and results of operations. Laws and regulations and their enforcement vary from jurisdiction to jurisdiction and are often evolving, unclear or inconsistent with other applicable laws.At the same time, authorities may introduce protectionist measures or may observe regulatory developments in other jurisdictions and seek to implement similarmeasures, including measures to bring their respective jurisdictions in line with international standards that may be more stringent or restrictive, thus potentiallysubjecting us to more extensive regulation in each market. Future expansion in terms of our services and geographic coverage, including the expansion of our e-commerce platform, licensed or self-developed games and digital financial services and products, could subject us to additional regulatory requirements and otherrisks that may be costly or difficult to comply with. As the digital economy of our markets develop and new regulations and compliance requirements are introduced,there may be ambiguity regarding the applicability and scope of new and existing regulations and compliance requirements, which may in turn cause uncertainty toour business operations, user engagements and investor confidence. We may require more time than expected to adapt to these new requirements and may facedelays during the implementation or transition period. Any failure to timely comply with such new requirements may disrupt our business operations, damage ourreputation, cause us to lose users or reduce user engagement. News or rumors about potential introductions of new regulations, restrictions or compliancerequirements may also result in significant uncertainties to our business operations and may negatively affect the market price of our ADSs. 15Table of ContentsIn addition, data protection, privacy, content, competition, and other laws and regulations may impose different obligations and are expected to become morerestrictive in certain of our markets. For example, the General Data Protection Regulation (GDPR) includes operational requirements for companies that receive orprocess personal data of residents of the European Union. There are a number of recently enacted and amended data protection laws as well as legislative andregulatory proposals in various jurisdictions that could impose new obligations or limitations in areas affecting our business. There are also jurisdictions that areconsidering or have passed legislation implementing data transfer restrictions or requiring local storage and processing of data or similar requirements, which couldaffect our business operations. If we are required to make changes to or are otherwise restricted in the manner in which we transfer data between and among countriesand regions or share data among our businesses, it could affect our ability to and the manner in which we provide our content, products and services, which couldadversely affect our financial results. We may be required to implement different operating practices and protocols depending on the requirements of each localmarket, which may be costly, and increase the complexity of delivery of our content, products and services. There has been increased scrutiny over the power and influence of big technology companies globally. Competition authorities scrutinize technologycompanies around issues of exclusivity and abuse of market power. In addition, government agencies and regulators may, among other things, prohibit futureacquisitions, divestitures or combinations, impose significant fines or penalties, or impose other restrictions that limit or require us to modify our operations withplatform users or place restrictions on our business models due to anti-competition concerns. Such restrictions may alter the way in which we do business, increaseour costs or liabilities or reduce demand for our platforms, which could adversely affect our business, financial condition and results of operations. From time to timewe have received inquiries from or are subject to investigations by competition authorities. Any antitrust or competition related lawsuit, regulatory investigations, oradministrative proceedings against us could require us to terminate or change some of our business practices, or result in us being subject to regulatory actions. Regulators may regularly re-examine and increase legislation, regulation and enforcement of compliance obligations, which may require us or our businesspartners to revise or expand compliance programs, including the procedures we use to verify the identity of our users and to monitor the transactions on ourplatforms. Such new legislation, government policies or compliance requirements may also make it more burdensome for us to operate our businesses, expand ourofferings and for our users to use our services and products, which could potentially discourage users from using our services and products. We may also makechanges to or expand our product offerings or services in a manner that subjects our businesses to additional legislation, regulations or other compliance obligations,which may result in similar burdens and risks to our businesses. The provision of financial services such as mobile wallet services, payment processing, cross-border e-commerce transactions, consumer and merchant creditproducts, insurtech and banking services and products are typically more regulated and subject to a broad range of complex laws and regulations that are rapidlychanging. The monetary, commercial or equivalent authorities in the markets in which we operate could impose new or additional licensing requirements, capitalcommitments, governance standards, reporting obligations or other regulatory requirements, requiring us to devote substantial operational and financial resources tocomply with such requirements. We may fail to compete effectively. We face competition in each of our business lines and the failure to compete effectively in any of them could materially and adversely affect our business,financial condition and results of operations. Our e-commerce business faces competition from global and regional players that operate across several markets, and from single-market players. Global e-commerce or internet companies are also making efforts to enter into our markets or e-commerce and may further expand their footprints in such markets. Suchcompetitors may have longer operating history and greater access to financial, technological and marketing resources than we do. We compete to attract, engage, andretain buyers based on the variety and value of products and services listed on our marketplaces, overall user experience and convenience, online communicationtools, social features, integration with mobile and networking applications and tools, mobile applications and availability, quality and costs of payment and logisticsservices. We also compete to attract and retain sellers based on the number and the engagement of buyers, the effectiveness and value of the services we offer tosellers, commission rates, and the availability of support services. As e-commerce is evolving in our markets, competition for market share is particularly intense. Ourcompetitors may also consolidate or be acquired by other competitors, allowing them to obtain greater market share, gain access to greater resources and gain realadvantages over us. In addition, we may face increasing competition from social media platforms, online and app-based search engines through which products andservices may be researched and sold, and other content-providing market players. Social media platforms with high levels of user engagement may be able to leveragecontent and user connections and traffic on their platform to increase the visibility and attractiveness of a wide variety of brands and products. 16Table of ContentsOur digital entertainment business competes globally on the basis of a number of factors, including user base, game portfolio, quality of user experience,brand awareness and reputation, relationships with game developers, access to developer talent, monetization strategies and access to distribution and paymentchannels. Our competitors for game publishing include companies with a presence in just one or several markets, as well as companies offering global publishingplatforms. Our competitors for game development include global developers, who may have more experience, better reputation and more data obtained fromdeveloping games that target the same user pool. Our competitors may capitalize on their significant financial, technical or know-how resources to develop, distributeand operate mobile, console and PC online games or acquire other game or developer studios. Some developers may choose to distribute games themselves throughother channels such as the iOS App Store, the Google Play Store, Steam, or through consoles which may compete with games distributed and developed by us. Inaddition, we face competition from other games, platforms and entertainment formats for the time, attention and entertainment spending of our online game players. Ifother leisure time activities are perceived by our players to offer greater variety, affordability, interactivity and overall enjoyment, our digital entertainment businessmay be materially and adversely affected. Our digital financial services business faces competition from existing online and offline payment methods, including, among others, other mobile walletservices and other digital financial service providers. We expect competition to intensify as existing and new competitors introduce new services or enhance existingservices. Some of our competitors may have more experience, greater financial resources or larger bases of customers than we have. In addition, certain competitorsmay have longstanding relationships with certain merchants to accept the payment services they offer, which may make it difficult or costly for us to establishpartnerships with these merchants. New entrants tied to established brands may engender greater user confidence in the safety and efficacy of their services, alongwith greater liquidity. We may also face pricing pressures and other forms of competition from competitors. Some potential competitors may charge lower commissionsto merchants or subsidize users through other services they offer. Such competition may result in the need for us to alter the pricing we offer which could reduce ourgross profit and negatively affect our business, financial condition and results of operations. Competitors in the digital banking space such as banks and largerfinancial institutions may be able to offer more extensive or enhanced products and services, or offer such products and services at more attractive rates, credit orother terms, including more attractive rates on deposits and rates on loans. If such competitors appear more attractive to high quality customers or credit users, suchcustomers or users may be less likely to use our products and services, and we may have a decreased pool of high-quality customers or credit users. For ourconsumer and merchant credit business, other non-bank fintechs, neobanks, credit unions, multi-finance companies, off-card financing, private credit card and point-of-sale service providers, banks and larger financial institutions may also build solutions to compete in the consumer and merchant lending space. Our competitorsmay also be able to obtain certain licenses that we are unable to obtain, which may hinder our ability to offer certain products or access certain pools of liquidity thatare the subject of such licenses. We may offer new products and services, develop new or enhance the features and functionality of our platforms, that may lead to increased or additionalcompetition. We may also periodically change or remove new features and functionality, and optimize our operational efficiency and increase monetization efforts,which may not be well received and decrease the time spent by users on our platforms. We may need to compete with existing service providers who have moreexperience and infrastructure than us. We may also face potential protectionist policies, political measures or regulatory challenges that are more supportive of localplayers in such markets, which may among other things, hinder our ability to compete effectively in such markets. Existing or future investments or acquisitions may not be successful. We have invested in or acquired, and may in the future invest in or acquire, teams, businesses, services, assets or technologies from time to time. We may failto select appropriate investment or acquisition targets, or we may not be able to negotiate optimal arrangements, including arrangements to finance such investmentsor acquisitions. Investments and acquisitions entail uncertainties and risks, such as: 17Table of Contents•we may fail to successfully achieve the intended objectives; •our investments or acquisitions may be viewed negatively by customers, financial markets or investors; •the costs of identifying and consummating these transactions may be significant; •acquisitions and the subsequent integration of new assets and businesses into our own could require significant management attention and could divertresources from our existing businesses; •we may have difficulty in transitioning and integrating the business, technologies, products, personnel or operations of the acquired businesses; •we may face unforeseen operating challenges; •our relationships with existing employees, customers and business partners of our group, or those of the target, may be impaired; •we may assume pre-existing contractual relationships of an acquired company that we would not have otherwise entered into, the termination ormodification of which may be costly or disruptive to our business; •an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty aboutcontinuity and effectiveness of service from either company; •we may face challenges associated with managing additional and/or geographically remote businesses; •investments and acquisitions could result in the use of substantial amounts of cash or significant capital contributions, which could limit other potentialuses for our cash; •investments and acquisitions could result in increased leverage, dilutive issuances of equity securities, adverse tax consequences, goodwill impairmentcharges or write-offs, amortization expenses for other intangible assets; •if we incur debt to fund any investments or acquisitions, such debt may subject us to material restrictions on our ability to conduct our business,including financial maintenance covenants; •we may need to issue new shares as acquisition consideration or to raise additional capital to fund the acquisition consideration, which may dilute ourexisting investors’ interest in us; •we may assume unknown material liabilities of acquired companies, or may be exposed to claims and disputes by shareholders and third parties,including intellectual property claims and disputes; •we may be unsuccessful in accurately projecting revenue, cost or other metrics of the invested or acquired entity in the due diligence process; •the invested or acquired assets or businesses may not generate the financial results we expect; and •the market value of our investments or acquisitions may fluctuate, particularly in volatile markets, or they may become obsolete. These factors could adversely affect our financial results. In addition, we may fail to obtain any required approvals and licenses from relevant governmentauthorities. We may become subject to new governmental regulations in connection with our investments and acquisitions, which could result in increased costs andnew strategic risks. Any of these risks may materially and adversely affect our business, financial condition and results of operations.18Table of ContentsWe have a limited operating history for some of our businesses. We have a limited operating history upon which to evaluate the viability and sustainability of our businesses, in particular our e-commerce business in newermarkets that may be very different from Southeast Asia and Taiwan, our digital financial services business, and new game genres and markets for our digitalentertainment business. In particular, our history of operating our SeaMoney business in its current business model with its services and product offerings isrelatively short. Our historical results may not be indicative of our future performance and you should consider our future prospects in light of the risks anduncertainties we face operating in a fast evolving digital financial services industry in certain markets. Our businesses involve third parties over whose actions we have no control. Each of our e-commerce, digital entertainment and digital financial services businesses involves the participation of third parties such as third-party gamedevelopers, owners of other third-party intellectual properties, users who generate content on our platforms, including livestreaming or other real-time contentdissemination, sellers and merchants who own the content and services offered through our platforms, as well as intermediaries and other third-party serviceproviders. We rely on a number of third-party channels to provide content and services to our users, as well as performing other functions of our platform. Forexample, we primarily rely on third-party application distribution channels, such as the iOS App Store and the Google Play Store, to allow users to download andaccess our applications and games. If our third-party distribution channels voluntarily or involuntarily suspend their services to us, including taking down orremoving our applications in response to government actions or other legal action or pursuant to their own policies, and we are unable to arrange for alternativemeasures in a timely manner or at all, our users will have difficulties accessing our applications and games or making payments for our products and services.Consequently, we will lose users temporarily or permanently, and our financial results could be materially and adversely affected.We may not be able to control the actions of these or other third parties and thus are subject to various risks associated with working with or relying on thirdparties in our businesses, including:•risks relating to third-party sellers on our platforms and merchant partners, including deficiencies in the quality of products, misrepresentation ofproducts, listing of restricted or prohibited products, and potential intellectual property issues (see “—We may be subject to intellectual property-relatedrisks”); •risks relating to third-party publishing or distribution channels we use to make our applications available for download, such as the iOS App Store andthe Google Play Store; •risks relating to user generated content in our games (see “—We rely on third-party game developers for some of our digital entertainment content andalso allow our users to contribute and interact with user generated content”), e-commerce platform, or other platforms, including livestreaming content orother content posted in real-time that may be illegal, obscene, defamatory, infringing or otherwise inappropriate or unlawful; •risks relating to third-party payment service providers we depend on to provide users with various payment options or mobile wallet top-up options,such as the iOS App Store and the Google Play Store, payment on delivery, bank transfers, direct carrier billing, credit cards, debit cards,telecommunication card top-up and payment through other third-party payment services; •risks relating to services by third-party logistics service providers (see “—We face risks related to logistics and fulfillment”); •risks relating to third party collection agents in relation to our credit products and loans receivable; •risks relating to manpower agencies and independent contractors (see “—We face manpower-related risks”); •risks relating to business process outsourcing vendors, including customer service agents; 19Table of Contents•risks relating to users’ personal data that is received or used by third parties in connection with our services, such as when sellers or third-party logisticsproviders receive user information in connection with order fulfillment; •risks relating to third party banks, insurance and wealth management service providers providing services on our platforms. If such third party serviceproviders engage in activities that are negligent, fraudulent, or otherwise harm the interest of users subscribing to such services or products through ourplatforms, we may be subject to legal and financial harm, including potential contractual or non-contractual liability, reputational damage, litigation riskand/or user loss even if due to actions or activities not related to, attributable to or caused by us, or within our control; •risks relating to users of our services or platforms who engage in fraud or other conduct that violates our terms of service, other policies, or the law; •risks relating to our business and/or banking partners or counterparties being sanctioned and/or otherwise being found to have violated our agreements,other policies, or the law; •risks relating to third-party data center providers and cloud services for the storing of data from our users and operations, including any risks relating tousers’ personal data hosted by such service providers. In addition, we do not control the operation of these facilities and rely on contracts to employtheir use. The owners of the data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If weare unable to renew these agreements on commercially reasonable terms, we may be required to transfer our servers and other infrastructure to new datacenter facilities, or change to other service providers, and we may incur significant costs and possible lengthy service interruptions in connection withdoing so; and •damage to our reputation if third parties on our platforms or our other business partners do not properly perform their functions and negatively affectour users’ experience with our platforms. Although we take efforts to prevent third parties from engaging in prohibited conduct via the content available on our platforms, we may not detect everyunlawful, improper or fraudulent third-party action. In some of our markets, we may be liable for certain third-party conduct under local law, including if users commitfraud or cause other users of our services to incur losses. While we have agreements with some of these parties that obligate them to carry out their respectivedealings in a lawful and professional manner and to indemnify us for losses subject to applicable laws, any legal protection we may have could be insufficient tocompensate us for our losses or may not repair the damage to our reputation. If any of our third-party service providers and channel providers delivers unsatisfactory service, engages in fraudulent or prohibited actions, or is unable orrefuses to continue to provide its services to us and our users for any reason, our business, financial condition and results of operations may be materially andadversely affected. Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars. We operate in multiple markets, which exposes us to the effects of fluctuations in currency exchange rates as we report our financials and key operationalmetrics in U.S. dollars. We earn revenue denominated in local currencies of our markets in Southeast Asia, Taiwan and Brazil, among other currencies, while some ofour costs and expenses are paid in other foreign currencies. We generally pay license fees to game developers in U.S. dollars, and incur expenses for employeecompensation and other operating expenses in the local currencies in the markets in which we operate. From time to time, we may pay acquisition considerations inU.S. dollars. We do not rely on any single currency as we earn revenue in different local currencies across our markets and keep a significant cash position in U.S.dollars. However, fluctuations in the exchange rates among the various currencies that we use could cause fluctuations in our operational and financial results. Ourexpenses may become higher and our revenue and operating metrics may become lower than would be the case if exchange rates were stable or if we were operatingand reporting in one currency. Movements in foreign currency exchange rates may have a material adverse effect on our results of operations, which may cause ourfinancial and operational metrics reported in U.S. dollars to be not fully representative of our underlying business performance. A significant amount of our revenueand some of our operating metrics are denominated in certain local currencies that have been subject to significant volatility in the past. Because fluctuations in thevalue of these local currencies are not necessarily correlated, our results of operations in any period may be adversely affected by such volatility. See “Item 5.Operating and Financial Review and Prospects—A. Operating Results—Major Factors Affecting Our Results of Operations” and “Item 11. Quantitative andQualitative Disclosures About Market Risk.” 20Table of ContentsWe may enter into foreign exchange derivatives transactions and incur relevant costs from time to time to manage our exposure to exchange rate risk. Suchderivatives transactions while intended to be non-speculative, are designed to protect us against increases or decreases in exchange rates, but not both. If we enteredinto derivatives transactions to protect against, for example, decreases in the value of a local currency and such local currency instead increases in value, we mayincur financial losses. Such losses could materially and adversely affect our financial condition and results of operations. We may be subject to intellectual property-related risks. We rely on a wide portfolio of intellectual properties to operate our businesses. We may not be able to effectively protect these intellectual properties againstinfringement, or efforts to safeguard our intellectual properties may be costly. We rely on a combination of trademark, patent, fair trade practice, copyright and trade secret protection laws, as well as confidentiality procedures andcontractual provisions, to protect our intellectual properties. We also enter into confidentiality agreements with our employees and any third parties who may accessour proprietary information, and we rigorously control access to our proprietary technology and information. Our intellectual property protection measures may not besufficient, and confidentiality agreements may be breached by counterparties. There may not be adequate remedies available to us for any such infringement orbreach. For example, in the event any third-party game developer, publisher or hacking group infringes the copyright of our self-developed game, our users may loseinterest in our games. In addition, policing any unauthorized use of our intellectual properties is difficult, time-consuming and costly, and the steps we take may beinadequate to prevent the misappropriation of our intellectual properties. In the event that we resort to litigation to enforce our intellectual property rights, suchlitigation could result in substantial costs and a diversion of our managerial and financial resources. We may not prevail in such litigation. In addition, our tradesecrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectualproperty rights could have a material adverse effect on our business, financial condition and results of operations. From time to time we receive notices from third parties or are named in lawsuits by third parties alleging infringement of their proprietary intellectual propertyrights or in connection with claims relating to our content, products or marketing activities. For example, with respect to our e-commerce business, we receivecomplaints alleging that items offered on or sold through our Shopee platform infringe third-party copyrights, trademarks and patents or other intellectual propertyrights, or contain obscene, defamatory or libelous content. Although we have adopted measures to reduce infringements or offense by product listings on our Shopeeplatform before they appear on the marketplace, these efforts may not always be successful. In January 2023, the Office of the U.S. Trade Representative, or USTR,published its latest annual Review of Notorious Markets for Counterfeiting and Piracy, which identified the Shopee platform in several of our markets as “notoriousmarkets.” The USTR may continue to identify those Shopee markets as notorious markets, and the USTR may identify other Shopee markets as notorious markets inthe future. In December 2020, the European Commission placed Shopee on its Counterfeit and Piracy Watch List. Any public perception that counterfeit, pirated, orotherwise inappropriate or illegal items are commonplace on Shopee, even if factually incorrect, or perceived delays in our removal of these items could damage ourreputation and result in regulatory action against us and diminish the value of our brand name. We may be subject to allegations of civil or criminal liability for allegedintellectual property infringement, including based on allegedly unlawful activities carried out by third parties through our platforms. We may also be subject to finesor sanctions by local authorities for infringing products or improper content offered on our marketplace, including requiring the removal of the infringing products or atemporary or permanent block of our platform. We may implement further measures to protect users and ourselves against potential intellectual property liabilities, and these measures could cost ussubstantial additional resources or require us to discontinue certain service offerings. In addition, these measures may reduce the attractiveness of our platforms tousers. For example, a seller whose listings are removed or suspended by us, regardless of our compliance with the applicable laws, rules and regulations, may disputeour actions and commence action against us for damages based on breach of contract or other causes of action or make public complaints or allegations. Any costsincurred as a result of such liability or asserted liability could also harm our business. 21Table of ContentsAs the number of interactive games increases and the features and content of these games continue to overlap, software developers and distributors haveincreasingly become subject to infringement claims. Some of our game content is highly realistic and features materials that are based on real‑world objects or people,which may also be the subject of claims of infringement, including right of publicity, copyright, trademark and unfair competition claims. Despite any steps taken by usto avoid knowingly violating the intellectual property rights of others, third parties may still claim that content we develop or license from third parties infringes theirintellectual property rights. We received intellectual property related claims in the past. In addition, as we begin to allow user generated content on our platforms, wemay also become subject to third party claims relating to such content. Any such claims, whether or not meritorious, that we need to defend or litigation we take to enforce our intellectual property rights may be time-consuming,distracting to management and costly, and we may not prevail in any such litigation. We may also be forced to stop distributing, cease using or redesign the relevantcontent or product, obtain a license from the claimant, which, if available at all, may not be available on commercially favorable terms. We may be liable for security breaches and attacks against our or our third-party partners’ platforms and network, particularly with regard to confidential userinformation and personal or other data or any other privacy or data protection compliance issue, and our platforms and games may contain unforeseen “bugs”or errors. Our business stores, generates and processes a large amount of data, including personal data and payment information from users, and any failure to preventor mitigate security breaches and the improper access, use or disclosure of such data could impact our operations negatively and harm our reputation. We alsomaintain certain other proprietary and confidential data relating to our business and personal data of our consumers and personnel. Although we have employedsignificant resources to develop and implement security measures aimed at preventing breaches, our cybersecurity and data protection measures have not and maynot detect or prevent all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, malicious software, physical or electronic break-ins, phishing attacks, data leaks, social engineering, security breaches or other attacks and similar disruptions and fraudulent behavior or improper use by ouremployees or third party partners that may jeopardize the security of information stored in and transmitted by our systems or that we otherwise maintain. Any securitybreach, including personal data breaches or incidents, including cybersecurity incidents, could result in unauthorized access to our systems or a user’s system,misappropriation of our or a user’s information or data, loss, corruption or alteration of such data, financial loss, deletion or modification of user information, damageto our systems or those of our users, or a denial-of-service or other interruption to our business operations. Any such incidents could impact our operations andcould expose us to claims, litigation, regulatory or other governmental investigations, administrative fines, and potential liability, as well as remediation costs andincreased cybersecurity and/or data protection costs. We have in the past been and are likely again in the future to be subject to these types of attacks and securitybreaches. As techniques used to obtain unauthorized access to or otherwise breach or sabotage systems change frequently, we may not be aware that we have beenattacked and we may be unable to anticipate or implement adequate measures to protect against these security breaches until they have been launched against us, ourplatforms or services, our users or our third-party service providers. We may not have the resources, technical sophistication, or ability to anticipate or prevent rapidlyevolving or sophisticated types of cyberattack or other types of security breaches. In addition, our confidential or proprietary information or our users’ personal dataor payment information may, in some instances, be stored or processed by certain third-party partners, which poses similar risks. If an actual or perceived breach ofour or our third-party partners’ security occurs, public perception of the effectiveness of our security measures and brand could be harmed, demand for our platformsor services may be reduced, our operations may be disrupted, we may incur significant legal liabilities, financial loss, and remediation costs, and our business could bematerially and adversely affected. While we take measures to require third-party service providers to adopt necessary security measures and to protect against databreaches in accordance with applicable laws and regulations, we also face similar risks where personal data is shared with third-party service providers. If our thirdparty partners engage in activities that are negligent, fraudulent, illegal or otherwise harm the trustworthiness and security of our platforms, including improperdisclosure or use of user data, or if our third party partners otherwise fail to meet their data security and privacy obligations, or users are otherwise dissatisfied withtheir service quality on or off our platforms, we may be subject to user complaints and suffer reputational harm, even if due to actions or activities not related to,attributable to or caused by us, or within our control. Any compromise of our or our third-party partners’ security or data could have a series of significantconsequences, ranging from violation of applicable security, privacy or data protection, consumer and other laws, regulatory or other governmental investigations,enforcement actions, to other legal and financial exposure, including potential contractual liability, reputational damage, litigation risk and/or user loss. 22Table of ContentsOur platforms services, applications, websites and games have in the past contained and may in the future contain errors or “bugs” that are not detecteduntil after the applications, products or services are published or released. Any such errors or a significant unavailability of our platforms, services or games or anybreach of users’ data protection rights due to these errors or “bugs” could affect the overall user experience, which could cause users to reduce their time on orinterest in our platforms, services or games, or not recommend our content and services to others. Such errors could also result in non-compliance with applicablelaws and regulations, cause financial loss, or create legal liability for us. Resolving such errors could also disrupt our operations, cause us to divert resources fromother matters, or materially harm our business, financial condition and results of operations. In addition, “cheating” programs or other unauthorized software tools andmodifications that enable players to cheat in games harm the experience of players who play fairly and could negatively impact the volume of purchases of in-gameitems. Also, vulnerabilities in the design of our products, services and of the platforms on which they run could be discovered after their release and exploited bymalicious actors before they are remedied. This may lead to loss of revenues or increased cost of developing technological measures to respond to these, either ofwhich could negatively affect our business, financial condition and results of operations. We collect, process, transmit, and store personal information in connection with the operation of our businesses and are subject to complex and evolvinginternational laws and regulations regarding privacy and data protection.Our businesses are subject to a number of data protection laws and requirements in the markets in which we operate and where our users, merchant partners,customers and other participants are located. In addition, certain of our digital financial services businesses may be subject to more stringent and restrictive bankingsecrecy laws or other heightened requirements with respect to customer data. We are also subject to agreements with third parties such as Apple, Google, Facebookand others that place conditions and requirements on the data collected via their services. As we continue to operate internationally and as laws continue to evolveand change, we will be subject to additional data protection laws and requirements. The privacy and data protection related laws, rules and regulations of jurisdictionswe operate in may change or evolve to become more comprehensive or restrictive as compared to laws, rules and regulations we are currently subject to. In addition,such laws, rules and regulations, including any penalties, may differ or be inconsistent from jurisdiction to jurisdiction. Complying with privacy and data protectionrelated laws, rules and regulations for an increasing number of jurisdictions could require significant resources and costs. Such laws, rules and regulations may alsorestrict the transfer of data across jurisdictions, require data localization, require us to obtain user consent for the use and collection of their data, to delete or limit theprocessing of their data, and require us not to sell or engage in marketing data with respect to certain users, among other things, which may impose additional andsubstantial operational, administrative and compliance burdens on us, and may also restrict our operations and expansions in new markets. The costs to comply with,or our actual or perceived failure to comply with, new or changing laws, rules and regulations regarding privacy and data protection, privacy and data protection laws,rules and regulations in new markets, and/or contractual obligations related to privacy and data protection may adversely affect our business, financial condition andresults of operation. We may also face potentially significant fines, reputational loss and customer loss, and may be subject to proceedings or actions against us bygovernmental entities, consumers or others relating to privacy and data protection. Risks Related to Our E-Commerce Business We face uncertainties relating to the growth and profitability of the e-commerce industry in our markets and we may face challenges and uncertainties inimplementing our e-commerce strategy. Our future results of operations and ability to grow our platforms and to sustain or increase profitability will depend on numerous factors affecting thedevelopment of the e-commerce retail industry in our markets, which may be beyond our control. These factors include: 23Table of Contents•the growth rate of internet, broadband, personal computer and smartphone penetration and usage in our markets, including any changes or fluctuationsin growth rates and/or usage; •the trust and confidence level of e-commerce consumers, as well as changes in customer demographics and consumer tastes and preferences; •the selection, pricing and popularity of products that online sellers offer; •attracting and retaining a wide range of merchants, brands and retailers; •providing effective technologies, infrastructure and services that meet the evolving needs of consumers and merchants; •economic landscape, macro-economics, and consumer discretionary spending; •whether alternative retail channels or business models that better address the needs or preferences of consumers emerge, including social commerce ormulti-category service e-commerce platforms; •the differing and quickly changing laws and regulations applicable to e-commerce businesses in our markets, including any required licenses or permits,exposure to additional liability, including for conduct by or content originating from third parties, and new labor legislation or changes to anyemployment or independent contractor classification frameworks; and •the development of logistics (especially last-mile delivery and warehousing infrastructure), payment and other ancillary services associated with e-commerce. Our e-commerce revenue is currently concentrated, with our top three markets accounting for nearly half of our total e-commerce revenue. If we were toexperience a material decline in Shopee’s major markets, especially those profitable or near profitable markets, or we are prohibited from operating or subject torestrictions limiting our operations in such markets, it could materially and adversely affect our financial results and the prospects and profitability of our e-commercebusiness. Our investments and future investments in new markets may not generate sufficient user engagement or revenues to justify continued investment. We maynot gain market share in such new markets or turn profitable. We face risks related to logistics and fulfillment. We rely on our own logistics operations as well as third-party logistics service providers to deliver Shopee’s orders. Interruptions or failures in such logisticsservices could prevent the timely delivery of Shopee’s orders. These interruptions or failures may be due to unforeseen events that are beyond our control or thecontrol of our third-party logistics service providers, such as inclement weather, natural disasters, virus outbreaks, transportation disruptions or labor unrest,government inspections or regulatory orders mandating service halts or temporary or permanent shutdowns or due to fraud, theft or other individual wrongdoings.Our logistics operations as well as third-party logistics service providers are subject to risks associated with transportation safety, fraud, theft, robbery, or othernatural events or human errors, which may result in personal injury loss or damage to the parcels or other consequences. If Shopee’s orders are not delivered on timeor are delivered in a damaged state, our users may have less confidence in our services. We have in the past received customer complaints from time to time regardingour delivery services. Further, we may incur additional costs and may not be able to pass such costs to our users. As we continue to develop our last-mile delivery and warehousing capacity as well as expand the categories of services we offer through our e-commerceplatform, we expect these developments to potentially require additional capital expenditures or increase our operating expenses. In addition, we may acquire land orland use rights to build warehouses and to support such capabilities, which may expose us to risks relating to declining real estate value and construction risks. If wefail to accurately predict demand for such services, or accurately adjust our operations in response to evolving business needs and economic and regulatoryconditions, we may suffer increased costs or impairment charges. Any such adjustments may also not achieve their desired or expected results. The development ofour logistics and fulfillment capabilities may also become increasingly complex and challenging to operate as it expands, and we may not be able to acquire land, landuse rights, set up warehouses, or lease suitable facilities to directly handle delivery of products to our customers, on commercially acceptable terms or at all. 24Table of ContentsWe may be held liable for actions by our marketplace participants. With the increasing use of e-commerce marketplaces and development of legislation in different markets towards e-commerce marketplaces, proposed andnewly enacted laws as well as recent court decisions in certain markets may increase our liability as a marketplace platform for the actions of, content created by,and/or products sold by third party sellers that use our Shopee platform. For example, the issuance of Decree 85/2021/ND-CP, or Decree 85, in Vietnam makes e-commerce platforms jointly liable to the buyer under certain circumstances if they fail to comply with the requirements of Decree 85 such as taking remedial measuresupon detection or receipt of reports of goods or services that violate local laws, or to support the relevant authorities in Vietnam in investigating and handling illegalacts and settling disputes. We may also be held directly or secondarily liable for intellectual property infringement, product related claims or consumer protectiondeficiencies, privacy and data protection incidents, regulatory violations by sellers, or other similar conduct of sellers over which we have limited or no influence orcontrol. As Shopee is readily identifiable, buyers may seek claims against us rather than the seller, which in the aggregate could be costly to defend. We also receiveinquiries or demands from regulators and law enforcement regarding defective, unregistered, unlicensed or fraudulent products sold by sellers through our Shopeeplatform. We have developed robust consumer protection policies and procedures focused on requiring sellers to comply with applicable laws and creating a secureand reliable shopping environment for our buyers. When these policies and procedures are circumvented or fail to operate sufficiently, our business could beadversely impacted and our reputation could be harmed. In addition, we could face civil or criminal liability for unlawful activities by our sellers. We may suffer losses relating to the products we sell on Shopee. In connection with our direct sales and certain value-added services on our Shopee platform, we purchase certain products from manufacturers and thirdparties and subsequently sell such products on our Shopee platform. This subjects us to risks relating to such products and to managing our inventory turnover. Wedepend on our forecasts of demand and popularity for a variety of products to make decisions regarding product purchases. Our customers may not order products atthe levels expected by us due to our failure to forecast accurately, unfavorable market conditions or changes in consumer trends. In addition, if the supply of productsfrom manufacturers and third parties deteriorates, we may be unable to obtain the products that buyers want to purchase. Manufacturers and third parties maydiscontinue selling products due to factors that may or may not be within our control. Our inability to secure timely and sufficient supplies of products wouldnegatively affect inventory levels and our platform popularity. We do not always have the right to return unsold items to sellers or suppliers. If we fail to efficientlymanage our inventory, we may suffer losses. We may also be subject to legal claims in relation to such products or the conduct of our sellers from time to time. Wecannot guarantee that all products we purchase for direct sale are of the quality expected by our buyers. If buyers have any disputes with us regarding the productswe sell, including disputes relating to product quality or authenticity, we may suffer reputational loss or liability and may need to incur additional costs to addresssuch disputes, which in turn may adversely affect our business and results of operations. Risks Related to Our Digital Entertainment Business We derive a significant portion of digital entertainment revenue and gross profit from a limited number of online games. In 2020, 2021 and 2022, our digital entertainment business contributed 46.1%, 43.4% and 31.1% of our total revenue, respectively. In addition, our gross profitin 2020, 2021 and 2022 was significantly attributable to the positive impact of our digital entertainment business. With many economies reopening further in 2022, wehave observed ongoing moderation in user engagement and monetization. 25Table of ContentsAmong our online games, we substantially depend on a small number of popular games, including our first fully self-developed game, Free Fire, a globalpopular battle royale type of mobile game, which was launched in December 2017. In 2022, our top five games, comprising Free Fire and games licensed to us by third-party game developers, contributed 97.9% of our digital entertainment revenue, among which Free Fire contributed a significant portion. If we are unable to identify,source, develop and launch new games titles that gain widespread popularity and generate significant revenue, our revenue and revenue growth may continue todepend on the success of just a few game titles. Our digital entertainment revenue decreased by 10.3% from US$4.3 billion in 2021 to US$3.9 billion in 2022, primarilyattributable to the ongoing moderation in user engagement and monetization. Any negative developments or occurrences to any of our key revenue-earning gamesincluding Free Fire, such as decline in popularity, content quality issues, competing products, content restrictions, government actions, regulatory or legal changesthat affect our ability to monetize our games, reductions in consumer spending and engagement levels, delay or failure in producing new engaging content, or real orperceived security risks could lead to material decline or slower growth. We may also select and invest significant financial and human resources in games that laterprove unsuccessful. There may also be unforeseen delays in the launch of new games. If we are unable to source or launch new popular games in a timely manner, ourgame players may seek entertainment elsewhere. As the gross margin of self-developed game content tends to be higher than that of content licensed from thirdparties, any fluctuations in the mix of our revenue generated from self-developed game content and licensed game content may also affect our profitability. We have a limited track record in game development and global game distribution. While we have developed Free Fire, we are still relatively new to game development outside of Free Fire. We may be unable to continue to identify marketopportunities and develop new games, and subsequent self-developed games may not always have the same or comparable levels of success. Development of newgames requires considerable cost and resources, including research, testing, marketing, infrastructure and staff expenses. Free Fire is currently available in more than 130 markets. Any self-developed games we may develop in the future may also be offered in multiple jurisdictions.Future growth of our digital entertainment business, including through our self-developed games, may subject us to additional regulatory and compliancerequirements and other new risks. We may have to adopt differing methods and processes to adhere to each jurisdiction’s laws and regulations, which could result inundue delays in launching such self-developed games or increased costs. We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with user generatedcontent. We license many of our online games from third-party game developers. The term of our game license agreements with game developers typically ranges fromtwo to seven years, renewable upon both parties’ consent. However, we may not be able to develop or procure new games or renew existing licenses on termsacceptable to us. Our game developer partners may terminate our agreements prior to their expiration if we are not in compliance with the relevant terms or conditionsand we fail to remedy such non-compliance in time, or they may refuse to renew the agreements. Any failure on our part to effectively localize, operate, market ormonetize their games, safeguard their intellectual properties, or otherwise perform our obligations under the license agreements may cause substantial harm to ourrelationships with game developers, who may then choose other game operators to distribute their games. Some of our most popular games are owned or developed by Tencent Holdings Limited and its affiliates, or Tencent, one of our shareholders. In November2018, we obtained a right of first refusal from Tencent to publish its mobile and PC games in Indonesia, Taiwan, Thailand, the Philippines, Malaysia and Singapore,subject to certain terms and conditions. The term of this right of first refusal is for an initial term of five years, with an automatic renewal option for further 2-year termswith 3-months’ notice, unless terminated. Although we have already launched certain games under such right of first refusal arrangement, there is no guarantee thatwe will continue to publish the existing games or publish more games under such right of first refusal arrangement or renew such contract on terms satisfactory to usor at all, or that any games published under such arrangement will yield a positive result. As part of our continued efforts to encourage user participation and user content creation, we have recently introduced and begun to explore game featuresthat enable users to contribute and interact with user generated content. While we believe the move towards having more user generated content is aligned with majoremerging industry trends, we are unable to predict and cannot guarantee that such features in our existing or new games will contribute to the penetration orprofitability of our games or achieve their desired or expected results. 26Table of Contents In certain circumstances, the actions of our third-party game developers and content creators or contributors which are beyond our control could materiallyand adversely affect the success of our games, causing our games revenue to fluctuate or even be lower than expected. These actions by game developers couldinclude software updates resulting in adverse changes in gameplay that are poorly received by our users, game or update releases with insufficient content to attractusers or maintain the level of their engagement, or delays in any release of anticipated games in our pipeline or game updates. User-generated content features make itrelatively easy for developers, content creators or contributors, and other users to upload and contribute content, which may result in content moderation challenges,including the possibility that infringing or inappropriate content is added to our games or platforms. There is no guarantee that we will be able to successfullyimplement policies or procedures to moderate user generated content or identity and block infringing or inappropriate content before it is uploaded and/or beforeother users view it, which could lead to legal or regulatory actions being taken against our games or platforms and/or user complaints and litigations. Our games are subject to scrutiny regarding the appropriateness of their content. Our games are subject to reviews, ratings, age restrictions or other restrictions for example on processing of data of minors or on content, advertisement ordistribution mandated by laws in some of our markets or ratings by third-party application distribution channels. For example, in Vietnam, online game publishers arerequired to obtain certain licenses, approval on game content, certificate and/or acknowledgement of announcement from the competent authority, depending on theclassification of each game to be provided to the market. In Thailand, applications to publish online games need to be reviewed and approved by the Thailand Filmand Video Censorship Committee. Apple uses its own proprietary app rating system and Google Play uses the International Age Rating Coalition (IARC) ratingsystem. If we are unable to obtain the ratings we have targeted for our games, it could delay the launch or upgrade of our games. Legislation or regulations may be introduced in our markets to impose age, spending or playtime restrictions or to allow government censorship or toestablish a system for protecting users from the potential influence of graphic violence, gaming addiction or other objectionable elements contained in various typesof games. Some of our games may be subject to stricter regulations caused by government actions or legal proceedings, including those imposed against otherdevelopers’ games which are in the same genre as ours, and these restrictions may vary by jurisdiction. We may be required to modify our game content or features oralter our marketing or monetization strategies to comply with new governmental regulations or ratings assigned to our current or future games, which could delay orprohibit the release of new games or upgrades and reduce the existing and potential scope of our user base. We may also be required to modify or remove certaingame features to react to government actions, court decisions such as injunctions or complaints from activist groups or organizations. If we are required or elect to doso, it could adversely affect our monetization, user base and financial results. If any of our key games, including Free Fire, is banned or temporarily suspended by anygovernment, court or distribution channels, our business, financial condition and results of operations may be materially and adversely affected. The WHO’s Eleventh Revision of the International Classification of Diseases (ICD-11) lists gaming addiction as a disorder. While the effects of gaming andwhether gaming addiction is a disorder continues to be discussed and researched by health officials and others, the WHO and other governments may continue totake measures against gaming addiction, such as imposing gaming curfews or spending limits for minors and establishing treatment programs aimed at addressinggaming addiction. There are increasing discussions in many jurisdictions globally regarding whether certain game mechanics, such as loot boxes, should be subject to a higherlevel or different type of regulation to protect consumers. Some jurisdictions have seen enforcement or actions initiated by activist groups or organizations to protectconsumers, in particular minors and other susceptible persons. For example, in February 2021, the National Association of Centers for the Defense of the Rights ofChildren and Adolescents in Brazil, or ANCED Brazil, a youth rights group in Brazil, filed lawsuits against a number of electronic games companies and distributionplatforms, including our gaming entity in Brazil, in a court dedicated to resolving matters concerning children and adolescents regarding alleged loot box mechanismsin the games. In addition, to the extent Apple, Google, or any of our other platform providers or game distribution channels restrict the use of loot boxes or similarmechanism in games, we may need to adjust our game content or monetization strategy in order to continue distribution on such platforms or channels, which maycause a decline in the revenues generated from these games and require us to incur additional costs. If new or amended legislations or regulations, which may varysignificantly across jurisdictions and which we may be required to comply with, require certain game mechanics of our games to be modified or removed, suchrequirements would increase the costs of operating our games, impact player engagement and monetization, or may otherwise harm our business performance. Inaddition, the increased attention focused on potential liability issues or alleged harms as a result of any lawsuits and legislative proposals could harm our reputationor otherwise impact our business. 27Table of ContentsAs debate in the industry continues, we cannot predict the likelihood, timing, scope or terms of gaming related laws or regulations in our markets, or theextent to which implementation or public reactions of such laws or regulations (including lawsuits brought against game companies by alleged victims of gamingaddiction or other issues relating to gaming content) may adversely affect our reputation and business. We may need to adjust our game content or monetizationstrategy to respond to local legal or regulatory requirements. Moreover, public dialogue concerning online games may have an adverse impact on our reputation andusers’ willingness to play our games. Any costs incurred as a result of this potential liability or reputational concerns could harm our business, financial condition andresults of operations. Risks Related to Our Digital Financial Services Business We face uncertainties and risks relating to our digital financial services business. Although there are trends of uptick of digital financial services and products across the globe, there is no certainty that this will continue or will result inwidespread market acceptance of our digital financial services and products across all or any of the markets in which we operate. We may be unable to achieve therequired level of market acceptance in order for us to recoup the investment costs involved in developing and launching our digital financial services and products orto bear the associated risks involved in providing such services and products. Our ability to achieve or maintain market acceptance for our digital financial servicesand products are affected by a number of factors, such as the community’s lack of trust in digital financial services and products being provided by a company that isnot a traditional financial institution, entrenched preferences in traditional payment methods, insufficient use cases for our digital payment services and lack ofinfrastructure support locally. Even if there is adequate acceptance of our digital financial services and products, we continue to be subject to a quickly changingregulatory environment for such services and to the changing needs and demands of users, which may change for a multitude of reasons such as availability ofalternative payment methods that are more popular or widely accepted. If we are found or alleged to be non-compliant, we may suffer financial and reputationaldamage, and may be required to modify our operations or stop offering our products and services, among other things that could negatively impact our business.While we endeavor to consistently increase demand for our digital financial services and products by broadening and improving our use cases and product offerings,we cannot predict with certainty the reasons for the changes in user demands, and the consequential effects of such changes on our business. In addition to other relevant risk factors described herein, our mobile wallet business is subject to other risks including: (i) changes to rules or practicesapplicable to payment systems that link to our mobile wallet, (ii) increasing costs, including fees charged by banks to process transactions through our mobile wallet,and (iii) failure to manage user funds accurately or loss of user funds, whether due to employee fraud, security breaches, technical errors or otherwise. Other paymentcard schemes that link to our mobile wallet may impose special assessments for transactions that are executed through a mobile wallet and these fees couldsignificantly increase our costs. Most of our digital financial services product offerings have a limited operating history and face inherent uncertainties with regard to operations andprofitability. In addition, our digital financial services business faces intense competition with existing services providers and other new entrants. Our competitors mayhave greater experience in the financial services sector and greater resources than we have. To attract users, we may have to create differentiated product and servicesofferings or offer incentives. Our current or future digital financial products and services may not be successful or generate sufficient revenue to cover the costs andexpenses of their launch and development. We face risks related to our lending and consumer and merchant credit businesses. As we further diversify our credit product offerings and services and our business scale remains large or further increase, we may require additional funds,explore alternative funding methods such as partnering with external funding providers or consider securitization of our credit portfolio. If our capital is insufficient tomeet the demand or, in the case of our lending business, any applicable regulatory or capital requirements, due to lack of internal resources or alternative fundingoptions, it may affect our credit product or loan offering capabilities, lead to loss of users, borrowers or slower growth, and constrain our working capital. 28Table of ContentsThese services will also expose us to risks and liabilities, including credit risks relating to the borrowers who may be individuals or commercial customers,and counterparty risks in dealing with potential business partners. We rely on, among other things, the information and knowledge we gain from our existingbusinesses to build the strategy of our credit and loan products and assess the creditworthiness of potential borrowers. Our ability to assess creditworthiness may beimpaired if the strategies or policies we use to manage our credit risks do not achieve their desired effect, which could lead to, for instance, loans being issued to userswho may have higher than expected default or delinquency risks. Even if our information collection, strategy and policy are all appropriate, other factors such asmacro-economic or unexpected incidents may still affect our borrowers’ ability to repay. High rates of delinquency or default may occur, which could negatively affectour business, financial condition and results of operations. Interest rates we charge may not be sufficient to cover our costs and expenses in providing the loans,including the costs associated with borrower defaults. Moreover, upon a borrower’s default, we may need to devote internal resources or engage third-partycollection agencies to collect the receivables, which may not be successful at all. If any collection personnel are involved with any misconduct or there areperceptions that our collection practices are considered to be aggressive or not compliant with relevant laws and regulations, our reputation and business may beharmed or may become subject to fines or other penalties. We currently have, or may explore, channeling and joint financing arrangements with our banking partners to fund some of our credit business and maysecuritize our consumer and merchant loans, or enter into other arrangements to fund our credit business. Any changes to, or new interpretations of, the existingregulations relating to consumer and merchant credit business and these funding activities may discourage our financing or funding partners from funding loansthrough our platform. Further, increases in interest rates could increase our cost of funding and may make our securitization products less attractive. If our financingor funding partners cease to fund the loans (whether temporary or permanent), our consumer and merchant credit business may be adversely impacted. If fewerinvestors, financing or funding partners are willing to fund the loans, the increased competition for funding and the cost of funding may increase, which mayadversely impact our results of operation. In addition, as we expand various product offerings including credit services to consumers and merchants across more markets and roll out more digitalfinancial products and services on our SeaMoney platform, including digital banking and insurtech, our limited operating history in these markets or with theseproducts and service hinders our ability to forecast and maintain appropriate capital reserves for any losses that may arise. Our banking and consumer and merchant credit businesses are subject to credit cycle volatility and risk of credit losses. As our banking and consumer and merchant credit businesses develop, our business and financial results may also become increasingly subject to creditcycle volatility and the risk of credit losses, including deterioration of the credit profile of borrowers. Our allowance for credit losses is based on our historical creditloss experience, adjusted for forward-looking factors specific to the receivables and economic environment, and the allowance we make for credit losses are calculatedon an aggregate basis for various customer segments that are considered to have similar credit characteristics and risk of loss. There are various factors used to helpus assess the credit risks of our banking and consumer and merchant credit businesses. These factors may be based on limited history or be beyond our control, andwe may be unable to accurately predict the creditworthiness of a borrower, merchant or consumer due to inaccurate assumptions. For example, credit risks may beaffected by changes in the political, economic or social environment, volatility in the financial markets resulting from bank failures and disruptions to the bankingsystem, market concerns related to the liquidity, solvency or capitalization of banks or other financial institutions, such as the availability and terms of governmentassistance to financial institutions under financial pressure and limited liquidity in accessing bank deposits, or credit cycles, rising interest rates, changes in consumerbehavior, legal or regulatory changes, and other factors. If our assessment of, assumptions used or expectations concerning the above-mentioned factors differ fromactual developments, if the quality of our total loan portfolio deteriorates, for any reason, or if future actual losses exceed our estimates of expected losses, we may berequired to increase our provisions for credit losses and/or be subject to increased liquidity risks, which may adversely impact our results of operation and financialcondition. 29Table of ContentsOur banking business may subject us to additional material business, operational, financial, legal and compliance requirements and risks. Our wholly-owned subsidiary in Singapore has been granted a digital full bank license in Singapore in December 2021. As the holder of a digital full banklicense, our Singapore digital bank is required to comply with certain licensing conditions and other regulatory requirements which include additional business,operational, financial and legal requirements. In addition, we expect to be required to meet the minimum paid-up capital requirement set by the Monetary Authority ofSingapore, or MAS, eventually reaching S$1.5 billion (US$1.1 billion) once our digital bank is fully functioning. We have in the past made, and may in the future, make investments in, acquire or partner with other parties in making investments in or acquiring licensedfinancial institutions and financial services technologies and providers, including commercial banks. For example, we acquired a controlling interest in a localcommercial bank in Indonesia in 2020, and launched SeaBank in Indonesia in the latter half of 2021. We also obtained a bank license in the Philippines, and launchedSeaBank in Philippines in March 2022. Banking business, including digital banking business, is heavily regulated and subject to various laws, regulatory requirements and guidelines imposed bythe relevant regulators. Such laws, regulations and guidelines may impose rules and/or restrictions on the type of banking products and services we offer, eligibilitycriteria of our customers, related party transactions, market entry, risk management, corporate governance, minimum capital requirements, capital adequacy, liquidityand/or regulatory ratios, and tax and accounting policies, among other things. Local authorities may have the authority to inspect our operations and conduct periodicand/or ad hoc audits of our operations to assess our compliance with the relevant regulatory requirements and guidelines. They may also have the authority toimpose fines, sanctions or order remediations. As digital banking evolves as an industry, applicable laws, regulations and guidelines may change or increase, and wemay not be able to adapt to new or revised laws, regulations and guidelines in a timely manner or at all. We are a new player in the banking industry, and have limitedexperience operating banks, including digital banks. Recent disruptions to the banking system and the surrounding speculation and uncertainty related to liquidity,solvency and capitalization of banks may negatively impact the industry’s reputation and lead to a level of distrust towards banks, especially in relation to newentrants or smaller scale players like us, which could adversely affect our banking business’ ability to access additional funds and attract more customer deposits. Inaddition, if we fail to comply with new laws, regulations or guidelines, or our strategies to develop and grow our digital bank business, including products andservices, fail to achieve their intended effect, our business, financial condition and results of operations, as well as our reputation, could be materially and adverselyaffected. We face risks related to our insurance business. Our SeaInsure business is relatively small in scale compared to our other digital financial services businesses. We act as underwriters for selective types ofinsurance products in certain of our markets and also conduct insurance brokerage business in certain of our markets. Demand for insurance depends on numerous factors, including general macro-economic conditions, regulatory constraints and competition. Negative marketconditions may impair our ability to underwrite insurance or act as brokers at rates we consider appropriate and commensurate relative to the risk assumed. Adversemarket conditions could result in a decline in policies sold, an increase in the frequency of claims and premium defaults, and an uptick in the frequency of falsificationof claims. Accordingly, we may experience periods with excess underwriting capacity and unfavorable premium rates, and if we cannot underwrite insurance atappropriate rates, our ability to transact business will be materially and adversely affected. We must accurately and timely evaluate and pay claims that are made under our policies. Many factors affect our ability to pay claims accurately and timely,including the efficacy of claims processing, and our ability to develop or select and implement appropriate procedures and systems to support our claims functions.Any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or litigation, or result in damage to our reputation, which couldmaterially and adversely affect our business, financial condition, results of operations, and prospects. If we experience higher than expected claims, our liquidity maybe constrained and our financial condition and results of operations may be adversely affected. 30Table of ContentsWe are also engaged in the insurance brokerage business in certain of our markets and derive revenues primarily from commission fees paid by the insurerpartners. Commission fee rates and premiums can change based on the prevailing economic, regulatory, taxation and competitive factors as well as consumer demandand the growing availability of alternative methods for clients to meet their risk-protection needs. We have no control over these factors and fluctuations in fee orpremium rates, and our revenues and profitability are subject to change to the extent that fee or premium rates fluctuate or trend in a particular direction. We could be held liable if our digital financial services and products are used for fraudulent, illegal or improper purposes. Despite measures we have taken and continue to take, our digital financial services and products remain susceptible to potentially illegal or improper uses,which could damage our reputation and subject us to liability. These may include the use of our payment services in connection with fraudulent sales of goods orservices, unauthorized purchases or transfers, software and other intellectual property piracy, money laundering, bank fraud and prohibited sales of restrictedproducts. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and to gain unauthorized access to other users’accounts. We could be subject to fraud or related claims if confidential information obtained from our users is used for unauthorized purposes. Our risk management policies and procedures may not be fully effective in identifying, monitoring and managing these risks. We are unable to monitor ineach case the sources of funds from users of our digital financial services and products, or the ways in which they are used. An increase in fraudulent or unlawfultransactions or publicity regarding payment disputes could harm our reputation and reduce consumer confidence in our services. The use of our products andservices for illegitimate, fraudulent, unlawful or similar transactions can also expose us to governmental and regulatory sanctions, including U.S. anti-moneylaundering and economic sanctions violations. Other Operational Risks We rely on technology and internet infrastructure, data center and cloud service providers and telecommunications networks in the markets where we operate. We are continuously upgrading our technology to provide improved performance, increased scale, security and better integration among our threebusinesses. If we experience problems with the functionality and effectiveness of our software or platforms, or are unable to maintain and constantly improve ourtechnology infrastructure to handle our business needs and ensure a consistent and acceptable level of service for our users, our business, financial condition andresults of operations, as well as our reputation, could be materially and adversely affected. In addition, our businesses depend on the performance and reliability ofour internet ecosystem and infrastructure and contracted data center and cloud service providers in the markets where we operate. Adopting new technologies andupgrading our internet ecosystem and infrastructure require significant investments of time and resources, including adding new hardware, updating software andrecruiting and training new engineers. Adverse consequences for the failure to do so may include unanticipated system disruptions, security breaches, computervirus attacks, slower response times, impaired quality of experiences for our users and delays in reporting accurate operating and financial information. The internet infrastructure in some of the markets where we operate may not support the demands associated with continued growth in internet usage. Wemay not have access to alternative networks or data servers in the event of disruptions or failures of, or other problems with, the relevant internet infrastructure.Interruptions in our services may reduce our revenue and/or subject us to potential liability. We also rely on major telecommunication operators and internet service providers in the markets where we operate to provide us with data communicationscapacity primarily through local telecommunications lines and data centers to host our servers. We and our users may not have access to alternative services in theevent of disruptions or failures of, or other problems with, the fixed telecommunications networks of these telecommunications operators, or if such operatorsotherwise fail to provide such services. Some of these operators and providers may take measures that could degrade or disrupt, as well as restrict or prohibit the useof their lines for our businesses. Any unscheduled service interruption could disrupt our operations, damage our reputation and result in a decrease in our revenue.We have no control over the costs of the services provided by the telecommunications operators to us and our users. If the prices that we pay for telecommunicationsand internet services rise significantly, our gross margins could be significantly reduced. In addition, if internet access fees or other charges to internet users increase,our user traffic may decrease, which in turn may cause our revenue to decline. 31Table of ContentsWe may fail to attract, motivate and retain the key members of our management team or other experienced and capable employees. Our future success significantly depends on the continued service of our executives and other key employees. If we lose the services of any member ofmanagement or any key personnel, we may not be able to locate a suitable or qualified replacement and we may incur additional expenses to recruit and train areplacement, which could severely disrupt our business and growth. In addition, from time to time, there may be changes in our management team that may bedisruptive to our business. We will need to identify, hire, develop, motivate and retain highly skilled employees. Identifying, recruiting, training, integrating and retaining qualifiedindividuals requires significant time, expense and attention. We may also be subject to local hiring restrictions in certain markets, particularly in connection with thehiring of foreign employees, which may affect the flexibility of our management team and workforce. If our management team, including any new hires that we make,fail to work together effectively and execute our plans and strategies, or if we are unable to recruit and retain employees effectively, our ability to achieve our strategicobjectives will be adversely affected and our business and growth prospects will be harmed. Competition for highly skilled personnel is intense. We may need to invest significant amounts of cash and equity to attract and retain new employees andwe may not be able to realize returns on these investments. We face manpower-related risks. We have a significant employee base across various markets. In addition, we rely on a contingent workforce, such as agency workers, dispatched workers,outsourced workforce and other types of arrangements, to operate our logistics, customer services and certain other operations. We may require additional manpowerduring promotional activities and holiday seasons. Our inability to effectively meet our manpower needs can hinder our ability to execute our business strategy,negatively impact cost and service levels, and adversely affect our business and results of operations. Further, our workforce may attempt, successfully or unsuccessfully, to form one or more unions or enter into collective bargaining agreements against us ortheir respective employers. Work stoppages or strikes could occur within a unionized workforce. We may be required to participate in or facilitate such unionization orcollective bargaining efforts within certain jurisdictions. These efforts could increase our costs, decrease our operational flexibility, and impact how we are able to staffour operations and supplement our workforce. In addition, the classification of certain types of contingent workforce is currently being challenged in some of ourmarkets. If, as a result of changes to law or regulation or for any other reason, we are required to reclassify our contingent workforce as employees, we may incursignificant additional expenses for manpower costs, including expenses associated with the application of wage and hour laws, benefits, social security contributions,taxes, and potential penalties. Any such reclassification may require us to fundamentally change our business model with respect to such workforce, decrease ouroperational efficiency and consequently have a material and adverse effect on our business, financial condition, results of operations and cash flows. In addition, in order to optimize our operating efficiency, we have made adjustments to a number of teams across various markets and may in the futureimplement other such adjustments. Any adjustments may yield unintended consequences and costs, such as attrition beyond the intended adjustments, and couldmake it more difficult for us to hire new personnel in the future. A failure to properly manage our operating efficiency may materially and adversely affect our business,reputation, financial condition and results of operations. We may need additional capital, but may be unable to obtain it on favorable terms or at all. We may require additional cash capital resources in order to fund future growth and the development of our businesses, including expansion of our e-commerce and digital financial service businesses and any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy ourcash requirements, we may seek to issue additional equity or debt securities, obtain new or expanded credit facilities or enter into securitization or channelingarrangements. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including market conditions, our future financial condition,results of operations, cash flows, share price performance, liquidity of international capital and lending markets, governmental regulations over foreign investment andthe e-commerce, digital entertainment and digital financial services industries in our various markets. In addition, incurring indebtedness would subject us to increaseddebt service obligations and could result in operating and financing covenants that would restrict our operations. There can be no assurance that financing will beavailable in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severelyrestrict our liquidity as well as have a material adverse effect on our business, financial condition and results of operations. Moreover, any issuance of equity orequity-linked securities could result in significant dilution to our existing shareholders. 32Table of ContentsWe may have exposure to greater than anticipated tax liabilities, and our financial position and results of operations may be adversely affected by theimplementation of legislation or internationally accepted principles. Tax legislation relating to the digital economy is still developing. Governments in our markets may promulgate or strengthen the implementation of taxregulations and impose more tax obligations on our services and product offerings, which could increase the costs to our users and merchants and make our servicesand product offerings less competitive. Shopee as the marketplace operator could potentially be required to report transactions made by sellers and other service providers through the platform tothe tax authorities in the future and may also be subject to additional tax or withholding obligations. Governments in some of our markets have discussedpromulgating or promulgated laws to require e-commerce marketplace operators to assist in the enforcement of tax requirements on sellers and collection of taxes withrespect to revenues or profits generated by sellers. If we are held responsible, whether financially or operationally for such taxes, our business, financial condition andresults of operations may be materially and adversely affected. We may also be requested by government authorities to supply information about our sellers, such astransaction records and seller’s information, and assist in the enforcement of other tax regulations, which could affect our relationships with sellers. Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many tax jurisdictions, including in our markets or in otherjurisdictions we may operate in the future. The Organization for Economic Cooperation and Development, or OECD, has published proposals to advance internationalnegotiations to ensure that large and highly profitable multinational enterprises, including digital companies, pay tax in market jurisdictions where they have businessactivities and earn profits if the prescribed threshold is met. OECD has also introduced Global Anti-Base Erosion Rules to ensure that multinational enterprises pay aminimum level of tax on the income arising in each of the jurisdictions where they operate. These actions aim to standardize and modernize global corporate tax policy,including cross-border taxes, transfer-pricing documentation rules and nexus-based tax incentive practices, and has heightened scrutiny of policies regardingcorporate income and other taxes in many jurisdictions. Tax reform legislation has been enacted, implemented or is being proposed in many such jurisdictions. Forexample, certain jurisdictions in Asia, Europe and Latin America have already enacted or are discussing new tax laws, rules and regulations directed at the digitaleconomy and multi-national businesses. Such laws may increase our tax obligations in those markets or change the manner in which we operate our businesseslocally, and may adversely affect our business, financial condition and results of operations. In addition, a number of markets have been pursuing fundamental changes to the tax laws applicable to multinational companies like us, including developingglobal OECD guidelines and enacting taxes relevant to the provision of digital services, including with respect to digital services tax, sales tax, value-added taxes,withholding taxes, tariffs, revenue-based taxes, excise taxes or other similar taxes. If these developments lead to enacted policy changes, it may have an adverse impacton our income tax expense and negatively impact our business. Possible implications may include multiple levels of taxation, additional obligations, prospectively orretrospectively, as well as imposition of interest and penalties if non-compliance is determined. Potential heightened tax law enforcement against us could have amaterial adverse effect on our business, financial condition and results of operations. 33Table of ContentsWe may not achieve the intended tax efficiencies of our corporate structure and intercompany arrangements, which could increase our worldwide effective taxrate. Our corporate structure and intercompany arrangements, including the manner in which we conduct our intercompany and related party transactions, areintended to provide us with worldwide tax efficiencies while adhering to the arm’s length principle. The application of tax laws of various jurisdictions to our businessactivities is subject to interpretation and also depends on our ability to operate our business in a manner consistent with our corporate structure and intercompanyarrangements. The tax authorities of the jurisdictions where we operate may challenge our methodologies for intercompany and related party arrangements, includingtransfer pricing. We could face adverse tax consequences if local tax authorities assert that any transactional arrangements among our group entities were not enteredinto on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under the applicable laws, rules and regulations, and adjust the incomeof such group entities in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expensedeductions recorded by our group entities for tax purposes, which could in turn increase their tax liabilities. In addition, local tax authorities may impose late paymentfees and other penalties on our entities for the adjusted but unpaid taxes according to the applicable regulations. If the manner in which we operate does not achievethe intended tax consequences, our financial condition and results of operations could be adversely affected. A certain degree of judgment is required in evaluating our tax positions and determining our provision for income taxes. In the ordinary course of business,there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rate could be adversely affected bylower than anticipated earnings in markets where we have lower statutory rates and higher than anticipated earnings in markets where we have higher statutory rates,by changes in foreign currency exchange rates or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. Any of thesefactors could materially and adversely affect our business, financial condition and results of operations. We have limited business insurance coverage. We do not have extensive insurance coverage. While we have obtained insurance to cover certain potential risks and liabilities for certain businesses weoperate, the coverage of any insurance we have may be insufficient to compensate for losses that may occur. We do not carry business interruption insurance tocover our operations. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commerciallyreasonable terms make it impractical for us to carry such insurance. Any uninsured damage to our platforms, technology infrastructures or disruption of our businessoperations could require us to incur substantial costs and divert our resources, which could have an adverse effect on our business, financial condition and results ofoperations. Industry data, projections and estimates contained in this annual report are inherently uncertain and subject to interpretation. Certain facts, forecasts and other statistics relating to the industries in which we compete contained in this annual report have been derived from varioussources, which may have used different assumptions and estimates to derive their published data. While we generally believe such sources to be reliable, we have notindependently verified the accuracy or completeness of such information. Such sources may not be prepared on a comparable basis or may not be consistent withother sources. Industry data, projections and estimates are inherently uncertain as they require certain assumptions and judgments. Moreover, geographic markets and theindustries we operate in are not rigidly defined or subject to standard definitions, and are the result of subjective interpretation. Accordingly, our use of the termsreferring to our geographic markets and industries such as e-commerce, digital entertainment and digital financial services markets may be subject to interpretation,and the resulting industry data, projections and estimates may not be reliable. Our industry and market data should be interpreted in light of the defined geographicmarkets and defined industries we operate in. Any discrepancy in interpretation could lead to different industry data, measurements, projections and estimates andresult in errors and inaccuracies. For these reasons, you should not place undue reliance on such information. Our user metrics and other estimates are subject to inherent challenges in measuring our operating performance. From time to time we disclose certain metrics, including, without limitation, our Game QAUs, Game QPUs, orders, GMV, and total payment volume, to evaluatetrends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data and have not been validated by anindependent third party. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherentchallenges in measuring how our services are used across large populations throughout our markets. For example, we believe that we cannot distinguish individualusers who have multiple accounts unless certain official individual identification information is provided to us. Our user metrics are also affected by technology oncertain mobile devices that automatically runs in the background of our applications when another phone function is used, and this activity can cause our system tomiscount the user metrics associated with such accounts. Our user metrics may also differ from estimates published by third parties or from similarly titled metrics ofour competitors due to differences in assumptions, methodologies or data used. 34Table of ContentsErrors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement oroverstatement of active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to remedy anunfavorable trend. If partners or investors do not perceive our user, geographic or other operating metrics to accurately represent our user base, or if we discovermaterial inaccuracies in our user, geographic or other operating metrics, our reputation may be seriously harmed. If we fail to maintain an effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reportingobligations or prevent fraud. As a public company, we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and determinethe effectiveness of our internal control over financial reporting, report any material weaknesses in such internal controls and for our independent registered publicaccounting firm to issue an attestation report on management’s assessment on the effectiveness of internal control over financial reporting. Our management has concluded that our internal control over financial reporting is effective as of December 31, 2022. See “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” Our independent registered public accounting firm has issued an attestation report onmanagement’s assessment on the effectiveness of internal control over financial reporting. However, if we fail to maintain an effective internal control environment, wecould suffer material misstatements in our financial statements and fail to meet our reporting obligations, which could cause investors to lose confidence in ourreported financial information. This could in turn limit our access to capital markets, and investor confidence in us and the market price of our ADSs may decline.Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potentialdelisting from the New York Stock Exchange, regulatory investigations and civil or criminal sanctions. We may be subject to risks related to litigation and regulatory proceedings. Our businesses and our directors and officers may be, and in some instances have been, subject to claims, lawsuits (including class actions and individuallawsuits), regulatory and government investigations, and other proceedings relating to alleged infringement or violation of third-party intellectual property rights,consumer protection, privacy and data protection, content restrictions, labor and employment, import and export practices, antitrust or competition, securities, tax,marketing and communications practices, contracts, commercial disputes, consumer complaints, and various other matters. The number and significance of our legaldisputes and inquiries have increased as we have grown larger, as our business has expanded in scope and geographic reach, and as our services have increased incomplexity. As a public company, our public profile has grown, which may result in increased litigation as well as increased public awareness of any such litigation. Inaddition, we may be the target of securities class action and derivative lawsuits, as well as other types of claims. We will need to defend against such lawsuits,including any appeals, and we may also initiate legal proceedings to protect our rights and interests. We may also be subject to regulatory and governmentinvestigations or actions in various jurisdictions. There is substantial uncertainty regarding the scope and application of many of the laws and regulations to whichwe are subject, which increases the risk that we will be subject to actions or claims alleging violations of those laws and regulations. Any adverse outcome could havea material adverse effect on our reputation, business, financial condition and results of operations. In particular, we will need to defend against the putative shareholder class action lawsuit described in “Item 8. Financial Information—A. ConsolidatedStatements and Other Financial Information—Legal and Administrative Proceedings,” including any appeals of such action. We are currently unable to ascertain thepossible loss or possible range of loss, if any, associated with the resolution of this lawsuit. The litigation process may utilize our cash resources and divertmanagement’s attention from the day-to-day operations of our company, all of which could materially harm our business. An adverse determination in this lawsuit,including an adverse determination on appeal in this lawsuit, may have a material adverse effect on our financial condition and results of operations. 35Table of ContentsRegardless of its outcome, any legal proceeding can have a material adverse effect on us due to costs, diversion of our resources, negative publicity andother factors. We may decide to settle legal disputes, including on terms that are unfavorable to us. If any litigation to which we are a party is resolved adversely, wemay be subject to an unfavorable judgment that we may not choose to appeal or that may not be reversed upon appeal. We may have to seek a license or settlementterms to continue practices alleged or found to be in violation of a third party’s rights. If we are required or choose to enter into royalty or licensing arrangements orother settlement terms, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As aresult, we may also be required to develop or procure alternative technology or products or discontinue the use of certain allegedly infringing technology or products,and doing so could require significant effort and expense, or may not be feasible. In addition, the terms of any settlement or judgment in connection with any legalclaims, lawsuits, or proceedings may require us to cease some or all of our operations, make changes to our business operations or other practices, terminateagreements, arrangements or transactions found to be violative of applicable laws or regulations, or pay fines or substantial amounts to the other party to thoseproceedings and could materially and adversely affect our business, financial condition and results of operations. We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not complywith existing laws and regulations. We are also subject to other risks relating to such structural arrangements. The laws and regulations in some of our markets place restrictions on foreign investment in and ownership of entities engaged in a number of businessactivities. To comply with the relevant laws and regulations, we and certain of our wholly-owned subsidiaries in the Cayman Islands and Singapore have entered intoa series of contractual arrangements with certain local entities, or VIEs, and their shareholders who are local citizens, which enable us to (i) exercise effective controlover such VIEs, (ii) receive substantially all of the economic benefits and absorb the losses of such VIEs, and (iii) have an exclusive call option to purchase all or partof the equity interests in and/or assets of such VIEs when and to the extent permitted under the relevant laws. Because of these contractual arrangements, we havecontrol over and are the primary beneficiary of such VIEs and hence consolidate their financial results under U.S. GAAP. For the year ended December 31, 2022,revenue from all our VIEs (which excludes entities for which we have majority direct equity ownership) accounted for 5.8% of our total revenue. None of our VIEs isindividually a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X. See “Item 4. Information on the Company—C. Organizational Structure—ContractualArrangements among Our VIEs, Their Shareholders and Us.” In Thailand, we conduct our business activities using a tiered shareholding structure in which direct foreign ownership in each Thai entity is less than 50%.See “Item 4. Information on the Company—C. Organizational Structure—Thailand Shareholding Structure.” As Thai laws only consider the immediate level ofshareholding, no cumulative or look-through calculation is applied to determine the foreign ownership status of a company when it has several levels of foreignshareholding. Such shareholding structure has allowed us to consolidate our Thai operating entities as our subsidiaries. While we believe the structural or contractual arrangements we use are in compliance with applicable local laws, the local or national authorities or regulatoryagencies in such jurisdictions may reach a different conclusion, which could lead to an action being brought against us, the VIEs and their shareholders byadministrative orders or in local courts. If local authorities find that our arrangements do not comply with their prohibition or restrictions on foreign investment in ourlines of business, or if the relevant government otherwise finds that we or any of our subsidiaries, VIEs or their subsidiaries are in violation of the relevant laws orregulations or lack the necessary registrations, permits or licenses to operate our businesses in such jurisdictions, they would have broad discretion in dealing withsuch violations or failures, including: •revoking the business licenses and/or operating licenses of such entities; •discontinuing or placing restrictions or onerous conditions on the operations of our VIEs or Thai subsidiaries, or on our operations through anytransactions between our company or our Cayman Islands or Singapore subsidiaries on the one hand and our VIEs, subsidiaries of such VIEs or ourThai subsidiaries on the other hand; 36Table of Contents•imposing fines, prohibiting payments by our VIEs or their shareholders to us as contemplated in the contractual arrangements with our VIEs,confiscating income from us, our Cayman Islands or Singapore subsidiaries, VIEs or Thai subsidiaries, or imposing other requirements with which suchentities may not be able to comply; •imposing criminal penalties, including fines and imprisonment on our VIEs or Thai subsidiaries, their shareholders or directors; •requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIEs and theirshareholders, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over our VIEs or Thaisubsidiaries; or •restricting or prohibiting us from providing funding to our business and operations in Vietnam and Thailand. Any of these actions could disrupt the business operations of such entity and may damage our reputation, which would in turn adversely affect ourbusiness, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of our VIEs or Thai subsidiaries thatmost significantly impact such entity’s economic performance, or prevent us from receiving the economic benefits or absorbing losses from such entity, we may not beable to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP. The shareholders of our VIEs are our local employees or other local citizens. None of these shareholders has a significant equity interest in our company andthus their interests may not be aligned with ours, or they may have other potential conflicts of interest with us. These shareholders of our VIEs may breach, or causeour VIEs to breach, the existing contractual arrangements we have with them and our VIEs, which would adversely affect our ability to effectively control our VIEs andreceive economic benefits and absorb losses from them. Currently, we do not have any arrangements to address potential conflicts of interest between theseshareholders and our company. If our VIEs or their shareholders fail to perform their respective obligations under any such contractual arrangements, fail to conducttheir operations in an acceptable manner or take other actions that are detrimental to our interests, we may incur substantial costs and expend additional resources toenforce such arrangements. We may also have to rely on legal remedies, including seeking specific performance or injunctive relief, and claiming damages. Such legalremedies may differ between jurisdictions, and may be more difficult to pursue than those available in the United States. In addition, if any third parties claim anyinterest in the equity interests of our VIEs, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may beimpaired. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of the lawswhere our VIEs are located and through arbitration, litigation or other legal proceedings and therefore will be subject to uncertainties in the legal systems in therelevant jurisdiction. Our contractual arrangements with our VIEs may not be as effective in ensuring our control over the relevant portion of our business operationsas direct ownership would be. As part of our structural arrangements with our VIEs, certain of our VIEs hold certain licenses and assets that are used in the operation of their business inthe relevant jurisdictions. If any of our VIEs go bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable tocontinue some or all of the business activities conducted by such VIEs. Under the structural arrangements, our VIEs may not, in any manner, sell, transfer, mortgage ordispose of their assets or legal or beneficial interests in the business without our prior consent. If our VIEs undergo a voluntary or involuntary liquidation proceeding,their independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate the business the VIEs currentlyconduct, which could adversely affect our business, financial condition and results of operations. There are risks relating to joint venture or partnership arrangements. We may carry out operations through joint ventures, subsidiaries that are not wholly owned by us, or other partnerships with third parties in certain markets.Such arrangements may carry a higher risk than operating through wholly owned subsidiaries. If there are disagreements between us and the other shareholders ofentities operating under such arrangements, we cannot assure you that we will be able to resolve them in a manner that will be in our best interests. We may also notbe able to make decisions as quickly as compared to wholly owned operations. These other shareholders may have interests that are inconsistent with ours. All or anysuch factors could have an adverse effect on our business, prospects, financial condition and results of operations. There may also be heightened governmentscrutiny of shareholding arrangements in industries or sectors that have foreign ownership restrictions. If local or national authorities reach a different conclusion,they would have broad discretion including imposing penalties, and the business operations of such entity could be disrupted, and our reputation may be damaged. 37Table of ContentsMARKETS RELATED RISKS Our businesses and operations in Taiwan may be materially and adversely impacted if we are deemed to be a PRC investor.There have been and remain tensions surrounding the Taiwan Strait. Such tensions may affect the economic and social activities in Taiwan, which may inturn affect our businesses and operations in Taiwan. There has historically been imposed prohibitions and restrictions on investments, directly and indirectly, by PRCinvestors in Taiwan. “PRC investors” refer to PRC individuals, juristic persons, organizations and other institutions, and PRC invested companies from otherjurisdictions. “PRC invested companies from other jurisdictions” refer to those entities incorporated outside of the PRC and invested by PRC individuals, juristicpersons, organizations and other institutions that: (i) directly or indirectly hold more than 30% of the shares or capital of such entities (each intermediate holdingcompany shall be separately assessed based on this 30% test to determine whether it is deemed a PRC invested company from other jurisdictions), or (ii) have theability to control such entities. Under the current policies on PRC investments in Taiwan, PRC investors are allowed to invest, upon prior approval, in Taiwancompanies that operate business in the statutory business categories listed as permitted in the Positive Listings promulgated by the Taiwan authorities, and areprohibited or restricted from investing in all other businesses. In addition, if a PRC investor is a juristic person, organization, or other institution invested by (a) the“political party,” military, administrative or political agency of PRC, or (b) PRC invested companies from other jurisdictions (defined in “Item 4. Information on theCompany—B. Business Overview—Regulation—Taiwan—Regulations on Foreign Investment”) invested by the agency listed in item (a) above, the Taiwanauthorities may restrict or prohibit such PRC investor from investing in businesses in Taiwan. Under Taiwan company law, a Taiwan company is required to select from a statutory list of business categories for inclusion in its corporate registrationbased on various aspects of its business operations. Some of the statutory categories currently listed in the corporate registration of our Taiwan operating entitiesinclude computer recreational activities, software publication, third-party payments, general advertising services and sales of certain medical or cosmetics relatedgoods that are not within the Positive Listings. The other statutory business categories currently listed in the business scope of the corporate registration of ourTaiwan operating entities are within the Positive Listings, including the data processing services listed in the corporate registration of our e-commerce and digitalentertainment business entities, and the software design services currently listed in the corporate registration of our digital entertainment business entity. We do not believe, based on advice from our Taiwan counsel, LCS & Partners, that we are a PRC investor under existing Taiwan law and court judgments.Therefore, we do not believe that we are prohibited from operating businesses that have statutory business categories not listed as permitted in the Positive Listingsor that we need to seek prior PRC investment approval for operating businesses that have statutory business categories listed as permitted in the Positive Listings.We currently operate our e-commerce and digital entertainment businesses in Taiwan through our wholly-owned branch offices in Taiwan. Both of such entities wereacquired or established upon approval by the relevant Taiwan government authorities. However, should the Taiwan authorities deem us to be a PRC investor, theTaiwan authorities may take a range of actions, including: •imposing fines between NT$120,000 (US$3,905) to NT$25,000,000 (US$813,537) and further fines if the non-compliance is not rectified as ordered; •ordering us to reduce any direct or indirect ownership or control by PRC investors in our company; •requesting us to divest some or all of our ownership or control in our operating entities in Taiwan; •suspending the rights of shareholders of our Taiwan operating entities; and 38Table of Contents•discontinuing the operations and revoking the business licenses of our Taiwan operating entities. If any such action is taken, our operations in Taiwan and our business, financial condition and results of operations may be materially and adversely affected. Uncertainties with respect to the legal system in certain of our markets could adversely affect us. The legal systems in many of our markets vary significantly from jurisdiction to jurisdiction. Some jurisdictions have a civil law system based on writtenstatutes and others are based on common law. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but havelimited precedential value. Many of the markets in which we operate have not developed a fully integrated legal system, and laws and regulations may not cover all aspects of economicactivities in such markets with a high degree of certainty or predictability. In particular, the interpretation and enforcement of these laws and regulations involvepolitical uncertainties, and the application of some of these laws and regulations to our businesses is not settled. Since local administrative and court authorities mayhave significant discretion in interpreting and implementing statutory provisions, legal principles and contractual terms, it may be difficult to evaluate or predict theoutcome of administrative and court proceedings or the level of legal protection we have in many markets in which we operate. Local courts may have broad discretionto reject enforcement of foreign court decisions or arbitration awards. These uncertainties may affect our judgment on the relevance of legal requirements and ourability to enforce our contractual rights or claims. In addition, the legal and regulatory uncertainties in such markets may be exploited by other parties throughunmerited or frivolous legal actions, claims concerning the conduct of third parties, or threats in attempt to extract payments or benefits from us. Many jurisdictions in our markets have enacted, and may enact or amend from time to time, laws and regulations governing the distribution of content andcommunications, including games, services, advertising, marketing, messages, applications, electronic documents, personal data and other information through theinternet or on digital platforms. The relevant government authorities may prohibit the distribution of information through the internet that they deem to beobjectionable on various grounds, such as public interest or public security, protection of minors, data protection related, obscene, offensive or defamatory content,or to otherwise be in violation of local laws and regulations. If any information disseminated through our platforms were deemed by any relevant governmentauthorities to violate content restrictions, we may not be able to continue to display such content and could be subject to penalties, including confiscation of theproperty used in the non-compliant acts, removal of the infringing content, temporary or permanent blocks, administrative fines, suspension of business, revocationof the registration to act as an electronic systems provider and revocation of required licenses, which could materially and adversely affect our business, financialcondition and results of operations. Many of the legal and regulatory requirements in markets where we operate are based in part on government policies and internal rules, some of which arenot published on a timely basis or at all and may have retroactive effect. There are other circumstances where key regulatory definitions are unclear, imprecise ormissing, or where interpretations that are adopted by regulators or governmental authorities are inconsistent with previous interpretations or interpretations adoptedby courts in analogous cases. As a result, we may not be aware of our violation or alleged violation of certain policies and rules until sometime after the violation. Inaddition, any administrative and court proceedings in our markets may be protracted, resulting in substantial costs and diversion of resources and managementattention. It is possible that laws and regulations may be adopted or construed to apply to us that could restrict or otherwise impact our industries. Scrutiny andregulation of the industries in which we operate may further increase, and we may be required to devote additional legal and other resources to addressing suchregulation. For example, existing laws or new laws regarding the regulation of currency, money laundering, banking institutions, unclaimed property, e-commerce,consumer and data protection and intermediary payments may be interpreted to cover services offered on our e-commerce platform, virtual items offered in our digitalentertainment business or through our mobile wallet networks. Changes in current laws or regulations or the imposition of new laws and regulations regarding ourindustries may slow the growth of our industries and adversely affect our financial condition and results of operations. 39Table of ContentsIt is not certain if Sea Limited will be classified as a Singapore tax resident. Under the Income Tax Act 1947 of Singapore, or the Singapore Income Tax Act, a company established outside Singapore but whose governing body, beingthe board of directors, usually exercises de facto control and management of its business in Singapore could be considered a tax resident in Singapore. However, suchcontrol and management of the business should not be deemed to be in Singapore if physical board meetings are mainly conducted outside of Singapore. Whereboard resolutions are passed in the form of written consent signed by the directors each acting in their own jurisdictions, or where the board meetings are held byteleconference or videoconference, it is possible that the place of de facto control and management will be considered to be where the majority of the board arelocated when they sign such consent or attend such conferences. We believe that Sea Limited is not a Singapore tax resident for Singapore income tax purposes. However, the tax residence status of Sea Limited is subject todetermination by the Inland Revenue Authority of Singapore, or IRAS, and uncertainties remain with respect to the interpretation of the term “control andmanagement” for the purposes of the Singapore Income Tax Act. If IRAS determines that Sea Limited is a Singapore tax resident for Singapore income tax purposes,the portion of Sea Limited’s single company income on an unconsolidated basis that is received or deemed by the Singapore Income Tax Act to be received inSingapore, where applicable, may be subject to Singapore income tax at the prevailing tax rate of 17% before applicable income tax exemptions or relief. If Sea Limited isregarded as a Singapore tax resident, any dividends received or deemed received by Sea Limited in Singapore from subsidiaries located in a foreign jurisdiction with arate of income tax or tax of a similar nature of no more than 15% may generally be subject to additional Singapore income tax where there is no other applicable taxtreaty between such foreign jurisdiction and Singapore. Income is considered to have been received in Singapore when it is: (i) remitted to, transmitted or brought intoSingapore; (ii) applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; or (iii) applied to purchase any movableproperty that is brought into Singapore. In addition, as Singapore does not impose withholding tax on dividends declared by Singapore resident companies, if SeaLimited is considered a Singapore tax resident, dividends paid to the holders of our ordinary shares and ADSs will not be subject to withholding tax in Singapore.Regardless of whether or not Sea Limited is regarded as a Singapore tax resident, holders of our ordinary shares or the ADSs who are not Singapore tax residentswould generally not be subject to Singapore income tax on gains derived from the disposal of our ordinary shares or the ADSs if such shareholders do not maintain apermanent establishment in Singapore, to which the disposition gains may be effectively connected, and the entire process (including the negotiation, deliberation,execution of the acquisition and sale, etc.) leading up to the actual acquisition and sale of the ADSs or our ordinary shares is performed outside of Singapore. ForSingapore resident shareholders, if the gain from disposal of our ordinary shares or the ADSs is considered by IRAS as income in nature, such gain will generally besubject to Singapore income tax, and not taxable in Singapore if the gain is considered by IRAS as capital gains in nature. See “Item 10. Additional Information—E.Taxation—Singapore Taxation—Income Tax—Gains With Respect to Disposition of Our ADSs or Our Ordinary Shares.” It will be difficult to acquire jurisdiction and enforce liabilities against our assets based in some of our markets. Substantially all of our assets are located outside the United States. In addition, substantially all of our directors and executive officers are nationals orresidents of jurisdictions other than the United States and substantially all of their assets are located outside the United States. As a result, it may be difficult orimpossible for our shareholders to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in the United Statescourts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the UnitedStates. It may also be difficult for you to enforce judgments obtained in the United States based on the civil liability provisions of the United States federal securitieslaws against us and our directors and executive officers. Even if our shareholders are successful in bringing an action of this kind, they may be unable or may find itdifficult to enforce a judgment against our assets or the assets of our directors and executive officers due to the laws of the Cayman Islands and of the jurisdictionsthat comprise our markets. Management has been advised that Indonesia, Taiwan, Thailand, Vietnam and many of the other jurisdictions within Southeast Asia do nothave treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. It is unclear if extradition treaties now in effectbetween the United States and some of our markets, such as Indonesia, the Philippines and Malaysia, would permit effective enforcement of criminal or otherpenalties, including those under U.S. federal securities laws. 40Table of ContentsThe ability of our subsidiaries to distribute dividends to us may be subject to restrictions under the laws of their respective jurisdictions. We are a holding company, and have subsidiaries located globally. Part of our primary internal sources of funds to meet our cash needs is our share of thedividends, if any, paid by our subsidiaries. The distribution of dividends to us from the subsidiaries in the markets where we operate may be subject to restrictionsimposed by the applicable laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation.” In addition, although there arecurrently no foreign exchange control regulations which restrict the ability of our subsidiaries in most of our markets to distribute dividends to us, the relevantregulations may be changed and the ability of these subsidiaries to distribute dividends to us may be restricted in the future. Restrictions on currency exchange may limit our ability to receive and use our cash effectively. A significant portion of our revenue and expenses are denominated in currencies subject to exchange control. If revenue denominated in such currenciesincreases or expenses denominated in such currencies decrease in the future, we may need to convert a portion of our revenue into other currencies to meet ourforeign currency obligations. Currently, in Taiwan, a single remittance by a company for an amount over US$1 million or its equivalent in foreign currency shall bereported and documents supporting the accuracy of such report shall be provided to the bank handling such remittance before the remittance is conducted. Inaddition, remittances by a company in annual aggregate amounts exceeding US$50 million or its equivalent in foreign currency may not be processed without theapproval of the Central Bank of the Republic of China (Taiwan). In Vietnam, exchanging Vietnamese dong into foreign currency must be conducted at a licensed creditinstitution such as a licensed commercial bank. Conversion of Thai baht to another currency is subject to regulations promulgated by the Ministry of Finance andBank of Thailand. Conversion of Indonesian rupiah into any foreign currency that exceeds certain specific threshold is required to have an underlying transaction andsupported by underlying transaction documents. In Malaysia, the foreign exchange policy requires the approval of the Central Bank of Malaysia (BNM) for cross-border remittances which are either set out in the foreign exchange notices or applied for on an ad hoc basis. BNM has the discretion whether to grant its approval,and to impose any condition on such approval so there is no assurance that its approval will be granted. We may be unable to convert such local currencies into U.S.dollars or other foreign currencies to pay dividends or for other purposes on a timely basis or at all. RISKS RELATED TO THE ADSs The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad marketand industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in the same marketsas us that have listed their securities in the United States. The stock markets have experienced extreme price and volume fluctuations that have affected and continueto affect the market prices of equity securities of many technology companies. In addition to market and industry factors, the price and trading volume for the ADSsmay be highly volatile for factors specific to our own operations, including the following: •variations in our quarterly or annual revenue, earnings and cash flow; •guidance or other projections we may provide to the public, including any changes or failure to meet any guidance or other projections; •announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; •announcements of new content and services or plans of expansion or exits by us or our competitors; •changes in financial estimates by securities analysts and data providers, or our failure to meet these estimates or the expectations of investors; •downgrades by industry or securities analysts that publish research or reports on us; 41Table of Contents•detrimental adverse publicity about us, our businesses or our industries or investor sentiment with respect to our competitors, our shareholders andinvestors, and our industry in general; •additions or departures of key personnel; •release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities, including the perception thatthese sales could occur; •dilution of the ownership interests of our ADS holders due to conversions of our 2023, 2024, 2025 and 2026 convertible notes, which we may choose tosettle by issuing ADSs, or from the unwinding of capped call transactions in connection with our 2024 and 2025 convertible notes; •current or potential litigation, government actions or regulatory investigations, including class actions; •volatility in the stock market, including price and volume fluctuations in the overall stock market, changing trends in the economy, interest rate hikes orother interest rate-related decisions; and •general political, economic, or market conditions, or other events or factors, including those resulting from war, incidents of terrorism, pandemics, andother disruptive external events, or responses to these events. Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade. Shareholders of public companies have often brought securities class action suits against those companies following periods of volatility or decline in themarket price of their securities. Sea Limited is currently a defendant in a putative securities class action. See “Item 8. Financial Information—A. ConsolidatedStatements and Other Financial Information—Legal and Administrative Proceedings.” Involvement in a securities class action lawsuit could divert a significantamount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, whichcould harm our results of operations. Any such class action suit, whether or not meritorious, could harm our reputation and restrict our ability to raise capital in thefuture. In addition, if a claim is successfully established against us, we may be required to pay significant damages, which could have a material adverse effect on ourfinancial condition and results of operations. As we operate globally, we may receive an increasing degree of media coverage. We have been the subject of media coverage involving concerns around ourmarkets, our products or services and business developments and our efficiency initiatives, and we continue to receive publicity relating to these concerns amongothers. Any publicity that is unfavorable or perceived to be unfavorable may affect our business, brand and reputation. For example, such publicity could have anadverse effect on the size, engagement, and loyalty of our user base as well as result in increased scrutiny of our business, including our business practices andpolicies. Substantial future sales or perceived potential sales or issuances of our ADSs, Class A ordinary shares or other equity securities could cause the price of ourADSs to decline significantly. As of March 15, 2023, the aggregate principal amount outstanding of our 2023, 2024, 2025 and 2026 convertible notes was approximatelyUS$31.3 million, US$152.0 million, US$1.1 billion and US$2.1 billion, respectively. The holders of our 2023, 2024, 2025 and 2026 convertible notes may convert theirconvertible notes in accordance with the instruments governing such convertible notes at the initial conversion rate of 50.5165 ADSs, 19.9475 ADSs, 11.0549 ADSsand 2.0964 ADSs per US$1,000 principal amount, respectively. Our 2023 convertible notes are currently convertible until prior to the close of business on the secondscheduled trading day immediately preceding July 1, 2023, which is the maturity date of these convertible notes. In addition, for the current quarter, being April to June2023, our 2024 convertible notes are currently convertible in accordance with their terms. To the extent our convertible notes are convertible in a given period andconverted and we issue ADSs to settle our obligations, the ownership interest of our ADS holders will be further diluted. 42Table of ContentsOur founder has control over key decision making as a result of his control of a majority of the voting power of our outstanding share capital and has substantialinfluence over our company.We have adopted a dual-class voting structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares since our IPO.On February 14, 2022, our shareholders approved the amendment and restatement of our memorandum and articles of association at our annual general meeting. Uponthe effectiveness of such amendment, the voting power of our Class B ordinary shares increased from three votes per share to 15 votes per share on all matterssubject to vote at general meetings of our company and Forrest Xiaodong Li, our founder, chairman and Group Chief Executive Officer, is the sole beneficial owner ofall our Class B ordinary shares. The voting power of our Class A ordinary shares of one vote per share remains unchanged. Due to the different voting powersassociated with our two classes of ordinary shares, as of March 15, 2023, our founder beneficially owns an aggregate of approximately 59.9% of the total voting powerof our issued and outstanding ordinary shares. As a result, our founder has substantial influence over our business, including significant corporate actions includingmergers, consolidations, and election of directors. As a board member and officer, Mr. Li owes a fiduciary duty to our company and must act in good faith in a mannerhe reasonably believes to be in the best interests of our company. As a shareholder, even a controlling shareholder, Mr. Li is entitled to vote his shares in his owninterests, which may not always be in the interests of our shareholders generally. Certain actions may be taken even if they are opposed by our other shareholders.This concentrated control could discourage, delay or prevent a change of control of our company, which could deprive our shareholders of an opportunity to receivea premium for their shares as part of a sale of our company and may reduce the price of our ADSs. It could also discourage a potential investor from acquiring ourADSs represented by our Class A ordinary shares, which has less voting power compared with our Class B ordinary shares, and may harm the trading price of ourADSs. In the event of his death, the Class B ordinary shares beneficially owned by Mr. Li will be automatically converted into an equal number of Class A ordinaryshares. The depositary for the ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying our ADSs at shareholders’ meetings if holders ofADSs do not give voting instructions to the depositary, except in limited circumstances, which could adversely affect the interests of such holders. Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying our ADSs atshareholders’ meetings if holders of ADSs do not give voting instructions to the depositary, unless: •we have failed to timely provide the depositary with our notice of meeting and related voting materials; •we have instructed the depositary that we do not wish a discretionary proxy to be given; •we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or •a matter to be voted on at the meeting would have a material adverse impact on shareholders. The effect of this discretionary proxy is that, if holders of ADSs fail to give voting instructions to the depositary, they cannot prevent our Class A ordinaryshares underlying our ADSs from being voted, absent the situations described above, and it may make it more difficult for holders of our ADSs to influence ourmanagement. We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses and dilution to shareholders. We adopted our 2009 Share Incentive Plan, last amended and restated in April 2022, or the 2009 Plan, for the purpose of granting share-based compensationawards to officers, employees, directors and other eligible persons to incentivize their performance and align their interests with ours. In April 2022, our board ofdirectors approved the amendment and restatement of the 2009 Plan to increase the maximum aggregate number of shares available under the 2009 Plan, pursuant towhich on January 1 of each of 2023, 2024, 2025 and 2026, the maximum aggregate number of ordinary shares which may be issued under the 2009 Plan will increase by3% of the total number of ordinary shares of all classes of the company outstanding on that day immediately before the increase. The current maximum aggregatenumber of ordinary shares which may be issued pursuant to all awards under the 2009 Plan is 193,718,406. We are authorized to grant options, share appreciationrights, share awards of restricted shares and non-restricted shares, restricted share units and other types of awards the administrator of the 2009 Plan decides. 43Table of ContentsWe account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statements ofoperations in accordance with U.S. GAAP. As of March 15, 2023, outstanding awards granted under the 2009 Plan consisted of (i) options to purchase 69,873,363Class A ordinary shares, (ii) 11,827,347 restricted Class A ordinary share units, and (iii) 211,701 share appreciation rights. As a result of our grants of awards under the2009 Plan, we incurred share-based compensation expense of US$290.2 million, US$470.3 million and US$705.9 million in 2020, 2021 and 2022, respectively. For moreinformation on our share incentive plan, see “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” We will incuradditional share-based compensation expenses in the future as we continue to grant share-based incentives. We believe the granting of share-based compensation isof significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in thefuture. As a result, our expenses associated with share-based compensation may remain significant or increase, which may have an adverse effect on our results ofoperations. Because we do not expect to pay dividends in the foreseeable future, holders of ADSs must rely on price appreciation of our ADSs for return on their investment. We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result,we do not expect to pay any cash dividends in the foreseeable future. Therefore, holders of ADSs should not rely on an investment in ADSs as a source for anyfuture dividend income. Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, thetiming, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount ofdistributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors.Accordingly, the return on the investment in our ADSs will likely depend entirely on any future price appreciation of our ADSs. There is no guarantee that our ADSswill appreciate in value or even maintain the price at which the holders purchased our ADSs. Holders of ADSs may not realize a return on their investment in ourADSs and may even lose their entire investment in our ADSs. Our memorandum and articles of association contain anti-takeover provisions and a dual-class voting structure that could have a material adverse effect on therights of holders of our Class A ordinary shares and our ADSs. Our memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage inchange-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium overprevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our memorandum andarticles of association contain a dual-class voting structure that gives disproportionate voting power to the Class B ordinary shares, all of which are held by ForrestXiaodong Li, our founder, chairman and Group Chief Executive Officer. As of March 15, 2023, our founder beneficially owned an aggregate of approximately 59.9% ofthe total voting power of our outstanding ordinary shares. In addition, in September 2022, Tencent granted an irrevocable voting proxy with respect to all its Class Aordinary shares to our board of directors to vote on matters that are subject to the vote of shareholders of Sea. Such proxy gives our board of directors (dulyconstituted from time to time) approximately 8.7% of voting power. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” Our board ofdirectors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers,preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversionrights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in theform of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal ofmanagement more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders ofour Class A ordinary shares and our ADSs may be materially and adversely affected. 44Table of ContentsHolders of ADSs may face difficulties in protecting their interests, and their ability to protect their rights through U.S. courts may be limited, because we areincorporated under Cayman Islands law. We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles ofassociation, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against thedirectors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common lawof the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as fromthe common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of ourshareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent insome jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, suchas Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may nothave standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (save for thememorandum and articles of association, register of mortgages and charges, and special resolutions of shareholders) or to obtain copies of lists of shareholders ofthese companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records maybe inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for holders of ADSs to obtain theinformation needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporatedin other jurisdictions such as the United States. To the extent we choose to follow home country practice with respect to corporate governance matters, ourshareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management,members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and holders of ADSs may not be able to exercise their right to vote theirClass A ordinary shares. Holders of ADSs are only able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of thedeposit agreement. Holders of ADSs may not have the same voting rights as the holders of our Class A ordinary shares and may not receive voting materials in timeto be able to exercise the right to vote. Under the deposit agreement, holders of ADSs must vote by giving voting instructions to the depositary. If we ask forinstructions from the holders of ADSs, upon receipt of voting instructions from the holders of ADSs, the depositary will try to vote the underlying Class A ordinaryshares in accordance with these instructions. If we do not instruct the depositary to ask for instructions from the holders of ADSs, the depositary may still vote inaccordance with instructions given by the holders of ADSs, but it is not required to do so. Holders of ADSs are not able to directly exercise the right to vote withrespect to the underlying Class A ordinary shares unless holders of ADSs withdraw their Class A ordinary shares from the depositary and become a registered holderof such shares. When a general meeting is convened, holders of ADSs may not receive sufficient advance notice to withdraw their Class A ordinary shares to allowthem to vote with respect to any specific matter. If we ask for instructions from holders of ADSs, the depositary will notify holders of ADSs of the upcoming vote andwill arrange to deliver our voting materials to holders of ADSs. We have agreed to give the depositary prior notice of shareholder meetings as far in advance of themeeting date as practicable. Nevertheless, we cannot assure you that holders of ADSs will receive the voting materials in time to ensure that holders of ADSs caninstruct the depositary to vote the Class A ordinary shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry outvoting instructions or for their manner of carrying out voting instructions. This means that holders of ADSs may not be able to exercise the right to vote and mayhave no legal remedy if the Class A ordinary shares underlying our ADSs are not voted as they requested. 45Table of ContentsHolders of ADSs may be subject to limitations on the transfer of their ADSs. Our ADSs are transferable on the books of the depositary. The depositary may refuse to deliver, transfer or register transfers of ADSs generally when ourshare register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or ofany government or governmental body, or under any provision of the deposit agreement, or for any other reason. We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable todomestic public companies in the United States. As a foreign private issuer under the Exchange Act, we are exempt from certain disclosure and other requirements and obligations that are applicable to U.S.domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii)the sections of the Exchange Act regulating the solicitation of proxies in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Actrequiring insiders to file public reports of their stock ownership and trading activities and “short swing” liability for insiders who profit from certain trades; and (iv) theselective disclosure rules by issuers of material nonpublic information under Regulation FD. We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our results on a quarterly basisthrough press releases. Press releases relating to financial results and material events are furnished to the SEC on Form 6-K. However, the information we are requiredto file with or furnish to the SEC will be less extensive and may be less timely compared with that required to be filed with the SEC by U.S. domestic issuers. As aresult, holders of ADSs may not be afforded the same protections or information, which would be made available to them, were they investing in a U.S. domesticissuer. We are subject to the corporate governance requirements of the New York Stock Exchange. However, New York Stock Exchange rules permit a foreign privateissuer like us to follow the corporate governance practices of our home country in lieu of certain New York Stock Exchange rules. Certain corporate governancepractices in the Cayman Islands, which is our home country, may differ significantly from the New York Stock Exchange corporate governance requirements. To theextent we choose to follow home country practice, our shareholders may be afforded less protection than they would otherwise enjoy under the New York StockExchange corporate governance listing standards applicable to U.S. domestic issuers. If we are a passive foreign investment company for United States federal income tax purposes for any taxable year, United States holders of ADSs or our ordinaryshares could be subject to adverse United States federal income tax consequences. Depending upon the value and the nature of our assets and the amount and nature of our income over time, we could be classified as a passive foreigninvestment company (“PFIC”) for U.S. federal income tax purposes. We will be classified as a PFIC in any taxable year if either: (i) 75% or more of our gross income forsuch year consists of certain types of “passive” income or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) duringsuch year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains fromthe sale or exchange of property producing such income and net foreign currency gains. For this purpose, cash is generally categorized as a passive asset and thecompany’s unbooked intangibles associated with active business activity are taken into account as a non-passive asset. We will be treated as owning ourproportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own (or are deemed to own), directly orindirectly, 25% or more (by value) of the stock. In addition, although the law in this regard is not entirely clear, we treat our VIEs as being owned by us for U.S. federalincome tax purposes. As a publicly traded foreign corporation we intend for this purpose to treat the aggregate fair market value of our gross assets as being equal tothe aggregate value of our outstanding stock (“market capitalization”) plus the total amount of our liabilities and to treat the excess of the fair market value of ourassets over their book value as a non-passive asset to the extent attributable to our non-passive income. Because we currently hold, and expect to continue to hold, asubstantial amount of cash and cash equivalents and other passive assets used in our business, and because the value of our gross assets is likely to be determinedin large part by reference to our market capitalization, we would likely become a PFIC for a given taxable year if the market price of the ADSs or Class A ordinary shareswere to decrease significantly. The application of the PFIC rules is subject to uncertainty in several respects, and we must make a separate determination after theclose of each taxable year as to whether we were a PFIC for such year. If we are a PFIC for any taxable year during which a U.S. investor held the ADSs or Class Aordinary shares, the U.S. investor might be subject to increased U.S. federal income tax liability and to additional reporting obligations. We do not intend to providethe information necessary for the U.S. investor to make a qualified electing fund election with respect to the ADSs or Class A ordinary shares. See “Item 10. AdditionalInformation—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.” 46Table of ContentsBased on our income and assets, and the value of the ADSs, we do not believe that we were a PFIC, for U.S. federal income tax purposes, for the taxable yearended December 31, 2022, and do not anticipate becoming a PFIC for the current taxable year or for the foreseeable future. Nevertheless, because PFIC status is afactual determination made annually after the close of each taxable year on the basis of the composition of our income and assets, there can be no assurance that wewill not be a PFIC for the current taxable year or any future taxable year. ITEM 4.INFORMATION ON THE COMPANY A.History and Development of the Company On May 8, 2009, we incorporated Garena Interactive Holding Limited, our holding company, as a limited liability company in the Cayman Islands. On April 8,2017, we changed our company name from Garena Interactive Holding Limited to Sea Limited. Sea Limited is a holding company that does not have substantive operations. We conduct our businesses through our subsidiaries and consolidatedaffiliated entities. We launched our e-commerce platform, Shopee, in Southeast Asia and Taiwan in June and early July 2015, and in Brazil in the fourth quarter of 2019. We began our digital entertainment business at our inception in May 2009, and have since expanded our local game operations beyond Southeast Asia andTaiwan to Latin America and other markets. Our self-developed game Free Fire is also currently available in more than 130 markets globally. We launched our digital financial services platform in Vietnam in April 2014 and in Thailand in June 2014. In the fourth quarter of 2019, we introducedSeaMoney as the overall brand for our digital financial services business. Since 2021, we have further expanded our digital financial service offerings across credit,insurtech and digital bank services, including launching our bank business in Indonesia, Philippines and Singapore. On October 20, 2017, we completed our initial public offering and listed our ADSs on the New York Stock Exchange under the symbol “SE.” At our annual general meeting on February 14, 2022, our shareholders approved as a special resolution the amendment and restatement of our memorandumand articles of association. Upon the effectiveness of such amendment, among other relevant changes, the voting power of our Class B ordinary shares increasedfrom three votes per share to 15 votes per share on all matters subject to vote at general meetings of our company. Immediately upon the special resolution beingapproved by the shareholders, Tencent converted all the Class B ordinary shares beneficially owned by it to Class A ordinary shares. Upon effectiveness of suchconversion by Tencent, all outstanding Class B ordinary shares are currently beneficially owned by Forrest Xiaodong Li, our founder, chairman and Group ChiefExecutive Officer. At the same time, the irrevocable proxy between Tencent and Mr. Li dated September 1, 2017 (the “Irrevocable Proxy”) was also terminated. Inrelation to such termination, the currently effective memorandum and articles of association no longer contain a requirement that the Class B ordinary sharesbeneficially owned by Mr. Li shall be subject to automatic conversion upon termination of the Irrevocable Proxy. See “Item 10. Additional Information—B.Memorandum and Articles of Association.” In September 2022, Tencent granted an irrevocable voting proxy with respect to all its Class A ordinary shares to ourboard of directors (duly constituted from time to time) to vote on matters that are subject to the vote of shareholders of Sea. Our principal executive offices are located at 1 Fusionopolis Place, #17-10, Galaxis, Singapore 138522. Our telephone number at this address is +65 6270-8100.Our registered office in the Cayman Islands is at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, CaymanIslands. Our agent for service of process in the United States in connection with the registration statement on Form F-1 for our initial public offering is Cogency GlobalInc., located at 122 East 42nd Street, 18th Floor New York, N.Y. 10168. Our agent for service of process in the United States in connection with the registrationstatement on Form F-3 is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our website is www.sea.com. 47Table of ContentsB.Business Overview Our Mission Our mission is to better the lives of the consumers and small businesses with technology. Our Beliefs and Values We have Three Core Beliefs: •Our people define us. Sea shall be a place where talented people thrive at scale, enjoy freedom of ideas and achieve the unimaginable. It shall be amagnet for the smartest, the most creative and the most driven. •Our products and services differentiate us. We aspire to better every life we touch and make the world an ever more connected community throughinnovative products and services. •Our institution will outlast us. We strive to build an institution that will last for generations and evolve with time, and that is founded upon our corevalues. These Five Core Values are Sea’s foundation: •We serve. Our customers are the sole arbiter of the value of our products and services. We strive to meet unmet needs and serve the underserved. •We adapt. Rapid change is the only constant in the digital age of ours. We embrace change, celebrate it and always strive to be a thought leader thatinfluences it. •We run. We are in a constant race to success while grappling with rapidly shifting forces. We move faster, better and with more urgency every day. •We commit. Our work is our commitment. We commit to our values, institution, customers and partners. We commit to each other. Above all, we commit todoing the best we can and being the best we are. •We stay humble. We have traveled a long way from our humble beginning and yet, we never lose our humility in our continual quest for greater heights. Together, our Three Core Beliefs and Five Core Values form a consistent mindset which we believe is both a practical recipe for long-term organizationalsustainability and also a deeper philosophy for how we want to live our lives. They are a guide for the kind of people we hire and develop, as well as a roadmap forhow we interact with our customers, our business partners, and our broader stakeholders. Ultimately, they are our compass: whenever we are faced with a decision, wealways ask ourselves which alternative is most authentic to these Beliefs and Values. Overview Sea has developed an integrated platform consisting of e-commerce, digital entertainment, and digital financial services, each localized to meet the uniquecharacteristics of our markets. Many of our markets are experiencing a generational transition to the new digital economy, with digital inclusion bringing consumersever more closely to each other and online services, by leading internet business models such as our own. Our culturally rich and diverse markets observe a rise intraditionally underserved digital consumers, who require dedicated focus, resources, and respective local market knowledge.48Table of ContentsSea operates three key businesses—Shopee, Garena, and SeaMoney:•Our Shopee e-commerce platform is the largest e-commerce platform in Southeast Asia and Taiwan. We are also gaining traction in Brazil and building asignificant presence locally. Since its inception, Shopee has adopted a mobile-first approach and is a highly scalable marketplace platform that connectsbuyers and sellers. Shopee provides users with a convenient, safe and trusted shopping environment that is supported by integrated payment, logistics,fulfillment, and other value-added services. Our users enjoy the social nature of Shopee’s platform, where users can follow, rate and easily browse fordiscovery to enhance their retail experience. We also empower sellers with various tools and support such as livestreaming and other value-added servicesfor them to better engage with their buyers. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, andcharging for certain value-added services, including logistics. We also purchase products from manufacturers and third parties and sell them directly tobuyers on our Shopee platform. •Our digital entertainment business, Garena, is a global game developer and publisher. Garena provides users with access to popular and engaging mobileand PC online games that we develop, curate and localize for each market. Garena also exclusively licenses and publishes games developed by thirdparties. We also promote esports in our markets to strengthen our game ecosystem and increase user engagement. •Our SeaMoney business is a leading digital financial services provider in Southeast Asia. SeaMoney currently offers offline and online mobile walletservices, payment processing and other offerings across credit, insurtech and digital bank services. These services and products are offered in variousmarkets in Southeast Asia under ShopeePay, SPayLater, SeaBank, SeaInsure and other digital financial services brands. Each of our businesses provides a distinct and compelling value proposition to our users, and each also exhibits strong virtuous cycle dynamics, which webelieve support our leadership position and provide a strong foundation for continued growth while creating barriers to entry for our competitors in our markets. Since our founding, we have achieved significant scale and growth. Our total revenue increased from US$4.4 billion in 2020 to US$12.4 billion in 2022, aCAGR of 68.7%. We had gross profit of US$1.3 billion, US$3.9 billion and US$5.2 billion in 2020, 2021 and 2022, respectively. We incurred net losses of US$1.6 billion,US$2.0 billion and US$1.7 billion in 2020, 2021 and 2022, respectively, primarily due to our investments in expanding our businesses, in particular our e-commerce anddigital financial services businesses. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Segment Reporting” and “Item 5. Operatingand Financial Review and Prospects—A. Operating Results—Description of Certain Statement of Operations Items—Revenue” for a breakdown of our total revenuesby category of activity and geographic market for each of the last three financial years. Our Businesses Shopee E-commerce Platform Our Shopee e-commerce platform is a mobile-centric, social-focused marketplace with integrated payment and logistics infrastructure and comprehensiveservices we offer to sellers. It is a highly scalable marketplace platform that provides users with a convenient, safe, and trusted shopping environment. Shopee is thelargest e-commerce platform in Southeast Asia and Taiwan. We are also gaining traction in Brazil and building a significant presence locally. Shopee provides users with a convenient, safe, and trusted shopping environment that is supported by integrated payment, logistics, fulfillment, and othervalue-added services. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-addedservices, including logistics. Shopee’s marketplace model allows it to scale rapidly. In addition, we introduce many social and gamification elements into Shopee which we believe enablesus to increase organic user acquisition, user retention and user time spent on our platform. The table below sets forth certain of our operating metrics for the periodsindicated. For the Three Months Ended March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 (billions) GMV (US$) 17.4 19.0 19.1 18.0 Orders 1.9 2.0 2.0 1.7 49Table of ContentsWhile we primarily operate as a marketplace, we also purchase some products from manufacturers or third parties directly and sell on our Shopee platformunder our official store to meet buyers’ demand. Bulk purchasing and direct product sales for specific product categories also enable us to offer a better productassortment to our buyers.Our Buyers and Sellers Our buyers are individuals and households who mainly purchase from sellers that are within the same market. Shopee sellers are primarily small and medium businesses, brands, large retailers as well as individuals, who view Shopee as an efficient and reliable way ofmanaging the selling process while maximizing customer needs. On Shopee, each seller has an online storefront on which they list their products, communicate withbuyers, and complete transactions. Our Shopee Mall hosts brands and large retailers prominently featuring their distinct logos, and offers a premium shoppingexperience to a broad base of buyers. E-commerce Platform Operations Product Category Focus We use targeted seller engagement and product placement to attract sellers and bring products to our platform. We leverage our deep understanding of localmarket conditions and user preferences to prioritize product categories that we believe have higher realization rates and profitability for our sellers. We currently offera general merchandise platform focused on long-tail high-margin categories, such as fashion, health and beauty, and home and living. Meanwhile, we continue tofocus on expanding categories to include an increasingly diverse range of products. Seller Support and Service by Shopee We offer strong support to sellers on the Shopee platform through large on-the-ground teams with deep local knowledge. Our local teams also offer fast andlocalized operational and technological assistance in using business management tools. Moreover, an extensive network of logistics and payment solution providersare integrated into the platform to provide users with a one-stop solution. We also offer sellers integrated payment, logistics, fulfillment, and other value-addedservices. Under “Service by Shopee,” we offer a range of value-added services to sellers, including inventory management, online store operations, and fulfillmentservices. Depending on sellers’ needs and preferences, we may help sellers manage inventory and fulfill orders from warehouses leased and operated by us, operatestores on our platform, or purchase products from sellers for reselling on our platform. “Service by Shopee” is currently available to sellers in our Southeast Asia andTaiwan markets. We take the user experience beyond a traditional online marketplace environment, making online shopping truly seamless. We believe that these efforts helpto streamline the whole online business operation from store setup to selling, inventory and revenue management, delivery and payment collection for our sellers,empowering them to achieve greater success in their commercial activities. Buyer Protection We focus on creating a secure and reliable shopping environment for our buyers and have developed robust consumer protection policies and procedures,including the following measures: •Seller Verification. Everyone that registers to become a seller on the Shopee platform is subject to our verification process and must agree to ourstandard terms of service before opening a seller account. 50Table of Contents•Listing Screening. Shopee has adopted a set of policies and procedures to prevent and remove listings of inappropriate or illegal goods and to screenout repeat offenders. All listings on the Shopee platform first undergo automated screenings against a list of illegal product names, categories anddescriptions. We have developed this list based on local regulations and it is frequently updated by our local teams to reflect the latest regulatoryrequirements. Listings posted by sellers which are deemed to be of high risk based on our screening will not be visible on our platform until they aremanually cleared by our operations and compliance teams. Listings that are not cleared due to regulatory violations or other violations of our terms of usewill be permanently removed, and the seller will not be able to edit or re-submit the same product listing. We may suspend or remove accounts thatrepeatedly submit illegal or inappropriate listings. Moreover, users and other third parties may report listings that they believe to be illegal, inappropriate oroffensive for our further review. •Shopee Guarantee. We provide “Shopee Guarantee,” a free service to facilitate transactions on the Shopee platform. Under Shopee Guarantee, we holdpayments made by buyers in certain designated Shopee Guarantee account held by us until the ordered products are received or deemed to have beenreceived by the buyer. After this, we release the payment to the seller. If the purchased products are never delivered to or received by the buyer, we willreturn the funds to them. Shopee Guarantee is available for all transactions executed through the Shopee platform. We believe that Shopee Guaranteereduces settlement risks and improves transaction efficiency and security. •Dispute Resolution. We have on-the-ground teams to help resolve disputes between buyers and sellers. In the case of a dispute, a buyer may submitsupporting evidence through our dispute resolution system and seek compensation from the seller. Shopee Communication Tool The Shopee platform offers a live chat function enabling real-time communication between buyers and sellers. Buyers typically use the chat function toclarify product-related details, while sellers typically use the function to confirm payment and delivery information. We believe this communication tool hassignificantly improved the efficiency and security of transactions and the overall shopping experience. Integrated Logistics Services Logistics is critical for the development of e-commerce in our markets since many of them have terrain that is difficult to navigate and underdevelopedinfrastructure. We rely on a combination of our own logistics capability and third-party logistics service providers to service Shopee orders. The logistics serviceproviders which we cooperate with include some of the largest and most reliable service providers in our markets. Because of the large number of transactions fromour platform, we are typically able to negotiate preferred terms with these service providers for our users. We also build our own local logistics capabilities toeffectively service our buyers and sellers. Moreover, on our Shopee platform, sellers and buyers can track the delivery status of their packages and provide feedback on logistics services. We evaluateand provide feedback to logistics service providers to improve the level of services provided to our users, including average delivery times. Payment on Shopee As transactions on Shopee are protected by Shopee Guarantee, buyers make payments to Shopee’s designated Shopee Guarantee account which are thenreleased by Shopee to the sellers upon buyers’ receipt or deemed receipt of the goods. Depending on the market, sellers and buyers can choose from a number ofpayment options to complete transactions on Shopee, including our own mobile wallet services, credit cards, bank transfers through ATM or over the internet, andcash payments upon delivery or at designated convenience stores. Shopee has already integrated its payment processing system with SeaMoney’s paymentinfrastructure. Marketing and Promotions We undertake both online and offline marketing efforts to promote our brand awareness and attract new users. Our online efforts mainly include onlineadvertisements through major web portals, search engines, social media, and our Shopee Affiliate Program. Our online advertisements focus on promoting campaignssuch as Shopee 3.3 Mega Shopping Sale, 9.9 Super Shopping Day, 11.11 Big Sale, and 12.12 Birthday Sale, as well as driving order conversions. Our offline marketingefforts are based on localized approaches, including television commercials on major TV channels and display advertisements in selected high traffic locations to caterto each market’s consumer landscape. 51Table of ContentsSocial and Gamification Features As part of our strategy to enhance user traffic and engagement on the Shopee platform, we have introduced a number of innovative social and gamificationfeatures such as “Shopee Coins,” “Shopee Prizes,” and “Shopee Live.” We also enhanced our augmented reality tools, namely “BeautyCam” and “SkinCam” thatenable virtual try-ons for a personalized online shopping experience. Users can win “Shopee Coins” from making purchases, sharing reviews, playing mini-games and participating in campaign activities, then use these ShopeeCoins to offset the cost of purchase from eligible sellers. “Shopee Prizes” are a variety of mini games that promote in-app interactions between fellow users throughachieving individual or group rewards. “Shopee Live” enables buyers to watch and purchase directly from livestreams hosted by sellers and Shopee’s community ofcontent creators. These livestreams promote real-time product demonstrations and interactions between sellers, content creators and their viewers, driving a path topurchase. Monetization We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services,including logistics. Revenue from Shopee also includes revenue of products sold by us. We purchase products from manufacturers or third parties directly and sell on ourShopee platform under our official store to meet buyers’ demand for such products. Garena Digital Entertainment Business Garena, our digital entertainment business, primarily focuses on offering mobile and PC online games and developing mobile games for the global markets. We began our digital entertainment business at our inception in 2009. We offer our users easy access to highly engaging and localized content online that wedevelop or license, as well as organize and sponsor exciting game activities online and offline. We focus on game development, curation, localization, operation,distribution, monetization, and payments, as well as user community building and esports activities. Our Games Our games consist of self-developed games and games licensed from third-party developers. We offer immersive games covering some of the most popularand engaging genres, such as battle royale games; multiplayer online battle arenas, or MOBAs; action role-playing games, or action RPGs; massively multiplayeronline role-playing games, or MMORPGs; racing games and sports games. In most of these games, users play online in a virtual environment existing on networkgame servers that connect a large number of players simultaneously to interact with each other within the games. Mobile games have gained popularity in our markets. In December 2017, we launched the first game that we developed entirely in-house, Free Fire, a mobilegame of the battle royale genre. Free Fire has enabled us to grow globally beyond Southeast Asia and Taiwan where we initially launched our game business. It iscurrently available on the Google Play and iOS App Stores in more than 130 markets. We plan to continue to expand our game development capabilities and publishingbusiness. Game Players We have a large and active user base for our online game business. 52Table of ContentsThe table below sets forth certain of our operating metrics for the periods indicated. For the Three Months Ended March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Bookings (US$ in billions)(1) 0.8 0.7 0.7 0.5 Game QAUs (in millions) 615.9 619.3 568.2 485.5 Game QPUs (in millions) 61.4 56.1 51.5 43.6 (1)GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as anapproximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment.Our large user base as well as the team and social aspects of our games keep our game players engaged and also create powerful network effects that furtherattract users to our games, resulting in a high barrier to entry for our competitors. In-House Game Development We develop mobile games that cater to the demands of highly diverse markets across the globe. Our game development capabilities are particularlystrengthened by our global experience in game publishing. We have a sizeable in-house game development team consisting of global developers focused onenhancing Free Fire gameplay and building out our pipeline of self-developed games. Third-Party Games Publishing We also curate top third-party game content globally for publishing in our markets. Our market leadership and success in operating and customizing gamesfor our local game players have helped us forge deep relationships with key international game developers in different parts of the world. Game developers choose usto operate their games in our markets because of our leading market position, strong reputation in the online game community, and successful track record ofoperating and popularizing games in our markets. We are therefore able to source high-quality games from world class developers, many of whom work with us as theirexclusive partner in our markets. We rely on our local knowledge and years of game operating experience to select games that will match user needs and genrepreferences. We also believe that our large user base contributes to a virtuous cycle. As we attract more high-quality game developers to partner with us, we are ableto attract more users with a larger volume of high-quality content. We provide our game developer-partners access to a large user base in highly diverse markets across the globe, enabling our games to quickly becomepopular. Our services to third-party game developers include game launch and hosting, localization, marketing, distribution, monetization, integrated paymentinfrastructure, including access to our SeaMoney platform, and online and offline community building activities. In particular, we localize licensed games to adapt to each market. We work with game developers to translate game content into local languages, revise gamedesign to suit local preferences, and meet regulatory requirements for each jurisdiction. We also develop exclusive local content for particular markets to enhancegame attractiveness to local audiences. Our content localization efforts entail continuing feedback loops with developers throughout the life of the games we operate. Monetization and Payments Our game monetization model is a “freemium” model that allows our users to download and play fully functional games for free. We generate revenueprimarily by selling our game players in-game items, which include in-game virtual items such as digital representations of functional or decorative items, as well asseason passes. Digital representation of functional or decorative items includes in-game clothing, pets, weaponry or equipment, which players can purchase andutilize within the game environment to enhance their gameplay experience. Players that purchase season passes can receive additional in-game virtual items uponsatisfying certain conditions. Players who choose to purchase in-game items benefit from being able to accelerate progress, enhance social interactions, and enjoy amore personalized game playing experience. We offer multiple methods for users to purchase in-game items, including through our SeaMoney platform, the Google Play Store and the iOS App Storepayment gateways, other online payment gateways, bank transfers, credit cards, debit cards, mobile phone billing, and prepaid cards, including our own prepaid cards,which are sold through agents. 53Table of ContentsEsports and Community Building Garena organizes esports events annually and operates one of the largest mobile-game professional leagues in Southeast Asia, Taiwan and Brazil. Weorganize esports competitions that range in size from relatively small-scale local tournaments to widely publicized and promoted global esports events that rival thesize of popular professional athletic events. Some of our users have become full-time professional esports athletes that compete for prize money in tournaments and sponsorships from largecorporations that often also sponsor professional sports. Free Fire’s large esports and streaming community is another key pillar of our user engagement strategy. Asa result, we believe our esports operations generate strong user engagement for our games as well as promote user acquisition and retention. Marketing We devise and execute marketing plans tailored for each market. We market our games through a combination of online advertisement, outdoor and printadvertisements, television commercials, influencer partnerships as well as social media platforms and other online forums. SeaMoney Digital Financial Services Business SeaMoney, our digital financial services business, is a leading digital financial services provider in Southeast Asia. We began to offer digital financialservices in 2014. In the fourth quarter of 2019, we introduced SeaMoney as the overall brand for our digital financial services business. SeaMoney currently offersoffline and online mobile wallet services, payment processing and other offerings across credit, insurtech and digital bank services. These services and products areoffered in various markets in Southeast Asia under ShopeePay, SPayLater, SeaBank, SeaInsure and other digital financial services brands. We have integrated the mobile wallet services of SeaMoney with our Shopee platform across different markets, to promote efficient growth of SeaMoney andto reduce payment friction for Shopee users. Moreover, we have use cases of our mobile wallet services outside of Sea’s platforms, including other online and offlinemerchants, along with a variety of third-party use cases. Third-party merchants currently include telecommunications companies, online and offline entertainmentservice providers such as game operators or app stores, movie theaters, concert/event venues, utility service providers, food delivery service providers, credit cardissuers, banks, insurance companies, and car leasing companies. As we increase the number and type of merchants on the SeaMoney platform, we are able to offermobile payment solutions for a wider range of products and services to meet the daily needs of our users and attract more users to the platform. In addition, SeaMoney provides payment processing services to Shopee in almost all of our markets, which, depending on the operational arrangement ineach specific market, may include payments from buyers to Shopee accounts under Shopee Guarantee as well as outgoing payments from Shopee accounts to Shopeeseller accounts that are operationally handled by SeaMoney. Moreover, SeaMoney offers other digital financial services to its users through technology, such as credit, insurtech and digital bank services. SeaMoneyalso provides credit offerings to select Shopee users including Shopee buyers and sellers. We also offer insurance products through our SeaInsure business. SeaInsure acts as underwriters for selective types of insurance products in certain of ourmarkets and also conducts insurance brokerage business in certain of our markets. We mainly monetize our digital financial services business by charging fees (fees from our mobile wallet services and payment processing services andcommissions from third-party financial institutions which offer financial products or lend to consumers on our platform), by earning interest from our credit andbanking businesses and by earning premium from our insurance business. 54Table of ContentsMarketing of our SeaMoney products and services have been done through offline advertisements and in-app advertisements through our Shopee apps. The financial services industry is heavily regulated and we are required to obtain and maintain certain licenses in the jurisdictions in which we providefinancial services. As of the date of this annual report, we have obtained licenses and governmental approvals necessary to provide electronic money services inIndonesia, Vietnam, Thailand, the Philippines, Malaysia, Singapore and Brazil and to provide loans in Indonesia, Thailand, the Philippines and Malaysia. We have alsoobtained licenses and governmental approvals necessary to offer general and life insurance products in Indonesia and Philippines, and to operate as a broker inThailand. As we expand our digital financial services business to additional markets, we may need to obtain additional licenses and permits in order to comply withlocal laws. See “—Regulation” and “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across MultipleBusinesses—We are subject to extensive and changing laws and government regulations across our business.” We acquired a controlling interest in a local commercial bank in Indonesia in 2020, and launched SeaBank in Indonesia in the latter half of 2021. We alsoobtained a bank license in the Philippines, and launched SeaBank in Philippines in March 2022. In addition, our wholly-owned subsidiary in Singapore has beengranted a digital full bank license in Singapore in December 2021. For further details, see “Item 3. Key Information—D. Risk Factors—Business and OperationalRelated Risks—Risks Related to Our Digital Financial Services Business—Our banking business may subject us to additional material business, operational, financial,legal and compliance requirements and risks.” Our Technology Technology is key to our success as it enables us to operate our business more efficiently, improves the user experience and supports innovation. Our network infrastructure utilizes our private data centers and cloud services that are linked with high-speed networks. We have established local serversand infrastructure in many of our key markets to ensure faster connections and a seamless user experience. We operate at a scale that routinely delivers massiveamounts of content to tens of millions of users across our platforms. Our technology architecture has been designed to scale horizontally to accommodate the largeamounts of data our network generates. As our user base grows and the level of engagement and activities on our platforms increase, we will continue to expand ourtechnology infrastructure to maintain and improve the quality of our user experience. Our data science technology serves various types of data-intensivecomputational needs, including high-volume batch processing and multi-variable and multi-dimensional real-time analytics. Customer Service We have dedicated customer service teams. We believe our customer service team is well-trained in assisting our users with issues they encounter on ourplatforms, gathering feedback on how to improve our services and receiving user complaints and suggestions. Moreover, we have adopted systematic internalprocedures to quickly respond to and resolve customer complaints. Intellectual Property Our business is based significantly on the acquisition, creation, use, and protection of intellectual property. Free Fire, our self-developed game, is one of ourkey intellectual properties. Other forms of this intellectual property include the technology and know-how that we developed and use to operate our e-commerce andpayment products. We believe the protection of our trademarks, copyrights, domain names, trade names, trade secrets, patents, and other proprietary rights is critical to ourbusiness and we protect our intellectual property rights in various jurisdictions by relying on local laws and contractual restrictions. More specifically, we rely on acombination of trademark, fair trade practice, copyright, patent and trade secret protection laws, as well as confidentiality procedures and contractual provisions, toprotect our intellectual property rights. Moreover, we enter into confidentiality, proprietary rights assignment, non-compete, and non-assignment agreements with ouremployees, and have confidentiality arrangements with our business partners. We also actively engage in monitoring and enforcement activities with respect toinfringing uses of our intellectual property by third parties. 55Table of ContentsWhile we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of theintellectual property created by or licensed to us. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable AcrossMultiple Businesses—We may be subject to intellectual property-related risks.” Also, we cannot be certain that the products and content on our platforms do not orwill not infringe on the valid patents, copyrights or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims from timeto time relating to the intellectual property of others, as discussed in “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—OtherOperational Risks—We may be subject to risks related to litigation and regulatory proceedings.” Competition Each of the e-commerce, online games, and digital financial services industries in our markets is highly fragmented. We face competition in each of our linesof business in each market where we operate. Some of our competitors may have greater access to capital markets, more financial and other resources, and a longeroperating history than we do. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across MultipleBusinesses—We may fail to compete effectively.” E-commerce We face competition principally from regional players that operate across several markets and global players that expand into our markets by building localplatforms or making their existing platforms accessible to users in our markets. We also face competition from single-market players. We compete to attract, engage,and retain buyers based on the variety and value of products and services listed on our marketplaces, overall user experience and convenience, online communicationtools, social features, integration with mobile and networking applications and tools, mobile applications and availability, quality and costs of payment and logisticsservices. We also compete to attract and retain sellers based on the number and the engagement of buyers, the effectiveness and value of the services we offer tosellers, commission rates, and the availability of support services. In addition, we may face increasing competition from social media platforms, online and app-basedsearch engines through which products and services may be researched and sold, and other content-providing market players. Social media platforms with high levelsof user engagement may be able to leverage content and user connections and traffic on their platform to increase the visibility and attractiveness of a wide variety ofbrands and products. Online Games We compete on the basis of a number of factors, including user base, game portfolio, quality of user experience, brand awareness, and reputation,relationships with game developers and access to distribution and payment channels. Our competitors for publishing primarily include companies with a presence injust one or a few of our markets, as well as other global platforms and self-publishing game developers. Our competitors for game development include globaldevelopers. Digital Financial Services SeaMoney competes primarily with existing online and offline payment service providers, including, among others, other mobile wallet service providers.SeaMoney competes with these companies primarily on the basis of network size, transaction processing speed, convenience, accessibility, reliability, and price. Webelieve that strengths across the e-commerce and digital entertainment businesses position us very well to grow our digital financial businesses and SeaMoney has asignificant competitive advantage because of the strong demand in our markets for seamless convenient forms of mobile payments with the continued development ofthe digital economy in the region. Seasonality Our revenue and other operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. Fora discussion of the factors that may contribute to fluctuations of our quarterly results, see “Item 3. Key Information—D. Risk Factors—Business and OperationalRelated Risks—Risks Applicable Across Multiple Businesses—Our results of operations are subject to fluctuations.” 56Table of ContentsRegulation This section sets forth a summary of the significant regulations or requirements in the jurisdictions where we conduct our material business operations,namely Indonesia, Taiwan, Vietnam, Thailand, Singapore and Malaysia. The primary laws and regulations to which we are subject relate to foreign investment,dividend distributions, foreign exchange controls, e-commerce, game operating, mobile wallet, payment processing, data protection, intellectual property rights, anti-money laundering and terrorism financing and employment and labor.IndonesiaRegulations on Foreign InvestmentThe Law No. 25 of 2007 regarding Investment issued on April 26, 2007, as amended by Government Regulation In Lieu of Law No. 2 of 2022 regarding JobCreation (the “Indonesia Investment Law”), states that all business sectors or business types are open to foreign investment, except certain lines of business that theIndonesian government has expressly prohibited or restricted from foreign investment. Under the Indonesia Investment Law, foreign investors can own up to 100% ofthe equity in game distribution and e-commerce marketplace businesses in Indonesia. We have obtained the investment in-principle license and the business licenserequired for foreign investment companies engaging in game distribution and e-commerce marketplace businesses in Indonesia issued by the Indonesia InvestmentCoordinating Board. In addition, the Indonesia Investment Law renders void any agreements containing statements by Indonesian shareholders that they hold sharesin an Indonesian company for the benefit of a foreign beneficiary.Regulations on the Use of RupiahOn January 12, 2023, the government of Indonesia enacted Law No. 4 of 2023 on Financial Sector Development and Reinforcement, which amends Law No. 7of 2011 on Currency (the “Indonesia Currency Law”). Notwithstanding this, Bank Indonesia Regulation No. 17/3/PBI/2015 on the Mandatory Use of IndonesianRupiah within the Territory of the Republic of Indonesia (the “Indonesia Currency Law Implementation Regulations”) and Bank Indonesia Circular Letter No.17/11/DKSP, the implementing guideline to the Indonesia Currency Law Implementation Regulations, remain applicable. Such rules require the use of IndonesianRupiah for all transactions conducted within Indonesia, including transactions for payment, settlement of obligations and other financial transactions, except forcertain exemptions provided under the Indonesia Currency Law Implementation Regulations. Failures to comply with any provisions under the Indonesia CurrencyLaw Implementation Regulations may lead to administrative, criminal or monetary sanctions of up to IDR1 billion (US$64,135).Regulations on Dividend DistributionsDividend distributions are regulated under Law No. 40 of 2007 on Limited Liability Companies, as amended by Government Regulation In Lieu of Law No. 2 of2022 regarding Job Creation (the “Indonesia Companies Law”). A decision to distribute a dividend needs to be made by a resolution of the shareholders at the annualor general meeting of shareholders upon the recommendation of the board of directors of a limited liability company. A limited liability company may only declaredividends if it has positive retained earnings at the end of a fiscal year. Furthermore, the Indonesia Companies Law allows a limited liability company to distributeinterim dividends prior to the end of a financial year so long as it is permitted by its articles of association and provided that the interim dividend does not result in thelimited liability company’s net assets becoming less than the total issued and paid-up capital and the compulsory reserves fund. Such distribution shall be determinedby the limited liability company’s board of directors after being first approved by the board of commissioners. If, after the end of the relevant financial year, the limitedliability company has suffered a loss, any distributed interim dividends must be returned by the shareholders, and the board of directors and board of commissionersof the limited liability company will be jointly and severally responsible if the interim dividend is not returned. A limited liability company is required to reserve acertain amount from its net profit each year as a reserve fund until such fund amounts to at least 20% of its issued and paid-up capital.57Table of ContentsRegulations on Foreign ExchangeIndonesia has limited foreign exchange controls. The Indonesian rupiah is generally freely convertible within or from Indonesia. The Indonesia InvestmentLaw stipulates that foreign investors are allowed to make capital contributions and repatriate dividends, profits and other income in foreign currency withoutobtaining prior approvals from governmental authorities and/or Bank Indonesia, the central bank of Indonesia. The conversion of foreign currency into Indonesianrupiah for capital contribution purposes does not require any governmental approvals.Bank Indonesia Regulation No. 24/7/PBI/2022 on Transactions on the Foreign Exchange Market and Board of Governors Regulation No. 24/10/PADG/2022 onImplementing Regulation on Transactions in the Foreign Exchange Market (collectively, the “Indonesia Foreign Exchange Regulations”), issued by Bank Indonesia,came into force on July 4, 2022. According to such regulations, a party wishing to convert Indonesian rupiah to foreign currency exceeding certain thresholds setforth in the Indonesia Foreign Exchange Regulations is required to submit certain supporting documents to the bank handling the foreign exchange conversion,including the underlying transaction documents and a duly stamped statement confirming that the underlying transaction documents are valid and that the foreigncurrency will only be used to settle the relevant payment obligations within the timeline specified under the underlying transaction, among other things. Forconversions not exceeding the threshold set forth in the Indonesia Foreign Exchange Regulations, the party only needs to declare in a duly stamped letter that itsaggregate foreign currency purchases have not exceeded the monthly threshold set forth in the Indonesian banking system.Regulations on E-commerceGeneral Regulation on E-CommerceOn November 25, 2019, the Indonesian government enacted Government Regulation No. 80 of 2019 on Commerce through Electronic Systems (the “E-commerce Regulation”). This regulation governs not only the restrictions and requirements for e-commerce sellers, but also e-commerce platform providers andintermediary service providers. See below for more details about the liability of platform providers and intermediary service providers under the E-commerceRegulation. Further, this regulation also regulates, among others, e-contracts, online advertisements and personal data protection in the e-commerce sector. Thisregulation governs local e-commerce sellers, as well as foreign e-commerce sellers if they actively provide their services to Indonesian consumers. The implementingregulation of the E-commerce Regulation, the Ministry of Trade Regulation No. 50 of 2020 on the Requirements for Business Licensing, Advertising, Development,and Supervision of Businesses in Electronic Commerce further provides that a domestic e-commerce platform must obtain an e-commerce trade business license orSurat Izin Usaha Perdagangan Melalui Sistem Elektronik, while a local merchant must obtain a business license that is relevant to their business activities.Applications for both licenses can be submitted online via the Online Single Submission portal. We believe we currently possess the necessary license to operate ourShopee business in Indonesia.Governance of Electronic Information and/or DocumentsGeneral obligation of the government to prevent the dissemination of prohibited content is explicitly provided under Law No. 11 of 2008 on ElectronicInformation and Transaction, as amended by Law No. 19 of 2016 (the “Electronic Information and Transaction Law”). On November 24, 2020, the Indonesiangovernment enacted MOCIT Regulation No. 5 of 2020 on Private Electronic Systems, as amended by MOCIT Regulation No. 10 of 2021 (the “Private ElectronicSystems Regulation”). Under the Private Electronic Systems Regulation, all digital platforms that fall within the private electronic system provider category, includingplatforms that offer goods and/or services such as financial transaction services and paid content to users’ devices, are required to ensure that its platform does notcontain or facilitate the dissemination of prohibited content. Prohibited content includes those that violate the prevailing law, disturb members of the public and publicorder, and provide access to or information to access prohibited content. The platform operator must take down any prohibited content identified in a written noticefrom the Ministry of Communication, Information and Technology (“MOCIT”) no later than 24 hours upon receiving such notice. If the content is related to terrorism,child pornography, or any other content that may disturb public order, the take down request will be considered as urgent and must be concluded within four hoursupon receiving notice from MOCIT.Failure to take down prohibited content within the specified time period would, amongst others, cause MOCIT to block the public’s access to the platform.Upon removal of the prohibited content, the digital platform operator or the relevant ministry or institution may submit a written request to MOCIT to lift the block onthe platform.58Table of ContentsLimitations and Liabilities of Platform Operators and E-commerce MerchantsThe E-commerce Regulation provides for certain limitations of liability for e-commerce platform providers. E-commerce platform providers and intermediaryservice providers are discharged from liability for any illegal third-party content found on their platform if the relevant provider has acted expeditiously to remove ordisable access to such content after being aware of its existence. However, the E-commerce Regulation does not provide any clear criteria of what constitutes anexpeditious response. As for an intermediary service provider, it will also be discharged from any liability for illegal content if such provider is acting as mere conduit,caching, hosting and search engine providers. More detailed guidelines are provided in the Private Electronic Systems Regulation, which specifically addresses thesteps to be taken by user-generated-content platforms (“UGC platforms”), to be discharged from liabilities arising from prohibited content uploaded by its users. First,UGC platform operators must maintain a governance policy governing the rights and obligations of the users and the operator as well as the division of liability arisingfrom the user’s content. Subsequently, the UGC platform must include a reporting feature which can be accessed by members of the public to file a claim or report onthe existence of prohibited content on its platform. Further, UGC platform operators must provide the information relating to the uploader of the prohibited content tothe relevant law enforcement agencies and comply with the mandatory take down timeline.If we fail to employ the abovementioned measures or to act in a timely or effective manner in response to user reports relating to listings or sales of prohibitedcontent on the Shopee e-commerce marketplace, we may be subject to sanctions in the form of, amongst others, a temporary or permanent block.Regulations on Personal Data Protection and Information SecurityOn October 17, 2022, Law No. 27 of 2022 on Personal Data Protection (“PDP Law”) was enacted and effective, providing a new framework for personal dataprotection in Indonesia. To the extent provisions in existing and separate regulations relating to privacy and/or personal data protection in Indonesia such as MOCITRegulation No. 20 of 2016 on Personal Data Protection in Electronic Systems and Government Regulation No. 71 of 2019 on the Provision of Electronic System andTransactions (collectively, “General Data Protection Regulations”), do not conflict with the PDP Law, the non-conflicting provisions in these General Data ProtectionRegulations remain valid. These General Data Protection Regulations set out the rules governing the protection of personal data that are stored in electronic formwhile PDP Law governs protection of personal data that are stored both in electronic and non-electronic forms. The PDP Law introduces the definitions of “PersonalData Controllers” and “Personal Data Processors,” which previously was limited to “electronic system provider” under the General Data Protection Regulations. ThePersonal Data Controllers, either individually or jointly with other parties, determine the purpose and control the processing of personal data, while the Personal DataProcessors, either individually or jointly with other parties, act on behalf of the Personal Data Controllers to process personal data. The PDP Law requires any actiontaken in relation to the processing of personal data by either Personal Data Controllers and Personal Data Processors, including acquisition and collection, processingand analysis, storage, correction and updates, display, announcement, transfer, dissemination, disclosure, and deletion or destruction, to be subject to provisions ofthe PDP Law, such as requiring prior consent of the owner of such personal data. Further, under the PDP Law, the Personal Data Controllers and Personal DataProcessors are imposed with a comprehensive set of obligations, including: (i) adoption of internal data protection and security policies, (ii) performing an impactassessment for any high-risk personal data processing, (iii) providing access to the personal data that is processed along with the track record of the processing inaccordance with the storage period, (iv) appointment of a data protection officer by Personal Data Controllers or Personal Data Processors to carry out personal dataprotection functions, and (v) for overseas transfer of personal data, ensuring the recipient country has an equal or higher personal data protection governance thanthe PDP Law, or otherwise, ensuring that there is adequate and binding protection, or if the foregoing is not available, consent from the personal data subjects.The General Data Protection Regulations clarify the data localization requirement by specifying that such requirement applies only to “public electronicsystems providers” (i.e. central and regional executive, legislative, judicative bodies and any other bodies established pursuant to a statutory mandate, and entitiesappointed by the public bodies to operate electronic systems on their behalf). Meanwhile, a private provider can choose whether to process and/or host its electronicsystems and data onshore or offshore. Regardless of the location, such provider must ensure that its electronic systems and data are accessible to the authority.However, this flexibility does not apply to private operators in the banking and financial services sectors.59Table of ContentsThe PDP Law and the General Data Protection Regulations also describe the right of a data subject to request the removal of any data pertaining to them thatare no longer relevant, which is popularly known as “the right to be forgotten.” There are two types of the right to be forgotten, which is the right to erasure and theright to delist. The latter can only be requested based on a court’s order.In the event of a data breach, the PDP Law requires the Personal Data Controllers to deliver written notification no later than 72 hours to the personal datasubjects and to the personal data protection authority.If the Personal Data Controllers or the Personal Data Processors fail to comply with the PDP Law, they may be subject to sanctions in the form of warnings orwritten reprimands, temporary suspensions of personal data processing activities, forced deletion or destruction of personal data, and administrative fines of up to 2%of annual revenue and income of the Personal Data Controller or the Personal Data Processor may be imposed. If corporations fail to comply with PDP Law, they maybe subject to criminal fines as well as license revocation and liquidation.The PDP Law provides a transition period of two years for the Personal Data Controllers, Personal Data Processors, and other relevant parties to adjust andcomply with the PDP Law. However, this grace period does not apply to criminal sanctions for prohibited data processing activities under the PDP Law as they becameeffective immediately after October 17, 2022.Regulations on Consumer ProtectionConsumer protection in Indonesia is regulated under Law No. 8 of 1999 on Consumer Protection (the “Consumer Protection Law”), which became effective onApril 20, 2000. It is the first comprehensive law devoted to protecting the rights of and promoting the recourses available to users of both goods and services. The lawdetails activities and circumstances that are prohibited such as disclosing incorrect and unclear information regarding the services rendered or promoting falseadvertising. Violations of the Consumer Protection Law may result in an administrative and/or criminal sanction such as monetary compensation or an imprisonmentsanction.On April 18, 2022, the Financial Services Authority (Otoritas Jasa Keuangan/OJK) issued OJK Regulation No. 6/POJK.07/2022 regarding Consumer andGeneral Public Protection in the Financial Services Sector. Under this regulation, financial services entities are required to provide sufficient time for prospectiveconsumers to fully understand a financial product or service agreement, which cannot contain exoneration or exemption clauses at signing. Financial services entitiesare also required to carry out yearly activities to improve the financial literacy of consumers or the public. Violations of this regulation may result in administrativesanctions, ranging from written warnings to license revocation.In addition to the above, the E-commerce Regulation also requires an e-commerce business operator to provide certain customer service mechanism for itsconsumers, including contact number and email address, and resolve any report of damages by its consumers to the Ministry of Trade of Indonesia. Merchants and e-commerce platform providers are also required to give their consumers at least two days to return the purchased goods and/or services or to carry out a cancellation,starting from the time when the goods and/or service is received by the consumer. However, the return of goods and/or services or cancellation may only beconducted if such return or cancellation fulfils certain criteria, among others, if the goods and/or service is damaged or has expired. E-commerce platform providers arealso required to provide a refund mechanism for cancellation of a purchase. Failure to comply with the aforementioned requirements may result in administrativesanctions ranging from written reprimands to revocation of the business license.Regulations Relating to Game BusinessIf a game operating platform in Indonesia wishes to rate its games, it may refer to Regulation No. 11 of 2016 on Classifications of Electronic Interactive Games(the “Rating Regulation”), promulgated by the MOCIT. The Rating Regulation allows game developers, producers, or operators to self-rate the games that they havecreated, produced or published in Indonesia, regardless of whether such game has been rated in its country of origin. This self-rating will be evaluated by the GamesClassifications Committee, appointed by and reports to the MOCIT. The evaluation conducted by the Games Classifications Committee will be made based on reportsfrom or information available to the public, periodically.60Table of ContentsThe Rating Regulation classifies games into five categories which are intended to guide parents and other users to choose games that are appropriate for theage group of the users. Based on the amount of sensitive content, games are classified into the following age-groups: over three years old, over seven years old, over13 years old, over 18 years old, and all ages. Games that have been rated by developers, producers or creators, will be included in the Recommended Games Registermaintained by the Directorate General of Information Technologies Applications under MOCIT (“DGITA”). On the other hand, if a game contains pornographicmaterial, promotes gambling using real or virtual money, or contradicts prevailing laws, such game will not be rated and will not be included in the RecommendedGames Register. DGITA may, based on a recommendation from the Games Classifications Committee, adjust the rating of a game if the operator of the game fails to givean appropriate rating. In addition, such operator could face claims from the public should its rating be deemed to mislead users or parents, and DGITA may adjust therating accordingly. The games that have been classified are displayed on igrs.id, the official site maintained by DGITA.Regulations on Electronic Money and Electronic WalletOn July 1, 2021, Bank Indonesia enacted Bank Indonesia Regulation No. 23/6/PBI/2021 on Payment Service Providers (the “Payment Service ProvidersRegulation”), which regulates the requirements and restrictions for all payment service providers in Indonesia (“PSPs”). Previously, licenses for PSPs were determinedbased on whether a PSP provided their services on a front-end basis (e.g., e-money, e-wallet, and payment gateway providers) or a back-end basis (e.g., switching,clearing, and settlement providers). However, upon enactment of the Payment Service Providers Regulation, PSP licenses are reclassified so that they are based on thespecific activities provided by a PSP. The Payment Service Providers Regulation divides PSP licenses into three categories, category 1, category 2, and category 3.Category 1 license is required for PSPs that conduct the following activities: (i) administration of fund sources; (ii) provision of information on fund sources; (iii)payment initiation and/or acquiring services; and (iv) remittance services. Category 2 license is required for PSPs that conduct the activities under items (ii) and (iii)only, and category 3 license is required for PSPs that provide remittance services and/or other activities determined by Bank Indonesia.Under prevailing Indonesian laws and regulations, electronic money or e-money is defined as a payment instrument (i) issued on the basis of the source offunds being denominated in Rupiah that is deposited in advance to the e-money issuer, (ii) where the source of funds denominated in Rupiah is stored electronically ina server or a chip for purposes of transferring funds, and (iii) where the value of the e-money managed by the issuer is not considered as savings under the bankingregulations. The Payment Service Providers Regulation also recognizes two types of e-money systems: (i) closed loop systems, where the e-money can only be usedas a payment instrument for goods and/or services provided by the e-money issuer, and (ii) open loop systems, where the e-money can be used as a paymentinstrument for goods and/or services provided by third party providers. A closed loop e-money provider which issues floating funds less than IDR1 billion(US$64,135) is exempted from the licensing requirement. An e-money provider may offer features such as user registration, deposit top-up and transaction and billspayment, while funds transfer, cash withdrawal and any additional features (upon approval from Bank Indonesia) are only available for open loop and licensed e-money providers. Unregistered users can deposit up to IDR2 million (US$128) in e-money value, whilst registered users may deposit and use up to IDR10 million(US$641). We currently have the e-money license in Indonesia.With respect to reporting obligations, both e-money and e-wallet providers are obliged to submit periodical and incidental reports to Bank Indonesia. Theperiodical reports consist of daily, monthly and annual reports, as well as a report on the result of independent audits on information systems and security testing.Incidental reports include report of data and information in documents submitted when applying for a license to Bank Indonesia, results of independent audit oninformation system in case of any significant changes, any problems in the payment transaction processing, change of capital, shareholding, control, and/ormanagement, and force majeure events. Any failure to comply with the regulations governing payment service providers may result in reprimands and monetary fines;and, depending on the severity of the non-compliance, may also result in temporary suspension of activities and/or revocation of the relevant license.Regulations on Payment SystemsIn December 2020, Bank Indonesia issued Regulation No. 22/23/PBI/2020 of 2020 on Payment Systems (the “Payment Systems Regulation”), which becameeffective on July 1, 2021. The Payment Systems Regulation is intended to be an “umbrella” regulation that provides a regulatory framework for the Indonesianpayment systems industry.61Table of ContentsThe Payment Systems Regulation categorizes non-bank payment institutions into two categories, PSP and payment infrastructure providers (“PIP”). PSPsinclude most institutions providing front-end services to end-consumers such as e-money issuers, acquirers, payment gateway services providers, fundtransfer/remittance services providers. PIPs are generally institutions which facilitate clearing and settlements or back-end services, between PSPs or between otherPIPs.PSPs and PIPs are classified based on transaction size, interconnectivity, complexity, and whether they are replaceable. Bank Indonesia assesses the existinglicensed players to: (i) reclassify the licensee, and (ii) ensure the capability of the licensee to fulfil the new requirements, particularly on capital and financial, riskmanagement, and IT system capability aspects. Based on the assessment, Bank Indonesia will convert the existing license into a new license. The licensee will need tomake a statement of commitment to comply and afterwards, the licensee will be given a transition period of two years to fulfil the requirements.Foreign investors in a PSP are permitted to hold up to 85% economic interests and Bank Indonesia does not take into account economic interests indetermining control. A shareholder in a PSP will be deemed to have control if it holds at least 51% voting rights in the provider, has the right to appoint members ofmanagement in the provider, or holds a veto right in the provider’s general meeting of the shareholders. Under the regulation, only domestic parties can hold suchcontrolling voting rights. Bank Indonesia does not differentiate between economic interests and voting right in a PIP where a foreign investor can only hold up to 15%economic interests. These restrictions are also applicable to existing providers, if there is a change in the foreign shareholding in such provider after July 1, 2021.The Payment Systems Regulation expressly prohibits PSPs from: (i) accepting cryptocurrency in a payment transaction processing, (ii) processing paymenttransactions with virtual currency as the source of funds, and/or (iii) linking virtual currency with payment transactions processing.Regulations on Online LendingOnline lending in Indonesia is regulated under two categories, namely off-balance sheet and on-balance sheet. Whilst online on-balance sheet lendingbusinesses are subject to the financing company regulations that are applicable to its offline counterparts, online off-balance sheet lending, or peer-to-peer lending, isregulated specifically under the OJK Regulation No. 10 /POJK.05/2022 on Information Technology-Based Co-Funding Services, which revoked OJK Regulation No.77/POJK/01/2016 on Lending and Borrowing Services based on Information Technology. We have the requisite license for the lending business we currently conductin Indonesia.Regulations on BankingBanking in Indonesia is regulated under Law No. 7 of 1992 regarding Banking issued on March 25, 1992, as amended by Law No. 4 of 2023 on Financial SectorDevelopment and Reinforcement (the “Banking Law”). The Banking Law governs banks’ types and businesses, licensing, legal form and ownership, managementstructure, and bank secrecy. In 2020, the Financial Services Authority issued Regulation No. 12/POJK.03/2020 TAHUN 2020 on Consolidation of Commercial Bankswhich requires all banks to fulfil a minimum core capital of at least IDR3 trillion (US$192 million) by December 31, 2022. Moreover, OJK revoked the Financial ServicesAuthority Regulation No. 6/POJK.03/2016 TAHUN 2016 on Business Activities and Branch Offices Based on Core Capital of Banks and enacted the Financial ServicesAuthority Regulation No. 12/POJK.03/2021 on Commercial Banks or the Commercial Banks Regulation on October 30, 2021. The Commercial Banks Regulation amendsthe four categories of banks called “Buku” to “Bank Categories Based on Core Capital (Kelompok Bank berdasarkan Modal Inti)” or “KBMI.” Banks are divided intofour KBMI categories, namely: (i) KBMI 1 with core capital equal or less than IDR6 trillion (US$384 million), (ii) KBMI 2 with core capital between IDR6 trillion (US$384million) and IDR14 trillion (US$898 million), (iii) KBMI 3 with core capital between IDR14 trillion (US$898 million) and IDR70 trillion (US$4.5 billion), and (iv) KBMI 4banks with core capital of more than IDR70 trillion (US$4.5 billion).62Table of ContentsRegulations on Intellectual Property RightsTrademark and Geographical Indication LawThe Law No. 20 of 2016 on Trademark and Geographical Indication (the “Trademark and Geographical Indication Law”) has expanded upon the scope oftrademark protection and adopted the Madrid Protocol provisions for trademark registration in Indonesia.The Government Regulation In Lieu of Law No. 2 of 2022 regarding Job Creation shortens the trademark registration process and inserts an additionalqualification/consideration for the trademark examiner in determining whether a trademark application can be registered. In addition, the Trademark and GeographicalIndication Law recognizes two types of international trademark registration application under the framework of Madrid Protocol: an application originating fromIndonesia to an International Bureau which is filed through the Directorate General of Intellectual Properties under the Minister of Law and Human Rights, or anapplication addressed to Indonesia as the receiving office from an International Bureau. To be able to file an application in Indonesia for the international registrationof a trademark through the Madrid Protocol, the applicant either must have applied for registration of the trademark in Indonesia or already owns the trademark inIndonesia.Regulations Relating to CopyrightsCopyrights in Indonesia are regulated under Law No. 28 of 2014 on Copyrights (the “Indonesia Copyright Law”). Indonesia adopts the declarative system ofcopyright protection whereby a copyright is an exclusive right of a creator of content which arises automatically after a creation appears in a concrete form. TheIndonesia Copyright Law protects creations in the field of science, arts and literature, which includes, among others, computer programs, video games, photography,songs or music with or without lyrics, and all forms of art.Regulations on Anti-money Laundering and Prevention of Terrorism FinancingPrevention and Eradication of Money LaunderingLaw No. 8 of 2010 on Prevention and Eradication of Money Laundering regulates the types of transactions which are required to be reported to theIndonesian Financial Transaction Reports and Analysis Center (“PPATK”), and the entities responsible to report such transactions. Under this law, any party whoconceals or disguises the origin, source, location, allocation, assignment, or actual ownership or assets known or reasonably suspected to be proceeds of crimes maysubject to monetary sanction of up to IDR5 billion (US$320,677) or imprisonment of up to 20 years. Financial service providers must comply with know-your-customerprinciples and report suspicious financial transactions that it believes is related to money laundering to the PPATK. The reporting party is required to report to PPATKany suspicious financial transaction entered into with its customers having a minimum amount of IDR500 million (US$32,068), or an equivalent value in othercurrencies, and/or any financial transaction involving the transfer of funds from and to other countries, no later than 14 business days after the transaction isconducted.Failure to submit the report may subject the reporting party to administrative sanction(s) including warning letters, public announcements on the action or anadministrative penalty.Prevention and Eradication of Terrorism FinancingLaw No. 9 of 2013 on the Prevention and Eradication of Terrorism Financing was enacted in order to prevent the funding of terrorists. Under this regulation,an act of terrorism financing is defined as direct and/or indirect acts to provide, collect, grant, or loan funds to persons that would knowingly use the funds to conductterrorist acts. Companies that fund terrorism in Indonesia may face large monetary fines, have their assets seized and their permits revoked. Moreover, such companiesmay also be dismantled or expropriated by the government. Financial service providers must comply with know-your-customer principles and report suspiciousfinancial transactions that it believes is related to terrorism to the PPATK. Failure to do so will result in fines of up to IDR1 billion (US$64,135). Financial serviceproviders that provide fund transfer services must also request the sender of funds to present identification and information explaining the purpose of the fundtransfer and must keep a record of all transactions for at least five years. Funds of the alleged financers of terrorism may be frozen upon the request of the PPATK,investigators, public prosecutors, a judge, and other legally designated parties.63Table of ContentsRegulations on LaborUnder Law No. 13 of 2003 on Manpower, as amended by Government Regulation In Lieu of Law No. 2 of 2022 regarding Job Creation (the “IndonesiaManpower Law”), we are not allowed to pay our employee wages below the minimum wage stipulated annually by the relevant provincial government. In certainconditions, a governor may set the minimum wage for regencies or municipalities in their respective provinces. The minimum wage is set in accordance with theeconomy and employment situation of the relevant province. If we fail to abide by requisite minimum wage regulations in the Indonesia Manpower Law, our directorsmay be liable to a term of imprisonment of no less than one year and up to four years. Moreover, we may also be subject to a fine of no less than IDR100 million(US$6,414) and up to IDR400 million (US$25,654).Indonesia has adopted social protection and social welfare programs for employees who are working in Indonesia under Law No. 24 of 2011 on the SocialSecurity Agency as amended by Government Regulation In Lieu of Law No. 2 of 2022 regarding Job Creation (the “Indonesia Social Security Agency Law”). TheIndonesia Social Security Agency Law establishes two social welfare programs, namely, the healthcare social security insurance and employment social security.Employment social security covers occupational accident security program, death security program, old-age security program, pension security program, and job-losssecurity program. Under the Indonesia Social Security Agency Law, an employer is required to register itself and its employees as employment social securityparticipants. If an employer fails to comply with this obligation, it will be subject to a written warning, fines and/or exclusion from certain public services, which relateto business-related licensing, license required to participate in project tenders, license to employ foreign workers, license to outsource company, and building permit.The Indonesia Social Security Agency Law further stipulates that an employer that violates its obligation to provide the requisite financial contributions to healthcaresocial security insurance and employment social security will be subject to up to eight years of imprisonment and fines of IDR1 billion (US$64,135). In addition, everyperson, including foreign nationals, who is employed for at least six months in Indonesia, must participate in the social security programs in Indonesia.Taiwan Regulations on Foreign Investment There have been and remain tensions surrounding the Taiwan Strait. If such tension intensifies, our business in Taiwan might not be able to operate normallyor at all. Due in large part to these tensions, Taiwan has imposed restrictions on investments by PRC investors. Investment in Taiwan by PRC investors is governed by the Measures Governing Investment Permits to the People of the Mainland Area, (the “Measures”),which was last amended on December 30, 2020, and promulgated by the Ministry of Economic Affairs of Taiwan, or the MOEA. PRC investors refer to PRCindividuals, juristic persons, organizations and other institutions and PRC invested companies from other jurisdictions (collectively, “PRC investors”). “PRC investedcompanies from other jurisdictions” refer to those entities incorporated outside of the PRC and invested by PRC individuals, juristic persons, organizations and otherinstitutions that (i) directly or indirectly hold more than 30% of the shares or capital of such entities (each intermediate holding company shall be separately assessedbased on this 30% test to determine whether it is deemed a PRC invested company from other jurisdictions), or (ii) have the ability to control such entities. Underapplicable regulatory guidance, “control” is defined to include: (i) having the ability to hold more than 50% of the voting shares under agreement with other investors;(ii) having the ability to control the financing, operation and personnel appointment and removal of the company according to laws or agreements; (iii) having theability to appoint or remove more than half of the members of the board of directors or more than half of the key members of the other organization that is able to directa company’s operation, and such company is controlled by the board of directors or such other organization mentioned above; (iv) having the ability to direct morethan 50% of the voting power in the board of directors or more than 50% of the voting power in the other organizations that is able to direct a company’s operation,and such company is controlled by the board of directors or such other organization mentioned above; or (v) other indicia of control as set forth in the InternationalFinancial Reporting Standards or Enterprise Accounting Standards promulgated by the Financial Accounting Standards Committee of the Accounting Research andDevelopment Foundation of the Republic of China. PRC investors are required to apply for an approval before engaging in the following investment activities: (i)holding the shares issued by or making capital contribution in a company, sole proprietorship, partnership or limited partnership in Taiwan, exclusive of a single oraccumulated investment that is less than 10% of the shares in a company that is listed on a stock exchange or traded on an over-the-counter market or emerging stockmarket in Taiwan; (ii) setting up a branch office, sole proprietorship, partnership or limited partnership in Taiwan; (iii) providing loans to invested companies investedby (i) and (ii) for more than one year; (iv) having the ability to control a sole proprietorship, partnership, limited partnership or company in Taiwan that is not listed andtraded on a Taiwanese stock exchange, an over-the-counter market or emerging stock market according to agreements or other methods; or (v) a PRC investedcompanies from other jurisdictions acquires business or assets of a Taiwanese company that is not list and traded on a Taiwanese stock exchange, an over-the-counter market or emerging stock market. In addition, if a PRC investor is a juristic person, organization, or other institution invested by (a) a “political party,” military,administrative or political agency of PRC, or (b) PRC invested companies from other jurisdictions invested by the agencies listed in item (a) above, the Taiwanauthorities may restrict or prohibit such PRC investor from investing in businesses in Taiwan. PRC investors are not allowed to invest in a Taiwan company thatoperates businesses in certain statutory business categories, such as computer recreational activities, software publication, third party payment and generaladvertising. 64Table of ContentsBefore investing in Taiwan in accordance with the Measures, PRC investors investing in a Taiwan company that operates businesses in certain permittedstatutory business categories are required to apply for prior approval from the MOEA. In case of being deemed non-compliant with the above-mentioned laws and regulations, the Taiwan authorities may take a range of actions, including: •imposing fines between NT$120,000 (US$3,905) to NT$25,000,000 (US$813,537) and further fines if the non-compliance is not rectified as ordered;•ordering the violator to reduce any direct or indirect ownership or control by PRC investors;•requesting the violator to divest some or all of its investment or control in its invested entities in Taiwan;•suspending the rights of shareholders; and•discontinuing the operations and revoking the business licenses of its invested entities in Taiwan.Foreign Investors Foreign investments in Taiwan are governed by the Statute for Investment by Foreign Nationals, last amended on November 19, 1997. Foreign investors mayinvest by holding shares issued by a Taiwanese company, contributing to its registered capital, establishing a branch office, a proprietary business or a partnership inTaiwan, or providing loans to the invested business for a period exceeding one year, provided that the business items of the invested Taiwanese company are not in anegative list promulgated by the MOEA from time to time. Financial Support Provided by Offshore Entities According to the Statute for Investment by Foreign Nationals, last amended on November 19, 1997, offshore entities can provide loans for a period less thanone year to any Taiwanese companies that such offshore entities do not hold any equity interest in without any approval from government authorities, subject tocertain foreign exchange approval requirements in connection with the remittance of foreign currency in excess of certain amount by Taiwanese entities. There is nomaximum limitation on the amount of loans a Taiwanese company may receive from an offshore entity. Moreover, based on current laws and regulations, there isgenerally no limitation on guarantees made by an offshore entity to a Taiwanese company. Regulations on Foreign Exchange Foreign exchange matters are generally governed by Taiwan’s Foreign Exchange Regulation Act, last amended on April 29, 2009, and regulated by theMinistry of Finance of Taiwan, and the Central Bank of the Republic of China (Taiwan). Authorized by the Foreign Exchange Regulation Act, the Central Bank of theRepublic of China (Taiwan) has promulgated the Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements or Transactions, lastamended on December 26, 2022, in order to deal with the declaration of foreign exchange receipts, disbursements or transactions involving NT$500,000 (US$16,271) ormore or its equivalent in foreign currency. 65Table of ContentsUnder existing laws and regulations, foreign exchange approvals must be obtained from the Central Bank of the Republic of China (Taiwan) on a payment-by-payment basis. A single remittance by a company with an amount over US$1 million or its equivalent in foreign currency shall be reported and documents supportingthe accuracy of such report shall be provided to the bank handling such remittance before the remittance is conducted. In addition, remittances by a company whoseannual aggregate amount exceeds US$50 million or its equivalent in foreign currency may not be processed without the approval of the Central Bank of the Republicof China (Taiwan). Although such approvals have been routinely granted in the past, there can be no assurance that in the future any such approvals will be obtainedin a timely manner, or at all. Regulations on Dividend Distributions Dividend distributions by companies incorporated in Taiwan are governed by the Taiwan Company Act. Under the Taiwan Company Act, with respect to acorporate entity, dividends shall only be distributed after the 10% of annual net income (less prior years’ losses, if any, and applicable income taxes) is set aside as alegal reserve until the accumulated legal reserve equals the paid-in capital of such company. In addition, a foreign company’s Taiwan branch, such as our digitalentertainment business entity in Taiwan, is not entitled to distribute dividends or make other distributions and can only remit the profits to its holding company inaccordance with foreign exchange control regulations after satisfying the relevant income tax obligation in Taiwan. Regulations on Information Technology and Intellectual Property Rights Taiwan does not have a specific statute with respect to regulations governing information technology. The related regulations are mainly dispersed withinthe Electronic Signatures Act promulgated on November 14, 2001. The main purpose of the Electronic Signatures Act is to encourage the use of electronictransactions, ensure the security of electronic transactions, and facilitate the development of electronic commerce. According to the Electronic Signatures Act,documents may be maintained in electronic form, and an electronic signature may be used with the consent of the other party. In addition, a non-government agencyshall not collect or process specific personal information unless it has a legitimate specific purpose and complies with all of the conditions provided in the relevantlaws. Intellectual property rights are protected primarily through the Copyright Act (last amended on June 15, 2022), the Patent Act (last amended on May 4, 2022),the Trademark Act (last amended on May 4, 2022) and the Trade Secrets Act (last amended on January 15, 2020) in Taiwan. Regulations on E-commerce As there are no specific regulations in Taiwan governing e-commerce businesses, operation of e-commerce in Taiwan is regulated by a number of legislations,such as Personal Data Protection Act, the Act Governing Electronic Payment Institutions, and Consumer Protection Act. See “—Regulations on E-payment Services”and “—Regulations on Data Protection and Information Security” below. The regulation on e-commerce by Consumer Protection Act is generally implementedthrough the Recording of Matters in the Standard Contracts of Retail Business and Other Online Transactions. According to the Recording of Matters in the StandardContracts of Retail Business and Other Online Transactions, last amended on July 15, 2016, online retail business is required to present certain information on theirwebsite, such as product information, delivery method and location, and mechanism for resolution of consumer disputes.Regulations on Imported Games and Game Operations Operations of online games are regulated by the Regulations on the Rating of Game Software, last amended on May 23, 2019. Game operating companies andagents of game software need to clearly label the rating and warning language on the packaging or webpages of the game according to the rating system under theregulations and register the rating level and plot of such game software in the database of the competent authority to allow for rating level searches prior to theearliest date on which the game is made available for public purchase. In the event the rating level of a game is not labeled properly according to the relevantregulations, the game operating company or agent may be subject to fines, and may be subject to repeated penalties if such non-compliance is not rectified within thestipulated periods. 66Table of ContentsIn addition, according to the Recording of Matters in the Standard Contracts of Online Games promulgated by the Executive Yuan on December 13, 2007 andlast amended on August 10, 2022, game operating companies need to label the following information on their (a) game websites, log-in page of the game or checkoutpage; and (b) the packaging of their games: (i) the rating level and the age groups that are prohibited or suitable for the game, (ii) the minimum system requirements forrunning the game, (iii) payment information for safety systems provided within the online games (if any) and whether such safety systems are free or not, and (iv)information and certain warning language regarding in-game activities, rewards, prizes and winning percentage. Regulations on E-payment Services Under the Act Governing Electronic Payment Institutions promulgated on February 4, 2015, effective as of May 3, 2015 and last amended on January 19, 2023(such amendments effective as of March 1, 2023), an “electronic payment institution” means a company approved by the Financial Supervisory Commission tooperate the following businesses and certain ancillary or derivative businesses as prescribed under the Act Governing Electronic Payment Institutions: (i) collectingand making payments for real transactions as an agent, (ii) accepting deposits of funds as stored value funds, (iii) conducting small amount of foreign exchange, and(iv) conducting the purchase and sale of the foreign currencies and the currencies of PRC, Hong Kong or Macau. However, a company which (i) only engages in thebusiness of collecting and making payments for real transactions as an agent; (ii) the total balance of funds it collects/pays and keeps does not exceed NT$2 billion(US$65 million) in the average daily amount of a year; and (iii) does not accept deposits of funds as stored value funds, or transfer funds between e-paymentaccounts, is not considered an electronic payment institution. If the total balance of funds such company collects/pays exceed NT$2 billion (US$65 million) in theaverage daily amount of a year, or if such company conducts either accepting deposits of funds as stored value funds, or transferring funds between e-paymentaccounts, then such company shall apply for a license to qualify as an electronic payment institution. Regulations on Data Protection and Information Security The main regulation governing the protection of personal data in Taiwan is the Personal Data Protection Act, last amended on December 30, 2015. ThePersonal Data Protection Act governs the collection, processing and use of personal information in order to prevent abuse of personal data by other parties.Companies that seek to collect, process and use personal information need to disclose the name of the party collecting the personal information and the purpose ofcollecting the personal information subject to the user’s consent. Data subjects should also be informed of their rights under the Personal Data Protection Act andhow they can exercise such rights. Our digital entertainment and e-commerce businesses are required to comply with the Personal Data Protection Act whilecollecting, processing, transferring, and using the personal information of our users. Failure to comply with the Personal Data Protection Act will give rise to fines andcriminal liability. Regulations on Anti-money Laundering and the Prevention of Terrorism Financing According to the Money Laundering Control Act of Taiwan, last amended on November 7, 2018, money laundering includes the following behaviors: (i)knowingly disguises or conceals property or property interests obtained from a serious crime or transfers or changes the specific gain from criminal actions to assistothers to escape from criminal indictment; (ii) covers or hides the nature, source, flowing, location, ownership, disposition and other interest of gains of a particularcrime; and (iii) receives, possesses or uses the gain of a particular crime. We will continue to closely monitor regulatory developments in order to continue to complywith the anti-money laundering and prevention of terrorism financing regulations. Regulations on Labor According to the Labor Standards Act of Taiwan, last amended on June 10, 2020, employers are not allowed to terminate employment contracts withoutcause. Further, the mere transfer of ownership of a company is not sufficient grounds for laying off employees. Only when the employer is to be dissolved due totransactions under the Business Mergers and Acquisitions Act can such employer terminate the employment agreements with employees that are not offeredemployment by the surviving or assigned company. Under the Labor Standards Act and the Labor Pension Act of Taiwan, employers are required to contribute noless than 6% of an employee’s monthly salary into a specific account as part of the employee’s pension. Under the Labor Insurance Act of Taiwan, employers shouldwithhold and pay for certain statutory percentages of the labor insurance premiums for employees aged between 15 and 65. In addition, under the National HealthInsurance Act of Taiwan, employers are required to pay a certain statutory percentage of the employees’ health insurance premium. 67Table of ContentsVietnam Regulations on Foreign Investment Foreign investment into Vietnam is regulated by both domestic legislation and international agreements, with the primary regulations being the Law onInvestment and Vietnam’s WTO commitments. Foreign investment is generally divided into three categories: unrestricted, restricted, and prohibited. With respect tothe “restricted” category, restrictions can take the form of a specific foreign ownership ceiling in a foreign-invested company, a general requirement to enter into a jointventure with a Vietnamese party with no mandated maximum foreign ownership ceiling, or the requirement to obtain certain government approvals for foreignownership with respect to the industries that the Vietnam government has not committed to opening to foreign investment. For example, foreign ownership incompanies engaging in online game business may not exceed 49% following Vietnam’s WTO commitments (or 51% following the application of Comprehensive andProgressive Agreement for Trans-Pacific Partnership (“CPTPP”)), and companies with foreign ownership engaging in e-payment or e-commerce business have toobtain certain government approvals. We have obtained approvals from competent authorities of Vietnam for direct ownership of equity interests in our online game,e-commerce and e-payment businesses as a foreign investor, including approval for 100% direct ownership in our e-commerce business. On June 17, 2020, the National Assembly of Vietnam adopted the Law on Investment 2020, which came into effect on January 1, 2021. Under the Law onInvestment 2020, the investment registration authority of Vietnam could terminate an investment project in whole or in part if the investor conducted investmentactivities on the basis of a false civil transaction, which is a transaction falsely entered into by transacting parties for the purpose of concealing other transactions orevading responsibilities to a third person. Such termination decision may only be based on legally effective court judgments or decisions or the arbitration awardunder the Article 59 of Decree 31/2021/ND-CP regulating the implementation of Law on Investment. Financial Support Provided by Offshore Entities Financial support in the form of loans, direct cash injections and guarantees provided by an offshore entity to a Vietnam entity is permitted under Vietnameselaws, including Vietnam’s foreign exchange control regime. Loans provided by offshore lenders to Vietnam entities with a term of (i) more than 12 months, (ii) 12months or below but extended to more than 12 months and (iii) 12 months or below but with the outstanding principal loan amount and interest remaining outstandingone year from the first disbursement date, unless such principal amount is settled within 30 days, must be registered with the State Bank of Vietnam and must satisfycertain conditions with respect to the term, type and purpose of the loan. There is no other restriction or dollar amount limitation imposed on any of the foregoingfinancial support mechanisms. Regulations on Foreign Exchange Vietnam does not possess a fully liberalized foreign exchange control regime, and the use, exchange and remittance of foreign currencies are regulated by theOrdinance on Foreign Exchange Control and its guiding instruments, along with miscellaneous regulations on inward investment. The use of, and exchange of foreign currencies for, Vietnamese dong, is broadly dependent on whether such foreign currencies are used for capitalinvestment purposes or general transactional purposes. Capital investment comprises both indirect investment and direct investment, with direct investment generallydefined as any foreign investment where (i) foreign investor(s) establish a corporate entity and is required to obtain an investment registration certificate, (ii) foreigninvestor(s) hold 51% or more of the charter capital following a merger, acquisition or restructuring, (iii) foreign investor(s) establish a project company to implementpublic-private partnership project(s), or (iv) foreign investor(s) hold 51% or more of the charter capital following the establishment of a corporate entity pursuant tospecialized laws without being required to obtain an investment registration certificate. Foreign currencies and Vietnamese dong are permitted to be used for directinvestments and only Vietnamese dong may be used for indirect investments. All capital investments into Vietnam, whether direct or indirect, must be made throughspecialized investment capital bank accounts, and any dividend distributions and returns of capital from such investments must be made through the same accounts.There are no foreign exchange control or remittance restrictions imposed on amounts held in such investment capital bank accounts, except for the requirement forsupporting documents evidencing valid remittances. 68Table of ContentsVietnamese dong held in current accounts can generally be freely exchanged for foreign currency and subsequently remitted offshore, provided that theorigin of such amounts and the reason for the exchange and remittance are legitimate. Contracts for the supply of goods or services entered into between aVietnamese individual or company and a foreign company are one of the valid bases for such foreign currency exchange transactions. Regulations on Dividend Distributions In Vietnam, a company is generally allowed to pay dividends or distribute profits after it has settled all of its outstanding tax or other financial obligations,and set off previous losses, provided that the payment of the dividends will not result in the company being unable to discharge its debts and other liabilities. Additionally, the distributed dividend or profit is allowed to be repatriated at the end of the financial year, after the audited financial statements and thecorporate income tax clearance have been submitted to the tax authority. Regulations on E-commerce E-commerce businesses are mainly governed by the Law on E-Transactions, Decree No.52/2013/ND-CP, as amended and supplemented by DecreeNo.85/2021/ND-CP (“Decree 85”), Circular 47/2014/TT-BCT, and Circular No.59/2015/TT-BCT, as amended and supplemented by Circular No.01/2022/TT-BCT (“Circular59”). According to Decree 85, companies that own e-commerce direct sale websites must notify the Ministry of Industry and Trade of Vietnam (“MOIT”) of theirestablishment if such websites have an online ordering function. Companies that own e-commerce service provision websites, including e-commerce marketplace,online auction websites, and online promotion websites, must register with the MOIT for the establishment of such e-commerce platforms. In addition, under Decree85, an approval from the Ministry of Public Security, which examines any national security impacts, must also be obtained by any foreign investors who have“control” in a company under the MOIT’s list on the top five e-commerce companies in Vietnam. Such a list has not been released by MOIT as of the date of thisannual report. According to Circular 59, e-commerce mobile applications include (i) applications used for direct sale of goods and (ii) applications for provision of e-commerce services. Accordingly, a company with an application used for sale of goods, which includes an online ordering function must notify the MOIT; a companywith an application for the provision of e-commerce services must register with the MOIT. However, a company with an application for both sale of goods andprovision of e-commerce services must register to establish an e-commerce service provision website and register the e-commerce service provision application withthe MOIT. According to Decree No. 09/2018/ND-CP (“Decree 09”), foreign-owned entities that provide e-commerce services are also required to obtain a specificbusiness license from the Department of Industry and Trade (“DOIT”). The licensing authority must seek approval of the MOIT before granting the license. Our e-commerce business in Vietnam is currently in compliance with the business licensing requirements under Article 50.1 of Decree 09. As a continuing licensingrequirement under Decree 09, we have submitted the relevant application with the DOIT of Hanoi in November 2021, which is now in progress. Regulations on Imported Games and Game Operations According to Circular No.34/2013/TT-BCT, games are permitted to be imported into Vietnam. With regard to the publication of games, including electronicgames, Vietnam’s WTO commitments and Vietnam’s CPTPP commitments allow foreign investors to provide electronic games only through a business cooperationcontract or a joint venture company with a Vietnamese partner which is licensed to provide electronic games. Foreign investment into the joint venture companygenerally shall not exceed 49% following Vietnam’s WTO commitments and 51% per Vietnam’s CPTPP commitments. See “—Regulations on Foreign Investment”above. 69Table of ContentsThe operation of electronic games is mainly governed by Decree No. 72/2013/ND-CP, which regulates the management, provision and use of internet servicesand online information, and Circular No. 24/2014/TT-BTTTT, as amended and supplemented by Decree No. 27/2018/ND-CP and Decree No. 150/2018/ND-CP, whichprovide further guidance to Decree No.72/2013/ND-CP. These regulations divide electronic games into the following categories: G1 games (simultaneous interactionsamong various players via a game server), G2 games (simultaneous interactions only between players and a game server), G3 games (simultaneous interactions amongvarious players but no interactions between players and a game server), and G4 games (those downloaded from a network with no interaction among players orbetween players and the game server). Companies may operate G1 games after obtaining a License to Provide Game Services and, for each game the company offers, italso needs to obtain a Decision to Approve Game Content issued by the Ministry of Information and Communications of Vietnam. Companies may operate G2, G3 andG4 games after obtaining a Certificate of Registration of Game Service Provision and, for each game the company offers, it also needs to obtain an Acknowledgementof Announcement of Service Provision issued by the Agency of Broadcasting and Electronic Information. We have obtained the license to operate G1 games. Regulations on E-payment Services According to Decree No.101/2012/ND-CP, intermediary payment services include the provision of electronic payment facilities (such as financial switchservices, electronic clearing services and electronic payment gateway services), payment support services (such as cash collection and cash payment services,support services for wire transfers and digital wallet services), as well as other intermediary payment services prescribed by the State Bank of Vietnam. Non-financialcompanies that wish to provide intermediary payment services are required to obtain a license for intermediary payment services. To obtain this license, companiesmust satisfy certain conditions, such as meeting minimum equity capital thresholds (VND 50 billion, or approximately US$2.1 million) as well as receiving priorapproval for operating the intermediary payment services. Our digital financial services business in Vietnam has obtained the license for intermediary payment services for electronic payment gateway services, cashcollection and cash payment services and digital wallet services. Regulations on Data Protection and Information Security Vietnam does not have a comprehensive data protection law. Instead, data protection provisions are prescribed across various legislations, which include theVietnam Civil Code, the Law on Protection of Consumers’ Rights, the Law on Information Technology, the Law on E-commerce, etc. which are all issued by theNational Assembly of Vietnam. While there is no unified definition, personal data may generally be defined as information that is adequate to accurately identify a datasubject, covering at least one of the following types of information: full name, date of birth, ID number/passport number, profession, title, contact address, e-mailaddress, and telephone number. A party’s right to privacy is protected by laws: any collection, publication, processing, transfer to a third party or any other use of aparty’s personal information may require the consent of such subject. On November 19, 2015, the Vietnam National Assembly issued the Law on Cyber Information Security, which sets forth regulations on cyber informationsecurity. Accordingly, individuals and companies must implement measures to assure the security of cyber information. For example, entities providing informationtechnology services must comply with regulations on the storage and use of personal information, apply blocking and handling measures upon receipt of a notice thatsending such information is illegal, and implement measures to allow recipients to refuse the receipt of information. On June 12, 2018, the Vietnam National Assembly issued the Law on Cybersecurity which regulates that any foreign service provider in the fields of e-payment, e-commerce, online games, and certain other industries, is required to have a commercial presence in Vietnam (such as branch, representative office) and tolocalize the user’s data in Vietnam. The government issued Decree No. 53/2022/ND-CP on August 15, 2022 to provide further details on a number of articles of the Lawon Cybersecurity. Regulations on Intellectual Property Rights Intellectual property rights in Vietnam are governed by the Law on Intellectual Property, together with certain international agreements to which Vietnam is asignatory (such as Vietnam’s WTO commitments on Trade-Related Aspects of Intellectual Property, and the Madrid Agreement Concerning the InternationalRegistration of Marks). 70Table of ContentsIn order for certain intellectual property rights to be recognized and enforceable in Vietnam, intellectual property owners must register those rights.Copyrights may be registered with the Department of Copyright of Vietnam but the registration is not compulsory. As a member of the Berne Convention, allcopyrights will be protected automatically. Industrial property, such as patents, trademarks (except for well-known trademarks) and industrial design, must beregistered with the National Office of Intellectual Property of Vietnam (“NOIP”) in order to be protected in Vietnam, although unregistered rights may be protectableunder the laws of unfair competition or passing off. A well-known trademark may be protected based on its use without registration and a trademark license is notrequired to be registered with NOIP in order to have validity against a third party. Regulations on Anti-money Laundering and Prevention of Terrorism Financing Vietnam’s Law on the Prevention of Money Laundering 2022 (effective as of March 1, 2023) contains the primary anti-money laundering and prevention ofterrorism financing regulations in Vietnam. It applies to all financial institutions (including intermediary payment service providers like us) and certain non-financialinstitutions engaged in specific business activities, which include offering games for prizes. Intermediary payment service providers are classified as one of thereporting entities under the Law on the Prevention of Money Laundering 2022. The Department of Anti-Money Laundering established under the State Bank of Vietnam monitors and regulates Vietnam’s anti-money laundering regime.Entities subject to the anti-money laundering regime must report certain transactions to the Department of Anti-Money Laundering, including high-value transactionsup to the amount prescribed, suspicious transactions, and transactions involving companies or individuals in the countries and territories on the “warning list”published by the State Bank of Vietnam , among others. Moreover, apart from the know-your-customer procedures required by Vietnamese law, entities subject to theanti-money laundering regime must conduct customer due diligence and assign a risk rating on its respective customers. If the customer has a high risk rating, theentity subject to the anti-money laundering regime must perform an enhanced due diligence investigation on such customer, which includes increased collection,update, and verification of customer information as well as maintaining close supervision of such customer’s transactions. Regulations on Labor Vietnam’s Labor Code, along with a number of guiding instruments, regulates the relationship between employers and employees in Vietnam, including bothVietnamese nationals and expatriates. It specifies that an employment contract must generally be made in writing. In accordance with Labor Code 2019, effectiveJanuary 1, 2021, there are two types of labor contracts, indefinite term and definite term contracts. An employer is only permitted to offer two consecutive fixed termcontracts, subsequent to which the employment contract must be an indefinite term contract. Vietnam has an employee friendly labor law regime. Employees are entitled to statutory benefits payable by the employer, including health, social andunemployment insurance. Since 2009, unemployment insurance replaced the employer’s compensation of severance to an employee upon the termination ofemployment. Moreover, non-compete, non-solicitation and any other labor contract clauses which may be deemed to interfere with a person’s right to seekemployment are difficult, if not impossible, to enforce. Thailand Regulations on Foreign Investment Foreign investment in Thailand is regulated under the Thai Foreign Business Act, B.E. 2542 (1999), as amended, which states that a foreigner is restrictedfrom engaging in certain businesses in Thailand as described in the Thai Foreign Business Act, such as advertising business, sale of food and beverage, and otherservice businesses which include e-payment services, unless an approval is granted by the Cabinet of Thailand or a foreign business license or a foreign businesscertificate is granted by the Ministry of Commerce of Thailand, depending on the type of business specified under the Annexes to the Thai Foreign Business Act, orthere is an exemption under other specific laws. 71Table of ContentsThe term “foreigner” under the Thai Foreign Business Act covers the following definitions:(i)a natural person who is not a citizen of Thailand; (ii)a juristic person not established in Thailand; (iii)a juristic person established in Thailand with half or more of the shares constituting its capital held by (i) or (ii) or half or more of the total capital ofsuch juristic person invested by (i) or (ii); and (iv)a juristic person established in Thailand with half or more of the shares constituting its capital held by (i), (ii) or (iii), or half or more of the totalcapital of such juristic person invested by (i), (ii) or (iii). Under the Thai Foreign Business Act, the definition of “foreigner” does not include references to relative voting arrangements, control of the management ofa company or the economic interests of Thai and foreign nationals. The Thai Foreign Business Act only considers the immediate level of shareholding. As a result, nocumulative or look-through calculation is applied to determine the foreign status of a company when it has several levels of foreign shareholding. See “—C.Organizational Structure—Thailand Shareholding Structure” for more details about our shareholding structures in Thailand and “Item 3. Key Information—D. RiskFactors—Business and Operational Related Risks—Other Operational Risks—We rely on structural arrangements to establish control over certain entities andgovernment authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to suchstructural arrangements.” Regulations on Foreign Exchange The legal basis for foreign exchange control in Thailand is derived from the Exchange Control Act, B.E. 2485 (1942), as amended, and the MinisterialRegulation No. 13 (B.E. 2497 (1954)). In order to control the volume of foreign currency in Thailand and promote the stability of the Thai baht, foreign exchange regulations in Thailand state thatall foreign exchange transactions, including those involving purchases, sales, exchanges and transfers, shall be conducted through commercial banks and throughauthorized non-banks, namely authorized money changers, money transfer agents, and companies, that are granted foreign exchange licenses from the Minister ofFinance of Thailand. There is no limit on the remittance of foreign currency into Thailand; nevertheless, the remittance of foreign currency to outside of Thailand isprimarily limited to the value of the underlying transaction. Prior approval from the Bank of Thailand may be necessary if the transaction is beyond what is allowedunder the regulations. Failure to comply with the laws and regulations will lead to a fine and/or imprisonment. We only remit foreign currency out of our Thailandoperations through commercial banks and authorized non-banks with the requisite licenses and obtain separate approval from the Bank of Thailand for suchtransactions (if required). Regulations on Dividend Distributions Dividend distributions by private companies incorporated in Thailand are governed by the Civil Commercial Code and the Thai Revenue Code. Dividendsshall only be distributed out of a company’s profit. A company looking to distribute dividends is required to set aside at least 5% of its retained earnings into a legalreserve fund at the time the dividend is paid until and unless the legal reserve fund reaches 10% of the company’s registered capital. The dividend distributed to a company’s shareholders is subject to a 10% withholding tax. The withholding tax may be exempt or reduced depending on therules and regulations of the Thai Revenue Code and the double taxation agreements that Thailand has entered into with other countries. Regulations on E-commerce Pursuant to the Commercial Registration Act, B.E. 2499 (1956), (as amended the “Commercial Registration Act”), and the Notification Regarding RequiringBusiness Operators to Register their Businesses No. 11, issued by the Ministry of Commerce in 2010, e-commerce business operators, including companies engagingin the sale and purchase of goods or services using electronic devices via the internet and e-marketplace, are required to register its business with the Ministry ofCommerce of Thailand. We have registered our Shopee e-commerce marketplace business. 72Table of ContentsPursuant to the Direct Sale and Direct Marketing Act B.E. 2545 (2002), (as amended, the “Direct Sale and Direct Marketing Act”), companies engaging indirect sales or direct marketing are required to register their business with the Secretariat General of the Office of Consumer Protection or the officer appointed by theSecretariat General of the Office of Consumer Protection. We have made the required registration for our Shopee e-commerce marketplace in Thailand. Under the DirectSale and Direct Marketing Act, companies that operate an online marketplace are direct marketing companies and are required to ensure that documentationevidencing sales and purchases of goods and services on its online marketplace are provided and delivered to consumers. Such documentation shall be in the Thailanguage and contain information including due date, place and method of payment, place and method of delivery of goods or services, termination of contract,product return method, product warranty and exchange policy in case of damage or defect. Moreover, consumers have the right to cancel their purchases made on anonline marketplace within seven days from the date of receipt of the purchased goods or services. In addition, direct marketing companies must comply with the relevant ministerial regulations and any applicable laws on consumer protection regarding theiradvertisements. The e-commerce platform business is also subject to the Royal Decree on Digital Platforms published in the Government Gazette on December 22, 2022, whichwill become effective on August 20, 2023. The decree mandates certain notification obligations for digital platform service providers with (i) annual income (beforeexpenses) higher than THB50,000,000 (US$1.4 million) or (ii) more than 5,000 users (on monthly average). Information required to be submitted to ElectronicTransactions Development Agency (“ETDA”) include details about the company, the platform, users and top complaint matters. Service providers are also required tosubmit the annual report to ETDA within 60 days following the end of the calendar year. The Royal Decree on Digital Platforms also sets various platform-related requirements, depending on the size and type of the digital platform. Theserequirements apply to notifications to the ETDA, conditions for provision, suspension, or cessation of service (including fees, remuneration, and expenses),criteria/algorithm used to rank, recommend, or advertise goods or services, criteria/algorithm for advertising display, criteria / algorithm for satisfaction ratings andfeedback from users, access and usage of data shared with business operators on the digital platform, inquiries, complaints, dispute settlement, and timeframe fordispute settlement and responses to unlawful or sensitive content (including content rating practices). Large size digital platforms (e.g., annual income beforeexpenses that exceed THB300,000,000 (US$8.7 million) for each service or THB1,000,000,000 (US$28.9 million) in total or having total users more than 10% of the Thaipopulation) will be subject to additional requirements, including those related to risk assessment, risk management, security measure, crisis management and externalaudit.Regulations on Consumer Protection Thailand’s consumer protection laws include the Consumer Protection Act B.E. 2522 (1979), as amended, the Unfair Contract Terms Act, B.E. 2540 (1997), theProduct Liability Act B.E. 2551 (2008) and the Consumer Case Procedure Act B.E. 2551 (2008). Such laws aim to promote greater transparency and more accuratedisclosures regarding products and services, adequate compensation if consumers are harmed by a product or service and fair transaction terms between sellers andbuyers. Regulations on Game Businesses Digital game and game distributing businesses, either for personal computers or mobile phones, are governed by the Film and Video Act B.E. 2551 (2008), (asamended, the “Film and Video Act”). Digital games are treated as videos under the Film and Video Act. Digital games to be exhibited, exchanged or distributed inThailand shall be reviewed and approved by the Thailand Film and Video Censorship Committee. Updates and amendments to previously approved digital games willbe regarded as new games and subject to review and approval by the Film and Video Censorship Committee. Companies engaging in the game distributing businessare required to obtain a game distributing license under the Film and Video Act unless the games are offered for free. We regularly arrange to obtain approvals of thegames we exhibit and any updated versions from the Film and Video Censorship Committee. 73Table of ContentsRegulations on E-payment Services In Thailand, electronic transactions and e-payment services are governed by several governmental authorities and regulations including the ElectronicTransaction Commission, the Governor of the Bank of Thailand or his or her designee, the Electronic Transactions Act, B.E. 2544 (2011), as amended, and the PaymentSystems Act, B.E. 2560 (2017). Regulated e-payment services businesses include: (i) credit card, debit card, or ATM card services, (ii) electronic money services, (iii) service of receivingelectronic payment for and on behalf of sellers, service providers or creditors, (iv) service of transferring money by an electronic means, and (v) other paymentservices which may affect the financial system or public interest. Our digital financial services business in Thailand has obtained e-payment service business licenses for (i) electronic money services, (ii) payment facilitatingservices, (iii) receiving electronic payments for and on behalf of sellers, service providers or creditors, and (iv) services for transferring money by electronic means. Under the Payment Systems Act, an operator seeking to operate a regulated payment system or regulated payment service, which includes e-paymentservices, is required to have a license before operating such business. Under the Payment Systems Act, a business operator who has been granted e-paymentbusiness licenses under prior regulations must have filed its application for a license or the application for registration with the Bank of Thailand before August 13,2018. Upon filing such applications within the prescribed period, the operator is entitled to operate the businesses indefinitely until the Minister of the Ministry ofFinance or the Bank of Thailand instruct otherwise. In this regard, the Bank of Thailand has issued several regulations regulating businesses operating regulatedpayment systems and services. As an existing license holder, we filed our application within the prescribed period and have obtained the new license under thePayment Systems Act to operate e-payment services. Any non-compliance with the regulations regarding the regulated payment system or the regulated payment services will be subject to penalties, includingmonetary fines and criminal liabilities (imprisonment), and, depending on the severity of the non-compliance, may result in the suspension or revocation of therelevant licenses obtained under such regulations. In addition, on January 18, 2021, the Bank of Thailand issued the Notification of the Bank of Thailand No. SorNorChor 1/2564 (2021) Regarding the Guidelineon Supervision of Information Technology Risk in accordance with the Laws on Payment System requiring the designated payment services providers to arrangeappropriate IT governance, IT security controls, and IT risk management. Under the Notification, the provisions regarding cyber hygiene became effective on April 29,2021 and provisions regarding IT risk management became effective on January 29, 2022. On March 16, 2023, The Royal Decree on Measures for Protection and Suppression of Technology Crimes B.E. 2566 (2023) was published in the GovernmentGazette and entered into force the following day. The key obligations under this new legislation require financial institutions and e-payment services operators to (i)share information of accounts and transactions that could be related to cybercrime to other financial institutions and e-payment services operators via a designatedsystem, (ii) temporarily freeze suspicious transactions that could be related to cybercrime (either it has been notified by account holder or can be identified by financialinstitutions or e-payment services operators itself), (iii) notify other financial institutions and operators that would be a transferee of the transaction in (ii), and (iv)report the information to the relevant authority and share such information through the designated system in accordance with (i). Regulations on Nano Financing The Ministry of Finance promulgated the Notification Regarding Businesses that Require a Permit According to Section 5 of the Notification of theRevolution Council No. 58 (Nano Finance), (the “Nano Finance Notification”), which requires a nano finance business operator to obtain approval from the Ministerof Finance through the Bank of Thailand. The Nano Finance Notification also stipulates that loan proceeds from nano financing may only be used for business-relatedpurposes in order to boost opportunities to small business owners. Our subsidiary engaging in digital financial services business in Thailand has obtained the nanofinance license from the Ministry of Finance in accordance with the Nano Finance Notification. We have approval to operate nano finance business in Thailand, which allows us to provide nano financing to Shopee buyers and sellers in Thailand. Ournano finance business is subject to certain restrictions imposed by the Bank of Thailand, the government authority overseeing nano finance businesses. The Bank ofThailand promulgated the Notification No. SorNorSor 13/2563 (2020) Regarding the Rules, Procedures and Conditions for the Operation of Nano Finance Businesses.Under such notification, operators of nano finance businesses should take into account the borrower’s ability to repay the loan (which is unsecured) and consider acredit limit for each borrower. The maximum credit limit shall not exceed THB100,000 (US$2,891), and the interest rate, together with fees and penalties, shall not exceed33% per annum. In addition, the nano finance business operator shall maintain a debt-to-equity ratio of seven times or less throughout its operation. 74Table of ContentsRegulations on Personal Loans Personal loan operators are subject to the Notification regarding Businesses that Require a Permit According to Section 5 of the Notification of theRevolution Council No. 58 (Supervised Personal Loan), as amended, and its implementation rules promulgated by the Bank of Thailand, (collectively, the “SupervisedPersonal Loan Notification”). According to the Supervised Personal Loan Notification, a company providing uncollateralized personal loans for no specific purpose toindividuals is required to obtain a supervised personal loan business license. Our subsidiary engaging in the digital financial services business in Thailand hasobtained a supervised personal loan business license from the Ministry of Finance in accordance with the Supervised Personal Loan Notification. According to the Notification of the Bank of Thailand No. SorNorSor 12/2563 (2020), the Bank of Thailand, as the competent authority under the SupervisedPersonal Loan Notification, requires that the credit limit for personal loans (not including for occupational purposes) should not exceed one and a half or five times theaverage monthly income of the borrower or the average monthly balance in the borrower’s deposit account, in the case where the average income is below or overTHB30,000 (US$867) a month, respectively, at a financial institution for the six month period immediately before the date on which the personal loan is granted.Moreover, the interest rate for personal loans, together with fees and penalties, shall not exceed 25% effective rate per annum. Regulations on Digital Lending Any personal loan operators under the Supervised Personal Loan Notification, who use digital technology and alternative data to facilitate provision of loansin regard to the assessment of the ability or willingness to repay the loan, disbursement and repayment, and disclosure of information, are subject to the Notificationof the Bank of Thailand No. TorPorTor.ForGorSor.(01)Vor. 977/2563 (2020) Regarding the Rules, Procedures and Conditions for the Undertaking of Digital PersonalLoan Business (the “Digital Personal Loan Notification”). Pursuant to the Digital Personal Loan Notification, the personal loan operators intending to undertake thedigital personal loan business must notify the Bank of Thailand before commencing its business. The maximum credit limit for digital personal loans granted to eachborrower shall not exceed THB20,000 (US$578) with the repayment period not exceeding six months, regardless of financial condition, income or balance in the depositaccount of the borrower. In addition, pursuant to the Circular of the Bank of Thailand No. TorPorTor.ForNorSor2Vor. 575/2565 (2022), the Bank of Thailand hastemporarily relaxed the repayment period for borrowers of digital personal loans to 12 months from the end of the month in which the first drawdown was made. Thisrelaxation on the repayment period will be effective up until December 31, 2023. Regulations on Intellectual Property Rights Intellectual property laws in Thailand are comprised of the Copyrights Act, B.E. 2537 (1994), as amended, Trademark Act B.E. 2534 (1991), as amended, PatentAct B.E. 2522 (1979), as amended, Trade Secret Act, B.E. 2545 (2002), as amended, and Optical Disc Production Act, B.E. 2548 (2005). Trademarks registered outside of Thailand are not automatically protected under Thai laws. Protection will be granted to trademarks registered with theDepartment of Intellectual Property of the Ministry of Commerce of Thailand. In contrast, original works of authorship will receive copyright protection the momentthey are created. Computer software will be protected under the Thailand Copyright Act. An infringement of intellectual property rights may lead to civil and/orcriminal liabilities. The amended Copyrights Act, B.E. 2537 (1994) became effective on August 23, 2022. Notable changes introduced by the amended act are (i) an extension ofthe term of protection for photographic works to be the author’s lifetime plus an additional 50 years after the author’s death; (ii) general and specific requirements forservice providers to be exempted from liability for copyright infringement; and (iii) the steps for notice-and-takedown procedure. 75Table of ContentsRegulations on Anti-Money Laundering and Prevention of Terrorism Financing The key regulations for anti-money laundering and counter-terrorist financing are the Money Laundering Prevention and Suppression Act, B.E. 2542 (1999),as amended, which imposes reporting obligations on persons designated by the Anti-Money Laundering Office and certain types of business operations for (i) anytransactions that reach certain thresholds which vary depending on the type of transactions involved; and (ii) suspicious transactions. Personal loan businessoperators and e-payment business operators are required to apply the know-your-client measures when the value of transaction(s) is (i) THB500,000 (US$14,455) ormore for any single bill payment; (ii) THB50,000 (US$1,446) or more for any e-money or electronic money transfer; or (iii) THB100,000 (US$2,891) or more for othersingle or cumulative transactions. In addition, personal loan operators and e-payment service business operators need to have procedures relating to customer duediligence in place to ensure that its services are not being used by members of groups identified as terrorists by the United Nations Security Council Resolutions orthe Anti-Money Laundering Office. Regulations on Labor Labor matters are mainly governed by the Thai Civil and Commercial Code and the Thai Labor Protection Act, B.E. 2541 (1998), as amended, and itssubsequent notifications. The laws stipulate the relationship between the employer and the employees in essential aspects, including working hours, leaves, wages,entitlements, employment termination and severance payment, etc. The employment arrangement can be made verbally and is not required in writing. Under the Thai Labor Protection Act, it is mandatory for employers to establish work rules when 10 or more employees are hired and it shall cover thefollowing issues: (i) working days, normal working hours and rest period; (ii) holidays and rules governing the taking of holidays; (iii) rules governing overtime andholiday work; (iv) the day and place where wages, overtime pay, holiday pay and holiday overtime pay are to be made; (v) leave and rules governing the taking ofleave; (vi) discipline and disciplinary measures; (vii) lodging of grievances; and (viii) termination of employment, severance pay and special severance pay.Regulations on Personal Data Protection On May 28, 2019, the Personal Data Protection Act B.E. 2562 (2019) became effective, while Chapter 2 (Personal Data Protection), Chapter 3 (Rights of theData Subject), Chapter 5 (Complaints), Chapter 6 (Civil Liability) and Chapter 8 (Penalties) of such law, collectively, the Delayed Provisions, took effect from June 1,2022 pursuant to the Royal Decree on Agencies and Businesses Not Subject to the Personal Data Protection Act, B.E. 2562 (2019) (No. 2), B.E. 2564 (2021). Personaldata collected from our conduct of businesses fall within the scope of the Personal Data Protection Act. The Personal Data Protection Act applies to the collection and processing of personal data, including but not limited to the collection, use, disclosure ortransfer by a data controller or a data processor. As the law has extraterritorial enforcement, data controllers and data processors both in and outside of Thailand maybe subject to this regulation. In addition, data controllers are required to inform data subjects of the purpose of their collection and subsequent processing of the personal data collected,and obtain consent for such collection or processing, unless otherwise provided in the Personal Data Protection Act or the regulations or announcements issued bythe Personal Data Protection Commission. Singapore Regulations on Dividend Distributions The governing legislation for the distribution of dividends in Singapore is the Companies Act 1967 of Singapore (the “Companies Act”). Under Section 403of the Companies Act, a Singapore company is only allowed to pay dividends out of profits and there are certain restrictions on the use of profits for the purposes ofdividend declaration. Firstly, any profits of a company applied towards the purchase of its shares pursuant to the share buyback provisions under the Companies Actcannot be payable as dividends to the shareholders. However, the foregoing restriction does not apply to any part of the proceeds received by the company from asale or disposal of its treasury shares where the sums that were utilized to purchase those treasury shares initially came out of profits in the first place. Finally, anygains derived from the sale of treasury shares cannot be payable as dividends to the shareholders of the company.76Table of ContentsIn addition to complying with the Companies Act, the payment of dividends must also be in accordance with the company’s constitution and the generallyacceptable accounting principles in Singapore. Regulations on Information Technology Regulation of Internet Content The Broadcasting Act 1994 of Singapore prohibits the provision of certain broadcasting services, including internet content, in or from Singapore without alicense issued by the Infocomm Media Development Authority. The Infocomm Media Development Authority is the regulator of the information, communications andmedia sectors in Singapore. The Broadcasting Act 1994 sets out an automatic class licensing scheme for computer online services provided by internet contentproviders. An internet content provider includes a corporation which provides any program for business purposes on the internet. Internet content providers are in general mandated to be automatically class licensed without any need to make specific applications to the Infocomm MediaDevelopment Authority, and are required to comply with the conditions of the class license and the Internet Code of Practice. As an internet content provider, we areobliged to use our best efforts to ensure that prohibited material (which refers to material that is objectionable on the grounds of public interest, public morality, publicsecurity, national harmony, offends good taste or decency, or is otherwise prohibited by applicable Singapore laws) is not broadcast via the internet to users inSingapore, and we are also required to deny access to any prohibited material if directed to do so by the Infocomm Media Development Authority. If we contravenethe class license conditions or the Internet Code of Practice, we may face administrative sanctions such as suspension or cancelation of our license, or fines. In addition, to the extent that our platforms or services enable our users to transmit online content to each other or access third party online content, wewould be an internet intermediary under the Protection from Online Falsehoods and Manipulation Act 2019 of Singapore (“POFMA”). POFMA empowers anySingapore government minister to direct the POFMA Office to issue certain directions to internet intermediaries whose internet intermediary service had been used tocommunicate a false statement of fact in Singapore, if the minister is of the opinion that it would be in the public interest to do so. Such directions would include: (a)targeted correction directions, which require the internet intermediary to communicate a correction notice on its service to all end-users in Singapore who accessed theoffending false statement of fact after a specified time; and (b) disabling directions, which require the internet intermediary to disable access by end-users inSingapore to the offending false statement of fact being communicated on or through its service. Companies may be fined if they fail to comply with directions issuedunder POFMA without reasonable excuse. Regulations on E-commerce Consumer Protection There are various general consumer protection laws in place in Singapore, which apply generally to all relevant transactions including electronic transactionsbut are not specifically targeted at regulating e-commerce operations. One or more of these laws would be relevant in the context of online game operations or e-commerce operations. The Consumer Protection (Fair Trading) Act 2003 of Singapore sets out a legislative framework to allow consumers aggrieved by unfair practices to haverecourse to civil remedies before the Singapore courts. The definition of supplier under the Consumer Protection (Fair Trading) Act 2003 includes persons whopromote the use or purchase of goods or services which we do through our digital entertainment and e-commerce platforms. Suppliers may be held liable for engagingin unfair practices in relation to consumer transactions. Unfair practices include, among other things: (i) doing or saying anything which would reasonably deceive ormislead consumers, (ii) making a false claim, (iii) taking unreasonable advantage of a consumer, or (iv) making various forms of misrepresentations to the consumer. 77Table of ContentsThe Consumer Protection (Trade Descriptions and Safety Requirements) Act 1975 of Singapore prohibits the use of false trade descriptions on goodssupplied in the course of trade. Trade descriptions include any description, statement or indication that directly or indirectly relates to the fitness for purpose,strength, performance, behavior or accuracy of any goods. This prohibition applies to all persons in the course of business and would be applicable in an e-commercemarketplace. Violations of the Consumer Protection (Trade Descriptions and Safety Requirements) Act 1975 are subject to criminal liability. While we have, among other things, policies in place which require users of our e-commerce platform not to promote or sell any products which are illegal orprohibited for sale under Singapore law, there remains a residual risk that we may be liable for abetting the sale and distribution of such illegal products in breach ofSingapore law if we knew of or had reason to suspect the listing and sale of illegal products on our e-commerce platform but failed to take action to remove suchlistings. Regulations on Imported Games and Game Operating Video Game Classification Pursuant to the Films Act 1981 of Singapore, the Infocomm Media Development Authority is responsible for classifying films, videos and video gamesdistributed in Singapore. In particular, it administers the video game classification system under the Films Act 1981, which requires businesses importing ordistributing physical copies of video games in Singapore to submit the video games to the Infocomm Media Development Authority for rating and classification.However, the video game classification system does not apply to games which are only available via internet download. Since the online games that we offer areavailable only through online platforms, we in general are not subject to the video game classification system. However, the Infocomm Media Development Authorityretains the right to issue a rating and/or classification of any of the online games we offer, should it choose to do so. Films Regulation The Films Act 1981 imposes a regulatory requirement for an organization to hold a license for importing, distributing or publicly exhibiting films in the courseof any business. A film is defined to include a video game. However, the definition of a video game under the Films Act 1981 expressly excludes a video game madeavailable by means of a computer online service that is a broadcasting service and is played on a mobile device or other device onto which the video game has beeninstalled, or while the player is using a broadcasting service that enables end-users to access the Internet. Since the online games that we offer are available onlythrough online platforms, we are exempted from having to comply with the abovementioned requirement to obtain a license. Regulations on E-payment The Monetary Authority of Singapore (“MAS”), regulates payment service providers and payment systems in Singapore under the Payment Services Act2019 of Singapore which came into effect on January 28, 2020. Under the Payment Services Act 2019, a license from the MAS is required for providing any type ofpayment service in Singapore unless such service is exempted under the law. The payment services regulated under the Payment Services Act 2019 are “accountissuance service,” “domestic money transfer service,” “cross-border money transfer service,” “merchant acquisition service,” “e-money issuance service,” “digitalpayment token service” and “money-changing service.” In particular, “e-money issuance service” means the service of issuing e-money to any person for the purposeof allowing a person to make payment transactions and “account issuance service” includes the service of issuing a payment account to any person in Singapore.Pursuant to the Payment Services (Exemption for Specified Period) Regulations 2019, certain entities who satisfied the relevant criteria and submitted a notification tothe MAS within the specified timeframe were exempt from holding a license under the Payment Services Act 2019 for the specific payment service(s) for a specifiedperiod. Our subsidiary engaging in providing various payment services obtained its major payment institution license in April 2022. 78Table of ContentsA licensee under the Payment Services Act 2019 is required to comply with the requirements under the Act and its subsidiary legislations, as well as allapplicable notices and guidelines issued by the MAS (including but not limited to Notice PSN01 Prevention of Money Laundering and Countering the Financing ofTerrorism – Holders of Payment Services Licence (Specified Payment Services) and/or Notice PSN02 Prevention of Money Laundering and Countering the Financingof Terrorism – Holders of Payment Service Licence (Digital Payment Token Service)). One such requirement imposed upon a licensee under the Payment Services Act2019 is to provide the MAS with all such information relating to its business of providing any payment service as the MAS may specify by notice in writing. Further,pursuant to Notice PSN01 Prevention of Money Laundering and Countering the Financing of Terrorism – Holders of Payment Services Licence (Specified PaymentServices), unless otherwise exempted, the holder of a license under the Payment Services Act 2019 to provide a specified payment service (i.e. “account issuanceservice,” “domestic money transfer service,” “cross-border money transfer service” or “money-changing service”) must, amongst various things, perform duediligence measures to establish and verify the identity of each customer; maintain data, documents and information relating to transactions; submit reports onsuspicious transactions to the Suspicious Transactions Reporting Office; and implement internal policies, procedures and controls to help prevent money launderingand terrorism financing. A licensee under the Payment Services Act 2019 will also need to comply with the directions and/or regulations issued by the MAS underSection 27A of the Monetary Authority of Singapore Act 1970 in relation to dealing with assets of and/or imposing sanctions on designated persons. In addition to the above, the Payment Services (Amendment) Bill was passed in parliament in 2021 but has not come into operation. It will come intooperation on a date that the Minister appoints by notification in the Gazette. The Payment Services (Amendment) Bill makes amendments to the Payment Services Act2019. The amendments include but are not limited to widening the definition of “cross-border money transfer service” to include transmission of money between twocountries, arranged by a payment service provider in Singapore; and widening the definition of “domestic money transfer service” such that the definition appliesexcept where both the payer and payee of a transaction executed under the service are financial institutions. Regulations on Digital Banking Our wholly-owned subsidiary in Singapore (“Singapore DFB”) has been granted a digital full bank (“DFB”) license in Singapore. As the holder of a DFBlicense, our Singapore DFB is required to comply with certain licensing conditions and other prudential and regulatory requirements which include additional conductof business, operational, financial and legal requirements. The Singapore DFB is allowed to conduct banking business in Singapore on a phased basis, which mayinclude the taking of deposits from, the making of advances to and providing banking services to retail and non-retail customer segments. The MAS regulates DFBs under the Banking Act 1970 of Singapore and its subsidiary legislation as well as all applicable notices and other instrumentsissued by the MAS, subject to certain modifications (as set out in the publication “Eligibility Criteria and Requirements for Digital Banks” issued by the MAS).Generally, a fully functioning DFB will be able to conduct all banking business as existing qualifying full banks and will be subject to the full range of laws, regulationsand prudential rules that apply to such banks. This includes complying with the notices and regulations surrounding ongoing risk-based capital and liquidityrequirements, unsecured lending, anti-money laundering and countering the financing of terrorism, economic sanctions, corporate governance, risk management,technology risk and the conduct of non-financial businesses. However, it should be noted that DFBs are (i) only allowed to operate one physical “place of business”(being a place where a bank conducts banking business or other regulated businesses), (ii) not allowed to access the automatic teller machine or cash deposit machinenetwork, but will be able to offer cashback services through EFTPOS terminals at retail merchants, and (iii) will be required to comply with same risk based capitalrequirements applicable to domestic systemically important banks. A DFB will commence operations as a restricted DFB before becoming a fully functioning DFB. Whilst a DFB will eventually be expected to comply with theminimum paid-up capital requirement set by the MAS of S$1.5 billion (US$1.1 billion) which is applicable to all existing qualifying full banks, prior to it becoming a fullyfunctioning DFB, the minimum paid up capital requirement applicable to a restricted DFB will initially be reduced to S$15,000,000 (US$11.2 million). This minimum paidup capital requirement will progressively increase as the restricted DFB grows. Unless otherwise agreed with MAS, a restricted DFB will also be subject to variousrestrictions on its business, including but not limited to (i) deposit caps of S$75,000 (US$55,953) per individual depositor and S$50,000,000 (US$37.3 million) inaggregate deposits, (ii) restrictions on who the DFB may take deposits from, (iii) restrictions on unsecured lending, (iv) restrictions on the safeguarding of “relevantmoney” as defined under the Payment Services Act 2019, and (v) restrictions on the types of investment products the DFB may offer, as well as (vi) restrictions onproprietary trading. These restrictions will progressively be lifted as the DFB grows. The pace of growth of a restricted DFB will depend on its ability to meet itscommitments as well as MAS’ supervisory considerations. Once a restricted DFB has met all relevant milestones and has been assessed by the MAS to pose nosignificant supervisory concerns, the MAS will lift all restrictions and the restricted DFB will become a fully functioning DFB. The MAS generally expects a DFB to befully functioning and to meet the minimum paid-up capital requirement of S$1.5 billion (US$1.1 billion) within three to five years from commencement of business. 79Table of ContentsRegulations on Data Protection and Information Security Personal Data Protection The Personal Data Protection Act 2012 of Singapore governs the collection, use and disclosure of the personal data of individuals by organizations, and isadministered and enforced by the regulator, the Personal Data Protection Commission. It sets out data protection obligations which all organizations are required tocomply with in undertaking activities relating to the collection, use or disclosure of personal data. A failure to comply with any of the above can subject anorganization to a fine per breach of up to S$1 million (US$746,046) or 10% of the organization’s annual turnover in Singapore, whichever is higher. An online game operator or e-commerce company is required to comply with the Personal Data Protection Act. Among other things, such company isrequired to obtain consent from its customers and inform them of the applicable purposes before collecting, using or disclosing their personal data. Moreover, it isalso required to put in place sufficient measures to protect the personal data in its possession or control from unauthorized access, loss or damage. Pursuant to the Personal Data Protection Commission’s Advisory Guidelines on the Personal Data Protection Act for NRIC and other National IdentificationNumbers, an organization such as an online game operator or e-commerce company is not permitted to collect, use or disclose an individual’s identification numberunless under certain exceptions. In the event of a data breach involving any personal data in an organization’s possession or control, the Personal Data Protection Act 2012 requires theorganization to reasonably and expeditiously assess the data breach, and notify the Personal Data Protection Commission of the data breach if it is assessed to be onethat: (a) is likely to result in significant harm or impact to the individuals to whom the information relates, or (b) involves personal data of 500 or more individuals. Inaddition to notifying the Personal Data Protection Commission, organizations are also required to notify the affected individuals if the data breach is one that is likelyto result in significant harm or impact to the affected individuals. Regulations on Intellectual Property Rights The Intellectual Property Office of Singapore administers the intellectual property legislative framework in Singapore, which includes copyrights, trademarksand patents. Singapore is a member of the main international conventions regulating intellectual property matters, and the WTO’s Agreement on Trade RelatedAspects of Intellectual Property Rights. Copyright Pursuant to the Copyright Act 2021 of Singapore, authors of protected works enjoy various exclusive rights, including the rights of reproduction andcommunication to the public. Generally, an author will automatically enjoy copyright protection as soon as he creates and expresses an original work in a tangibleform. Authors and performers also have a distinct right to be identified whenever their works or performances are used in public unless exceptions apply. Forcommissioned works, the copyright will be owned by the author by default, unless otherwise agreed by contract. On the other hand, employers by default own thecopyright in all content created by their employees in the course of the employees’ employment, unless otherwise agreed by contract. There is no need to file for registration to obtain copyright protection. Copyright works sent over the internet or stored on web servers are treated in thesame manner as copyright material in other media. Online games and computer programs would qualify for copyright protection, for example, as literary works, artisticworks and/or cinematograph films. Trademarks Singapore operates a first-to-file system in respect of registered trademarks under the Trade Marks Act 1988 of Singapore, and the registered proprietor isgranted a statutory monopoly of the trademark in Singapore in relation to the product or service for which it is registered. In the event of any trademark infringement,the registered proprietor will be able to rely on the registered trademark as proof of his right to the mark, and the infringement of a trademark may give rise to civil andcriminal liabilities. Statutory protection of a registered trademark can last indefinitely, as long as the registration is renewed every 10 years. 80Table of ContentsPatents The Patents Act 1994 of Singapore confers protection on patentable inventions on a first-to-file basis in Singapore, provided that the invention satisfies therequirements of novelty, having an inventive step and industrial applicability. Patents are valid for 20 years from the date of filing, subject to the payment of annualrenewal fees. During the life of the patent, the owner will have the exclusive right to exploit the invention that is the subject of the patent. Regulations on Anti-Money Laundering and Prevention of Terrorism Financing The primary anti-money laundering legislation in Singapore is the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992of Singapore (“CDSA”), provides for the confiscation of benefits derived from, and to combat, corruption, drug dealing and other serious crimes. Generally, the CDSAcriminalizes the concealment or transfer of the benefits of criminal conduct as well as the knowing assistance of the concealment, transfer or retention of such benefits. The Terrorism (Suppression of Financing) Act 2002 of Singapore (“TSOFA”), is the primary legislation for the combating of terrorism financing. It wasenacted to give effect to the International Convention for the Suppression of the Financing of Terrorism. Besides criminalizing the laundering of proceeds derived fromdrug dealing and other serious crimes and terrorism financing, the CDSA also requires suspicious transaction reports to be lodged with the Suspicious TransactionReporting Office and the TSOFA requires information about any property belonging to any terrorist or terrorist entity to be reported to the Commissioner of Police. Ifany person fails to lodge the requisite reports under the CDSA and the TSOFA, it may be subject to criminal liability. Regulations on Labor The Employment Act 1968 of Singapore generally extends to all employees regardless of their designation, salary level or type of work performed, with theexception of certain groups of employees. It provides employees falling within its ambit certain protections such as minimum notice periods, maximum working hours,maximum amount of deductions from wages, minimum holidays and rest days, maternity/paternity leave, paid childcare leave, sick leave, etc. The SingaporeEmployment Act also applies to employees who are foreigners so long as they fall within the definition of “employee” under the Employment Act. In addition, theemployment of foreign manpower in Singapore is also governed by the Employment of Foreign Manpower Act 1990 of Singapore. Aside from minimum benefits inrespect of the aforesaid terms of employment in the Employment Act and CDCSA, employees in Singapore are entitled to contributions to the central provident fundby the employer as prescribed under the Singapore Central Provident Fund Act 1953 (the “Singapore Central Provident Fund Act”). The specific contribution rate tobe made by employers varies depending on whether the employee is a Singapore citizen or permanent resident in the private or public sector and the age group andwage band of the employee. Generally, for employees who are Singapore citizens in the private sector or non-pensionable employees in the public sector, 55 years oldor below and that earn more than S$750 (US$560) a month, the employer’s contribution rate is 17% of the employee’s wages. Malaysia Regulations on Foreign Investment There are no overarching foreign investment laws in Malaysia, but there may be restrictions on the direct and/or indirect foreign shareholding in a companydepending on the types of licenses or permits that the company may hold to carry out its business activities in Malaysia. Regulations on Dividend Distributions The governing legislation for the distribution of dividends in Malaysia is the Companies Act 2016. Under Section 131 of the Companies Act 2016, aMalaysian company may only distribute dividends out of profits available if the company is solvent. Under the Companies Act 2016, the company is regarded assolvent if it is able to pay its debts as and when they become due within 12 months immediately after the distribution is made. Further, the distribution of dividendmust be in compliance with the relevant provisions of the Companies Act 2016 (e.g. where any distribution of dividend must be authorized by the directors of thecompany before such distribution is made) and the company’s constitution. 81Table of ContentsRegulations on Foreign Exchange Ringgit is the lawful currency of Malaysia. Payments between persons in Malaysia should be in ringgit, unless foreign currency is permitted under theforeign exchange policy (the “FEP”). The BNM, has a policy against the internationalization of ringgit, therefore ringgit exchange rates must be determined onshore inMalaysia, and there are restrictions on the outflow of ringgit under the FEP. Malaysia has FEP restrictions based on provisions in the Financial Services Act 2013 (“FSA”). Pursuant thereto, a wide range of transactions (these includepayments and receipts, exchange of currency) set out in Schedule 14 to the FSA are subject to the prior written approval of BNM. BNM issues FEP Notices setting outits general approval on the terms therein. Where a transaction comprises different aspects which require BNM approval under Schedule 14 to the FSA, BNM approvalhas to be obtained (either a general approval granted in the FEP Notices or approval applied for on an ad hoc basis) for each such aspect requiring approval, and BNMhas discretion whether to grant or not to grant the ad hoc approval subject to conditions. The FEP restrictions principally apply to transactions between “residents” and “non-residents” as defined in the FSA. Foreign investors are generallypermitted to invest in ringgit denominated assets and repatriate dividends, profits and other income in foreign currency with certain limited exceptions. Under the FEP,the conversion of ringgit into foreign currency may be freely effected onshore with licensed banks or money-changers with certain limited exceptions. Regulations on E-commerce The relevant laws governing Malaysia’s e-commerce include Electronic Commerce Act 2006 or ECA, Digital Signature Act 1997 (“DSA”), ConsumerProtection Act 1999 (“CPA”), Consumer Protection (Electronic Trade Transactions) Regulations 2012 (“CPR 2012”), Sale of Goods Act 1957, Contracts Act 1950, andPersonal Data Protection Act 2010 (“PDPA”). Limitations and Liabilities of Platform Operators and E-commerce SellersLimitations and Liabilities of Platform Operators and E-commerce Sellers There is no specific Malaysian legislative framework setting out the limitations and liabilities of online platform operators and e-commerce sellers. Consumerrights are protected under the CPA, which requires sellers offering goods and services by electronic means to comply with certain standards. The CPA implieswarranties among others as to reasonable care and skill, fitness for a particular purpose, reasonable time of completion and reasonable price, and prohibits misleadingand deceptive conduct, the making of false or misleading representations and the imposition of unfair contract terms. Sellers are prohibited from applying false tradedescription under the Trade Descriptions Act 2011. Specific products such as sale of price-controlled products, drugs, medical devices, food and cosmetic productsare subject to additional regulatory requirements. E-commerce sellers are required to provide appropriate means to enable the buyer to rectify any errors prior to theconfirmation of the order and shall acknowledge receipt of the order to the buyer without undue delay under CPR 2012. E-commerce sellers are also required todisclose the following information on the website or online marketplace: (i) the name, (ii) registration number of businesses or company, (iii) email address and phonenumber, (iv) a description of the main characteristics of the goods supplied, (v) full price of the goods, (vi) method of payment, (vii) terms and conditions and (viii) theestimated time of delivery of the goods to the buyer. Online marketplace operators, on the other hand, are required to take reasonable steps to keep and maintain arecord of the names, telephone numbers and the address of the person who supplies goods or services in the online marketplace, for a period of two years. With respect to user generated content (“UGC”), the concept of innocent carrier embedded in the Content Code provides that any service providersproviding access to any content but have neither control over the composition of such content nor any knowledge of such content is deemed an innocent carrier forthe purpose of the Content Code. An innocent carrier is generally not responsible for the content provided. UGC platforms must have a clear notice and take-downpolicy implemented to ensure that potentially infringing UGC can be reported by platform users and that rights holder can request the withdrawal of specific contentwith ease. Further, UGC platform operators should have a filtering system to remove offensive or defamatory content because there is a presumption that the platformor portal provider must assume responsibility for taking the risk of facilitating a platform. 82Table of ContentsRegulations Relating to Game Business Content moderation Multimedia and communications activities are under the purview of the Malaysian Communications and Multimedia Commission, a statutory bodyestablished under the Malaysian Communications and Multimedia Commission Act 1998. Section 211 of the Communications and Multimedia Act 1998 (“CMA”) provides that no content applications service provider, or other person using acontent applications service, shall provide content which is indecent, obscene, false, menacing, or offensive in character with intent to annoy, abuse, threaten orharass any person. To the extent an online game falls within the definition of “content” and that the provision thereof through the Internet can be considered as“Internet content applications service,” such provision will apply. Pursuant to the CMA, the Malaysian Communications and Multimedia Content Code (3rd edition,2022) (the “Content Code”), was passed to set out the guidelines and procedures for good practice and standards of content disseminated to audiences. This ContentCode is enforced by the Malaysian Communications and Multimedia Content Forum and it sets out the guidelines and procedures for good practice and standards ofcontent disseminated to audiences over the electronic network medium by service providers in the communications and multimedia industry. Compliance with theContent Code is voluntary but can be relied upon as a defense against any prosecution, action or proceeding of any nature whether in court or otherwise. Under theContent Code, the material disseminated must not include anything which offends good taste or decency, is offensive to public feeling, is likely to encourage crime orlead to disorder, or is abusive or threatening in nature. Regulations on Personal Data Protection and Information Security The PDPA regulates the processing of personal data in commercial transactions. The PDPA applies insofar as personal data of customer is processed (forexample, name, identification card number, address, phone number, email address). The definition of “personal data” under the PDPA includes any information inrespect of commercial transactions, which relates directly or indirectly to a data subject, who is identified or identifiable from that information or from that and otherinformation in the possession of a data user, including any sensitive personal data and expression of opinion about the data subject. The PDPA sets out sevenpersonal data protection principles to be complied with: General Principle, Notice and Choice Principle, Disclosure Principle, Security Principle, Retention Principle,Data Integrity Principle, and Access Principle. Additionally, the Personal Data Protection Regulations 2013 and the Personal Data Protection Standard 2015 set out indetail the requirements to be complied with in respect of the seven principles. Regulations on Electronic Money Electronic money (e-money) is a designated payment instrument under the FSA. It is defined as a payment instrument, whether tangible or intangible thatstores funds electronically in exchange of funds paid to the issuer, and can be used as a means of making payment to any person other than the issuer. The approval of BNM under the FSA is required before a person may carry on an issuance of e-money business. An issuer of e-money must comply withobligations in the FSA and subsidiary legislation issued thereunder on approved persons which include, without limitation, maintaining minimum capital funds at alltimes, complying with applicable standards issued by BNM and submission of information to BNM. The Electronic money (e-money) policy document prescribes broad principles (relating to, among others, having adequate governance and operationalrequirements, proper risk management, transparency of terms, timely refund of stored value, and prevention of the use of e-money for financial crimes) and minimumstandards to be observed by an issuer. A large e-money scheme operator must place users’ funds in a trust account with a licensed institution and apply them in themanner prescribed. As a financial services provider, an issuer of e-money may not engage in prohibited business conduct set out in Schedule 7 of the FSA, assupplemented by policy documents of BNM and must maintain secrecy of customer information unless an exemption applies. 83Table of ContentsBNM may revoke its approval of an approved person on the grounds set out in section 20 of the FSA, which include, without limitation, it has provided BNMwith false, misleading or incomplete information in its application for approval, it ceases to carry on its approved business, it has breached the FSA, the Central Bankof Malaysia Act 2009 or any standard or directive under those Acts applicable to it, BNM is of the opinion that it has ceased to be viable, it is in the interests ofconsumers of financial services to do so or it is wound-up or dissolved. Regulations on Merchant Acquiring Services BNM regulates an operator of a payment system that enters into a contract with a merchant for the purpose of accepting payment instruments for payment ofgoods and services as conducting merchant acquiring services under the FSA. Each such operator must be registered with BNM as a merchant acquirer and mustcomply with standards specified by BNM at all times. The merchant acquiring services policy document primarily sets out requirements on governance and oversight, operational risk management andinformation technology management of registered merchant acquirers, including the roles and responsibilities of directors and senior managers, minimum capitalrequirements for non-bank acquirers, and minimum checks and procedures to be conducted when on-boarding/ recruiting new merchants. As a financial servicesprovider, a merchant acquirer may not engage in prohibited business conduct set out in Schedule 7 of the FSA, as supplemented by policy documents of BNM. Regulations on Lending Moneylending is regulated under the Moneylenders Act 1951 in Malaysia (unless any of the limited exceptions apply) principally by the requirement thatany person who carries on or advertise or announces itself or hold itself in any way as carrying on the business of moneylending (defined as the lending of money atinterest, with or without security to a borrower) must be licensed and the moneylending agreement must be in the prescribed form. The Ministry of Local GovernmentDevelopment of Malaysia (“KPKT”) is the regulator administering the provisions of the Moneylenders Act 1951 and have also issued guidelines in connection withthe Moneylenders Act 1951 including its Guidelines on Online Moneylending applicable to licensed online moneylenders. Compounding of interest is prohibited and the moneylending agreement must be attested by any of the specified persons who must explain the terms thereofto the borrower. Any moneylending agreement entered into by an unlicensed moneylender is unenforceable. A licensed moneylender must apply for an advertisementpermit to advertise its moneylending business, and also observe the operational requirements set out in the Moneylenders Act. Regulations on Intellectual Property Rights The intellectual property laws of Malaysia comprise the following main legislation: the Patents Act 1983, Copyright Act 1987, Industrial Designs Act 1996,Layout-Designs of Integrated Circuits Act 2000, Trademarks Act 2019, and Geographical Indications Act 2022. The administration and practice of these laws comeunder the purview of the Intellectual Property Corporation of Malaysia (“MyIPO”). There are other areas of intellectual property law that may be governed by commonlaw rights including the tort of passing off and the law of confidence. Malaysia is a signatory to the main international conventions regulating intellectual propertymatters, the Agreement on Trade-Related Aspects of Intellectual Property Rights, and has acceded to the Madrid Protocol. Trademark Trademarks in Malaysia are governed by the Trademarks Act 2019 (“TMA”), and the Trademarks Regulations 2019. Once a trademark is registered, theregistered proprietor of trademark has the exclusive rights to use the trademark and authorize other persons to use the trademark, in relation to the goods or servicesfor which the trademark is registered. Upon registration, the registered trademark is valid for 10 years from the date of filing of the application and is renewable forfurther periods of 10 years each thereafter. Subject to limited exceptions, no person or enterprise other than the registered proprietor or persons authorized by theregistered proprietor may use the trademark, otherwise infringement actions may be taken against such person or enterprise. 84Table of ContentsCopyrights The main governing legislation for copyright law in Malaysia is the Copyright Act 1987. Pursuant to the Copyright Act 1987, authors of protected worksenjoy various exclusive rights, including the rights of reproduction in any material form of the works, communication to the public, performance, showing or playing tothe public of the works, and distribution of copies to the public by sale or other transfer of ownership. Literary works, musical works and artistic works will be eligiblefor copyright if sufficient effort has been made to make the works original in character; and the works have been written down, recorded or otherwise reduced to amaterial form. There is no formal system for registration of copyright in Malaysia. Copyright is conferred on a work once all the statutory requirements for eligibilityand qualification are met. The ownership of copyright in Malaysia can however be recorded formally with the Director General of MyIPO through the CopyrightVoluntary Notification System or evidenced by way of a statutory declaration under section 42 of the Copyright Act 1987. Online games and computer programswould qualify for such copyright protection. Patents In Malaysia, the Patents Act 1983 (“PA”), and the Patents Regulations 1986 govern the protection of an invention that is new, involves an inventive step, isindustrially applicable and must not be explicitly excluded by the PA. An invention may relate to a product or process, but specifically does not include, amongstothers, discoveries, rules or methods for doing business, playing games, etc. Subject to yearly renewal, the period of patent protection (for patent applications filed onor after August 1, 2001) is a maximum of 20 years from the date of filing. The PA grants the owner of a patent the exclusive rights to exploit the patented invention,assign or transmit the patent, conclude licensee contracts, and to deal with the patent as the subject of a security interest. Any person seeking to deal with a patentwhere the rights are exclusive to the owner will need to get prior consent from the latter. A patent is infringed when, without authorization of the owner, a personperforms any of the acts under the exclusive control of the patent owner, including the manufacture, importation, offer for sale, sale, or use of the patented product orprocess. Regulations on Anti-money Laundering and Prevention of Terrorism Financing Prevention and Eradication of Money Laundering Malaysia is a member of the Financial Action Task Force (“FATF”). The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of UnlawfulActivities Act 2001 (“AMLA”) is the statute that imposes obligations on prevention of money-laundering and terrorism financing based on the FATF’s 40recommendations. BNM is the competent authority under the AMLA. Entities conducting any activity listed in the First Schedule to the AMLA, including amongst others issuer of e-money, are designated as reportinginstitutions which have specific obligations set out in Part IV of the AMLA to, among others, conduct customer due diligence, maintain records thereof, appoint acompliance officer, conduct audit on its compliance with the AMLA and guidelines issued by BNM and submit suspicious transaction reports to BNM. The thresholdfor reporting institutions is also applicable to customers and person conducting single or multiple cash transactions within the same account on the same day for anamount equivalent to RM25,000 (US$5,682) and above. Such reports must be filed within the time prescribed by BNM and are in addition to the obligation to file asuspicious transaction report where applicable. Prevention and Eradication of Terrorism Financing and Proliferation Financing The prevention of terrorism financing in the AMLA is through the obligations in Part VIA thereof to maintain and update a sanctions database based onUnited Nations Security Council Resolutions (UNSCR) list and domestic list by the Minister of Home Affairs, and to screen the names of customers and any beneficialowners, beneficiaries (new, existing and potential) and related parties against the sanctions lists. A person on a sanctions list is referred to as a specified entity.Periodic reporting of positive name matches must be made to BNM. Regulations on Labor Employment and industrial relations in Malaysia are mainly governed by the Employment Act 1955 (“EA”). 85Table of ContentsThe requirements under the EA of Malaysia applies to all employees that enter into a contract of service regardless of wages, with certain exceptions forprescribed categories of employees such as employees earning more than RM4,000 (US$909) per month wherein provisions in the EA relating to among others,overtime payments and termination benefits do not apply to such employees. The EA provides for the minimum terms and conditions of employment, while theNational Wages Consultative Council Act 2011 and Minimum Wages Order provide for the minimum salary to be paid to prescribed employees. The EA also applies toemployees who are foreigners so long as they fall within the definition of “employee” under the Employment Act. Aside from minimum benefits under the EA, bothemployees and employers in Malaysia are required to contribute towards: the Employees Provident Fund, the Employment Insurance System as well as the EmployeesSocial Security Fund. The contributions are premised on the statutorily prescribed rates under the Employees Provident Fund Act 1991, Employment InsuranceSystem Act 2017 and Employees’ Social Security Fund Act 1969. C.Organizational Structure Sea Limited is a holding company that does not have substantive operations. We conduct our business operations through our subsidiaries, branch offices,and consolidated affiliated entities. Our significant subsidiaries, as that term is defined in Rule 1-02(w) of Regulation S-X, include the following entities (inchronological order based on their dates of incorporation): •Garena Online Private Limited, our wholly-owned subsidiary established in Singapore operating our digital entertainment business; •Shopee Limited, our wholly-owned subsidiary established in the Cayman Islands holding certain of our e-commerce subsidiaries; •Shopee Singapore Private Limited, our wholly-owned subsidiary established in Singapore operating our e-commerce business in Singapore; and •PT Shopee International Indonesia, our wholly-owned subsidiary established in Indonesia operating our e-commerce business in Indonesia. Contractual Arrangements among Our VIEs, Their Shareholders and Us The laws and regulations in some of our markets place restrictions on foreign investment in and ownership of entities engaged in a number of businessactivities. To comply with the relevant laws and regulations, we and certain of our wholly-owned subsidiaries in the Cayman Islands and Singapore have entered intoa series of contractual arrangements with certain VIEs and their shareholders who are local citizens. For the year ended December 31, 2022, revenue from all our VIEs(which excludes entities for which we have majority direct equity ownership) accounted for 5.8% of our total revenue. None of our VIEs is individually a significantsubsidiary as defined in Rule 1-02(w) of Regulation S-X. The contractual arrangements allow us to: •exercise effective control over our VIEs, including the ability to direct the VIE shareholders to vote at our direction and have the ability to replace each ofthem as a VIE shareholder; •receive substantially all of the economic benefits and absorb losses of our VIEs; and •have an exclusive call option to purchase all or part of the equity interests in and/or assets of our VIEs when and to the extent permitted by the relevantlaws. As a result of these contractual arrangements, we are the primary beneficiary of these VIEs and have consolidated their financial results in our consolidatedfinancial statements in accordance with U.S. GAAP. However, these contractual arrangements may not be as effective in providing operational control as directownership and the use of the contractual arrangements in some jurisdictions where we operate exposes us to certain risks. See “Item 3. Key Information—D. RiskFactors—Business and Operational Related Risks—Other Operational Risks—We rely on structural arrangements to establish control over certain entities andgovernment authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to suchstructural arrangements.” 86Table of ContentsThe following is a summary of the currently effective contractual arrangements by and among us, our VIEs and their respective shareholders.Contracts that Give Us Effective Control of the VIEs Loan Agreements In order to ensure that the shareholders of our VIEs are able to provide capital to each of these entities in order to develop its business, we have entered intoloan agreements with each shareholder. Pursuant to the loan agreements, we have granted loans to the shareholders that may only be used for the purpose ofacquiring equity interests in or contributing to the registered capital of these entities. The time and manner for repayment of the loans are at the sole discretion of ourlending entity. The loans may be repaid only by the shareholders transferring all of their equity interests in the VIE to us or our designee upon our exercise of theoptions under the exclusive option agreements. The loan agreements also prohibit the shareholders from assigning or transferring to any third party, or from creatingor causing any security interest to be created on, any part of their equity interests in these entities. In the event that the shareholders sell their equity interests to usor our designee at a price which is equal to or lower than the principal amount of the loan, the loan will be interest-free. If the price is higher than the principal amountof the loans, the excess amount will be deemed to be interest on the loans payable by the shareholders to us. Exclusive Option Agreements In order to ensure that we are able to acquire all of the equity interests in our VIEs at our discretion, we have entered into exclusive option agreements withthe respective shareholders of these VIEs. Each option is exercisable by us at any time, provided that doing so is not prohibited by law. The exercise price under eachoption is the minimum amount required by law and any proceeds obtained by the respective shareholders through the transfer of their equity interests in these entitiesshall be used for the repayment of the loan provided by us in accordance with the loan agreements. During the terms of the exclusive option agreements, theshareholders will not grant a similar right or transfer any of the equity interests in these entities to any party other than us or our designee, nor will such shareholderpledge, create or permit any security interest or similar encumbrance to be created on any of the equity interests. According to the exclusive option agreements, theVIEs cannot declare any profit distributions or grant loans in any form without our prior consent. The shareholders must remit to us or our designee in full any fundssuch shareholders receive from the VIEs in the event any distributions are made by the VIEs. The exclusive option agreements will remain in effect until the respectiveshareholder has transferred all of such shareholder’s equity interests in the VIE entity to us or our designee. Powers of Attorney In order to ensure that we are able to make all of the decisions concerning our VIEs, we have entered into powers of attorney with the shareholders of theseVIEs. Pursuant to the powers of attorney, each shareholder of our VIEs has irrevocably appointed us as such shareholder’s attorney-in-fact to act for all matterspertaining to such shareholder’s shareholding in the VIE entities and to exercise all of their rights as shareholders, including but not limited to attending shareholders’meetings and designating and appointing directors, supervisors, the chief executive officer and other senior management members of these entities, and selling,transferring, pledging or disposing the shares of these entities. We may authorize or assign our rights under this appointment to any other person or entity at our solediscretion without prior notice to or prior consent from the shareholders of these entities. Each power of attorney will remain in effect until these shareholders cease tohold any equity interest in the relevant VIE. Equity Interest Pledge Agreements In order to secure the performance of our VIEs and their shareholders under the contractual arrangements, each of the shareholders of our VIEs has pledgedall of their shares to us. These pledges secure the contractual obligations and indebtedness of such VIE shareholders, including all penalties, damages and expensesincurred by us in connection with the contractual arrangements, and all other payments due and payable to us by the relevant VIE under the exclusive businesscooperation agreements, and by the VIE shareholders under the loan agreements, exclusive option agreements, and powers of attorney. Should the VIE or the VIEshareholder breach or default under any of the contractual arrangements, we have the right to require the transfer of such VIE shareholders’ pledged equity interestsin the relevant VIE to us or our designee, to the extent permitted by laws, or require a sale of the pledged equity interest and have priority in any proceeds from theauction or sale of such pledged interests. Moreover, we have the right to collect any and all dividends in respect of the pledged equity interests during the term of thepledge. Unless the relevant VIEs have fully performed all of their obligations in accordance with the exclusive business cooperation agreements and the pledgedequity interests have been fully transferred to us or our designee in accordance with the exclusive option agreements and the loan agreements, the equity interestpledge agreements will continue to remain in effect. 87Table of ContentsSpousal Consent Letters Under the spousal consent letters, each spouse of the married shareholders of our VIEs unconditionally and irrevocably agreed that the equity interest in therelevant entity held by and registered in the name of their spouse will be disposed of pursuant to the contractual arrangements. Each spouse agreed not to assert anyrights over the equity interest in these entities held by their spouse. In addition, in the event that the spouses obtain any equity interest in these entities held by theirspouse for any reason, they agree to be bound by the contractual arrangements. All of the contractual arrangements as described above will be terminated once the respective shareholder has transferred all of such shareholder’s equityinterests in the VIE entity to us or our designee. Contracts that Enable Us to Receive Economic Benefits or Absorb Losses from the VIEs Exclusive Business Cooperation Agreements In order to ensure that we receive the economic benefits of our VIEs, we have entered into exclusive business cooperation agreements with these entitiesunder which we have the exclusive right to provide or to designate any third party to provide, among other things, technical support, consulting services, intellectualproperty licenses and other services to these entities, and these entities agree to accept all the services provided by us or our designee. Without our prior writtenconsent, our VIEs are prohibited from directly or indirectly engaging any third party to provide the same or any similar services under these agreements orestablishing similar cooperative relationships with any third party regarding the matters contemplated by these agreements. In addition, we have exclusive andproprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of these agreements. Our VIEs agree to pay a monthly fee to us at an amount determined at our sole discretion after taking into account factors including the complexity anddifficulty of the services provided, the level of and time consumed by our employees or our designee for providing the services, the content and value of services andlicenses provided and the market price of the same type of services or licenses. These agreements will remain effective unless terminated in accordance with theirprovisions or terminated in writing by us. Unless otherwise required by applicable laws, these entities do not have any right to terminate these agreements in anyevent. We have the right to terminate the exclusive business cooperation agreements and/or require these entities to indemnify all damages in the event of anymaterial breach of any term of these agreements by them. These entities agree to indemnify and hold us harmless from any losses, injuries, obligations or expensescaused by any lawsuits, claims or other demands against us arising from or caused by the services that we provide to these entities pursuant to the exclusivebusiness cooperation agreements, except where such losses, injuries, obligations or expenses arise from our own gross negligence or willful misconduct. Financial Support Confirmation Letters In order to ensure that our VIEs have sufficient cash flow to fund their daily operations and/or to set off any losses incurred in such operations, we haveentered into financial support confirmation letters with each of these entities. Under the financial support confirmation letters, we pledge to provide continuousfinancial support to these entities by ourselves or through our designees and agreed to forego our right to seek repayment in the event these entities are unable torepay such financial support or we become liable for the liabilities of these entities. These entities agree to accept such financial support and pledge to only use suchsupport to develop their respective businesses. To the extent permitted by law, the financial support we provide to these entities may take the form of loans,borrowings or guarantees. Based on opinions from our external legal counsels, we believe the ownership structure of our VIEs are generally in compliance with the local laws orregulations that are currently in effect, and each of the agreements among us, our VIEs and/or the local shareholders is valid, binding and enforceable, and do not andwill not result in any violation of such laws or regulations that are currently in effect. 88Table of ContentsHowever, uncertainties in the relevant legal system could cause the relevant regulatory authorities to find the current contractual arrangements andbusinesses to be in violation of any existing or future relevant laws or regulations. In addition, if the VIEs or the shareholders of the VIEs fail to perform theirobligations under the contractual arrangements, we may have to incur substantial costs and expend resources to enforce our rights as the primary beneficiary underthe contracts. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We rely on structuralarrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws andregulations. We are also subject to other risks relating to such structural arrangements.” Thailand Shareholding Structure Our operating entities in Thailand are established using a tiered structure that maximizes our equity interests in the entity while also complying with the Thailaw requirement that each Thai company has the minimum number of required shareholders and, without approval from Thai authorities, direct foreign ownership ofshare capital of each entity operating the restricted business under the Thai Foreign Business Act is limited to less than 50%. As Thai laws only consider theimmediate level of shareholding, no cumulative or look-through calculation is applied to determine the foreign ownership status of a company when it has severallevels of foreign shareholding. Under this shareholding structure, our Thai operating entities are each owned by (i) a Thai entity, or Thai Holdco 1, holding slightlymore than half of the shares, (ii) one of our employees holding one share, and (iii) one of our Cayman Islands or Singapore subsidiaries holding slightly less than halfof the shares. Thai Holdco 1 is then owned by (i) another Thai entity, or Thai Holdco 2, (ii) the employee who holds one share in the Thai operating entity, and (iii) ourCayman Islands or Singapore subsidiary in the same shareholding proportions that our Thai operating entities are held. Thai Holdco 2 is in turn held by (i) one of ouremployees, who is a Thai citizen, holding preference shares equivalent to slightly more than half of the total number of shares, (ii) the employee who holds one sharein the Thai operating entity, holding one share, and (iii) our Cayman Islands or Singapore subsidiary holding ordinary shares equivalent to slightly less than half ofthe total number of shares. The preference shares have limited voting rights and the right to receive a fixed, non-cumulative dividend of an immaterial amount in theevent a dividend is declared. This structure allows us to effectively control nearly 100% of our Thai operating entities. In the opinion of Kudun and Partners Company Limited, our counsel as to Thai law, the shareholding structure of our Thai operating entities is in compliancewith applicable Thai law. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Other Operational Risks—We rely on structuralarrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws andregulations. We are also subject to other risks relating to such structural arrangements.” D.Property, Plants and Equipment Our headquarters and our principal technical development facilities are located in Singapore, where we have leased approximately 80,000 square meters ofoffice space, as of December 31, 2022. We also have local offices in other parts of Asia and Latin America. The servers we currently use are hosted in leased data centers in different areas across our markets, as well as on cloud services. The data centers in ournetwork are owned and maintained for us by major domestic and international data center providers. We generally enter into leasing and hosting service agreementswith renewal terms. We believe that our existing facilities are sufficient for our current needs, and we may need to obtain, usually by lease, adequate facilities toaccommodate any future expansion plans. ITEM 4A.UNRESOLVED STAFF COMMENTS None. ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financialstatements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks anduncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result ofvarious factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. 89Table of ContentsA.Operating Results Overview Sea operates three key businesses—Shopee, Garena, and SeaMoney. Each of our businesses provides a distinct and compelling value proposition to ourusers, and we believe each exhibits strong virtuous cycle dynamics. We develop, curate and localize the content and services on our platforms to serve a highlydiverse population across multiple markets and regulatory regimes. Since our founding, we have achieved significant scale and growth. Our total revenue increased from US$4.4 billion in 2020 to US$12.4 billion in 2022, aCAGR of 68.7%. We had gross profit of US$1.3 billion, US$3.9 billion and US$5.2 billion in 2020, 2021 and 2022, respectively. We incurred net losses of US$1.6 billion,US$2.0 billion and US$1.7 billion in 2020, 2021 and 2022, respectively, primarily due to our investments in expanding our businesses, in particular our e-commerce anddigital financial services businesses. Major Factors Affecting Our Results of Operations Our results of operations and financial condition are affected by general factors driving the e-commerce, digital entertainment, digital financial services andother industries in our markets, including demographic and macro-economic growth, technology adoption trends, and the digital transformation of industries. Our results of operations are also directly affected by certain factors specific to us, including the following: Size of Our User Base Our revenue is largely driven by the number of users and the level of user engagement across our three businesses, subject to other factors such as macro-economics, geopolitics and consumer spending power. In our e-commerce business, the larger the number of sellers and buyers on the platform, the larger the numberand value of transactions which over time will drive advertising and transaction-based fee revenue for us. In our digital entertainment business, due to our freemiumbusiness model, the higher the number of active users in our games, the larger the number of users likely to make in-game purchases. In our digital financial servicesbusiness, the larger the number of users, the greater the potential to generate revenue from service fees, underwriting premiums, and net interest margin. User Engagement and Monetization As our level of user engagement increases, the potential for user spending and consequently our revenue also increases. A critical component of maximizingthe monetization potential of each of our businesses is providing high-quality content and services and pricing our content and services correctly. Monetization isalso dependent upon our ability to convert active users into paying users, and then increase revenue per paying user. For example: •In our e-commerce business, we closely monitor the number of transactions per active buyer. We optimize the assortment of our product categories on ourmarketplace and build convenient tools to attract sellers. We monetize our e-commerce business mainly by offering sellers paid advertising services,charging transaction-based fees, and charging for certain value-added services, including logistics. We may consider other monetization methods in orderto capture additional revenue streams. We also purchase products from manufacturers and third parties and sell them directly to buyers on our Shopeeplatform. •In our digital entertainment business, our primary source of revenue is the sale of in-game items. We focus on developing and curating the best contentand localizing that content to cater to the tastes and preferences of each of our unique markets. We maximize the in-game user experience to keep our usershighly engaged and increase the likelihood of in-game spending so as to maximize revenue. To do so, we provide a high-quality entertainment experience,adopt effective pricing strategies for each market and game, and leverage our platform’s cross-selling tools to support long-term user engagement with ourgames. 90Table of Contents•In our digital financial services business, we mainly monetize by charging fees (fees from our mobile wallet services and payment processing services andcommissions from third-party financial institutions which offer financial products or lend to consumers on our platform), by earning interest from our creditand banking businesses and by earning premium from our insurance business. COVID-19, including lifting of restrictions in relevant markets, has affected and may continue to affect our businesses and our users’ behaviors. We haveobserved ongoing moderation in user engagement and monetization in our businesses. Accordingly, the trends we saw with respect to our revenues and otherfinancial results and operating metrics during COVID-19 impacted periods are not indicative of results for future periods. See “Item 3. Key Information—D. RiskFactors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—The COVID-19 pandemic, including any lockdown and reopeningof relevant markets, has affected our business activities and results. Any future occurrence of natural disasters, epidemics, pandemics or other outbreaks, or othercatastrophic events could also adversely affect our business” for more details. Benefits of Our Platforms Our platforms benefit from internal dynamics that allow us to increase our scale and user engagement quickly and in a cost-effective manner. Our businessesenjoy network effects, virtuous cycles and synergies across our platforms. We benefit from the network effects resulting from the significant social aspects of our platforms. For example, because game players find it highly beneficialto join a platform with a large number of other game players, each new player that joins creates value for the existing community. This encourages current users toinvite new users to our platform, which allows us to grow our user base with moderate acquisition cost and increases the likelihood that users will remain active andengaged and therefore spend on our platform. Each of our three businesses is a multi-sided platform which benefits from virtuous cycle dynamics. Thus, as our platforms grow, they become more valuableto each of our users and this increases their potential spending opportunities. For example, as the number of buyers on our Shopee platform increases, Shopee attractsan increasing number of sellers, resulting in increases in the volume and variety of products available on the platform, which increases the purchasing opportunitiesfor each of those buyers. This results in greater monetization potential as the size of each platform grows. Finally, synergies among our digital financial services business and each of our e-commerce and digital entertainment businesses allow us to increase ouruser base and monetization quickly and cost-effectively. For example, as our Shopee buyers and Garena game players increasingly complete transactions using ourmobile wallet services, our mobile wallet user base grows, which in turn may attract more merchants to join the mobile wallet network. At the same time, the large userbase on Shopee may also increasingly explore other services and product offerings available on our digital financial services platform, such as our credit, insurtechand digital bank services. Optimization of Our Cost and Expense Structure Our cost and expense structure has several broad components: sales and marketing expenses, consisting primarily of customer acquisition and retentionexpenses for all our business segments; costs of logistics, including expenses for warehousing, for our e-commerce business; payment channel costs, royalties,amortized license fees and hosting costs for our digital entertainment business; funding costs as well as credit and default costs, for our consumer and merchantcredit business; employee compensation and welfare costs and expenses, which are spread among different functions; research and development expenses; and othercosts and expenses across our businesses that are mainly fixed in nature. By offering our own mobile wallet and payment processing services, we strive to effectivelyreduce our payment channel costs and capture value that may otherwise go to third-party payment service providers. Our scale in our digital entertainment businesshas enabled us to optimize our variable costs, as has our operating scale for e-commerce and digital financial services. 91Table of ContentsForeign Exchange Rates Our reporting currency is the U.S. dollar and changes in currency exchange rates may materially affect our reported results and consolidated trends. We earnrevenue denominated in local currencies of our markets in Southeast Asia, Taiwan and Brazil, among other currencies, while some of our costs and expenses are paidin other foreign currencies. We do not rely on any single currency as we earn revenue in different local currencies across our markets and keep a significant cashposition in U.S. dollars. Our expenses may become higher and our revenue and operating metrics may become lower than would be the case if exchange rates were stable or if wewere operating and reporting in one currency. For example, if the U.S. dollar weakens relative to currencies in our local markets, our revenue and operating expenseswill be higher than if currencies had remained constant. Likewise, if the U.S. dollar strengthens relative to currencies in our local markets, our revenue and operatingexpenses will be lower than if currencies had remained constant. Movements in foreign currency exchange rates may have a material adverse effect on our results ofoperations, which may cause our financial and operational metrics reported in the U.S. dollar to be not fully representative of the underlying business performance.We believe that our diversification in geographic coverage benefits our shareholders over the long-term. We may also enter into foreign currency derivativetransactions to hedge potential foreign exchange risks. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks ApplicableAcross Multiple Businesses—Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S.dollars.” Description of Certain Statement of Operations Items Revenue We currently generate revenue primarily from our digital entertainment business and e-commerce business. The table below sets forth our revenuebreakdown. For the Year Ended December 31, 2020 2021 2022 US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue (thousands, except for percentages) Service revenue Digital Entertainment 2,015,972 46.1 4,320,013 43.4 3,877,163 31.1 E-commerce and other services 1,777,330 40.6 4,564,617 45.8 7,463,173 60.0 Sales of goods 582,362 13.3 1,070,560 10.8 1,109,369 8.9 Total revenue 4,375,664 100.0 9,955,190 100.0 12,449,705 100.0 The table below sets forth the revenue from external customers based on the geographical locations where the services were provided or goods were sold,both in absolute amount and as a percentage of total revenue for the periods indicated. 92Table of Contents For the Year Ended December 31, 2020 2021 2022 US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue (thousands, except for percentages) Southeast Asia 2,791,894 63.8 6,316,782 63.5 8,321,249 66.8 Latin America 790,308 18.1 1,850,861 18.6 2,043,918 16.4 Rest of Asia 655,007 15.0 1,394,342 14.0 1,727,187 13.9 Rest of the world 138,455 3.1 393,205 3.9 357,351 2.9 Total revenue 4,375,664 100.0 9,955,190 100.0 12,449,705 100.0 Digital Entertainment We generate revenue from our digital entertainment business primarily by selling in-game items to our game players. We recognize revenue ratably over theestimated service period. Our revenue generated from digital entertainment accounted for 46.1%, 43.4% and 31.1% of our total revenue in 2020, 2021 and 2022,respectively. The primary driver for revenue in our digital entertainment business is the size of our active user base and the level of user engagement. Due to the freemiumbusiness model of our immersive games, the higher the number of active users on our games, the greater the likelihood of such users to make in-game purchases.Therefore, we believe Game QAU is a key metric to help us understand both the active user base and user engagement on our games. See “Item 4. Information on theCompany—B. Business Overview—Our Businesses—Garena Digital Entertainment Business—Game Players.” E-commerce and Other Services E-commerce and other services revenue consists of revenue generated from our e-commerce marketplace services, digital financial services, and otherservices on our platforms. Revenue from products owned and sold by us on our Shopee platform was recorded under sales of goods revenue as discussed below. Oure-commerce and other services revenue constituted 40.6%, 45.8% and 60.0% of our total revenue during 2020, 2021 and 2022, respectively. We monetize Shopee’s marketplace model mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certainvalue-added services, including logistics. We may also roll out other means of generating revenue to broaden our monetization avenues in the future. We generate revenue from our digital financial services business primarily from interest and fees from loans granted to commercial and consumer customers,and commissions charged to third-party merchants. We generally recognize our interest and fees, and commission from the transactions as revenue. Typically, thecommission charged is either a fixed rate or a certain percentage of the transaction value flowing through the platform. Sales of Goods Sales of goods revenue mainly comes from our e-commerce business. While we primarily operate as a marketplace, we also purchase products frommanufacturers or third parties directly and sell on our Shopee platform under our official store to meet buyers’ demand for such products. Bulk purchasing and directproduct sales for specific product categories also enable us to offer better product assortment and more competitive prices to our buyers. 93Table of ContentsCost of Revenue Our cost of revenue primarily consists of direct expenses in generating revenue from our businesses. Digital EntertainmentFor our cost of revenue for digital entertainment, the largest portion relates to channel cost which is generally paid as a percentage of gross billings, andrecognized as expenses over the performance obligation period, and a significant portion also relates to royalties, which are generally paid as a percentage of grossbillings from our licensed games, and other fees relating to our use of various third-party intellectual properties. Other costs include server and hosting costs, upfrontlicensing fees, which are fixed and amortized over the shorter of estimated useful life or game licensing period, staff compensation and welfare costs, which include theshare-based compensation, and other miscellaneous costs. E-commerce and Other Services Our cost of revenue for e-commerce services primarily consists of expenses associated with our logistics and other value-added services, bank transactionfees for transactions conducted through our Shopee platform, server and hosting costs, staff compensation and welfare costs, which include share-basedcompensation, and other miscellaneous costs. Our cost of revenue for digital financial services primarily consists of server and hosting costs, interest expenses for deposits payable, bank transaction feesfor transactions conducted through our SeaMoney platform, commissions we pay to counter operators, staff compensation and welfare costs, which include share-based compensation, and other miscellaneous costs. Sales of Goods Our cost of revenue for sales of goods is mainly attributable to the goods we purchase from manufacturers and third parties and sell directly to buyers on ourShopee platform. Operating Income and Expenses Our operating expenses consist of sales and marketing expenses, general and administrative expenses, provision for credit losses, research and developmentexpenses and impairment of goodwill, net of other operating income. In 2022, we made the management decision to strongly pivot to a clear focus on cost efficiency,and we expect to continue to solidify the efficiency gains and optimize the cost structure across our markets in 2023. The table below sets forth our operatingexpenses, both in absolute amount and as a percentage of total revenue, for the periods indicated. For the Year Ended December 31, 2020 2021 2022 US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue (thousands, except for percentages) Other operating income (189,645) (4.3) (287,946) (2.9) (279,184) (2.2)Sales and marketing expenses 1,830,875 41.8 3,829,743 38.5 3,269,223 26.3 General and administrative expenses 599,706 13.7 987,868 9.9 1,437,612 11.5 Provision for credit losses 57,509 1.3 117,427 1.2 513,690 4.1 Research and development expenses 353,785 8.1 831,703 8.4 1,376,501 11.0 Impairment of goodwill – – – – 354,943 2.9 Total operating expenses 2,652,230 60.6 5,478,795 55.1 6,672,785 53.6 94Table of ContentsOther Operating Income Our other operating income consists primarily of rebates from e-commerce related logistic services provided by third parties. Sales and Marketing Expenses Our sales and marketing expenses consist primarily of online and offline advertising expenses, sales incentive, and staff compensation and welfare expenses,which include share-based compensation for our employees engaged in sales and marketing functions. In 2022, sales and marketing expenses decreased mainly due toour efforts to continue optimizing operating costs and achieving higher cost efficiencies. In connection with such efforts, the excess sales incentive, representing thesales incentive given exceeding the revenue we expect to receive on a transaction-by-transaction basis, was approximately 12% of total revenue in 2022, whichdecreased over the quarters and was less than 5% of our total revenue in the fourth quarter of 2022. General and Administrative Expenses Our general and administrative expenses consist primarily of facilities and other overhead expenses, depreciation and amortization expenses, impairmentlosses, external professional service expenses, and staff compensation and welfare expenses, which include share-based compensation for our employees engaged ingeneral and administrative functions. Provision for Credit Losses Our provision for credit losses relates primarily to our credit business. Our provision for credit losses could increase if the size of our loans receivable growsor if the credit environment worsens. Research and Development Expenses Our research and development expenses consist primarily of staff compensation and welfare expenses, which include share-based compensation for ouremployees engaged in product development functions. We believe developing our platforms and content is extremely important to achieving our strategic objectives. Impairment of Goodwill We test goodwill for impairment at least annually and evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carryingamount. Goodwill impairment is recognized as the excess of goodwill allocated to the reporting unit’s carrying amount over its fair value, not to exceed the totalamount of goodwill allocated to the reporting unit. Results of Operations The table below sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of ourtotal revenue. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. Theoperating results in any period are not necessarily indicative of the results that may be expected for any future period. 95Table of Contents For the Year Ended December 31, 2020 2021 2022 US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue US$ Percentageof TotalRevenue (thousands, except for percentages) Selected Consolidated Statements ofOperations Data: Revenue: Service revenue Digital Entertainment 2,015,972 46.1 4,320,013 43.4 3,877,163 31.1 E-commerce and other services 1,777,330 40.6 4,564,617 45.8 7,463,173 60.0 Sales of goods 582,362 13.3 1,070,560 10.8 1,109,369 8.9 Total revenue 4,375,664 100.0 9,955,190 100.0 12,449,705 100.0 Cost of revenue: Cost of service Digital Entertainment (702,329) (16.1) (1,230,082) (12.4) (1,077,017) (8.7)E-commerce and other services (1,743,773) (39.9) (3,825,826) (38.4) (5,194,065) (41.7)Cost of goods sold (580,657) (13.3) (1,003,547) (10.1) (993,346) (8.0)Total cost of revenue (3,026,759) (69.2) (6,059,455) (60.9) (7,264,428) (58.4)Gross profit 1,348,905 30.8 3,895,735 39.1 5,185,277 41.6 Operating income (expenses): Other operating income 189,645 4.3 287,946 2.9 279,184 2.2 Sales and marketing expenses (1,830,875) (41.8) (3,829,743) (38.5) (3,269,223) (26.3)General and administrative expenses (599,706) (13.7) (987,868) (9.9) (1,437,612) (11.5)Provision for credit losses (57,509) (1.3) (117,427) (1.2) (513,690) (4.1)Research and development expenses (353,785) (8.1) (831,703) (8.4) (1,376,501) (11.0)Impairment of goodwill – – – – (354,943) (2.9)Total operating expenses (2,652,230) (60.6) (5,478,795) (55.1) (6,672,785) (53.6)Operating loss (1,303,325) (29.8) (1,583,060) (15.9) (1,487,508) (11.9)Interest income 24,804 0.6 36,082 0.4 115,515 0.9 Interest expense (123,843) (2.8) (136,876) (1.4) (45,396) (0.4)Net investment loss (17,820) (0.4) (43,502) (0.4) (207,331) (1.7)Net (loss) gain on debt extinguishment (24,400) (0.6) (2,069) (0.0) 199,697 1.6 Changes in fair value of convertible notes (87) (0.0) – – – – Foreign exchange (loss) gain (38,567) (0.9) 14,241 0.1 (75,510) (0.6)Loss before income tax and share of results ofequity investees (1,483,238) (33.9) (1,715,184) (17.2) (1,500,533) (12.1)Income tax expense (141,640) (3.2) (332,865) (3.3) (168,395) (1.4)Share of results of equity investees 721 0.0 5,019 0.1 11,156 0.1 Net loss (1,624,157) (37.1) (2,043,030) (20.5) (1,657,772) (13.3)96Table of ContentsYear Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue Our total revenue increased by 25.1% from US$10.0 billion in 2021 to US$12.4 billion in 2022. •Digital Entertainment: Our digital entertainment revenue decreased by 10.3% from US$4.3 billion in 2021 to US$3.9 billion in 2022. This decrease wasprimarily attributable to the ongoing moderation in user engagement and monetization. •E-commerce and other services: Our e-commerce and other services revenue increased by 63.5% from US$4.6 billion in 2021 to US$7.5 billion in 2022. Thisincrease was primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. •Sales of goods: Revenue was relatively stable at US$1.1 billion for 2021 and 2022. Cost of Revenue Our total cost of revenue increased by 19.9% from US$6.1 billion in 2021 to US$7.3 billion in 2022. •Digital Entertainment: Cost of revenue decreased by 12.4% from US$1.2 billion in 2021 to US$1.1 billion in 2022, which was largely in line with thedecrease in digital entertainment revenue. •E-commerce and other services: Cost of revenue for our e-commerce and other services combined increased by 35.8% from US$3.8 billion in 2021 to US$5.2billion in 2022. The increase was primarily driven by higher costs of logistics from order growth and other costs related to the growth of e-commercemarketplace. The improvement in gross profit margins was mainly due to the growth of core marketplace revenue with higher gross profit margin. •Cost of goods sold: Cost of goods sold was relatively stable at US$1.0 billion for 2021 and 2022. Gross Profit As a result of the foregoing, our gross profit was US$3.9 billion in 2021 and US$5.2 billion in 2022. We had gross margins of 39.1% and 41.6% in 2021 and2022, respectively. Our digital entertainment segment had gross margins of 71.5% and 72.2% in 2021 and 2022, respectively. Service revenue pertaining to our e-commerce and other services segment had gross margins of 16.2% and 30.4% in 2021 and 2022, respectively. Sales of goods had gross margins of 6.3% and 10.5% in2021 and 2022, respectively. Other Operating Income Our other operating income decreased by 3.0% from US$287.9 million in 2021 to US$279.2 million in 2022. Other operating income mainly consists of rebatesfrom e-commerce related logistics services providers. Sales and Marketing Expenses Our sales and marketing expenses decreased by 14.6% from US$3.8 billion in 2021 to US$3.3 billion in 2022. The decrease in sales and marketing expensesacross all major reporting segments was mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 45.5% from US$1.0 billion in 2021 to US$1.4 billion in 2022. The increase was primarily due to the higherstaff cost from higher average staff headcount over the year, as well as higher cost of office facilities and related expenses to support the headcount growth. Generaland administrative expenses described here exclude provision for credit losses. See “—Provision for Credit Losses” below for further details. 97Table of ContentsProvision for Credit Losses Our provision for credit losses increased by 337.5% from US$117.4 million in 2021 to US$513.7 million in 2022, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses increased by 65.5% from US$831.7 million in 2021 to US$1.4 billion in 2022. The increase was primarily due to theincrease in research and development staff costs from higher average staff headcount over the year. Impairment of Goodwill We recorded an impairment of goodwill of US$354.9 million in 2022, compared to nil in 2021. The goodwill impairment was primarily due to the change incarrying amount of goodwill associated with our prior acquisitions, mainly driven by the lower valuations amid the market uncertainties, and our strategic decision todispose of or shut down certain historical investments for the digital entertainment business. Other Income, Expenses, Gains and Losses Our interest income, interest expense, net investment loss, net (loss) gain on debt extinguishment, and foreign exchange (loss) gain was a net loss ofUS$132.1 million in 2021 compared to a net loss of US$13.0 million in 2022. Loss before Income Tax and Share of Results of Equity Investees As a result of the foregoing, we had loss before income tax and share of results of equity investees of US$1.7 billion in 2021, compared to loss before incometax and share of results of equity investees of US$1.5 billion in 2022. Income Tax Expense We had an income tax expense of US$332.9 million in 2021 and US$168.4 million in 2022. The lower income tax expense was primarily due to recognition ofdeferred tax assets from carried forward losses for our e-commerce business, as well as lower income tax expense incurred by our digital entertainment business. Share of Results of Equity Investees We had share of profit of equity investees of US$5.0 million in 2021 and US$11.2 million in 2022. Net Loss As a result of the foregoing, we had net loss of US$2.0 billion in 2021 and US$1.7 billion in 2022. Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Revenue Our total revenue increased by 127.5% from US$4.4 billion in 2020 to US$10.0 billion in 2021. The increase was mainly driven by the growth in each of thesegments detailed as follows: •Digital Entertainment: Our digital entertainment revenue increased by 114.3% from US$2.0 billion in 2020 to US$4.3 billion in 2021. This increase wasprimarily due to the increase in our active user base as well as the deepened paying user penetration. •E-commerce and other services: Our e-commerce and other services revenue increased by 156.8% from US$1.8 billion in 2020 to US$4.6 billion in 2021. Thisincrease was primarily driven by the growing adoption of products and services across our e-commerce and digital financial services businesses.•Sales of goods: Revenue increased by 83.8% from US$582.4 million in 2020 to US$1.1 billion in 2021, primarily due to the increase in our product offerings. 98Table of ContentsCost of Revenue Our total cost of revenue increased by 100.2% from US$3.0 billion in 2020 to US$6.1 billion in 2021. This increase was in line with the overall growth of ourbusinesses: •Digital Entertainment: Cost of revenue increased by 75.1% from US$702.3 million in 2020 to US$1.2 billion in 2021. The increase was largely in line with theincrease in our digital entertainment revenue. •E-commerce and other services: Cost of revenue for our e-commerce and other services combined increased by 119.4% from US$1.7 billion in 2020 toUS$3.8 billion in 2021. The increase was primarily due to higher costs of logistics from order growth, and other costs driven by the growth of our e-commerce marketplace. •Cost of goods sold: Cost of goods sold increased by 72.8% from US$580.7 million in 2020 to US$1.0 billion in 2021. The increase was largely in line with theincrease in our revenue from sales of goods. Gross Profit As a result of the foregoing, our gross profit was US$1.3 billion in 2020 and US$3.9 billion in 2021. We had gross margins of 30.8% and 39.1% in 2020 and2021, respectively. Our digital entertainment business had gross margins of 65.2% and 71.5% in 2020 and 2021, respectively. Service revenue pertaining to our e-commerce and other services segment had gross margins of 1.9% and 16.2% in 2020 and 2021, respectively. Sales of goods had gross margins of 0.3% and 6.3% in2020 and 2021, respectively. Other Operating Income Our other operating income increased by 51.8% from US$189.6 million in 2020 to US$287.9 million in 2021. The increase in our other operating income wasmainly due to the rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our sales and marketing expenses increased by 109.2% from US$1.8 billion in 2020 to US$3.8 billion in 2021. The increase in sales and marketing expenses in2021 was mainly from our e-commerce and digital financial services businesses. The increase in marketing expenses for our e-commerce business was primarilyattributable to the ramping up of marketing incentives and online marketing efforts, as we continue investing in capturing market opportunities and expanding acrossmarkets. The increase in marketing expenses for our digital financial services business was mainly due to our efforts to promote adoption of our mobile wallet services. General and Administrative Expenses Our general and administrative expenses increased by 64.7% from US$599.7 million in 2020 to US$987.9 million in 2021. This increase was primarily due tohigher staff compensation and benefit costs from increased staff to support the business growth, as well as office facilities and related expenses. General andadministrative expenses described here exclude provision for credit losses. See “—Provision for Credit Losses” below for further details. Provision for Credit Losses Our provision for credit losses increased by 104.2% from US$57.5 million in 2020 to US$117.4 million in 2021, primarily driven by the growth in our loan book. 99Table of ContentsResearch and Development Expenses Our research and development expenses increased by 135.1% from US$353.8 million in 2020 to US$831.7 million in 2021, primarily due to the increase inresearch and development staff force. Other Income, Expenses, Gains and Losses Our interest income, interest expense, net investment loss, net (loss) gain on debt extinguishment, fair value change for convertible notes and foreignexchange (loss) gain was a net loss of US$179.9 million in 2020 compared to a net loss of US$132.1 million in 2021. Our net non-operating loss in 2020 and 2021 wasprimarily due to interest expense on our convertible notes. Loss before Income Tax and Share of Results of Equity Investees As a result of the foregoing, we had loss before income tax and share of results of equity investees of US$1.5 billion in 2020, compared to loss before incometax and share of results of equity investees of US$1.7 billion in 2021. Income Tax Expense We had an income tax expense of US$141.6 million in 2020 and US$332.9 million in 2021. This was primarily due to corporate income tax and withholding taxexpenses incurred by our digital entertainment segment. Share of Results of Equity Investees We had share of profit of equity investees of US$0.7 million in 2020 and US$5.0 million in 2021. Net Loss As a result of the foregoing, we had net loss of US$1.6 billion in 2020 and US$2.0 billion in 2021. Segment Reporting We have three reportable segments, namely, digital entertainment, e-commerce and digital financial services. The chief operating decision maker reviews theperformance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources toand evaluating the financial performance of each segment. Information about segments during the years ended December 31, 2020, 2021 and 2022 presented were as follows: For the Year ended December 31, 2022 DigitalEntertainment E-commerce Digital FinancialServices OtherServices(1) Unallocatedexpenses(2) Consolidated (US$ thousands) Revenue 3,877,163 7,288,677 1,221,996 61,869 – 12,449,705 Operating income (loss) 1,971,416 (2,013,360) (277,264) (252,162) (916,138) (1,487,508)Non-operating loss, net (13,025)Income tax expense (168,395)Share of results of equity investees 11,156 Net loss (1,657,772)100Table of Contents For the Year ended December 31, 2021 DigitalEntertainment E-commerce Digital FinancialServices OtherServices(1) Unallocatedexpenses(2) Consolidated (US$ thousands) Revenue 4,320,013 5,122,959 469,774 42,444 – 9,955,190 Operating income (loss) 2,500,081 (2,766,566) (640,422) (177,633) (498,520) (1,583,060)Non-operating loss, net (132,124)Income tax expense (332,865)Share of results of equity investees 5,019 Net loss (2,043,030) For the Year ended December 31, 2020 DigitalEntertainment E-commerce Digital FinancialServices OtherServices(1) Unallocatedexpenses(2) Consolidated (US$ thousands) Revenue 2,015,972 2,167,149 60,785 131,758 – 4,375,664 Operating income (loss) 1,016,793 (1,442,593) (520,075) (49,006) (308,444) (1,303,325)Non-operating loss, net (179,913)Income tax expense (141,640)Share of results of equity investees 721 Net loss (1,624,157) (1)A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as“Other Services.”(2)Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportablesegments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. Theseexpenses are excluded from segment results as they are not reviewed by the chief operating decision maker as part of segment performance.Taxation Cayman Islands We are incorporated in the Cayman Islands and our primary business operations are conducted through our subsidiaries, branch offices and consolidatedaffiliated entities. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains. Singapore Our subsidiaries incorporated in Singapore are subject to the Singapore corporate tax of 17% in 2020, 2021 and 2022. Garena Online Private Limited wasgranted an additional five-year development and expansion incentive by the Singapore Economic Development Board, or the EDB, commencing from January 1, 2017,with another five-year extension commencing from January 1, 2022, which grant a concessionary tax rate of 10% from January 1, 2017 to December 31, 2021 and 10.5%from January 1, 2022 to December 31, 2026 on qualifying income, subject to certain terms and conditions imposed by the EDB. Others Subsidiaries incorporated in other jurisdictions are subject to the respective applicable corporate income tax rates of the jurisdictions where they are resident. 101Table of ContentsDomestic statutory corporate income tax rate in Indonesia was reduced from 25% to 22% with effect from the financial year 2020. In March 2021, the Philippines reduced its corporate income tax rate from 30% to 25%, effective retroactively from July 1, 2020. B.Liquidity and Capital Resources Cash Flows and Working Capital Our principal sources of liquidity have historically been cash generated from operating activities and proceeds from equity offerings and convertible notesofferings. We also receive customer deposits from our banking business. As of December 31, 2020, 2021 and 2022, we had US$7.1 billion, US$10.8 billion and US$7.6 billion, respectively, in cash, cash equivalents and restricted cash.Cash and cash equivalents consist of cash on hand, demand deposits and money market funds placed with banks and other financial institutions which areunrestricted as to withdrawal and use and have original maturities of three months or less. Restricted cash mainly comprise monies received that are held in escrow inconnection with our e-commerce business and mobile wallet in connection with our digital financial services business. Our cash, cash equivalents and restricted cashare primarily denominated in U.S. dollars as well as in local currencies of the markets where we operate. We believe that our cash and cash equivalents, together withcash generated from operating and short-term investments, will be sufficient to meet our anticipated cash needs and obligations for the next 12 months. We may alsoaccess capital markets or credit facilities should we require additional working capital.The following table sets forth a summary of our cash flows for the periods indicated: For the Year Ended December 31, 2020 2021 2022 (US$ thousands) Net cash generated from (used in) operating activities 555,868 208,649 (1,055,692)Net cash used in investing activities (886,912) (3,767,273) (2,428,809)Net cash generated from financing activities 3,733,132 7,401,589 400,256 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 80,727 (58,218) (143,511)Net increase (decrease) in cash, cash equivalents and restricted cash 3,482,815 3,784,747 (3,227,756)Cash, cash equivalents and restricted cash at beginning of year 3,570,578 7,053,393 10,838,140 Cash, cash equivalents and restricted cash at end of year(1) 7,053,393 10,838,140 7,610,384 (1)As of December 31, 2022, cash and cash equivalents of US$13.2 million was included in assets held for sale within prepaid expenses and other assets.Operating Activities Net cash used in operating activities amounted to US$1.1 billion for the year ended December 31, 2022 compared to net cash generated from operatingactivities of US$208.6 million for the year ended December 31, 2021. The principal driver of our operating cash flows is cash received from sales of our products andservices, including proceeds from our sales of in-game virtual items in our digital entertainment business, fees collected from customers in our e-commerce business,interest received from our loan business, commissions from merchants in our digital financial services business and proceeds from direct sales of products, offset byoperating expenses. The decrease in net cash generated from operating activities was primarily attributable to the decrease in the change in deferred revenue byUS$1.4 billion, decrease in the change in accrued expenses and other payables by US$584.8 million, and decrease in the change in escrow payables and advances fromcustomers by US$487.3 million. The decrease in the change in deferred revenue was mainly due to the impact from ongoing moderation in user engagement andmonetization and softer discretionary spending from gamers in our digital entertainment business. The decrease in the change in accrued expenses and other payableswas mainly due to lower accrued sales and marketing expenses, accrued payroll and welfare expenses, and lower payables to our logistics providers in our e-commercebusiness. The decrease in the change in escrow payables and advances from customers was in line with GMV growth. The decrease in operating cash flows waspartially offset by the improvement of net loss / profit position from US$1.1 billion net loss (after adjusting for non-cash items) for the year ended December 31, 2021 toUS$314 million net profit (after adjusting for non-cash items) for the year ended December 31, 2022. 102Table of ContentsNet cash generated from operating activities decreased by US$347.2 million to US$208.6 million for the year ended December 31, 2021, compared to US$555.9million for the year ended December 31, 2020. The principal driver of our operating cash flows is cash received from sales of our products and services, includingproceeds from our sales of in-game virtual items in our digital entertainment business, fees collected from customers in our e-commerce business, interest receivedfrom our loan business, commissions from merchants in our digital financial services business, and proceeds from direct sales of products. The decrease in operatingcash flows was primarily attributable to an increase in net loss (after adjusting for non-cash items) by US$97.3 million and a decrease in the change in deferred revenueby US$848.4 million. Despite higher cash generated from sales of in-game virtual items in our digital entertainment business in 2021, the decrease in the change indeferred revenue was mainly due to higher revenue being recognized in our digital entertainment business as compared to 2020. The decrease in operating cash flowswas partially offset by an increase in the change in escrow payables and advances from customers by US$112.7 million and an increase in the change in accruedexpenses and other payables by US$50.8 million mainly due to higher accrued sales and marketing expenses, business and other taxes payables, and accrued payrolland welfare expenses. The decrease in operating cash flows was further offset by the decrease in the change in accounts receivable by US$137.7 million, primarilydriven by lower receivables from our game distribution channels. The decrease in operating cash flows was also further offset by a decrease in the change in prepaidexpenses and other assets by US$131.3 million, which was primarily attributable to higher channel cost being recognized in our digital entertainment business in 2021and lower receivables due from our logistics providers in our e-commerce business. Investing Activities Net cash used in investing activities amounted to US$2.4 billion in 2022. This was primarily attributable to purchase of investments of US$2.6 billion mainlyconsisting of time deposits and liquid investment products, an increase in loans receivable of our credit business of US$1.2 billion and purchase of property andequipment of US$924.2 million. These were partially offset by proceeds from maturity and disposal of investments of US$2.3 billion. Net cash used in investing activities amounted to US$3.8 billion in 2021. This was primarily attributable to our time deposits and long-term investments suchas equity investments of US$2.5 billion, an increase in loans receivable of US$1.2 billion and purchase of property and equipment of US$772.2 million. These werepartially offset by proceeds from maturity and disposal of investments of US$798.2 million. Net cash used in investing activities amounted to US$886.9 million in 2020. This was primarily attributable to the purchase of property and equipment ofUS$336.3 million, purchase of investments of US$219.5 million and an increase in loans receivable of US$255.7 million. Financing Activities Net cash generated from financing activities amounted to US$400.3 million in 2022, primarily attributable to an increase in bank customer deposits of US$942.6million, partially offset by the repurchase of convertible notes of US$611.3 million. Net cash generated from financing activities amounted to US$7.4 billion in 2021, primarily attributable to net proceeds from issuance of convertible notes ofUS$2.8 billion and net proceeds from issuance of ordinary shares of US$4.1 billion. Net cash generated from financing activities amounted to US$3.7 billion in 2020, primarily attributable to net proceeds from issuance of convertible notes ofUS$1.1 billion and net proceeds from issuance of ordinary shares of US$3.0 billion. 103Table of ContentsMaterial Cash Requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period mainly include our convertible notes obligations, capitalexpenditures, other short-term working capital commitments, bank customer deposits, and other contractual cash obligations. Convertible Notes Our convertible notes obligations, including scheduled interest, were approximately US$3.4 billion as of December 31, 2022, based on the contractual maturityassuming no conversion subsequent to December 31, 2022. In June 2018, we completed an offering of 2.25% convertible senior notes in an aggregate principal amount of US$575 million, or the 2023 convertible notes.These 2023 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons incompliance with Regulation S under the Securities Act. The notes will mature in July 2023. Note holders have the right, at their option, to convert the outstandingprincipal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined inthe indenture prior to the close of business on the business day immediately preceding January 1, 2023; or (ii) anytime on or after January 1, 2023 until the close ofbusiness on the second scheduled trading day immediately preceding the maturity date. Unless otherwise converted or redeemed, we will repay the full outstandingand unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 50.5165 ADSsper US$1,000 principal amount (equivalent to approximately US$19.80 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments.Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. Between May andOctober 2020, we entered into separate privately negotiated agreements with certain holders of our 2023 convertible notes to exchange approximately US$378.5 millionprincipal amount of our then outstanding 2023 convertible notes for a combination of approximately US$50.0 million (plus accrued and unpaid interest to the exchangedate, if any) in cash and approximately 18.5 million ADSs as consideration. As of March 15, 2023, holders of an aggregate of US$165.2 million principal amount of our2023 convertible notes have elected to convert, and after taking into account the 2023 convertible notes exchanged, approximately US$31.3 million principal amount ofour 2023 convertible notes remained outstanding. In November 2019, we completed an offering of 1.00% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2024 convertiblenotes. These 2024 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons incompliance with Regulation S under the Securities Act. The notes will mature in December 2024. Note holders have the right, at their option, to convert theoutstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions asdefined in the indenture prior to the close of business on the business day immediately preceding June 1, 2024; or (ii) anytime on or after June 1, 2024 until the close ofbusiness on the second scheduled trading day immediately preceding the maturity date. On or after December 2, 2022, we may redeem for cash all or any part of thenotes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We mayalso redeem for cash all but not part of the notes at any time if less than US$75 million aggregate principal amount of notes remains outstanding at such time. Unlessotherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in wholeor in part, into our ADSs at an initial conversion rate of 19.9475 ADSs per US$1,000 principal amount (equivalent to approximately US$50.13 per ADS), subject tocertain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or acombination of cash and ADSs to converting holders. As of March 15, 2023, holders of an aggregate of US$998.0 million principal amount of our 2024 convertiblenotes have elected to convert, and approximately US$152.0 million principal amount of our 2024 convertible notes remained outstanding. In connection with the pricing of the 2024 convertible notes, we have entered into capped call transactions with certain financial institutions. These cappedcall transactions are generally expected to reduce the potential dilution with respect to our ADSs and Class A ordinary shares upon conversion of the 2024 convertiblenotes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, upon any conversion of thenotes, with such reduction of potential dilution or offset of cash payments, as the case may be, subject to a cap based on the cap price of the capped call transactions.The cap price of the capped call transactions will initially be US$70.36 per ADS, and is subject to certain adjustments under the terms of the capped call transactions. 104Table of ContentsIn May 2020, we completed an offering of 2.375% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2025 convertible notes.These 2025 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons incompliance with Regulation S under the Securities Act. The notes will mature in December 2025. Note holders have the right, at their option, to convert theoutstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions asdefined in the indenture prior to the close of business on the business day immediately preceding September 1, 2025; or (ii) anytime on or after September 1, 2025 untilthe close of business on the second scheduled trading day immediately preceding the maturity date. On or after May 19, 2023, we may redeem for cash all or any partof the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.We may also redeem for cash all but not part of the notes at any time if less than US$100 million aggregate principal amount of notes remains outstanding at such time.Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, inwhole or in part, into our ADSs at an initial conversion rate of 11.0549 ADSs per US$1,000 principal amount (equivalent to approximately US$90.46 per ADS), subjectto certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or acombination of cash and ADSs to converting holders. As of March 15, 2023, holders of an aggregate of US$0.5 million principal amount of our 2025 convertible noteshave elected to convert, and approximately US$1.1 billion principal amount of our 2025 convertible notes remained outstanding. In connection with the pricing of the 2025 convertible notes, we have entered into capped call transactions with certain financial institutions. These cappedcall transactions are generally expected to reduce the potential dilution with respect to our ADSs and Class A ordinary shares upon conversion of the 2025 convertiblenotes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, upon any conversion of thenotes, with such reduction of potential dilution or offset of cash payments, as the case may be, subject to a cap based on the cap price of the capped call transactions.The cap price of the capped call transactions will initially be US$136.54 per ADS, and is subject to certain adjustments under the terms of the capped call transactions. In September 2021, we completed a registered offering of 0.25% convertible senior notes in an aggregate principal amount of US$2.875 billion, or the 2026convertible notes. The notes will mature in September 2026. Note holders have the right, at their option, to convert the outstanding principal amount in whole or inpart in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the closeof business on the business day immediately preceding June 15, 2026; or (ii) anytime on or after June 15, 2026 until the close of business on the second scheduledtrading day immediately preceding the maturity date. On or after September 15, 2024, we may redeem for cash all or any part of the notes, if certain conditions are met,at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may also redeem for cash all but notpart of the notes at any time if less than US$250 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted orredeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSsat an initial conversion rate of 2.0964 ADSs per US$1,000 principal amount (equivalent to approximately US$477.01 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSsto converting holders. In the fourth quarter of 2022, we repurchased US$817.2 million aggregate of principal amount of our 2026 convertible notes for a cashconsideration of US$611.3 million, which resulted in a US$199.7 million gain on debt extinguishment. As of March 15, 2023, approximately US$2.1 billion aggregate ofprincipal amount of our 2026 convertible notes remained outstanding. For the years ended December 31, 2020, 2021 and 2022, we recognized total interest expense for coupon interest of US$35.5 million, US$36.2 million andUS$36.5 million and amortization of discount on the liability component of US$88.2 million, US$100.1 million and US$7.5 million, respectively, on our then outstandingconvertible notes. For further information, refer to Note 13 – Convertible Notes in the accompanying notes to consolidated financial statements included in “Item 17.Financial Statements.” 105Table of ContentsCapital Expenditures Our capital expenditures amounted to US$357.1 million, US$807.2 million and US$976.3 million in 2020, 2021 and 2022, respectively. Capital expenditure wasincurred for purchases of property and equipment and software, and costs for developing software for internal use. The increase in our capital expenditure in 2022 wasmainly attributable to the additional investment in servers, computer hardware and software, and leasehold improvements. We will continue to make capitalexpenditures to meet the needs of our business and expect that our cash and cash equivalents, together with cash generated from operating and short-terminvestments will meet our capital expenditure needs in the foreseeable future. Deposits Payable As of December 31, 2022, our consolidated balance sheets had deposits payable of US$1.3 billion, which are customer deposits from our banking business. Other Contractual Cash Obligations Our operating lease obligations, including imputed interest, were US$1.3 billion as of December 31, 2022, of which US$281.7 million is payable within the next12 months. Our obligations for leases that have not yet commenced, including imputed interest, were US$810.7 million as of December 31, 2022, of which US$21.2million is payable within the next 12 months. For further information on our leases, refer to Note 9 – Leases in the accompanying notes to consolidated financialstatements included in “Item 17. Financial Statements.” We have purchase commitments of US$238.5 million as of December 31, 2022, including US$99.1 million to purchase property and equipment and hostingservices, US$13.7 million committed licensing fee payable for the licensing of game titles, and US$125.7 million commitment to invest in certain companies. Theaggregate of our purchase commitments payable within the next 12 months is US$233.8 million. For further information, refer to Note 23 – Commitments andContingencies in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.” We have commitments to pay a minimum guarantee of royalty fees to game developers for certain online games we licensed. As of December 31, 2022, theminimum guarantee commitment amounted to US$45.3 million for launched games as well as licensed but yet to be launched games, of which US$33.9 million ispayable within the next 12 months. For further information, refer to Note 23 – Commitments and Contingencies in the accompanying notes to consolidated financialstatements included in “Item 17. Financial Statements.” Holding Company Structure Sea Limited is a holding company that does not have substantive operations. We conduct our operations primarily through our subsidiaries, branch officesand our consolidated affiliated entities. As a result, our ability to pay dividends depends upon, among others, dividends paid by our subsidiaries. If our subsidiariesor any newly formed subsidiaries 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, as determined in accordance with local regulations, our subsidiaries and VIEs in certain of our markets may be restricted from paying usdividends offshore or from transferring a portion of their assets to us, either in the form of dividends, loans or advances, unless certain requirements are met, andregulatory approvals are obtained. See “Item 3. Key Information—D. Risk Factors—Markets Related Risks—The ability of our subsidiaries to distribute dividends tous may be subject to restrictions under the laws of their respective jurisdictions.” Even though we currently do not require any such dividends, loans or advancesfrom our entities for working capital and other funding purposes, we may in the future require additional cash resources from them due to changes in businessconditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to our shareholders. 106Table of ContentsCertain of the markets in which we have significant subsidiaries or principal operating entities, including Indonesia, Thailand and Taiwan, require thosesubsidiaries to establish and fund statutory reserves. Indonesian laws require a limited liability company to reserve a certain amount from its net profit each year as areserve fund until such fund amounts to at least 20% of its issued and paid-up capital. Thailand regulations require a private limited liability company to allocate atleast 5% of its retained earnings into a legal reserve fund at the time the dividend is paid until and unless the legal reserve fund reaches 10% of the company’sregistered capital. The legal reserve is not available for dividend distribution. Taiwan laws require a limited liability company to set aside 10% of annual net income(less prior years’ losses, if any, and applicable income taxes) as legal reserve until the accumulated legal reserve equals the paid-in capital of such company beforesuch company can distribute any dividend. C.Research and Development, Patents and Licenses, etc. Research and Development Costs incurred in connection with the planning and post-implementation phases of the development of software for internal use are expensed. Costs incurredin the application development phase are capitalized when certain criteria are met. Capitalization ceases and the costs are amortized over the software’s estimateduseful life when the software is ready for its intended use.Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior to technologicalfeasibility being established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for generalrelease to customers. Technological feasibility is established upon completion of all the activities that are necessary to substantiate that the software product can beproduced in accordance with its design specifications, including functions, features, and technical performance requirements. None of such costs were capitalized forany of the periods presented.Intellectual Property See “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year endedDecember 31, 2022 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that wouldcause reported financial information not necessarily to be indicative of future operating results or financial conditions. E.Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect ourreporting of, among other things, assets and liabilities, disclosure of contingent assets and liabilities and revenue and expenses. We regularly evaluate these estimatesand assumptions based on the most recently available information, our own historical experiences and other factors that we believe to be relevant under thecircumstances. Since our financial reporting process inherently relies on the use of estimates and assumptions, our actual results could differ from what we expect. We believe that the following accounting policies reflect the significant judgments, estimates and assumptions used in the preparation of our consolidatedfinancial statements. For additional information, see the disclosure included in Note 2 – Summary of Significant Accounting Policies in the accompanying notes toconsolidated financial statements included in “Item 17. Financial Statements.” Recognition of Digital Entertainment Revenue We distribute online games, including self-developed games and licensed games from game developers, through our PC and mobile based applications andcertain app stores. We offer many ways for users to purchase virtual goods (consisting of virtual currencies and virtual items), including the ShopeePay and Shopeeplatform, other online payment gateways, bank transfers, credit cards, mobile phone billing and prepaid cards, including our own prepaid cards, which are soldthrough agents. As we control the service of providing games to the users and have a direct contractual arrangement with our paying users and have the right todetermine the price to be paid by such users, the gross proceeds collected from these channels represent revenue to be recognized, and the amounts retained by thesechannels based on a predetermined percentage represent our cost of revenue to be recognized. 107Table of ContentsRevenue is recognized over the performance obligation period. For purposes of determining the performance obligation period, we have determined that animplied obligation exists to the paying users to continue providing hosting services and access to the purchased virtual goods within the online games over anestimated service period. Such service period is determined in accordance with the estimated average lifespan of the virtual items sold or estimated average lifespan ofthe paying users of the said games or similar games. •Item-based revenue model. Virtual items have different lifespan patterns: time-based, consumable and durable. Time-based virtual items are items with astated expiration time, for which revenue is recognized ratably over the period based on the time unit of the virtual items. Consumable virtual items areitems that can be consumed by a specific user action and have limitations on repeated use. Revenue attributable to consumable virtual items is recognizedupon consumption. Durable virtual items are items that provide the user with continuing benefits over an extended period of time. Revenue attributable todurable virtual items is recognized ratably over their average lifespan, which are estimated based on the users’ historical usage patterns and playingbehaviors for the virtual items. We assess the estimated average lifespan of durable virtual items on a quarterly basis. •User-based revenue model. We track paying users’ activeness within each game where the user-based revenue model is used to estimate paying users’average lifespan. Paying users are defined as inactive when they have reached a period of inactivity for which it is reasonable to believe that these userswill not return to a specific game. We determine the inactive rate of these paying users and revise the estimated paying users’ average lifespan on aquarterly basis. We believe the current revenue recognition provides reasonable depiction of the service transferred patterns to the customers and represents the bestestimation of the time period the customers are likely to play the respective games. Determining the estimated service period is subjective and requires management’sjudgment. Future users’ usage patterns and playing behaviors may change and differ from the historical usage patterns and playing behaviors, and therefore theestimated service period may change accordingly in the future. Investment in Equity Securities Fair value of investments carried at fair value or measurement alternative (cost minus impairment, if any, plus or minus changes resulting from observableprice changes in orderly transactions for the identical or a similar investment of the same investee) are measured using market adjusted option pricing modelbacksolve, which is determined by using information including but not limited to the pricing of recent rounds of financing of the investees, liquidity factors and aselection of comparable companies. Investment in equity securities over which we do not have significant influence and investment in equity securities which do not have readily determinablefair value are reviewed regularly for impairment. Impairment evaluation requires significant judgment and includes, but is not limited to, reviewing the investee’s cashposition, recent financing, projected and historical financial performance, cash flow forecasts and current and future financing needs. The fair value would thenbecome the new cost basis of investment. Share-based Compensation Share options, restricted share awards, restricted share units or share appreciation rights are granted to our officers, employees, directors and other eligiblepersons (collectively known as “Eligible Persons”). Share-based compensation are measured at fair value and recognized as compensation expense over the requisiteservice period (which is generally the vesting period) in the consolidated statements of operations. Forfeitures are accounted for as they occur. 108Table of ContentsThe Black-Scholes option pricing model was applied in determining the estimated fair value of the share options granted to Eligible Persons. The modelrequires the input of highly subjective assumptions including the estimated expected stock price volatility and the expected term of the option for which employeesare likely to exercise their share options. The risk-free rate for periods within the contractual life of the option is based on the US Treasury Yields at the time of grant.We have used the simplified method to determine the expected term due to insufficient historical exercise data to provide a reasonable basis to estimate expected term.Changes in these assumptions could significantly affect the estimated fair value of our share options and hence the amount of compensation expense that werecognize in our consolidated financial statements. Our management is ultimately responsible for the determination of the estimated fair value of its ordinary shares.The weighted-average grant-date fair value of share options granted during the years of December 31, 2020, 2021 and 2022 were US$37.86, US$75.83 and US$57.74,respectively. Share-based compensation costs for restricted share awards and restricted share units are measured based on the fair value of our ordinary shares on thedate of grant. The fair value of the share appreciation rights is measured based on the fair value of our ordinary shares at the end of each reporting period. Income Taxes Deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enactedtax rates that will be in effect in the period in which the differences are expected to reverse. Significant judgment is required in evaluating our uncertain tax positionsand determining the likelihood that our net deferred tax assets will be realized from future taxable income. We record a valuation allowance against deferred tax assetsif, based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Impairment of Long-lived Assets in E-commerce ("EC") Segment We evaluate our long-lived assets for impairment when there are events or changes in circumstances which indicate that the carrying amounts of the long-lived assets may not be recoverable. Due to the continued losses incurred by the EC segment, we evaluate the related long-lived assets for impairment at the assetgroup level by comparing the carrying amount of the asset group to the recoverable value determined by forecasted undiscounted cash flows expected to begenerated by this asset group.The accounting estimates related to impairment of long-lived estimate is critical due to the magnitude of the carrying amount of long-lived assets andmanagement’s judgment is required in estimating the recoverable value (undiscounted cash flows) of the asset group, which are sensitive to key assumptions such asprojected revenue and sales and marketing expenses.Goodwill Impairment Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. In testinggoodwill for impairment, we evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitativeassessment indicates that goodwill impairment is more likely than not, we apply a one-step quantitative test and record the amount of goodwill impairment as theexcess of a goodwill allocated to the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.Allowance for Credit Losses We established allowances for credit losses for accounts receivable, loans receivable, off-balance sheet loan commitments and available-for-sale investments.For accounts receivable, loans receivable and off-balance sheet loan commitments, we establish a provision matrix applied on the portfolio segmented by factors suchas geographic region and products that are considered to have similar credit characteristics and risk of loss. The allowance for credit loss is computed based on ourhistorical lifetime credit loss experience, adjusted for forward-looking factors specific to the receivable and economic environment. We utilize models such as transitionmatrix method based on roll rates and then transformed, taking into account expected future delinquency rate to estimate the likelihood that a loan will default over agiven period of time net of any recoveries. These models utilize information that is available at the reporting date about past events, current conditions and macro-economic forecasts. The macro-economic forecast varies by country and includes factors such as unemployment rates and growth rates in gross domestic product.For collateral-dependent financial assets, the fair value of collateral is used instead in our estimates when the borrower is experiencing financial difficulty based on ourassessment as of the reporting date. For available-for-sale investments, we compare the present value of cash flows expected to be collected from the investment withthe amortized cost basis of the security to determine if a credit loss exists. If the present value of cash flows expected to be collected is less than the amortized costbasis of the investment, a credit loss exists and an allowance for credit losses are recorded for the credit loss, limited by the amount that the fair value is less thanamortized cost basis. Accounts receivable, loans receivable and available-for-sale investment are written off in the period the receivable or investment is deemeduncollectible. 109Table of ContentsRecent Accounting Pronouncements The recent accounting pronouncement adopted during the year ended December 31, 2022 is discussed and included in Note 2(z) – Summary of SignificantAccounting Policies – Recently adopted accounting pronouncements in the accompanying notes to consolidated financial statements included in “Item 17. FinancialStatements.”ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A.Directors and Senior Management The following table provides information regarding our directors and executive officers as of the date of this annual report. Directors and Executive OfficersAgePosition/TitleForrest Xiaodong Li45Chairman and Group Chief Executive OfficerGang Ye42Director and Group Chief Operating OfficerTony Tianyu Hou44Director and Group Chief Financial OfficerDavid Heng Chen Seng56DirectorKhoon Hua Kuok44DirectorChris Zhimin Feng40Group PresidentTerry Feng Zhao39President of GarenaYanjun Wang42Group Chief Corporate Officer, Group General Counsel and CompanySecretaryDavid Jingye Chen42Chief Product Officer of ShopeeDavid Y Ma42Chief Investment Officer of Sea CapitalForrest Xiaodong Li is our founder and has served as the chairman of Sea Limited and our group chief executive officer since our inception in May 2009. Heis a member of the board of directors of the Singapore Economic Development Board, and serves as an independent non-executive director of Shangri-La Asia Limited.He also serves on the board of trustees for the National University of Singapore, and on the advisory council of Stanford University’s Graduate School of Business.Forrest holds an M.B.A. degree from Stanford University’s Graduate School of Business and a bachelor’s degree in Engineering from Shanghai Jiaotong University. Gang Ye is our co-founder and has been a member of the board of directors of Sea Limited since March 2010. Gang has served as our group chief operatingofficer since January 2017 and served as our group chief technology officer between March 2010 and December 2016. He previously worked at Wilmar Internationaland the Economic Development Board of Singapore. Gang holds B.S. degrees in Computer Science and Economics from Carnegie Mellon University. Tony Tianyu Hou has served as our director since February 2018. Tony joined our company in September 2010 and has served as our group chief financialofficer since January 2013. He previously served as our financial controller. Before joining us, Tony was an audit senior manager at Ernst & Young, where he workedfrom October 2000 to September 2010 in both China and the U.S. Tony is a non-practicing U.S. Certified Public Accountant and a non-practicing member of theChinese Institute of Certified Public Accountants. He holds an M.B.A. degree from the University of Chicago’s Booth School of Business and a bachelor’s degree inAccounting from Fudan University. 110Table of ContentsDavid Heng Chen Seng has served as our director since October 2017. David is the chief executive officer of Temasek Trust Asset Management, a Singapore-based global asset management firm established by Temasek Trust. Under his leadership, Temasek Trust Asset Management operates two core investment units –ABC Impact and Temasek Trust Capital. David has over 25 years of experience in the investment industry. Over a span of 14 years, David held senior leadership rolesin Singapore-headquartered global investment company Temasek, including head of real estate, head of Japan and Korea, joint head of consumer, as well as joint headof China. Prior to Temasek, David was with Deutsche Bank AG. He currently serves as a director at Seatown Holdings and Temasek Trust Asset Management, amongother appointments, the Centre for Impact Investing and Practices, and the Singapore Art Museum. He also sits on the investment committees of ABC Impact anddecarbonization investment platform GenZero. David holds an M.B.A. degree from the University of Hull (United Kingdom) and a Bachelor of Engineering degree fromthe University of Canterbury (New Zealand). Khoon Hua Kuok has served as our director since October 2017. Khoon Hua is the chairman of Kerry Holdings Limited, the main investment holdingcompany of the Kuok Group in Hong Kong. He is also a director of Kerry Group Limited and Kuok (Singapore) Limited, the chairman and chief executive officer ofKerry Properties Limited and the non-executive vice chairman of Kerry Logistics Network Limited, both of which are companies listed on the Hong Kong StockExchange, and a non-executive director of Wilmar International Limited, a company listed on the Singapore Stock Exchange. Khoon Hua holds a B.A. degree inEconomics from Harvard University. Chris Zhimin Feng joined our company in March 2014 and has served as Group President since January 2022. Prior to this role, he served as the chiefexecutive officer of Shopee from July 2015, and as the chief executive officer of SeaMoney from March 2020. Previously he served as our head of mobile business.Before joining our company, Chris worked at Rocket Internet SE, where he served in management roles at Zalora and Lazada, and at McKinsey & Company. Chrisholds a bachelor’s degree in Computer Science with first class honors from the National University of Singapore. Terry Feng Zhao has been with our company since our inception in 2009 and has served as the president of Garena since November 2018. Prior to assuminghis current role, Terry has also served in a number of senior roles in our digital entertainment business across several key markets. Terry holds a bachelor’s degree inComputer Engineering with first class honors from Nanyang Technological University.Yanjun Wang is our group chief corporate officer, group general counsel and company secretary. Yanjun has served as our group chief corporate officer sinceMay 2019, company secretary since November 2017 and group general counsel since March 2014. Prior to joining our company, Yanjun was an attorney at Skadden,Arps, Slate, Meagher & Flom LLP and Kirkland & Ellis. She is qualified to practice law in the State of New York. She holds a J.D. degree from Harvard Law School anda B.A. degree in Economics from Harvard University. David Jingye Chen is our co-founder and serves as the chief product officer of Shopee. He was formerly group chief of staff, a position he held from January2017 to December 2019. Prior to that, David served as our group chief operating officer from our inception in May 2009 to December 2016. He previously held positionsat PSA Corporation Limited. David holds a bachelor’s degree in Computer Engineering with first class honors from the National University of Singapore.David Y Ma joined our company in March 2021 and serves as the Chief Investment Officer of Sea Capital. Before joining our company, he was the founder andManaging Partner of Composite Capital, a global investment management firm. Previously he served as a partner at Hillhouse Capital, and worked at Bain Capital andBoston Consulting Group. David holds a bachelor’s degree in Economics, Finance, and Management from the Wharton School of the University of Pennsylvania.Employment Agreements and Indemnification Agreements We have entered into employment agreements with our executive officers. Each of our executive officers is employed for a continuous term unless either weor the executive officer gives prior notice to terminate such employment. We may terminate the employment for cause, at any time, without notice or remuneration, forcertain acts of the executive officer, including but not limited to the commitments of any serious or persistent breach or non-observance of the terms and conditions ofthe employment, conviction of a criminal offense other than one which in the opinion of the board does not affect the executive’s position, willful, disobedience of alawful and reasonable order, misconduct being inconsistent with the due and faithful discharge of the executive officer’s material duties, fraud or dishonesty, orhabitual neglect of his or her duties. An executive officer may terminate his or her employment at any time with a three- to six-month prior written notice. 111Table of ContentsEach executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to useor disclose to any person, corporation or other entity without written consent, any confidential information or trade secrets. Each executive officer has also agreed todisclose in confidence to us all inventions, intellectual and industry property rights and trade secrets which they made, discover, conceive, develop or reduce topractice during the executive officer’s employment with us and to assign to our company all of his or her associated titles, interests, patents, patent rights, copyrights,trade secret rights, trademarks, trademark rights, mask work rights and other intellectual property and rights anywhere in the world which the executive officer maysolely or jointly conceive, invent, discover, reduce to practice, create, drive, develop or make, or cause to be conceived, invented, discovered, reduced to practice,created, driven, developed or made, during the period of the executive officer’s employment with us that are either related to our business, actual or demonstrablyanticipated research or development or any of our products or services being developed, manufactured, marketed, sold, or are related to the scope of the employmentor make use of our resources. In addition, all executive officers have agreed to be bound by non-competition and non-solicitation restrictions set forth in theiragreements. Each executive officer has agreed to devote all his or her working time and attention to our business and use best efforts to develop our business andinterests. Moreover, each executive officer has agreed not to, for a certain period following termination of his or her employment or expiration of the employmentagreement: (i) carry on or be engaged, concerned or interested directly or indirectly whether as shareholder, director, employee, partner, agent or otherwise carry onany business in direct competition with us, (ii) solicit or entice away any of our customer, client, representative or agent, or (iii) employ, solicit or entice away orattempt to employ, solicit or entice away any of our officers, managers, consultants or employees. We have entered into indemnification agreements with our directors and executive officers, pursuant to which we will agree to indemnify our directors andexecutive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director orexecutive officer. B.Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2022, we paid and accrued fees and compensation in cash (excluding equity-based awards) of approximatelyUS$5.1 million to our directors and executive officers as a group. On April 17, 2022, the board of directors of the company canceled authorized grants from May 2019 toForrest and certain other employees of options to purchase 20 million and 30 million Class A ordinary shares of the company, respectively, at US$22.50 per share. Atthe time of cancellation, these options had not been granted. In substitution of these canceled options, the board of directors of the company awarded the executiveofficers of the company options to purchase up to a total of 30 million Class A ordinary shares at US$120 per share, including options to purchase five million Class Aordinary shares to Forrest. These options will vest every three months over a period of five years commencing April 30, 2022 and will expire 10 years after the grantdate. These awards have been granted to the executive officers in April 2022. For more information on share incentive grants to our directors and executive officers,see “—Share Incentive Plan.” Our Singapore subsidiaries are required by the laws and regulations of Singapore to make contributions, as employers, to the Central Provident Fund for ourexecutive officers who are employed by our Singapore subsidiaries and are Singapore citizens or permanent residents as prescribed under the Singapore CentralProvident Fund Act. The contribution rates vary, depending on the age of the executive officers, and whether such executive officer is a Singapore citizen orpermanent resident. Share Incentive Plan We maintain a share incentive plan in order to attract, motivate, retain and reward talent, provide additional incentives to our officers, employees, directorsand other eligible persons, and promote the success of our business and the interests of our shareholders. 112Table of Contents2009 Share Incentive Plan We adopted the 2009 Plan to promote the success of our business and the interests of our shareholders by providing additional incentives to attract,motivate, retain and reward our officers, employees, directors and other eligible persons and to link the interests of the award recipients with our shareholders. InFebruary 2018, our board of directors approved automatic increases on January 1 of each of 2019, 2020, 2021 and 2022 of the maximum aggregate number of ordinaryshares which may be issued under the 2009 Plan by 5% of the total number of ordinary shares of all classes of the company outstanding on that day immediatelybefore the increase. In addition, in July 2019, our board of directors approved a one-time increase of the maximum aggregate number of shares which may be issuedpursuant to the 2009 Plan by three million, and at the same time reduced three million shares from the scheduled automatic increase of shares pursuant to the aforesaidautomatic annual increase mechanism on January 1, 2020. In April 2022, our board of directors approved the amendment and restatement of the 2009 Plan to increasethe maximum aggregate number of shares available under the 2009 Plan, pursuant to which on January 1 of each of 2023, 2024, 2025 and 2026, the maximum aggregatenumber of ordinary shares which may be issued under the 2009 Plan will increase by 3% of the total number of ordinary shares of all classes of the companyoutstanding on that day immediately before the increase. Currently, the maximum aggregate number of ordinary shares which may be issued pursuant to all awardsunder the 2009 Plan is 193,718,406. The awards expire 10 years after the date of the grant. As of March 15, 2023, outstanding awards granted under the 2009 Plan consisted of (i) options to purchase 69,873,363 Class A ordinary shares, (ii) 11,827,347restricted Class A ordinary share units, and (iii) 211,701 share appreciation rights. The following paragraphs summarize the terms of the 2009 Plan. Plan Administration. Our board of directors or one or more committees appointed by the board act as the plan administrator. Types of Awards. The 2009 Plan permits grants of (i) options to purchase Class A ordinary shares, (ii) awards of share appreciation rights to receive apayment in cash, or, at the discretion of the plan administrator, in Class A ordinary shares, equal to the excess of the fair market value of a Class A ordinary share onthe date the share appreciate right is exercised over the base price of the share appreciate right, (iii) awards of restricted Class A ordinary shares or unrestricted ClassA ordinary shares, or (iv) awards of restricted share units, which are contractual rights to receive Class A ordinary shares of our company. Any Class A ordinaryshares issuable pursuant to the awards under the 2009 Plan may be represented by ADSs. Eligibility. Only our employees, officers, directors and individual consultants or advisors who render or have rendered bona fide services to us are eligibleto receive awards or grants under the 2009 Plan. Term of Awards. Each award under the 2009 Plan will (in the case of options and share appreciation rights) expire, or (in the case of share awards) vest or berepurchased by us not more than 10 years after the date of grant which term be extended by the plan administrator to a maximum of 10 years. An award is onlyexercisable or distributable before the eligible individual’s termination of service with us, unless determined otherwise by the plan administrator or set forth in theaward agreement. Vesting Schedule and Other Restrictions. The plan administrator has discretion in determining and making adjustment in the individual vesting schedulesand other restrictions applicable to the awards granted under the 2009 Plan. The vesting schedule is set forth in each award agreement. Exercise Price and Purchase Price. The plan administrator has discretion in determining the price of the awards, subject to a number of limitations, andhas discretion in making adjustments in the exercise price of the options or the base price of the share appreciation rights. Acceleration of Vesting upon Corporate Transaction. Upon the occurrence of a change in control event, the plan administrator may make provision for acash payment in settlement of, or for the assumption, substitution or exchange of any or all outstanding awards (or the cash, securities or other property deliverable tothe holder(s) of any or all outstanding awards) based upon, to the extent relevant in the circumstances, the distribution or consideration payable to holders of theClass A ordinary shares upon or in respect of such event. Termination. The plan will terminate in 2027. Our board of directors may terminate the plan at any time, in whole or in part. 113Table of ContentsAmendment, Suspension or Termination. The administrator may waive conditions of or limitations on awards to award recipients that the administrator inthe prior exercise of its discretion has imposed, without the consent of award recipients, and may make other changes to the terms and conditions of awards. However,no amendments, suspension or termination of the 2009 Plan or amendments of any outstanding award may, without written consent of the award recipients, materiallyand adversely affect any rights or benefits of the award recipient or obligations of us under any award granted under the plan prior to the effective date of suchchange. Subject to the above, our board of directors may, at any time, terminate or, from time to time, amend, modify or suspend the 2009 Plan, in whole or in part. Noawards may be granted during any period that the board of directors suspends the 2009 Plan. To the extent set forth in the 2009 Plan and where required by theapplicable laws, rules or regulations, any amendments to the 2009 Plan shall be subject to shareholders’ approval. Transfer Restrictions. All awards are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge,encumbrance or charge except in certain situations. Power of Attorney on Voting. Under the award agreements, with respect to the Class A ordinary shares issued upon exercise of options or vesting ofrestricted shares or restricted share units, almost all of our award recipients appoint Mr. Forrest Xiaodong Li, our chairman and group chief executive officer, as his orher irrevocable proxy to vote all such Class A ordinary shares on all matters on which such Class A ordinary shares are entitled to vote. The table below sets forth certain information as of December 31, 2022 concerning the outstanding awards we have granted to our directors and executiveofficers by the time on an individual basis. Name Class AOrdinarySharesUnderlyingOutstandingAwardsGranted Price(US$/Share) Date of Grant Date of Expiration Forrest Xiaodong Li 10,000,000(1)(3) 15.0 April 30, 2019 April 30, 2029 5,000,000(1)(3) 15.0 April 30, 2020 April 30, 2030 5,000,000(1) 120.0 April 17, 2022 April 17, 2032 Gang Ye 4,650,000(1) 15.0 February 28, 2018 February 28, 2028 5,000,000(1) 120.0 April 17, 2022 April 17, 2032 Tony Tianyu Hou *(1) 4.5 January 26, 2015 January 26, 2025 *(1) 15.0 February 28, 2018 February 28, 2028 *(1) 120.0 April 17, 2022 April 17, 2032 David Heng Chen Seng *(2) — October 19, 2021 — Khoon Hua Kuok 7,500(2) — October 19, 2021 — Chris Zhimin Feng 100,000(1) 4.5 January 26, 2015 January 26, 2025 4,500,000(1) 15.0 February 28, 2018 February 28, 2028 4,000,000(1) 15.0 February 28, 2019 February 28, 2029 6,000,000(1) 120.0 April 17, 2022 April 17, 2032 Terry Feng Zhao *(1) 4.5 January 26, 2015 January 26, 2025 *(1) 15.0 January 31, 2019 January 31, 2029 *(1) 120.0 April 17, 2022 April 17, 2032 Yanjun Wang *(1) 15.0 February 28, 2018 February 28, 2028 *(1) 120.0 April 17, 2022 April 17, 2032 David Jingye Chen 802,140(1) 1.8 January 11, 2014 January 11, 2024 220,000(1) 4.5 January 26, 2015 January 26, 2025 2,000,000(1) 15.0 February 28, 2018 February 28, 2028 2,000,000(1) 120.0 April 17, 2022 April 17, 2032 David Y Ma *(1) 120.0 April 17, 2022 April 17, 2032 All directors and executive officers as a group 66,747,140 *Each of these directors and executive officers beneficially owns less than 1% of our total outstanding shares as of December 31, 2022.(1)Represents options to purchase Class A ordinary shares.(2)Represents unvested restricted shares units for Class A ordinary shares.(3)Granted pursuant to the previously disclosed authorization by our board of directors on April 8, 2018 of options to purchase a total of 20 million Class Aordinary shares. The relevant options disclosed here were granted to Mr. Li between April 2019 and April 2020 and to vest between April 2020 and April 2022.114Table of ContentsAs previously disclosed in our annual reports on Form 20-F for the years ended December 31, 2019 to 2021, in May 2019, the board of directors of thecompany generally authorized grants to Forrest and certain other employees of options to purchase 20 million and 30 million Class A ordinary shares of the company,respectively, at US$22.50 per share, with the actual grants of such awards conditioned on the availability of such shares under our 2009 Plan (the “May 2019Authorization”). The awards, when granted, were to have a four-year vesting period commencing no earlier than January 1, 2022. These awards have not beengranted. On April 17, 2022, the board of directors of the company canceled the May 2019 Authorization and, in substitution of the May 2019 Authorization, awardedthe executive officers of the company options to purchase up to a total of 30 million Class A ordinary shares at US$120 per share, including options to purchase fivemillion Class A ordinary shares to Forrest. The options will vest every three months over a period of five years commencing April 30, 2022 and will expire 10 years afterthe grant date. These awards have been granted to the executive officers in April 2022. Accordingly, no grants may be made pursuant to the May 2019 Authorization. C.Board Practice Our board of directors consists of five directors. A director is not required to hold any shares in our company to qualify to serve as a director. A director whois in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required to declare the nature of his interest at a meetingof our directors. A general notice given to the directors by any director to the effect that he is a member of any specified company or firm and is to be regarded asinterested in any contract or transaction which may thereafter be made with that company or firm shall be deemed a sufficient declaration of interest in regard to anycontract so made or transaction so consummated. Subject to applicable New York Stock Exchange listing rules and disqualification by the chairman of the relevantboard meeting, a director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein andif he does so his vote shall be counted and he may be counted in the quorum at any meeting of the directors at which any such contract or transaction or proposedcontract or transaction is considered. Our board of directors may exercise all of the powers of our company to borrow money, to mortgage or charge its undertaking,property and uncalled capital, or any part thereof, and to issue debentures, debenture stock or other securities whenever money is borrowed or as security for anydebt, liability or obligation of our company or of any third-party. None of our directors has a service contract with us that provides for benefits upon termination ofservice, or an appropriate negative statement. Committees of the Board of Directors We have established an audit committee, a compensation committee and a nominating committee under the board of directors. We have adopted a charter foreach of the three committees. Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Mr. David Heng Chen Seng and Mr. Khoon Hua Kuok, and is chaired by Mr. David Heng Chen Seng.Both of Mr. David Heng Chen Seng and Mr. Khoon Hua Kuok satisfy the “independence” requirements of Section 303A of the New York Stock Exchange ListedCompany Manual and meet the independence standards under Rule 10A-3 under the Exchange Act. Our board of directors has also determined that Mr. David HengChen Seng qualifies as an “audit committee financial expert” within the meaning of the SEC rules and that both members of the audit committee are financially literatewithin the meaning of Section 303A of the New York Stock Exchange Listed Company Manual. The audit committee oversees our accounting and financial reportingprocesses and the audits of the financial statements of our company. The audit committee is responsible for, among other things: •selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by ourindependent registered public accounting firm; •reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response; •reviewing and approving related party transactions; •discussing the annual audited financial statements with management and our independent registered public accounting firm; •meeting periodically with the management and our internal auditor and our independent registered public accounting firm; and •reviewing and discussing our accounting and control policies and procedures and any steps taken to monitor and control major financial risk exposure. 115Table of ContentsCompensation Committee. Our compensation committee consists of Mr. Forrest Xiaodong Li and Mr. Khoon Hua Kuok, and is chaired by Mr. ForrestXiaodong Li. Mr. Khoon Hua Kuok satisfies the “independence” requirements for compensation committee members of Section 303A of the New York Stock ExchangeListed Company Manual. Our compensation committee assists the board in reviewing and evaluating the compensation structure, including compensation plansrelating to our directors and executive officers. The compensation committee is responsible for, among other things: •reviewing and approving the compensation package for our chief executive officer; •reviewing the annual bonus, long-term incentive compensation, stock option, employee pension and welfare benefit plans of our company; •reviewing annually and administering all long-term incentive compensation or equity plans; and •selecting and receiving advice from compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to thatperson’s independence from management. Corporate Governance and Nominating Committee. Our corporate governance and nominating committee consists of Mr. Forrest Xiaodong Li and Mr.Khoon Hua Kuok, and is chaired by Mr. Forrest Xiaodong Li. Mr. Khoon Hua Kuok satisfies the “independence” requirements of Section 303A of the New York StockExchange Listed Company Manual. The corporate governance and nominating committee assists the board in selecting individuals qualified to become our directorsand in determining the composition of the board of directors. The corporate governance and nominating committee is responsible for, among other things: •identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy; •reviewing annually with our board of directors its current composition in light of the characteristics of independence, qualification, experience andavailability of service to us; •review the performance of our board of directors and management and will make appropriate recommendations for improving performance; and •monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensureproper compliance. Duties of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in whatthey consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our companya duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than mayreasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard withregard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensurecompliance with our memorandum and articles of association, as amended and restated from time to time. Our company has the right to seek damages if a duty owedby our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors isbreached. 116Table of ContentsThe functions and powers of our board of directors include, among others: •convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; •declaring dividends and distributions; •appointing officers and determining the term of office of officers; •exercising the borrowing powers of our company and mortgaging the property of our company; and •approving the transfer of shares of our company, including the registering of such shares in our share register. Terms of Directors and Executive Officers Each of our directors holds office until the expiration of his or her term, as may be provided in a written agreement with our company, and his or her successorhas been elected and qualified, until his or her resignation or until his or her office is otherwise vacated in accordance with our articles of association. All of ourexecutive officers are appointed by and serve at the discretion of our board of directors. Our directors may, at any time and from time to time, appoint any person to bea director to fill a vacancy arising from the resignation or removal of a former director or as an addition to the existing board of directors. In addition, our directors maybe appointed or removed from office by an ordinary resolution of shareholders. A director will be removed from office automatically if, among other things, the director(i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found to be or becomes of unsound mind; (iii) resigns by notice inwriting to our company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the boardresolves that his office be vacated; or (v) is removed pursuant to our amended and restated memorandum and articles of association. The compensation of ourdirectors is determined by the board of directors. There is no mandatory retirement age for directors. D.Employees We had a total of approximately 33,800, 67,300 and 63,800 employees as of December 31, 2020, 2021 and 2022, respectively. The following table indicates thedistribution of our employees by function as of December 31, 2022: Function Number of Employees General operation 33,600 Sales and marketing 13,000 General and administrative 5,900 Research and development 11,300 Total 63,800 We generally enter into standard confidentiality and employment agreements with our management and other employees. These contracts include a standardnon-compete covenant that prohibits the employee from competing with us, directly or indirectly, during his or her employment and for one year after the terminationof his or her employment. We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes as of the date ofthis annual report. E.Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares as of March 15, 2023: •each of our directors and executive officers; and •each person known to us to beneficially own more than 5% of our ordinary shares. 117Table of ContentsThe calculations in the table below are based on 566,758,842 ordinary shares issued and outstanding as of March 15, 2023, comprising 521,231,049 Class Aordinary shares and 45,527,793 Class B ordinary shares. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by aperson and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exerciseof any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownershipof any other person. Class AOrdinary Shares Class BOrdinary Shares Percentage ofTotal Class Aand Class BOrdinaryShares† Percentage ofTotal VotingPower Held†† Directors and Executive Officers:(1) Forrest Xiaodong Li(2) 63,610,849 45,527,793 17.9 59.9 Gang Ye(3) 35,618,937 — 6.2 1.9 Tony Tianyu Hou * — * * David Heng Chen Seng * — * * Khoon Hua Kuok(4) 16,611,063 — 2.9 1.4 Chris Zhimin Feng(5) 7,450,000 — 1.3 0.0 Terry Feng Zhao * — * * Yanjun Wang * — * * David Jingye Chen(6) 11,711,241 — 2.1 0.7 David Y Ma * — * * All directors and executive officers as a group(7) 218,541,667 45,527,793 43.2 72.2 Principal Shareholders: Tencent entities(8) 104,264,743 — 18.4 0.0 Blue Dolphins Venture Inc(9) — 45,527,793 8.0 56.7 Capital Research Global Investors(10) 40,850,962 — 7.2 3.4 *Less than 1% of our total outstanding shares on an as converted basis. †For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such personor group, including shares that such person or group has the right to acquire within 60 days after March 15, 2023, by the sum of Class A and Class B ordinaryshares, and the number of shares that such person or group has the right to acquire beneficial ownership within 60 days after March 15, 2023. ††For each person and group included in this column, percentage of total voting power represents voting power based on both Class A and Class B ordinaryshares beneficially owned by such person or group with respect to all outstanding Class A and Class B ordinary shares as one single class. Holders of ClassA ordinary shares are entitled to one vote per share and holders of Class B ordinary shares are entitled to 15 votes per share on all matters subject to ashareholders vote. (1)Unless otherwise indicated, the business address of our directors and executive officers is c/o 1 Fusionopolis Place, #17-10, Galaxis, Singapore 138522. (2)Represents (i) 45,527,793 Class B ordinary shares held by Blue Dolphins Venture Inc, a British Virgin Islands company wholly owned by Mr. Li, (ii) 3,038,831Class A ordinary shares beneficially owned by Mr. Li (including through an entity solely owned and controlled by Mr. Li), (iii) 16,000,000 Class A ordinaryshares issuable upon exercise of options held by Mr. Li within 60 days of March 15, 2023, and (iv) an aggregate of 44,572,018 Class A ordinary shares overwhich Mr. Li has received irrevocable voting proxies from the respective owners of such shares (namely, certain directors and employees, certain affiliates ofour employees, Garena ESOP Program (PTC) Limited and a family member of Mr. Li), including 24,944,868 Class A ordinary shares issuable upon exercise ofoptions within 60 days of March 15, 2023 and 710,780 Class A ordinary shares issuable upon vesting of restricted share units within 60 days of March 15,2023. 118Table of Contents(3)Represents (i) 29,968,937 Class A ordinary shares held or beneficially owned by Mr. Ye, and (ii) 5,650,000 Class A ordinary shares issuable upon exercise ofoptions held by Mr. Ye within 60 days of March 15, 2023. With respect to 12,603,431 Class A ordinary shares, Forrest Xiaodong Li has been given anirrevocable proxy with regard to all matters that are subject to the vote of shareholders, and such numbers are excluded from the total voting power of Mr. Ye. (4)Includes (i) 1,061,950 Class A ordinary shares held or beneficially owned by Bright Magic Investments Limited, a British Virgin Islands company, (ii) 1,171,873Class A ordinary shares beneficially owned by Crystal White Limited, a Hong Kong company, (iii) 2,926,071 Class A ordinary shares held by Fexos Limited, aBritish Virgin Islands company, (iv) 5,048,233 Class A ordinary shares beneficially owned by Velmar Company Limited, a Hong Kong company, (v) 3,696,695Class A ordinary shares beneficially owned by Macromind Investments Limited, a British Virgin Islands company, including 1,363,945 Class A ordinary sharesunderlying US$27 million principal amount of our 2023 convertible notes and 1,994,750 Class A ordinary shares underlying US$100 million principal amount ofour 2024 convertible notes, both of which are currently convertible, (vi) 1,955,184 Class A ordinary shares held by City Jet Limited, a British Virgin Islandscompany, (vii) 104,616 Class A ordinary shares beneficially owned by Joyce M. Kuok Foundation, a Hong Kong company, (viii) 104,616 Class A ordinaryshares beneficially owned by Zheng Ge Ru Foundation, a Hong Kong company, (ix) 188,725 Class A ordinary shares held by Peacebright Assets Limited, aBritish Virgin Islands company, and (x) 322,000 shares held by Always Best International Limited, a Hong Kong company. Bright Magic Investments Limited,Crystal White Limited, Fexos Limited, Macromind Investments Limited, and Velmar Company Limited are all wholly-owned subsidiaries of Kerry GroupLimited. Mr. Kuok is a director of Kerry Group Limited and has indirect minority interests in these entities. Mr. Kuok may be deemed to have beneficialinterests in the shares beneficially owned by these entities. City Jet Limited’s shareholders are Joyce M. Kuok Foundation and Zheng Ge Ru Foundation. AsMr. Kuok is a governor of these two foundations, he may be deemed to have or share investment power which includes the power to dispose, or to direct thedisposition of, the shares beneficially owned by City Jet Limited and these two foundations. Peacebright Assets Limited is an investment company of adiscretionary trust in which Mr. Kuok is one of the discretionary beneficiaries. Always Best International Limited is an investment company of a discretionarytrust in which Mr. Kuok is one of the discretionary beneficiaries. Mr. Kuok disclaims beneficial ownership of ordinary shares held or beneficially owned by allof the aforesaid entities for all other purposes. The business address of Kerry Group Limited is 32/F, Kerry Centre, 683 King’s Road, Quarry Bay, Hong Kong.The business address or registered office of all the other aforesaid entities is 31/F, Kerry Centre, 683 King’s Road, Quarry Bay, Hong Kong, except for City JetLimited and Peacebright Assets Limited, whose registered office is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, BritishVirgin Islands. Shares beneficially owned by Mr. Kuok do not include the shares issuable upon conversion of the following convertible notes which were notconvertible accordingly to their respective terms and conditions within 60 days of March 15, 2023: (i) US$10 million principal amount of our 2025 convertiblenotes currently held by Velmar Company Limited, and (ii) US$35 million principal amount of our 2026 convertible notes currently held by MerrywoodInvestments Limited, a British Virgin Islands company, wholly owned by Kerry Group Limited, subject to the terms and conditions of such notes. (5)Represents (i) 650,000 Class A ordinary shares held or beneficially owned by Mr. Feng, and (ii) 6,800,000 Class A ordinary shares issuable upon exercise ofoptions held by Mr. Feng within 60 days of March 15, 2023. With respect to all these shares, Forrest Xiaodong Li has been given an irrevocable proxy withregard to all matters that are subject to the vote of shareholders, and such numbers are excluded from the total voting power of Mr. Feng. (6)Represents (i) 8,289,101 Class A ordinary shares held or beneficially owned by Mr. Chen, and (ii) 3,422,140 Class A ordinary shares issuable upon exercise ofoptions held by Mr. Chen within 60 days of March 15, 2023. With respect to 3,553,869 Class A ordinary shares, Forrest Xiaodong Li has been given anirrevocable proxy with regard to all matters that are subject to the vote of shareholders, and such numbers are excluded from the total voting power of Mr.Chen. (7)In September 2022, Tencent Holdings Limited and certain other Tencent entities granted an irrevocable voting proxy with respect to all their Class A ordinaryshares to our board of directors to vote on matters that are subject to the vote of shareholders of Sea. Such proxy gives our board of directors (dulyconstituted from time to time) approximately 8.7% of total voting power as of March 15, 2023. The total number of Class A ordinary shares beneficially ownedby all directors and executive officers as a group and the voting power of all directors and executive officers as a group have included the shares subject tosuch proxy. 119Table of Contents(8)Based on a Schedule 13D/A filed with the SEC on September 8, 2022 by Tencent Holdings Limited and Tencent Limited, the number of shares beneficiallyowned by Tencent entities are as follows: (i) 1,816,833 Class A ordinary shares beneficially owned by Tencent Holdings Limited through Huang RiverInvestment Limited, (ii) 98,510,410 Class A ordinary shares held by Tencent Limited, and (iii) 3,937,500 Class A ordinary shares by Tencent GrowthfundLimited, a wholly-owned subsidiary of Tencent Holdings Limited. Tencent Holdings Limited is a limited liability company organized and existing under thelaws of the Cayman Islands and is currently listed on Hong Kong Stock Exchange. The registered office of Tencent Holdings Limited is Cricket Square,Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. In September 2022, Tencent granted an irrevocable voting proxy with respect to allits Class A ordinary shares to our board of directors (duly constituted from time to time) to vote on matters that are subject to the vote of shareholders ofSea. Total voting power of Tencent excludes voting power subject to such proxy. (9)Represents 45,527,793 Class B ordinary shares held by Blue Dolphins Venture Inc, a company wholly owned by Forrest Xiaodong Li. The registered addressof Blue Dolphins Venture Inc is Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands. (10)Based on a Schedule 13G filed with the SEC on February 13, 2023 by Capital Research Global Investors (“Capital Research”), Capital Research reported solevoting power over 40,810,964 ADSs, each representing one Class A ordinary share, and sole dispositive power over 40,850,962 ADSs. The address of CapitalResearch is 333 South Hope Street, 55th Fl, Los Angeles, CA 90071, U.S.A. Our ADSs are traded on the New York Stock Exchange and brokers or other nominees may hold ADSs in “street name” for customers who are the beneficialowners of our ADSs. As a result, we may not be aware of each person or group of affiliated persons who beneficially owns more than 5.0% of our ordinary shares. Our issued and outstanding share capital consists of Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class Bordinary shares have the same rights except for voting and conversion rights and certain approval rights. Each Class A ordinary share is entitled to one vote, and eachClass B ordinary share is entitled to 15 votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinaryshares under any circumstances. See “Item 10. Additional Information—B. Memorandum and Articles of Association” for a more detailed description of our Class Aordinary shares and Class B ordinary shares. As of March 15, 2023, 379,779,386 of our Class A ordinary shares were held as ADSs by the depositary for our ADS holders. Other than the depositary, weare not aware of any record shareholder being a United States citizen or an entity incorporated in the United States as of March 15, 2023. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. For certain information as of December 31, 2022 concerning the outstanding awards we have granted to our directors and executive officers individuallypursuant to our share incentive plan, see “—B. Compensation—Share Incentive Plan.” Other than under the 2009 Plan, there are no arrangements for involving theemployees in the capital of the company, including any arrangement that involves the issue or grant of options or shares or securities of the company. F.Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A.Major Shareholders See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 120Table of ContentsB.Related Party Transactions Contractual Arrangements with Our VIEs, Their Shareholders and Us See “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements among Our VIEs, Their Shareholders and Us.” Transactions with Certain Shareholder On September 5, 2022, Yuxin Ren, the director who is an executive officer of Tencent, resigned from our board of directors, and Tencent granted an irrevocablevoting proxy with respect to all its shares in our company to our board of directors to vote on matters that are subject to the vote of shareholders of Sea. In relation tosuch changes, we no longer treat Tencent as our related party since September 2022. From January 2022 to the date Tencent ceased to be a related party, we paidTencent US$109.4 million in royalties and license fees as well as for other miscellaneous services. Share Incentive Plan See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements and IndemnificationAgreements.” C.Interest of Experts and Counsel Not applicable. ITEM 8.FINANCIAL INFORMATION A.Consolidated Statements and Other Financial Information We have appended consolidated financial statements filed as part of this annual report. Legal and Administrative Proceedings From time to time, we are and may become involved in legal proceedings, claims, investigations, and other disputes incidental to the ordinary conduct of ourbusiness including, among other things, contract or licensing disputes, copyright, trademark and other intellectual property infringement claims, consumer protectionclaims, employment related cases, disputes between consumers and third-party sellers or merchants, and disputes concerning other matters incidental to the ordinarycourse of our business. We may also initiate legal proceedings to protect our rights and interests. We are not a party to, nor are we aware of, any legal proceeding,investigation or claim which, in the opinion of our management, is likely to have any material adverse effect on our business, financial condition or results ofoperations, and our management believes that the risk of material loss in connection with the action discussed below is currently remote. However, in light of theinherent uncertainties involved in these matters, some of which are beyond our control, the risk of loss may become more likely and an adverse outcome of one ormore of these matters could be material to our results of operations or cash flows for any particular reporting period. Class Action Litigation On February 11, 2022, a putative class action captioned City of Taylor Police and Fire Retirement System v. Sea Limited, et al., No. 151344/2022, was filed inNew York state court against our company, directors, one of our shareholders, registered agent, and the underwriters of our ADS offering in September 2021. Theplaintiff’s complaint, which was amended on May 16, 2022, alleges that the registration statement for our ADS offering contained material misstatements or omissionsin violation of the U.S. securities laws. On June 17, 2022, a second putative securities class action lawsuit captioned General Retirement System of the City of Detroit v.Sea Limited, et al., Index No. 155162/2022, was filed in New York state court against the same defendants. The complaint is purportedly on behalf of investors whopurchased the company’s 0.25% convertible notes due 2026 in our registered notes offering in September 2021 conducted concurrently with the abovementioned ADSoffering and contained substantially similar allegations. 121Table of ContentsIn July 2022, the parties to both lawsuits jointly filed a stipulation and proposed order of consolidation, seeking to consolidate the two lawsuits, which wasso-ordered by the New York state court on August 3, 2022. On August 8, 2022, the county clerk certified the consolidation of the actions, with the consolidated actionproceeding under Index No. 151344/2022, and re-captioning the consolidated action as In re Sea Limited Securities Litigation. The company has filed a motion todismiss the consolidated action, which remains at its preliminary stages. We believe the case is without merit and intend to vigorously defend the action. For risks anduncertainties relating to the pending cases against us, please see “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—OtherOperational Risks—We may be subject to risks related to litigation and regulatory proceedings.” Dividend Policy We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, ofour available funds and any future earnings to operate and expand our business. Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, ourshareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, aCayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this wouldresult in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, theform, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractualrestrictions and other factors that the board of directors may deem relevant. If we pay any dividends on our ordinary shares, we will pay those dividends which arepayable in respect of the Class A ordinary shares underlying the ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositarythen will pay such amounts to our ADS holders who will receive payment to the same extent as holders of our ordinary shares, subject to the terms of the depositagreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars. B.Significant Changes Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financialstatements included in this annual report. ITEM 9. THE OFFER AND LISTING A.Offer and Listing Details Our ADSs have been listed on the New York Stock Exchange since October 20, 2017 and traded under the symbol “SE.” Each ADS represents one Class Aordinary share. B.Plan of Distribution Not applicable. C.Markets Our ADSs have been listed on the New York Stock Exchange since October 20, 2017 under the symbol “SE.” D.Selling Shareholders Not applicable. 122Table of ContentsE.Dilution Not applicable. F.Expenses of the Issue Not applicable. ITEM 10.ADDITIONAL INFORMATION A.Share Capital Not applicable. B.Memorandum and Articles of Association We are a Cayman Islands exempted company and our affairs are governed by our amended and restated memorandum and articles of association and theCompanies Act (As Revised) of the Cayman Islands, or Companies Act, and the common law of the Cayman Islands. We incorporate by reference into this annual report our Ninth Amended and Restated Memorandum and Articles of Association, the form of which wasincluded as Exhibit 3.1 to the Form 6-K (File No. 001-38237) we furnished to the Securities and Exchange Commission on February 14, 2022. Our shareholders adoptedour Ninth Amended and Restated Memorandum and Articles of Association by a special resolution on February 14, 2022. The following are summaries of material provisions of our Ninth Amended and Restated Memorandum and Articles of Association and the Companies Act asthey relate to the material terms of our ordinary shares. Registered Office and Objects Our registered office in the Cayman Islands is at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104,Cayman Islands. According to Clause 3 of our Ninth Amended and Restated Memorandum of Association, the objects for which we are established are unrestricted and wehave full power and authority to carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands. Board of Directors See “Item 6. Directors, Senior Management and Employees.” Exempted Company We are an exempted company incorporated with limited liability under the Companies Act. The Companies Act distinguishes between ordinary residentcompanies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may applyto be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary resident company except for theexemptions and privileges listed below: •an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies; •an exempted company is not required to open its register of members for inspection; •an exempted company does not have to hold an annual general meeting; •an exempted company may issue no par value shares; 123Table of Contents•an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the firstinstance); •an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; •an exempted company may register as a limited duration company; and •an exempted company may register as a segregated portfolio company.Ordinary SharesGeneral All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our shareholders who are non-residents of the Cayman Islands mayfreely hold and vote their ordinary shares. Our Ninth Amended and Restated Memorandum and Articles of Association prohibit us from issuing bearer shares. Ourcompany will issue only shares in registered form, which will be issued when registered in our register of members. Dividends The holders of our ordinary shares are entitled to receive such dividends as may be declared by our board of directors subject to our Ninth Amended andRestated Memorandum and Articles of Association and the Companies Act. In addition, our shareholders may by ordinary resolution declare a dividend, but nodividend may exceed the amount recommended by our directors. Under Cayman Islands law, dividends may be paid only out of profits, which include net earnings andretained earnings undistributed in prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No dividend may be declaredand paid unless our directors determine that, immediately after the payment, we will be able to pay our debts as they fall due in the ordinary course of business and wehave funds lawfully available for such purpose. Register of Members Under Cayman Islands law, we must keep a register of members and there must be entered therein: •the names and addresses of the members, together with a statement of the shares held by each member, and such statement shall confirm (i) of the amountpaid or agreed to be considered as paid, on the shares of each member, (ii) the number and category of shares held by each member, and (iii) whether eachrelevant category of shares held by a member carries voting rights under the articles of association of the company, and if so, whether such voting rightsare conditional; •the date on which the name of any person was entered on the register as a member; and •the date on which any person ceased to be a member. Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raisea presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members will be deemed as a matter of CaymanIslands law to have legal title to the shares as set against its name in the register of members. If the name of any person is, without sufficient cause, entered in or omitted from the register of members, or if default is made or unnecessary delay takesplace in entering on the register the fact of any person having ceased to be a member, the person or member aggrieved or any member or the company itself may applyto the Grand Court of the Cayman Islands for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justiceof the case, make an order for the rectification of the register. 124Table of ContentsClasses of Ordinary Shares; Conversion Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Except for conversion rights and voting rights, the Class Aordinary shares and Class B ordinary shares carry equal rights and rank pari passu with one another, including the rights to dividends and other capital distributions.Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. In addition, upon any direct or indirect sale, transfer,assignment or disposition of any number of Class B ordinary shares by a holder thereof or the direct or indirect transfer or assignment of the voting power attached tosuch Class B ordinary shares through voting proxy or otherwise to any person or entity which is not a permitted transferee, such Class B ordinary shares willautomatically convert into an equal number of Class A ordinary shares. Permitted transferees of our founder, who currently beneficially owns all issued andoutstanding Class B ordinary shares, include certain of his relatives so long as our founder retains control of the voting power over the Class B ordinary shares heldby such permitted transferees. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances and no Class B ordinary shares willbe issued after our initial public offering. Voting Rights Holders of our ordinary shares have the right to receive notice of, attend, speak and vote at general meetings of our company. Holders of Class A ordinaryshares and Class B ordinary shares shall at all times vote together as one class on all resolutions submitted to a vote for shareholders’ approval or authorization,except for certain class consents required under our memorandum and articles of association. Each Class A ordinary share shall be entitled to one vote, and each ClassB ordinary share shall be entitled to 15 votes, on all matters subject to the vote at general meetings of our company. At any general meeting a resolution put to thevote of the meeting shall be decided on a poll. An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votescast in a general meeting. A special resolution requires the affirmative vote of two-thirds of the votes cast in a general meeting. Both ordinary resolutions and specialresolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our NinthAmended and Restated Memorandum and Articles of Association. A special resolution will be required for important matters such as making changes to ourmemorandum and articles of association. General Meetings and Shareholder Proposals As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our Ninth Amended andRestated Memorandum and Articles of Association provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting inwhich case we will specify the meeting as such in the notices calling it, and the annual general meeting will be held at such time and place as may be determined by ourdirectors. Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to putany proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our Ninth Amended and Restated Memorandumand Articles of Association allow shareholders holding shares representing in aggregate not less than one-third of all votes attaching to the issued and outstandingshares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of the shareholders, in which case the directors are obligedto call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, our Ninth Amended and Restated Memorandum and Articles ofAssociation do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by suchshareholders. A quorum required for a meeting of shareholders consists of one or more shareholders holding, in aggregate, not less than 40% of the votes attaching to allissued and outstanding shares of our company present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative.Advance notice of at least seven calendar days (exclusive of the day on which it is given or deemed to be given and of the day for which it is given) is required for theconvening of our annual general meeting and other shareholders meetings. 125Table of ContentsTransfer of Ordinary Shares Subject to the restrictions in our Ninth Amended and Restated Memorandum and Articles of Association as set out below, any of our shareholders maytransfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board. Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have alien. Our directors may also, but is not required to, decline to register any transfer of any ordinary share unless: •the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our boardof directors may reasonably require to show the right of the transferor to make the transfer; •the instrument of transfer is in respect of only one class of shares; •the instrument of transfer is properly stamped, if required; •in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; or •the ordinary shares transferred are free of any lien in favor of us; or •a fee of such maximum sum as the designated stock exchange may determine to be payable, or such lesser sum as the board of directors may from time totime require, is paid to us in respect thereof. If our directors refuse to register a transfer they are obligated to, within three months after the date on which the instrument of transfer was lodged, send toeach of the transferor and the transferee notice of such refusal. The registration of transfers of shares or of any class of shares may, after compliance with any noticerequirement of the designated stock exchange, be suspended at such times and for such periods (not exceeding in the whole thirty (30) days in any year) as our boardof directors may determine. Issuance of Additional Shares Our Ninth Amended and Restated Memorandum and Articles of Association authorizes our board of directors to issue additional ordinary shares from timeto time as our board of directors shall determine, to the extent of available authorized but unissued shares. Our Ninth Amended and Restated Memorandum andArticles of Association also authorize our board of directors to establish from time to time one or more series of preference shares and to determine, with respect toany series of preference shares, the terms and rights of that series, including: •the designation of the series; •the number of shares of the series; •the dividend rights, dividend rates, conversion rights, voting rights; and •the rights and terms of redemption and liquidation preferences. Our board of directors may issue preference shares without further action by our shareholders to the extent authorized but unissued. Issuance of theseshares may dilute the voting power of holders of ordinary shares. 126Table of ContentsLiquidation On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of theshare capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held bythem at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to ourcompany for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so thatthe losses are borne by our shareholders in proportion to the par value of the shares held by them. We are an exempted company with “limited liability” incorporatedunder the Companies Act, and under the Companies Act, the liability of our members is limited to the amount, if any, unpaid on the shares respectively held by them.Our Ninth Amended and Restated Memorandum of Association contains a declaration that the liability of our members is so limited. Calls on Ordinary Shares and Forfeiture of Ordinary Shares Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to suchshareholders at least 14 calendar days prior to the specified time and place of payment. The ordinary shares that have been called upon and remain unpaid on thespecified time are subject to forfeiture. Redemption, Repurchase and Surrender of Ordinary Shares We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in suchmanner as may be determined, before the issue of such shares, by our board of directors. Our company may also repurchase any of our shares provided that themanner and terms of such purchase have been approved by our board of directors or are otherwise authorized by our Ninth Amended and Restated Memorandum andArticles of Association. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of afresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if thecompany can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no suchshare may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares issued andoutstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration. Variations of Rights of Shares The rights attached to any class of shares may, unless otherwise provided by the terms of issue of the shares of or the rights attaching to that class, bematerially adversely varied only with the written consent of the holders of a majority of the issued shares of that class or with the sanction of an ordinary resolutionpassed at a separate meeting of the holders of the shares of that class. Inspection of Books and Records Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporaterecords (save for our memorandum and articles of association, register of mortgages and charges, and special resolutions of our shareholders). However, we willprovide our shareholders with annual audited financial statements. See “—H. Documents on Display.” Changes in Capital Our shareholders may from time to time by ordinary resolutions: •increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution prescribes; •consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; •convert all or any of its paid-up shares into stock and reconvert the stock into paid-up shares of any denomination; •sub-divide our existing shares, or any of them into shares of a smaller amount than that fixed by our Ninth Amended and Restated Memorandum ofAssociation; provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share will be thesame as it was in case of the share from which the reduced share is derived; and •cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount ofour share capital by the amount of the shares so canceled. 127Table of ContentsOur shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by our company for anorder confirming such reduction, reduce our share capital and any capital redemption reserve in any manner authorized by law. C.Material Contracts We have not entered into any material contracts other than in the ordinary course of business and other than those described in this annual report. D.Exchange Controls The Cayman Islands currently has no exchange control regulations or currency restrictions. See “Item 4. Information on the Company—B. BusinessOverview—Regulation” for exchange control and currency restrictions in Indonesia, Taiwan, Vietnam, Thailand, Singapore and Malaysia. E.Taxation The following discussion is a summary of Cayman Islands, Singapore and U.S. federal income tax considerations of an investment in our ADSs or ordinaryshares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summary does notdeal with all possible tax considerations relating to an investment in our ADSs or ordinary shares, such as the tax considerations under state, local and other tax laws,or tax laws of jurisdictions other than the Cayman Islands, Singapore and the United States. To the extent that the discussion relates to matters of Cayman Islands taxlaw, it represents the opinion of Maples and Calder (Hong Kong) LLP, our counsel as to Cayman Islands law. To the extent that the discussion relates to matters ofSingapore tax law, it represents the opinion of Rajah & Tann Singapore LLP, our counsel as to Singapore law. Cayman Islands Taxation The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in thenature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp dutieswhich may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double taxtreaties which are applicable to any payments made by or to our company. There are no exchange control regulations or currency restrictions in the Cayman Islands. Payments of dividends and capital in respect of our ordinary shares or our ADSs will not be subject to taxation in the Cayman Islands and no withholdingwill be required on the payment of a dividend or capital to any holder of our ordinary shares or our ADSs, nor will gains derived from the disposal of our ordinaryshares or our ADSs be subject to Cayman Islands income or corporation tax. No stamp duty is payable in respect of the issue of our ordinary shares or on an instrument of transfer in respect of our ordinary shares. Singapore Taxation The following discussion is a summary of Singapore income tax, goods and services tax and stamp duty considerations relevant to the acquisition,ownership and disposition of ADSs or our ordinary shares. The statements made herein regarding taxation are general in nature and based upon certain aspects of thecurrent tax laws of Singapore and administrative guidelines issued by the relevant authorities in force as of the date hereof and are subject to any changes in suchlaws or administrative guidelines or the interpretation of such laws or guidelines occurring after such date, which changes could be made on a retrospective basis. Thestatements made herein do not purport to be a comprehensive or exhaustive description of all of the tax considerations that may be relevant to a decision to acquire,own or dispose of our ADSs or our ordinary shares and do not purport to deal with the tax consequences applicable to all categories of investors, some of which(such as dealers in securities) may be subject to special rules. Prospective shareholders are advised to consult their own tax advisers as to the Singapore or other taxconsequences of the acquisition, ownership of or disposal of our ADSs and our ordinary shares, taking into account their own particular circumstances. It isemphasized that neither we, our counsels, nor any other persons involved in this annual report accept responsibility for any tax effects or liabilities resulting from theacquisition, holding or disposal of our ADSs or our ordinary shares. 128Table of ContentsIncome Tax Under the Singapore Income Tax Act, a company established outside Singapore but whose governing body, being the board of directors, usually exercisesde facto control and management of its business in Singapore could be considered tax residents in Singapore. However, such control and management of the businessshould not be deemed to be in Singapore if physical board meetings are mainly conducted outside Singapore. Where board resolutions are passed in the form ofwritten consent signed by the directors each acting in their own jurisdictions, or where the board meetings are held by teleconference or videoconference, it ispossible that the place of de facto control and management will be considered to be where the majority of the board are located when they sign such consent or attendsuch conferences. We believe that Sea Limited is not a Singapore tax resident for Singapore income tax purposes. However, the tax resident status of Sea Limited is subject todetermination by the IRAS and uncertainties remain with respect to our tax residence status. It is not certain if Sea Limited will be classified as a Singapore tax resident.See “Item 3. Key Information—D. Risk Factors—Markets Related Risks” for a discussion of the Singapore tax consequences to non-resident investors if Sea Limitedis deemed to be a Singapore tax resident. The statements below are based on the assumption that Sea Limited is not a tax resident in Singapore for Singapore incometax purposes. Dividends With Respect to Our ADSs or Our Ordinary Shares Where Sea Limited is not considered a tax resident in Singapore for Singapore income tax purposes, the dividend payments made by Sea Limited would beconsidered sourced outside Singapore (unless our ADSs or our ordinary shares are held as part of a trade or business carried out in Singapore, in which case theholders of our ADSs or our ordinary shares may be taxed on the dividends distributed to them). Foreign-sourced dividends received or deemed to be received inSingapore by non-resident individuals are exempt from Singapore income tax. This exemption also applies to Singapore tax resident individuals who have received or,are deemed to have received his foreign-sourced income in Singapore on or after January 1, 2004 (except where such income is received through a partnership inSingapore). Foreign-sourced dividends received or deemed to be received in Singapore by corporate investors who do not have a business presence in Singapore, arenot tax resident in Singapore, and who do not have a permanent establishment or tax presence in Singapore, will generally not be subject to income tax in Singapore.Foreign-sourced dividends received or deemed to be received in Singapore by corporate investors who are tax residents in Singapore will generally be subject toSingapore income tax. Since Sea Limited is a company incorporated in the Cayman Islands, and the prevailing rate of tax in the Cayman Islands, being a tax of a similarcharacter to the Singapore income tax, is 0%, dividends received in Singapore by resident corporate investors should be subject to Singapore income tax at theprevailing rate of 17%. Dividends received in respect of our ADSs or our ordinary shares whether by a Singapore tax resident or a non-Singapore tax resident as a shareholder arenot subject to any withholding tax in Singapore. Gains With Respect to Disposition of Our ADSs or Our Ordinary Shares There is no capital gain tax in Singapore and there is no specific law or regulation in Singapore dealing with the characterization of a gain as income or capitalin nature. Gains arising from disposition of our ADSs or our ordinary shares may be construed as income and subject to Singapore income tax if they arise from or areotherwise connected with a trade or business activity in Singapore. Factors that determine the existence of a trade include, inter alia, the length of ownership, thefrequency of similar transactions, and the motive of acquisition. 129Table of ContentsSuch gains may also be considered income in nature, even if they do not arise from an activity in the ordinary course of trade or business or an ordinaryincident of some other business activity, if our ADSs or our ordinary shares were purchased with the intention or purpose of making a profit by sale rather thanholding for long-term investment purposes in Singapore. Conversely, gains from disposition of our ADSs or our ordinary shares in Singapore, if considered as capitalgains rather than income by the Inland Revenue Authority of Singapore, are not taxable in Singapore. For corporate shareholders who are subject to Singapore income tax treatment under Section 34A or 34AA of the Singapore Income Tax Act in relation to theadoption of Singapore Financial Reporting Standard 39—Financial Instruments: Recognition and Measurement (FRS 39) or Singapore Financial Reporting Standard109—Financial Instruments (FRS 109), for accounting purposes, they may be required to recognize gains or losses (not being gains or losses in the nature of capital)even though no sale or disposal of our ADSs or our ordinary shares has been made. Our corporate shareholders who may be subject to such provisions shouldconsult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, ownership and disposition of our ADSs and ourordinary shares arising from the adoption of FRS 39 or FRS 109. Notwithstanding the above, foreign investors may claim that the gains from disposition of their ADSs or ordinary shares are not sourced or received inSingapore (so that such gains will not be subject to Singapore income tax) if (i) the foreign investor is not a tax resident in Singapore, (ii) the foreign investor does notmaintain a permanent establishment in Singapore, to which the disposition gains may be effectively connected, and (iii) the entire process (including the negotiation,deliberation, execution of the acquisition and sale, etc.) leading up to the actual acquisition and sale of our ADSs or our ordinary shares is performed outside ofSingapore. Goods and Services Tax The issuance of our ADSs or our ordinary shares is not subject to Singapore goods and services tax (GST). The sale of our ADS or our ordinary shares by a GST-registered investor in Singapore to another person belonging in Singapore is an exempt supply (i.e. notsubject to GST). Any input GST (for example, GST on brokerage) incurred by the GST-registered investor in connection with the making of this exempt supply isgenerally not recoverable and will become an additional cost to the investor unless the investor satisfies certain conditions prescribed under the GST legislation orsatisfies certain GST concessions. Where our ADS or our ordinary shares are sold by a GST-registered investor in the course or furtherance of a business carried on by such an investor to aperson belonging outside Singapore (and who is outside Singapore at the time of supply), the sale is a taxable supply subject to GST at a zero rate (i.e. 0%). Any inputGST (for example, GST on brokerage) incurred by the GST-registered investor in making this zero-rated supply for the purpose of his business will, subject to theconditions prescribed under the GST legislation, be recoverable from the Comptroller of GST. Investors should seek their own tax advice on the recoverability of GST incurred on expenses in connection with the purchase and sale of our ADSs or ourordinary shares. Services such as brokerage and handling services rendered by a GST-registered person to an investor belonging in Singapore in connection with theinvestor’s purchase or sale of our ADSs or our ordinary shares will be subject to GST at the prevailing rate (currently at 8% with effect from January 1, 2023 andsubsequently 9% with effect from January 1, 2024). Similar services rendered contractually to an investor belonging outside Singapore should, subject to certainconditions prescribed under the GST legislation, qualify for GST at zero rate (i.e. 0%). Stamp Duty No stamp duty is payable on the subscription and issuance of our ADSs or our ordinary shares. As Sea Limited is incorporated in the Cayman Islands andour ADSs and our ordinary shares are not registered in any register kept in Singapore, no stamp duty is payable in Singapore on any instrument of transfer upon asale or gift of our ADSs or our ordinary shares. This position would remain as long as Sea Limited is not considered a residential property-holding entity. 130Table of ContentsUnited States Federal Income Tax Considerations The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of the ADSs ownedby U.S. Holders (as defined below) and to the underlying ordinary shares. This discussion applies only to U.S. Holders that hold the ADSs or ordinary shares ascapital assets (generally, property held for investment). This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasuryregulations promulgated thereunder (“Regulations”), published positions of the Internal Revenue Service (the “IRS”), court decisions and other applicable authorities,all as of the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect).This discussion does not address all U.S. federal income tax considerations that may be applicable to U.S. Holders in light of their particular circumstances orU.S. Holders subject to special treatment under U.S. federal income tax law, such as:•banks, insurance companies and other financial institutions;•entities treated as partnerships for U.S. federal income tax purposes, S corporations or other pass-through entities;•tax-exempt entities;•real estate investment trusts;•regulated investment companies;•brokers, dealers, or traders in securities that elect to use a mark-to-market method of accounting;•certain former citizens or residents of the United States;•persons that elect to mark their securities to market;•persons who hold ADSs or ordinary shares as part of a hedging, integrated, straddle, conversion or constructive sale transaction for U.S. federal incometax purposes;•persons that have a functional currency other than the U.S. dollar; and•persons that actually or constructively own 10% or more of our stock by vote or value.This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift, alternative minimum tax or Medicarecontribution tax considerations.For purposes of this discussion, a “U.S. Holder” is a beneficial owner of the ADSs or ordinary shares that is for U.S. federal income tax purposes:•an individual who is a citizen or resident of the United States;•a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the UnitedStates or any state thereof or the District of Columbia; •an estate whose income is subject to U.S. federal income taxation regardless of its source; or•a trust, (i) the administration of which is subject to the primary supervision of a court within the United States and for which one or more U.S. personshave the authority to control all substantial decisions, or (ii) that has a valid election in effect under applicable Regulations to be treated as a U.S.person.131Table of ContentsIf a partnership or other entity treated as a partnership for U.S. federal income tax purposes holds the ADSs or ordinary shares, the tax treatment of a partnerwill generally depend on the status of the partner and the activities of the partnership. Partners in a partnership holding the ADSs or ordinary shares should consulttheir tax advisors regarding the tax considerations of an investment in the ADSs or ordinary shares.The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement andany related agreement have been and will be complied with in accordance with their terms.If a U.S. Holder holds ADSs, such holder will generally be treated as owning the underlying ordinary shares represented by those ADSs for U.S. federalincome tax purposes.DividendsSubject to the discussion below under “—Passive Foreign Investment Company Rules,” the gross amount of any distribution to a U.S. Holder with respectto the ADSs or ordinary shares will generally be included in such holder’s gross income as ordinary dividend income on the date actually or constructively receivedby such holder, in the case of ordinary shares, or by the depositary, in the case of ADSs, to the extent that the distribution is paid out of our current or accumulatedearnings and profits (as determined under U.S. federal income tax principles). We do not intend to calculate our earnings and profits under U.S. federal income taxprinciples. Therefore, U.S. Holders should expect that any distribution from us will generally be reported as a dividend. The amount of such dividend will includeamounts withheld by us or our paying agent in respect of any foreign taxes. Any dividend from us will not be eligible for the dividends-received deduction generallyallowed to corporations in respect of dividends received from U.S. corporations.The amount of any dividend paid in foreign currency will equal the U.S. dollar value of the foreign currency received calculated by reference to the exchangerate in effect on the date the dividend is received by a U.S. Holder, in the case of ordinary shares, or by the depositary in the case of ADSs, regardless of whether theforeign currency is converted into U.S. dollars. If the foreign currency received as a dividend is converted into U.S. dollars on the date it is received, a U.S. Holder willgenerally not be required to recognize foreign currency gain or loss in respect of the dividend income. If the foreign currency received as a dividend is not convertedinto U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or lossrealized on a subsequent conversion or other disposition of the foreign currency will be treated as U.S. source ordinary income or loss.With respect to individuals and certain other non-corporate U.S. Holders, dividends may constitute “qualified dividend income” that is subject to tax at thelower applicable capital gains rates provided that (1) the ADSs or ordinary shares on which the dividends are paid are readily tradable on an established securitiesmarket in the United States, (2) we are not a PFIC for either our taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding periodand other requirements are met. The ADSs, but not our ordinary shares, are listed on the NYSE so we anticipate that the ADSs should qualify as readily tradable on anestablished securities market in the United States, although there can be no assurances in this regard. U.S. Holders should consult their tax advisors regarding theavailability of the lower capital gains rate applicable to qualified dividend income for dividends paid with respect to the ADSs.Dividends from us will generally constitute non-U.S. source income and be treated as “passive category income” for foreign tax credit limitation purposes.U.S. Holders may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any nonrefundable foreign withholding tax imposedon dividends received on the ADSs or ordinary shares. If a U.S. Holder does not elect to claim a foreign tax credit for foreign taxes withheld, such holder may insteadclaim a deduction for U.S. federal income tax purposes in respect of such taxes, but only for a year in which such holder elects to do so for all creditable foreign incometaxes. U.S. Holders should consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.Sale or Other Disposition of ADSs or Ordinary SharesSubject to the discussion below under “—Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize gain or loss on any sale orother disposition of the ADSs or ordinary shares equal to the difference between the amount realized with respect to such ADSs or ordinary shares and such holder’stax basis in such ADSs or ordinary shares. Such gain or loss will generally be capital gain or loss. Individuals and certain other non-corporate U.S. Holders who haveheld such ADSs or ordinary shares for more than one year will generally be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations.Any such gain or loss recognized by a U.S. Holder will generally be treated as U.S.-source gain or loss for foreign tax credit limitation purposes.132Table of ContentsPassive Foreign Investment Company RulesA non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more ofits gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (generally determined on the basis of aquarterly average) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents,annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. For this purpose, cash is generally categorized as apassive asset and the company’s unbooked intangibles associated with active business activity are taken into account as a non-passive asset. We will be treated asowning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own (or are deemed to own),directly, indirectly or constructively, 25% or more (by value) of the stock.Although the law in this regard is not entirely clear, we treat our VIEs as being owned by us for U.S. federal income tax purposes.Based on our income and assets, and the value of the ADSs, we do not believe that we were a PFIC, for U.S. federal income tax purposes, for the taxable yearended December 31, 2022, and do not anticipate becoming a PFIC for the current taxable year or for the foreseeable future. Nevertheless, because PFIC status is afactual determination made annually after the close of each taxable year on the basis of the composition of our income and assets, there can be no assurance that wewill not be a PFIC for the current taxable year or any future taxable year. Under circumstances where revenues from activities that produce passive income significantlyincrease relative to our revenues from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash, our risk ofbecoming classified as a PFIC may substantially increase. In addition, because we have valued our goodwill based on the market value of the ADSs, a decrease in themarket value of the ADSs may also result in our becoming a PFIC.If we are a PFIC for any taxable year during which a U.S. Holder holds the ADSs or ordinary shares, such holder will be subject to special tax rules withrespect to any “excess distribution” that such holder receives on the ADSs or ordinary shares and any gain such holder realizes from a sale or other disposition(including a pledge) of the ADSs or ordinary shares, unless such holder makes a “mark-to-market” election as discussed below. Distributions received by a U.S.Holder in a taxable year that are greater than 125% of the average annual distributions such holder received during the shorter of the three preceding taxable years orsuch holder’s holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:•the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares;•amounts allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we areclassified as a PFIC (a “pre-PFIC year”) will be subject to tax as ordinary income; and•amounts allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will be subject to tax at the highest tax rate in effectapplicable to the U.S. Holder for that year, and such amounts will be increased by an additional tax equal to interest on the resulting tax deemed deferredwith respect to such years.If we are a PFIC for any taxable year during which a U.S. Holder holds ADSs or ordinary shares and any of our non-U.S. affiliated entities are also PFICs,such holder will be treated as owning a proportionate amount (by value) of the shares of each such non-U.S. affiliate classified as a PFIC for purposes of theapplication of these rules. 133Table of ContentsAlternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock of a PFIC to elect out of thetax treatment discussed in the second preceding paragraph. If a U.S. Holder makes a valid mark-to-market election for the ADSs, the U.S. Holder will include in incomeeach year an amount equal to the excess, if any, of the fair market value of the ADSs as of the close of such holder’s taxable year over such holder’s adjusted basis insuch ADSs. The U.S. Holder is allowed a deduction for the excess, if any, of such holder’s adjusted basis in the ADSs over their fair market value as of the close of thetaxable year. Deductions are allowable however, only to the extent of any net mark-to-market gains on the ADSs included in the U.S. Holder’s income for prior taxableyears. Amounts included in the U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs, are treatedas ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ADSs, as well as to any loss realized on the actualsale or disposition of the ADSs, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included in income with respect tosuch ADSs. The U.S. Holder’s basis in the ADSs will be adjusted to reflect any such income or loss amounts. If a U.S. Holder makes such a mark-to-market election,tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us (except that the lower applicable capital gains rate forqualified dividend income would not apply). If a U.S. Holder makes a valid mark-to-market election, and we subsequently cease to be classified as a PFIC, such U.S.Holder will not be required to take into account the mark-to-market income or loss described above during any period that we are not classified as a PFIC. The mark-to-market election is available only for “marketable stock” which is stock that is traded in other than de minimis quantities on at least 15 daysduring each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable Regulations. We expect that the ADSs will continueto be listed on the NYSE, which is a qualified exchange for these purposes, and, consequently, assuming that the ADSs are regularly traded, if a U.S. Holder holds theADSs, it is expected that the mark-to-market election would be available to such holder were we to become a PFIC. A mark-to-market election may not, however, bemade with respect to the ordinary shares, as they are not marketable stock. Accordingly, if we are a PFIC during any year in which a U.S. Holder holds ordinary shares,such holder will generally be subject to the special tax rules discussed above. In addition, because, as a technical matter, a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue tobe subject to the PFIC rules with respect to such holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federalincome tax purposes. We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatmentdifferent from the general tax treatment for PFICs described above. If a U.S. Holder owns the ADSs or ordinary shares during any taxable year that we are a PFIC, such holder must generally file an annual report with the IRSregarding their ownership of the ADSs or ordinary shares. U.S. Holders should consult their tax advisors concerning the U.S. federal income tax considerations ofholding and disposing of the ADSs or ordinary shares if we are or become a PFIC, including the availability and possibility of making a mark-to-market election. THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS INTENDED FOR GENERAL INFORMATION ONLY ANDDOES NOT CONSTITUTE TAX ADVICE. U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSIDERATIONS TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE ADSs AND ORDINARY SHARES IN THEIR PARTICULARCIRCUMSTANCES. F.Dividends and Paying Agents Not applicable. G.Statement by Experts Not applicable. 134Table of ContentsH.Documents on Display We previously filed with the SEC registration statement on Form F-1 (File No. 333-220571), as amended, including the prospectus contained therein, togetherwith the post-effective registration statement on Form F-1 (File No. 333-221029) to register additional securities that become effective immediately upon filing, toregister our Class A ordinary shares in relation to our initial public offering. We also filed with the SEC related registration statement on Form F-6 (File No. 333-220861)to register our ADSs and registration statements on Form S-8 (File No. 333-222071, No. 333-223551, No. 333-229137, No. 333-232859, No. 333-235799, No. 333-251873,No. 333-261969 and No. 333-269099) to register our securities to be issued under our 2009 Plan. We are subject to the periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Under theExchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after theend of each fiscal year. Copies of reports and other information, when so filed with the SEC, can be obtained from the SEC’s website at www.sec.gov. As a foreignprivate issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executiveofficers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Inaddition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companieswhose securities are registered under the Exchange Act. We will furnish The Bank of New York Mellon, the depositary of our ADSs, with our annual reports, which will include a review of operations and annualaudited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communicationsthat are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon ourrequest, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us. I.Subsidiary Information Not applicable. ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Exchange Risk Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. Ourexposure to the risk of changes in foreign exchange rates relates primarily to our operating activities when revenue or expense is denominated in a foreign currencyand our net investments in foreign subsidiaries. We have transactional currency exposures arising from sales or cost of revenue that are denominated in a currencyother than the respective functional currencies of our subsidiaries, primarily Indonesian rupiah, New Taiwan dollar, Thai baht, Singapore dollar, Malaysian ringgit,Vietnamese dong, Philippines peso, and Brazil real. The foreign currencies in which these transactions are denominated are mainly U.S. dollar. Our sales and costs aredenominated in the respective functional currencies of our subsidiaries. Our trade receivable and trade payable balances at the end of the reporting period have similarexposures. Such amounts include balances within the subsidiaries which, although eliminated from the consolidated balance sheets, will continue to contribute toforeign exchange risk exposures in the consolidated statements of operations and consolidated statements of comprehensive loss.Foreign currency exchange rates for currencies in some of our markets have experienced substantial volatility. It is difficult to predict how market forces or thegovernment policies in those markets may impact the exchange rates against the U.S. dollar in the future. See “Item 3. Key Information—D. Risk Factors—Businessand Operational Related Risks—Risks Applicable Across Multiple Businesses—Fluctuations in foreign currency exchange rates may adversely affect our operationaland financial results, which we report in U.S. dollars.”135Table of ContentsAs of December 31, 2022, we had cash, cash equivalents and restricted cash of US$7,597.2 million. We had U.S. dollar-denominated cash, cash equivalentsand restricted cash of US$4,683.2 million, Singapore dollar-denominated cash, cash equivalents and restricted cash of US$685.3 million, Indonesian rupiah-denominated cash, cash equivalents and restricted cash of US$614.3 million, Philippines peso-denominated cash, cash equivalents and restricted cash of US$414.0million, and cash, cash equivalents and restricted cash denominated in other currencies of US$1,200.4 million. If the U.S. dollar had strengthened or weakened by 100basis points against Singapore dollar, our cash, cash equivalents and restricted cash would have decreased or increased by US$6.9 million. If the U.S. dollar hadstrengthened or weakened by 100 basis points against Indonesian rupiah, our cash, cash equivalents and restricted cash would have decreased or increased byUS$6.1 million. If the U.S. dollar had strengthened or weakened by 100 basis points against Philippines peso, our cash, cash equivalents and restricted cash wouldhave decreased or increased by US$4.1 million. If the U.S. dollar had strengthened or weakened by 100 basis points against each of the other currencies in which weheld cash, cash equivalents and restricted cash, our cash, cash equivalents and restricted cash would have decreased or increased by US$12.0 million. Credit Risk We are exposed to credit risk from our operating activities (primarily from trade and other receivables) and from our investing activities, including loansreceivable, deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Our objective is to seek continual revenuegrowth while minimizing losses incurred due to increased credit risk exposure. Financial instruments that potentially subject us to significant concentrations of creditrisk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, other receivables, loans receivable, held to maturity investments, available-for-sale investments, and amounts due from related parties. As of December 31, 2022, substantially all of our cash and cash equivalents were held at major financialinstitutions in their respective locations. We believe that these financial institutions are of high credit quality and continually monitor the credit worthiness of thesefinancial institutions. Due to the relatively small dollar amount of individual loans receivable, we generally do not require collateral on these balances. As of December31, 2022, no single loan customer’s balance accounted for more than 5% of net loans receivable. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A.Debt Securities Not applicable. B.Warrants and Rights Not applicable. C.Other Securities Not applicable. D.American Depositary Shares Fees and Charges Our ADS Holders May Have to Pay Our ADSs, each of which represents one Class A ordinary share, are listed on the New York Stock Exchange. The Bank of New York Mellon is the depositaryof our ADS program. A holder of ADSs may have to pay certain fees of The Bank of New York Mellon, as depositary, and certain taxes, registration and transfercharges and fees and governmental charges and fees. The depositary collects fees for delivery and surrender of ADSs directly from holders depositing shares orsurrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to holders by deductingthose fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositaryservices by deduction from cash distributions or by directly billing holders or by charging the book-entry system accounts of participants acting for them. Thedepositary may collect any fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holdersthat are obligated to pay those fees. The depositary may generally refuse to deliver ADSs or deposited shares or to forward any distributions until its fees for thoseservices are paid. 136Table of ContentsFrom time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance ofthe ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing itsduties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated withthe depositary and that may earn or share fees, spreads or commissions. Persons depositing or withdrawing sharesor holders of ADSs must pay: For:US$5.00 (or less) per 100 ADSs (or portion thereof) Issuance of ADSs, including issuances resulting from a distributionof shares or rights or other propertyCancelation of ADSs for the purpose of withdrawal, including if thedeposit agreement terminates US$.05 (or less) per ADS (or portion thereof) Any cash distribution to ADS holders A fee equivalent to the fee that would be payable if securities distributed to you hadbeen shares and the shares had been deposited for issuance of ADSs Distribution of securities distributed to holders of depositedsecurities (including rights) that are distributed by the depositary toADS holders US$.05 (or less) per ADS (or portion thereof) per annum Depositary services Registration or transfer fees Transfer and registration of shares on our share register to or from thename of the depositary or its agent when you deposit or withdrawshares Expenses of the depositary Cable, telex and facsimile transmissions (when expressly provided inthe deposit agreement) Converting foreign currency to U.S. dollars Taxes and other governmental charges the depositary or the custodian has to pay onany ADS or shares underlying ADSs, such as stock transfer taxes, stamp duty orwithholding taxes As necessary Any charges incurred by the depositary or its agents for servicing the depositedsecurities As necessaryPART II ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None. ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS See “Item 10. Additional Information” for a description of the rights of shareholders. ITEM 15.CONTROLS AND PROCEDURES Disclosure Controls and Procedures The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, asamended (the “Exchange Act”)) that are designed to ensure that required information is recorded, processed, summarized and reported within the required timeframe,as specified in the rules set forth by the Securities and Exchange Commission (“SEC”). Our disclosure controls and procedures are also designed to ensure thatinformation required to be disclosed is accumulated and communicated to management, including the Group Chief Executive Officer and Group Chief Financial Officer,to allow timely decisions regarding required disclosures. 137Table of ContentsOur management, with the participation of our Group Chief Executive Officer and Group Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2022. While there are inherent limitations to the effectiveness of any system of disclosure controls and procedures,including the possibility of human error and the circumvention or overriding of the controls and procedures, the Company’s disclosure controls, and procedure aredesigned to provide reasonable assurance of achieving their objectives. Based on this evaluation, our Group Chief Executive Officer and Group Chief Financial Officerhave concluded that our disclosure controls and procedures were effective as of December 31, 2022. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financialstatements would be prevented or detected. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022. In making thisassessment, management used the criteria set forth in the “Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework).” Based on the results of this assessment and on those criteria, management concluded that our internal control over financial reporting was effective as ofDecember 31, 2022. Attestation Report of the Registered Public Accounting Firm The effectiveness of the company’s internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independentregistered public accounting firm, as stated in their report. Changes in Internal Control over Financial Reporting There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT Our board of directors has also determined that Mr. David Heng Chen Seng, an independent director and a member of our audit committee, qualifies as an“audit committee financial expert” within the meaning of the SEC rules and possesses financial sophistication within the meaning of the New York Stock ExchangeListed Company Manual. Mr. David Heng Chen Seng satisfies the “independence” requirements of Section 303A of the New York Stock Exchange Listed CompanyManual and meets the independence standards under Rule 10A-3 under the Exchange Act. 138Table of ContentsITEM 16B.CODE OF ETHICS Our board of directors has adopted a code of business conduct and ethics that applies to all of our directors, officers, employees, including certainprovisions that specifically apply to our principal executive officer, principal financial officer, principal accounting officer or controller and any other persons whoperform similar functions for us. We have filed our code of business conduct and ethics as Exhibit 99.1 of our registration statement on Form F-1 (File No. 333-220571)filed with the SEC on September 22, 2017. A copy of our code of business conduct and ethics is available on our website at www.sea.com. ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Ernst & YoungLLP, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our independent registered public accounting firmduring the periods indicated below. For the Year Ended December 31, 2021 2022 (US$ thousands) Audit fees(1) 4,505 4,414 Tax fees(2) 97 79 Audit related fees(3) 7 1,062 Other fees(4) 579 453 (1)“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of ourannual financial statements. This category also included professional services rendered by our independent registered public accounting firm for statutoryaudits required by non-U.S. jurisdictions. In 2022, the audit refers to financial audit and audit pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. (2)“Tax fees” means the aggregate fees billed for the tax services provided with respect to tax consulting and tax audit assistance. (3)“Audit-related fees” means the aggregate fees billed in each fiscal year listed for professional services rendered by our principal auditors related to the auditof our financial statements that are not reported under “audit fees.” (4)“Other fees” means the aggregate fees billed for transaction advisory services with respect to the review of our sustainability, regulatory compliance,cybersecurity, accounting standards training and transaction due diligence. The policy of our audit committee is to pre-approve all audit and non-audit services provided by Ernst & Young LLP, our independent registered publicaccounting firm, including audit services, audit-related services and tax services as described above, other than those for de minimis services which are approved bythe audit committee prior to the completion of the audit. ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not applicable. ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS None. ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable. ITEM 16G.CORPORATE GOVERNANCE We are subject to the New York Stock Exchange corporate governance listing standards. However, New York Stock Exchange rules permit a foreign privateissuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our homecountry, may differ significantly from the New York Stock Exchange corporate governance listing standards. 139Table of ContentsSection 303A.08 of the New York Stock Exchange Listed Company Manual requires a listed company to give shareholders an opportunity to vote on all equity-compensation plans and material revisions thereto. We are a Cayman Islands company, and there are no shareholder approval requirements for such matter. Pursuantto the exemption granted to foreign private issuers under Section 303A.00 of the New York Stock Exchange Listed Company Manual, we have followed our homecountry practice in lieu of the requirements of Sections 303A.08. In November 2017 and February 2018, we obtained approvals from our board of directors to increasethe maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2009 Plan. In April 2022, our board of directors approved theamendment and restatement of the 2009 Plan to increase the maximum aggregate number of shares available under the 2009 Plan, pursuant to which on January 1 ofeach of 2023, 2024, 2025 and 2026, the maximum aggregate number of ordinary shares which may be issued under the 2009 Plan will increase by 3% of the total numberof ordinary shares of all classes of the company outstanding on that day immediately before the increase. For additional information, see “Item 6. Directors, SeniorManagement and Employees—B. Compensation—Share Incentive Plan.” Section 303A.01 of the New York Stock Exchange Listed Company Manual requires a listed company to have a majority of independent directors, which is notrequired under the Companies Act of the Cayman Islands. Currently, our board of directors is composed of five members, two of whom are independent directors asdescribed under “Item 6. Directors, Senior Management and Employees—C. Board Practice.” We follow home country practice that permits our Audit Committee to consist of less than three members, in lieu of complying with Section 303A.07 of the NewYork Stock Exchange Listed Company Manual which requires each company to have an audit committee of at least three members. Our Audit Committee currentlyconsists of two members. Pursuant to Sections 303A.04 and 303A.05 of the New York Stock Exchange Listed Company Manual, a listed U.S. company is required to have anominating/corporate governance committee and a compensation committee, each composed entirely of independent directors. We follow home country practice andthe compensation committee and corporate governance and nominating committee of our board of directors are not comprised entirely of independent directors. Other than the home country practice described above, we are not aware of any significant ways in which our corporate governance practices differ from thosefollowed by U.S. domestic companies under the New York Stock Exchange listing rules. See “Item 3. Key Information—D. Risk Factors—Risks Related to the ADS—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to domesticpublic companies in the United States.” ITEM 16H.MINE SAFETY DISCLOSURE Not applicable. ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 17.FINANCIAL STATEMENTS We have elected to provide financial statements pursuant to Item 18. ITEM 18.FINANCIAL STATEMENTS The consolidated financial statements of Sea Limited are included at the end of this annual report. 140Table of ContentsITEM 19.EXHIBITS ExhibitNumber Description of Document1.1 Ninth Amended and Restated Memorandum and Articles of Association of Sea Limited (incorporated by reference to Exhibit 3.1 from our Form 6-K (File No. 001-38237) filed with the SEC on February 14, 2022) 2.1 Form of Sea Limited’s Specimen American Depositary Receipt (included in Exhibit 2.3) 2.2 Sea Limited’s Specimen Certificate for its Class A Ordinary Shares (incorporated by reference to Exhibit 4.2 from our registration statement on FormF-1 (File No. 333-220571) filed with the SEC on September 22, 2017) 2.3 Deposit Agreement dated as of October 19, 2017 among Sea Limited, The Bank of New York Mellon and owners and holders of the ADSs(incorporated by reference to Exhibit 4.3 from our registration statement on Form S-8 (File No. 333-222071) filed publicly with the SEC on December15, 2017) 2.4* Description of Securities registered under Section 12 of the Exchange Act 3.1* Irrevocable Proxy, dated as of September 5, 2022, between Tencent Holdings Limited, Tencent Limited, Tencent Growthfund Limited and HuangRiver Investment Limited, on the one hand, and Sea Limited’s Board of Directors, on the other hand 4.1 Second Amended and Restated Share Incentive Plan (incorporated by reference to Exhibit 4.1 from our annual report on Form 20-F filed with theSEC on April 22, 2022) 4.2 Form of Indemnification Agreement between Sea Limited and each director and executive officer (incorporated by reference to Exhibit 10.2 fromour registration statement on Form F-1 (File No. 333-220571) filed with the SEC on September 22, 2017) 4.3 Form of Employment Letter with each executive officer (incorporated by reference to Exhibit 10.3 from our registration statement on Form F-1 (FileNo. 333-220571) filed with the SEC on September 22, 2017) 4.4† Amended and Restated Mobile Game Development Agreement, dated as of March 8, 2018, by and between Garena Online Private Limited andProxima Beta Private Limited (incorporated by reference to Exhibit 4.16 from our annual report on Form 20-F filed with the SEC on April 10, 2018) 4.5 Indenture, dated as of June 18, 2018, by and between Sea Limited and Wilmington Trust, National Association (incorporated by reference toExhibit 4.16 from our annual report on Form 20-F filed with the SEC on March 1, 2019) 4.6† Master License Agreement, dated as of November 16, 2018, by and between Garena Online Private Limited and Shenzhen Tencent ComputerSystems Company Limited (incorporated by reference to Exhibit 4.17 from our annual report on Form 20-F filed with the SEC on March 1, 2019) 4.7 Indenture, dated as of November 18, 2019, by and between Sea Limited and Wilmington Trust, National Association (incorporated by reference toExhibit 4.16 from our annual report on Form 20-F filed with the SEC on April 14, 2020) 4.8 Indenture, dated as of May 22, 2020, by and between Sea Limited and Wilmington Trust, National Association (incorporated by reference toExhibit 4.16 from our annual report on Form 20-F filed with the SEC on April 16, 2021)141Table of ContentsExhibitNumber Description of Document4.9 Indenture, dated as of September 14, 2021, by and between Sea Limited and Wilmington Trust, National Association (incorporated by reference toExhibit 4.10 from our annual report on Form 20-F filed with the SEC on April 22, 2022) 4.10 First Supplemental Indenture, dated as of September 14, 2021, by and between Sea Limited and Wilmington Trust, National Association(incorporated by reference to Exhibit 4.11 from our annual report on Form 20-F filed with the SEC on April 22, 2022) 8.1* List of Principal Subsidiaries and Consolidated Affiliated Entities of Sea Limited 11.1 Code of Business Conduct and Ethics of Sea Limited (incorporated by reference to Exhibit 99.1 from our registration statement on Form F-1 (FileNo. 333-220571) filed with the SEC on September 22, 2017) 12.1* Certification by the Group Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 12.2* Certification by the Group Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 13.1** Certification by the Group Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 13.2** Certification by the Group Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 15.2* Consent of Maples and Calder (Hong Kong) LLP 15.3* Consent of LCS & Partners 15.4* Consent of Kudun and Partners Company Limited 15.5* Consent of Rajah & Tann Singapore LLP 101.INS Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embeddedwithin the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Exhibit 101 Inline XBRL document)*Filed with this annual report on Form 20-F. **Furnished with this annual report on Form 20-F. †Confidential treatment has been granted by the U.S. Securities and Exchange Commission with respect to portions of the exhibit that have been redacted. 142Table of ContentsSIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to signthis annual report on its behalf. Sea Limited By:/s/ Forrest Xiaodong Li Name:Forrest Xiaodong Li Title:Chairman and Group Chief Executive Officer Date: April 6, 2023 143Table of ContentsSEA LIMITEDINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm (PCAOB ID: 01247)F-2Consolidated Balance Sheets as of December 31, 2021 and 2022F-8Consolidated Statements of Operations for the Years Ended December 31, 2020, 2021 and 2022F-12Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2020, 2021 and 2022F-14Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2021 and 2022F-15Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2020, 2021 and 2022F-18Notes to the Consolidated Financial Statements for the Years Ended December 31, 2020, 2021 and 2022F-21Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Sea LimitedOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Sea Limited (the Company) as of December 31, 2022 and 2021, the related consolidated statementsof operations, comprehensive loss, cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2022, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2022, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internalcontrol over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework), and our report dated April 6, 2023 expressed an unqualified opinion thereon.Adoption of ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s OwnEquity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own EquityAs discussed in Note 2(z) to the consolidated financial statements, the Company has changed its method for accounting for convertible notes due to the adoption ofASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statementsbased on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance withthe U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement, whether due to error or fraud.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.F-2Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Sea LimitedCritical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financialstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate.Recognition of Digital Entertainment (“DE”) RevenueDescription of the Matter For the year ended December 31, 2022, the Company’s revenue arising from DE was $3,877.2 million. As outlined in Note 2(o) of the consolidated financial statements, DE revenue is recognized over the performance obligation period.The Company has determined that an implied obligation exists to the paying users to continue providing hosting services andaccess to the purchased virtual goods within the online games over an estimated service period. Such service period is largelydetermined in accordance with the estimated average lifespan of the paying users of the said games or similar games. Auditing the DE revenue recognition process was complex and involved judgment to determine the historical paying users’ inactiverate and playing behavior, in estimating the average lifespan of the paying users of the said games or similar games. In addition, theCompany utilized various operating systems to process user data and transactions and relies on automated processes and controlsover the completeness and accuracy of the historical user and game data, which were key inputs to the above-mentioned estimates. How We Addressed theMatter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’sDE revenue recognition process. For example, we tested the automated controls of the related operating systems. We also tested theeffectiveness of management’s review controls over assessing the completeness and accuracy of the historical user and game dataand the appropriateness of the judgments regarding the most relevant historical user and game data to be applied in their estimates. To test the recognition of DE revenue, our audit procedures included, among others, testing the completeness and accuracy of theabove-mentioned underlying historical user and game data and assessing the reasonableness of the historical data applied inestimating the average lifespan of the paying users of the said games or similar games. We also recalculated the amount of revenueto be deferred based on management’s estimated service periods and compared those amounts with the amounts recorded by theCompany. F-3Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Sea LimitedCritical Audit Matters (continued)Impairment of long-lived assets in E-commerce (“EC”) segment and goodwilla)Long-lived assets in EC segmentDescription of the Matter As at December 31, 2022, the Company’s long-lived assets in EC segment amounted to approximately 79.6% of the Company’s long-lived assets. The long-lived assets include property and equipment, operating lease right-of-use assets and intangible assets. As outlined in Note 2(m) to the consolidated financial statements, the Company evaluates its long-lived assets for impairment whenthere are events or changes in circumstances which indicate that the carrying amounts of the long-lived assets may not berecoverable. Due to the continued losses incurred by EC segment, the Company evaluated the related long-lived assets forimpairment at the asset group level by comparing the carrying amount of the asset group to the recoverable value determined byforecasted undiscounted cash flows expected to be generated by this asset group. Auditing management’s long-lived assets impairment test was highly judgmental due to the magnitude of the carrying amount oflong-lived assets and management’s judgment in estimating the recoverable value (undiscounted cash flows) of the asset group,which were sensitive to key assumptions such as projected revenue and sales and marketing expenses. How We Addressed theMatter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s long-lived asset impairment process to determine the recoverable value of the asset group. For example, we tested controls overmanagement’s review of the key assumptions used in estimating the recoverable value. To test the impairment of long-lived assets, our audit procedures included, among others, obtaining an understanding frommanagement regarding the basis of which the undiscounted cash flows were prepared and assessing the reasonableness of theforecasted undiscounted cash flows by comparing them against the Company’s business strategies and underlying key assumptionsover the forecast periods, taking into consideration current industry and economic trends. We performed sensitivity analysis overthe key assumptions described above to evaluate the changes to the estimated recoverable value for the asset group that wouldresult from reasonable changes in the assumptions.F-4Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Sea LimitedCritical Audit Matters (continued)Impairment of long-lived assets in E-commerce (“EC”) segment and goodwill (continued)b)GoodwillDescription of the Matter As described in Note 2(j) to the consolidated financial statements, the Company evaluates its goodwill for impairment at leastannually, and when it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Companyrecognized impairment on goodwill of $354.9 million during the year ended December 31, 2022. The impairment on goodwill was made due to triggering events that occurred for its various reporting units due to (i) worseningmarket conditions which impact the reporting unit’s fair value and/or (ii) shutdown or disposal of businesses where the projectionsof the reporting unit’s future operating results suggest that the fair value of the reporting unit is less than its carrying amount. Auditing management’s impairment analysis involved subjectivity as estimates underlying the determination of the reporting unit’sfair value were based on assumptions that are sensitive to expected future market or economic conditions, and industry andcompany-specific qualitative factors. Significant assumptions used in the Company’s fair value estimate included comparablecompanies’ market multiples and discount rate. Identifying appropriate comparable companies and determining the appropriateperformance metric to be used as the market multiple for the valuation also requires management judgment. Performing auditprocedures to evaluate management’s assumptions required a high degree of auditor judgment and an increased extent of effort,including the need to involve our specialists. How We Addressed theMatter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’sgoodwill impairment process, including controls over management’s review of the significant assumptions used in estimating the fairvalue.We made inquiries of management about their action plans and cash flow expectations of the shut down or disposed businesses,perused through relevant agreements and tested management’s calculations ensuring that the related impairments of goodwill of thereporting unit are appropriate. To test the Company’s impairment review process, we performed audit procedures that included, among others, involvement ofvaluation specialists in assessing the appropriateness of the methodologies used and evaluating the significant assumptionsdiscussed above. We also tested the completeness and accuracy of the underlying data used by the Company in its analysis andadequacy of the related disclosures in the Company’s consolidated financial statements./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2010.SingaporeApril 6, 2023F-5Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareholders and the Board of Directors of Sea LimitedOpinion on Internal Control Over Financial ReportingWe have audited Sea Limited’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Sea Limited (theCompany) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balancesheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, cash flows, and shareholders’equity for each of the three years in the period ended December 31, 2022, and the related notes and our report dated April 6, 2023 expressed an unqualified opinionthereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and arerequired to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securitiesand Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.F-6Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMDefinition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate./s/ Ernst & Young LLPSingaporeApril 6, 2023F-7Table of ContentsSEA LIMITEDCONSOLIDATED BALANCE SHEETS(Amounts expressed in thousands of US dollars (“$”)) As of December 31, Note 2021$ 2022$ ASSETS Current assets Cash and cash equivalents 9,247,762 6,029,859 Restricted cash 1,551,635 1,549,574 Accounts receivable, net of allowance for credit losses of $5,772 and $12,818, as of December 31, 2021 and2022, respectively 388,308 268,814 Prepaid expenses and other assets 5 1,401,863 1,798,651 Loans receivable, net of allowance for credit losses of $91,504 and $236,797, as of December 31, 2021 and2022, respectively 6 1,500,954 2,053,767 Inventories, net 117,499 109,668 Short-term investments 7 911,281 864,258 Amounts due from related parties 16,095 13,421 Total current assets 15,135,397 12,688,012 Non-current assets Property and equipment, net 8 1,029,963 1,387,895 Operating lease right-of-use assets, net 9 649,680 957,840 Intangible assets, net 10 52,517 65,019 Long-term investments 7 1,052,861 1,253,593 Prepaid expenses and other assets 5 124,521 135,616 Loans receivable, net of allowance for credit losses of $6,172 and $2,022, as of December 31, 2021 and 2022,respectively 6 28,964 21,663 Restricted cash 38,743 17,724 Deferred tax assets 18 103,755 245,226 Goodwill 4 539,624 230,208 Total non-current assets 3,620,628 4,314,784 Total assets 18,756,025 17,002,796 The accompanying notes are an integral part of these consolidated financial statements.F-8Table of ContentsSEA LIMITEDCONSOLIDATED BALANCE SHEETS (continued)(Amounts expressed in thousands of US dollars (“$”)) As of December 31, Note 2021$ 2022$ LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable (including accounts payable of the Consolidated VIEs without recourse to the primarybeneficiaries of $17,632 and $18,699 as of December 31, 2021 and 2022, respectively) 213,580 258,648 Accrued expenses and other payables (including accrued expenses and other payables of theConsolidated VIEs without recourse to the primary beneficiaries of $130,757 and $148,631 as ofDecember 31, 2021 and 2022, respectively) 11 1,519,938 1,396,613 Deposits payable (including deposits payable of the Consolidated VIEs without recourse to the primarybeneficiaries of nil and nil as of December 31, 2021 and 2022, respectively) 465,850 1,316,395 Escrow payables and advances from customers (including escrow payables and advances from customersof the Consolidated VIEs without recourse to the primary beneficiaries of $20,521 and $19,143 as ofDecember 31, 2021 and 2022, respectively) 1,789,973 1,862,325 Amounts due to related parties (including amounts due to related parties of the Consolidated VIEs withoutrecourse to the primary beneficiaries of $435 and $9 as of December 31, 2021 and 2022, respectively) 74,738 415 Borrowings (including borrowings of the Consolidated VIEs without recourse to the primary beneficiariesof nil and nil as of December 31, 2021 and 2022, respectively) 12 100,000 88,410 Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourseto the primary beneficiaries of $8,051 and $5,250 as of December 31, 2021 and 2022, respectively) 9 186,494 269,968 Convertible notes (including convertible notes of the Consolidated VIEs without recourse to the primarybeneficiaries of nil and nil as of December 31, 2021 and 2022, respectively) 13 – 31,237 Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primarybeneficiaries of $203,382 and $192,243 as of December 31, 2021 and 2022, respectively) 2,644,463 1,535,083 Income tax payable (including income tax payable of the Consolidated VIEs without recourse to theprimary beneficiaries of $537 and $664 as of December 31, 2021 and 2022, respectively) 181,400 176,598 Total current liabilities 7,176,436 6,935,692 The accompanying notes are an integral part of these consolidated financial statements.F-9Table of ContentsSEA LIMITEDCONSOLIDATED BALANCE SHEETS (continued)(Amounts expressed in thousands of US dollars (“$”)) As of December 31, Note 2021$ 2022$ Non-current liabilities Accrued expenses and other payables (including accrued expenses and other payables of theConsolidated VIEs without recourse to the primary beneficiaries of $4,038 and $4,338 as of December 31,2021 and 2022, respectively) 11 76,234 87,072 Operating lease liabilities (including operating lease liabilities of the Consolidated VIEs without recourseto the primary beneficiaries of $12,527 and $7,666 as of December 31, 2021 and 2022, respectively) 9 491,313 756,818 Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primarybeneficiaries of $36,189 and $23,886 as of December 31, 2021 and 2022, respectively) 104,826 63,566 Convertible notes (including convertible notes of the Consolidated VIEs without recourse to the primarybeneficiaries of nil and nil as of December 31, 2021 and 2022, respectively) 13 3,475,708 3,338,750 Deferred tax liabilities (including deferred tax liabilities of the Consolidated VIEs without recourse to theprimary beneficiaries of nil and nil as of December 31, 2021 and 2022, respectively) 18 6,992 9,967 Unrecognized tax benefits (including unrecognized tax benefits of the Consolidated VIEs without recourseto the primary beneficiaries of $107 and $107 as of December 31, 2021 and 2022, respectively) 107 107 Total non-current liabilities 4,155,180 4,256,280 Total liabilities 11,331,616 11,191,972 Commitments and contingencies 23 The accompanying notes are an integral part of these consolidated financial statements.F-10Table of ContentsSEA LIMITEDCONSOLIDATED BALANCE SHEETS (continued)(Amounts expressed in thousands of US dollars (“$”) except for number of shares and par value) As of December 31, Note 2021$ 2022$ Shareholders’ equity Class A Ordinary shares (par value of US$0.0005 per share; authorized: 14,800,000,000 and 14,800,000,000shares as of December 31, 2021 and 2022, respectively; issued and outstanding: 409,762,257 and519,231,049 shares as of December 31, 2021 and 2022, respectively) 15 204 258 Class B Ordinary shares (par value of US$0.0005 per share; authorized: 200,000,000 and 200,000,000 sharesas of December 31, 2021 and 2022, respectively; issued and outstanding: 147,975,703 and 45,527,793shares as of December 31, 2021 and 2022, respectively) 15 74 23 Additional paid-in capital 14,622,292 14,559,690 Accumulated other comprehensive loss 16 (28,519) (111,215)Statutory reserves 17 6,144 12,490 Accumulated deficit (7,201,498) (8,745,541)Total Sea Limited shareholders’ equity 7,398,697 5,715,705 Non-controlling interests 25,712 95,119 Total shareholders’ equity 7,424,409 5,810,824 Total liabilities and shareholders’ equity 18,756,025 17,002,796 The accompanying notes are an integral part of these consolidated financial statements.F-11Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts expressed in thousands of US dollars (“$”)) Year ended December 31, Note 2020$ 2021$ 2022$ Revenue Service revenue Digital entertainment 2,015,972 4,320,013 3,877,163 E-commerce and other services 1,777,330 4,564,617 7,463,173 Sales of goods 582,362 1,070,560 1,109,369 Total revenue 4,375,664 9,955,190 12,449,705 Cost of revenue Cost of service Digital entertainment (702,329) (1,230,082) (1,077,017)E-commerce and other services (1,743,773) (3,825,826) (5,194,065) Cost of goods sold (580,657) (1,003,547) (993,346)Total cost of revenue (3,026,759) (6,059,455) (7,264,428)Gross profit 1,348,905 3,895,735 5,185,277 Operating income (expenses) Other operating income 189,645 287,946 279,184 Sales and marketing expenses (1,830,875) (3,829,743) (3,269,223)General and administrative expenses (599,706) (987,868) (1,437,612)Provision for credit losses (57,509) (117,427) (513,690)Research and development expenses (353,785) (831,703) (1,376,501)Impairment of goodwill – – (354,943)Total operating expenses (2,652,230) (5,478,795) (6,672,785) Operating loss (1,303,325) (1,583,060) (1,487,508)Interest income 24,804 36,082 115,515 Interest expense (123,843) (136,876) (45,396)Net investment loss (17,820) (43,502) (207,331)Net (loss) gain on debt extinguishment (24,400) (2,069) 199,697 Changes in fair value of convertible notes (87) – – Foreign exchange (loss) gain (38,567) 14,241 (75,510)Loss before income tax and share of results of equity investees (1,483,238) (1,715,184) (1,500,533) Income tax expense18 (141,640) (332,865) (168,395)Share of results of equity investees 721 5,019 11,156 Net loss (1,624,157) (2,043,030) (1,657,772) Net loss (income) attributable to non-controlling interests 6,101 (3,729) 6,351 Net loss attributable to Sea Limited’s ordinary shareholders (1,618,056) (2,046,759) (1,651,421)The accompanying notes are an integral part of these consolidated financial statements.F-12Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF OPERATIONS (continued)(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data) Year ended December 31, Note 2020$ 2021$ 2022$ Loss per share: Basic and diluted19 (3.39) (3.84) (2.96)Weighted average shares used in loss per share computation: Basic and diluted 477,264,888 532,705,796 558,119,948 The accompanying notes are an integral part of these consolidated financial statements.F-13Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(Amounts expressed in thousands of US dollars (“$”)) Year ended December 31, 2020$ 2021$ 2022$ Net loss (1,624,157) (2,043,030) (1,657,772)Other comprehensive income (loss), net of tax Foreign currency translation adjustments: Translation gain (loss) 2,532 (32,972) (81,620)Net change 2,532 (32,972) (81,620)Available-for-sale investments: Change in unrealized loss (4,393) (1,386) (7,930)Reclassification adjustment to net loss – 236 212 Net change (4,393) (1,150) (7,718)Total other comprehensive loss, net of tax (1,861) (34,122) (89,338) Total comprehensive loss (income) attributable to non-controlling interests 7,146 (3,148) 11,129 Total comprehensive loss attributable to Sea Limited’s ordinary shareholders (1,618,872) (2,080,300) (1,735,981)The accompanying notes are an integral part of these consolidated financial statements.F-14Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts expressed in thousands of US dollars (“$”)) Year ended December 31, 2020$ 2021$ 2022$ Cash flows from operating activities Net loss (1,624,157) (2,043,030) (1,657,772)Adjustments to reconcile net loss to net cash generated from (used in) operating activities: Amortization of discount and debt issuance costs of convertible notes 88,198 100,141 7,536 Deferred income tax (27,451) (975) (140,553)Depreciation and amortization 180,761 279,032 428,344 Impairment and write-off of long-lived assets 6,579 1,614 32,823 Impairment of goodwill – – 354,943 Net foreign exchange differences 11,298 (45,214) 41,737 Net investment loss 19,905 43,337 216,001 Net loss (gain) on debt extinguishment 24,400 2,069 (199,697)Provision for credit losses 57,509 117,427 513,690 Share-based compensation 290,246 470,324 705,896 Share of results of equity investees (721) (5,019) (11,156)Others 3,136 12,723 22,144 Operating cash flows before changes in working capital: (970,297) (1,067,571) 313,936 Inventories (38,528) (62,735) 1,441 Accounts receivable (174,767) (37,066) 98,981 Prepaid expenses and other assets (527,139) (395,803) (497,889)Amounts due from related parties (10,897) 2,185 1,360 Operating lease right-of-use assets (45,203) (418,846) (360,472)Accounts payable 50,860 99,639 43,311 Accrued expenses and other payables 494,913 545,691 (39,069)Escrow payables and advances from customers 541,524 654,257 166,996 Operating lease liabilities 46,352 429,366 385,911 Deferred revenue 1,162,399 314,048 (1,093,229)Income tax payable 25,505 105,927 (4,628)Amounts due to related parties 1,146 39,557 (72,341)Net cash generated from (used in) operating activities 555,868 208,649 (1,055,692)The accompanying notes are an integral part of these consolidated financial statements.F-15Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Amounts expressed in thousands of US dollars (“$”)) Year ended December 31, 2020$ 2021$ 2022$ Cash flows from investing activities Purchase of property and equipment (336,274) (772,177) (924,178)Purchase of intangible assets and capitalized software costs (20,780) (34,999) (52,105)Proceeds from disposal of long-lived assets 1,732 620 119,996 Purchase of investments (219,548) (2,505,358) (2,630,842)Proceeds from sale and maturity of investments 19,541 798,178 2,281,019 Distributions from investments 1,294 1,632 4,674 Acquisition of businesses, net of cash acquired (92,190) (22,763) (60,713)Disposal of subsidiaries, net of cash disposed 15,008 (11,775) (230)Change in loans receivable (255,695) (1,220,631) (1,166,430)Net cash used in investing activities (886,912) (3,767,273) (2,428,809) Cash flows from financing activities Repayment of bank borrowings and finance lease obligations (31,833) (1,247) (117,238)Proceeds from bank borrowings 1,224 115,282 49,000 Proceeds from issuance of convertible notes, net 1,141,362 2,846,250 – Capital contributed by non-controlling interest 4,631 339 70,876 Transactions with non-controlling interests (20,736) – (22,889)Purchase of capped calls (135,700) – – Payments for redemption, exchange, conversion and repurchase of convertible notes (50,009) (1,935) (611,315)Proceeds from issuance of ordinary shares, net 2,970,248 4,050,055 50,211 Change in deposits payable (146,055) 392,845 942,630 Proceeds from secured borrowings, net – – 38,981 Net cash generated from financing activities 3,733,132 7,401,589 400,256 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 80,727 (58,218) (143,511)Net increase (decrease) in cash, cash equivalents and restricted cash 3,482,815 3,784,747 (3,227,756)Cash, cash equivalents and restricted cash at beginning of the year 3,570,578 7,053,393 10,838,140 Cash, cash equivalents and restricted cash at end of the year(1) 7,053,393 10,838,140 7,610,384 (1)As of December 31, 2022, cash and cash equivalents of $13,227 was included in Assets held for sale within Prepaid expenses and other assets.The accompanying notes are an integral part of these consolidated financial statements.F-16Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Amounts expressed in thousands of US dollars (“$”)) Year ended December 31, 2020$ 2021$ 2022$ Supplement disclosures of cash flow information Income taxes paid (144,874) (207,381) (313,755)Interest paid (42,003) (44,981) (104,557) Supplement disclosures of non-cash activities Purchase of property and equipment included in accrued expenses and other payables 1,834 38,742 (14,631)Purchase of property and equipment included in prepayments (83,782) 58,249 (13,171)Purchase of property and equipment by exercise of exchangeable loan – (20,722) – Purchase of intangible assets included in accrued expenses and other payables 484 183 (554)Purchase of intangible assets included in prepayments (6,638) (3,875) (4,506)Conversion and exchange of convertible notes into ordinary shares (464,930) (826,124) (5)Acquisition of subsidiaries by conversion of convertible notes or issuance of shares 72,000 270,733 – Proceeds from disposal of a subsidiary included in prepaid expenses and other assets 12,870 – – Transfers of loans receivable to prepaid expenses and other assets 8,830 186 56 The accompanying notes are an integral part of these consolidated financial statements.F-17Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY(Amounts expressed in thousands of US dollars (“$”) except for number of shares) Note No ofordinaryshares Ordinaryshares Additionalpaid-incapital Accumulatedothercomprehensiveincome Statutoryreserves Accumulateddeficit Total SeaLimitedshareholders’equity Non-controllinginterests Totalshareholders’equity $ $ $ $ $ $ $ $ Balance as of January 1,2020 463,244,652 230 4,687,284 5,449 46 (3,530,585) 1,162,424 10,228 1,172,652 Net loss for the year – – – – – (1,618,056) (1,618,056) (6,101) (1,624,157)Other comprehensiveloss – – – (816) – – (816) (1,045) (1,861)Acquisition ofsubsidiaries – – – – – – – 39,594 39,594 Appropriation ofstatutory reserves – – – – 2,317 (2,317) – – – Equity component ofconvertible notes – – 284,727 – – – 284,727 – 284,727 Purchase of capped callsrelated to issuance ofconvertible notes – – (135,700) – – – (135,700) – (135,700)Conversion ofconvertible notes intoClass A ordinaryshares 27,406,818 14 464,916 – – – 464,930 – 464,930 Issuance of Class Aordinary shares, net ofissuance costs 15 15,180,000 8 2,908,291 – – – 2,908,299 – 2,908,299 Capital contributed bynon-controllinginterest – – – – – – – 4,631 4,631 Transactions with non-controlling interests – – (20,294) 48 – – (20,246) (490) (20,736)Disposal of interest in asubsidiary – – – – – – – (11,971) (11,971)Shares issued todepositary bank 6,000,000 – – – – – – – – Exercise of shareoptions 2,861,169 1 61,948 – – – 61,949 – 61,949 Restricted share awardsand restricted shareunits issued 3,247,992 2 (2) – – – – – – Share-basedcompensation – – 275,401 – – – 275,401 2,481 277,882 Settlement of shareincentives with sharesheld by depositarybank (6,009,161) – – – – – – – – Balance as of December31, 2020 511,931,470 255 8,526,571 4,681 2,363 (5,150,958) 3,382,912 37,327 3,420,239 The accompanying notes are an integral part of these consolidated financial statements.F-18Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)(Amounts expressed in thousands of US dollars (“$”) except for number of shares) Note No ofordinaryshares Ordinaryshares Additionalpaid-incapital Accumulatedothercomprehensiveincome (loss) Statutoryreserves Accumulateddeficit TotalSea Limitedshareholders’equity Non-controllinginterests Totalshareholders’equity $ $ $ $ $ $ $ $ Balance as of January 1,2021 511,931,470 255 8,526,571 4,681 2,363 (5,150,958) 3,382,912 37,327 3,420,239 Net loss for the year – – – – – (2,046,759) (2,046,759) 3,729 (2,043,030)Other comprehensiveloss – – – (33,541) – – (33,541) (581) (34,122)Acquisition ofsubsidiaries 1,051,731 1 270,732 – – – 270,733 – 270,733 Appropriation ofstatutory reserves – – – – 3,781 (3,781) – – – Equity component ofconvertible notes – – 486,758 – – – 486,758 – 486,758 Issuance of Class Aordinary shares, netof issuance costs 15 12,650,000 6 3,972,410 – – – 3,972,416 – 3,972,416 Conversion ofconvertible notes intoClass A ordinaryshares 20,039,849 10 826,114 – – – 826,124 – 826,124 Capital contributed bynon-controllinginterest – – – – – – – 339 339 Transactions with non-controlling interests – – 6,761 341 – – 7,102 (15,102) (8,000)Shares issued todepositary bank 12,000,000 – – – – – – – – Exercise of shareoptions 8,027,170 4 77,635 – – – 77,639 – 77,639 Restricted share awardsand restricted shareunits issued 4,125,722 2 (2) – – – – – – Share-basedcompensation – – 455,313 – – – 455,313 – 455,313 Settlement of shareincentives with sharesheld by depositarybank (12,087,982) – – – – – – – – Balance as of December31, 2021 557,737,960 278 14,622,292 (28,519) 6,144 (7,201,498) 7,398,697 25,712 7,424,409 The accompanying notes are an integral part of these consolidated financial statements.F-19Table of ContentsSEA LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)(Amounts expressed in thousands of US dollars (“$”) except for number of shares) Note No ofordinaryshares Ordinaryshares Additionalpaid-incapital Accumulatedothercomprehensiveloss Statutoryreserves Accumulateddeficit TotalSea Limitedshareholders’equity Non-controllinginterests Totalshareholders’equity $ $ $ $ $ $ $ $ Balance as of January 1,2022 557,737,960 278 14,622,292 (28,519) 6,144 (7,201,498) 7,398,697 25,712 7,424,409 Adjustments for priorperiods from adoptingASU 2020-06 2(z) – – (811,483) – – 113,724 (697,759) – (697,759)Net loss for the year – – – – – (1,651,421) (1,651,421) (6,351) (1,657,772)Other comprehensiveloss – – – (84,560) – – (84,560) (4,778) (89,338)Acquisition ofsubsidiaries – – – – – – – 12,560 12,560 Appropriation ofstatutory reserves – – – – 6,346 (6,346) – – – Conversion ofconvertible notes intoClass A ordinaryshares 252 – 5 – – – 5 – 5 Capital contributed bynon-controllinginterest – – 335 1,864 – – 2,199 68,677 70,876 Transactions with non-controlling interests – – (14,889) – – – (14,889) – (14,889)Disposal of interest in asubsidiary – – – – – – – (701) (701)Shares issued todepositary bank 7,000,000 – – – – – – – – Exercise of shareoptions 3,412,987 1 50,210 – – – 50,211 – 50,211 Restricted share awardsand restricted shareunits issued 3,809,600 2 (2) – – – – – – Share-basedcompensation – – 713,222 – – – 713,222 – 713,222 Settlement of shareincentives with sharesheld by depositarybank (7,201,957) – – – – – – – – Balance as of December31, 2022 564,758,842 281 14,559,690 (111,215) 12,490 (8,745,541) 5,715,705 95,119 5,810,824 The accompanying notes are an integral part of these consolidated financial statements.F-20Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATIONSea Limited (the “Company”) is a limited liability company incorporated in the Cayman Islands on May 8, 2009 and conducts its business primarily throughits subsidiaries and variable interest entities (“VIEs”) in markets including Southeast Asia, Taiwan and Latin America. The Company is principally engaged inthe digital entertainment, e-commerce and digital financial service businesses.(a)As of December 31, 2022, significant subsidiaries of the Company include the following entities:EntityDate ofincorporation/acquisitionPlace ofincorporation Percentage ofdirect ownershipby the Company Principal activities 2021 2022 Garena Online Private Limited (“Garena Online”)May 8, 2009Singapore 100 100 Game operations and software development Shopee LimitedJanuary 16,2015CaymanIslands 100 100 Investment holding company Shopee Singapore Private LimitedFebruary 5,2015Singapore 100 100 Online platform PT Shopee International IndonesiaAugust 5, 2015Indonesia 100 100 Online platformF-21Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(b)VIE structureThe Company operates in various markets that have certain restrictions on foreign ownership of local companies. To comply with these foreignownership restrictions, the Company conducts certain businesses through VIEs using contractual agreements (the “VIE Agreements”).The following is a summary of the key terms of the VIE Agreements that were signed amongst the primary beneficiary and the respectiveshareholders of the VIEs (collectively the “VIE Shareholders”):Loan AgreementsIn order to ensure that the VIE Shareholders are able to provide capital to each of these VIEs in order to develop its business, the primary beneficiaryhas entered into loan agreements with each VIE Shareholder.Pursuant to the loan agreements, the primary beneficiary has granted loans to the VIE Shareholders that may only be used for the purpose ofacquiring equity interests in or contributing to the registered capital of these VIEs. The time and manner for repayment of the loans are at the solediscretion of the primary beneficiary. The loans may be repaid only by transferring all of the VIE Shareholders’ equity interests in the VIE to theprimary beneficiary or their respective designee upon exercise of the option under the exclusive option agreement. The loan agreements also prohibitthe VIE Shareholders from assigning or transferring to any third party, or from creating or causing any security interest to be created on, any part oftheir equity interests in these entities. In the event that the respective VIE Shareholders sell their equity interests to the primary beneficiary or theirrespective designee at a price which is equal to or lower than the principal amount of the loan, the loan will be interest-free. If the price is higher thanthe principal amount of the loans, the excess amount will be deemed to be interest on the loans payable by the VIE Shareholders to the primarybeneficiary.Exclusive Option AgreementsIn order to ensure that the Company is able to acquire all of the equity interests in the VIEs at its discretion, the primary beneficiary has entered intoexclusive option agreements with the respective VIE Shareholders. Each option is exercisable by the primary beneficiary at any time, provided thatdoing so is not prohibited by law. The exercise price under each option is the minimum amount required by law and any proceeds obtained by therespective VIE Shareholders through the transfer of their equity interests in these VIEs shall be used for the repayment of the loan provided inaccordance with the loan agreements.During the terms of the exclusive option agreements, the VIE Shareholders will not grant a similar right or transfer any of the equity interests in theseVIEs to any party other than the primary beneficiary or their respective designee, nor will it pledge, create or permit any security interest or similarencumbrance to be created on any of the equity interests. The VIEs cannot declare any profit distributions or grant loans in any form without theprior consent of the primary beneficiary. The VIE Shareholders must remit in full any funds received from the VIEs to the primary beneficiary or theirrespective designee in the event any distributions are made by the VIEs.F-22Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(b)VIE structure (continued)Exclusive Option Agreements (continued)Exclusive Option Agreements (continued)The exclusive option agreements will remain in effect until the respective VIE Shareholder has transferred such shareholder’s equity interests in theVIEs to the primary beneficiary or their respective designee.Powers of AttorneyIn order to ensure that the Company is able to make all of the decisions concerning the VIEs, the primary beneficiary has entered into powers ofattorney with the shareholders of these VIEs. Pursuant to the powers of attorney, each VIE Shareholder has irrevocably appointed the primarybeneficiary as their attorney-in-fact to act for all matters pertaining to such shareholding in these VIEs and to exercise all of their rights asshareholders, including but not limited to attending shareholders’ meetings and designating and appointing directors, supervisors, the chiefexecutive officer and other senior management members of these entities, and selling, transferring, pledging or disposing the shares of theseentities. The primary beneficiary may authorize or assign its rights to any other person or entity at its sole discretion without prior notice to or priorconsent from the VIE Shareholders of these VIEs.Each power of attorney remains in effect until the VIE Shareholder ceases to hold any equity interest in the respective VIE.Equity Interest Pledge AgreementsIn order to secure the performance of the VIEs and the VIE Shareholders under the contractual arrangements, each of the VIE Shareholders of theVIEs has pledged all of their shares to the primary beneficiary. These pledges secure the contractual obligations and indebtedness of the VIEShareholders, including all penalties, damages and expenses incurred by the primary beneficiary in connection with the contractual arrangements,and all other payments due and payable to the primary beneficiary by the respective VIEs under the exclusive business cooperation agreements andby the VIE Shareholders under the loan agreements, exclusive option agreements, and powers of attorney. Should the VIEs or their respective VIEShareholders breach or default under any of the contractual arrangements, the primary beneficiary has the right to require the transfer of therespective VIE Shareholders’ pledged equity interests in the VIEs to the primary beneficiary or their respective designee, to the extent permitted bylaws, or require a sale of the pledged equity interests and has priority in any proceeds from the auction or sale of such pledged interests. Moreover,the primary beneficiary has the right to collect any and all dividends in respect of the pledged equity interests during the term of the pledge.F-23Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(b)VIE structure (continued)Equity Interest Pledge Agreements (continued)Unless the respective VIEs have fully performed all of their obligations in accordance with the exclusive business cooperation agreements and thepledged equity interests have been fully transferred to the primary beneficiary or their respective designee in accordance with the exclusive optionagreements and the loan agreements, the equity interest pledge agreements will continue to remain in effect.Spousal Consent LettersUnder the spousal consent letters, each spouse of the married VIE Shareholders of the VIEs unconditionally and irrevocably agreed that the equityinterest in the respective VIE held by and registered in the name of their spouse will be disposed of pursuant to the contractual arrangements. Eachspouse agreed not to assert any rights over the equity interest in these VIEs held by their spouse. In addition, in the event that the spouses obtainany equity interest in these VIEs held by their spouse for any reason, they agree to be bound by the contractual arrangements.Exclusive Business Cooperation AgreementsIn order to ensure that the Company receives the economic benefits of the VIEs, the primary beneficiary has entered into exclusive businesscooperation agreements with these VIEs under which the primary beneficiary has the exclusive right to provide or to designate any third party toprovide, among other things, technical support, consulting services, intellectual property licenses and other services to these VIEs, and these VIEsagree to accept all services provided by the primary beneficiary or their respective designee. Without the primary beneficiary’s prior written consent,the VIEs are prohibited from directly or indirectly engaging any third party to provide the same or any similar services under these agreements orestablishing similar cooperative relationships with any third party regarding the matters contemplated by these agreements. In addition, the primarybeneficiary shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created duringthe performance of the exclusive business cooperation agreements.The VIEs agree to pay a monthly fee to the primary beneficiary at an amount determined at the primary beneficiary’s sole discretion after taking intoaccount factors including the complexity and difficulty of the services provided, the level of and time consumed by its employees or third-partyservice providers designated by the primary beneficiary providing the services, the content and value of services and licenses provided and themarket price of the similar type of services or licenses.The exclusive business cooperation agreements will remain effective unless terminated in accordance with their provisions or terminated in writingby the primary beneficiary. Unless otherwise required by applicable laws, these VIEs do not have any right to terminate the exclusive businesscooperation agreements in any event.F-24Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(b)VIE structure (continued)Financial Support Confirmation LettersIn order to ensure that the VIEs have sufficient cash flow to fund their daily operations and/or to set off any losses incurred in such operations, theprimary beneficiary has entered into financial support confirmation letters with each of these VIEs. Under the financial support confirmation letters,the primary beneficiary pledges to provide continuous financial support to these VIEs by itself or their respective designee and agreed to forego itsright to seek repayment in the event these entities are unable to repay such financial support or the primary beneficiary becomes liable for theliabilities of these VIEs. These VIEs agree to accept such financial support and pledge to only use such support to develop their respectivebusinesses. To the extent permitted by law, the financial support the primary beneficiary provides to these VIEs may take the form of loans,borrowings or guarantees.Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between the primary beneficiary and their respectiveVIEs, through the irrevocable power of attorney agreements, whereby the VIE Shareholders effectively assigned all of the voting rights underlyingtheir equity interest in the respective VIEs to the primary beneficiary. Furthermore, pursuant to the loan agreements, exclusive option agreementsand equity interest pledge agreements, the primary beneficiary obtained effective control over the respective VIEs, through the ability to exercise allthe rights of the VIE Shareholders and therefore the power to govern the activities that most significantly impact the economic performance of theVIEs. The primary beneficiary demonstrates its ability and intention to continue to absorb substantially all the expected losses through the financialsupport confirmation letters. The primary beneficiary also demonstrates its ability to receive substantially all of the economic benefits of the VIEsthrough the exclusive business cooperation agreements. Thus, the Company consolidates these VIEs and their subsidiaries under ASC 810-10,Consolidation: Overall.In the opinion of the Company’s management and external legal counsels, the ownership structure of its VIEs are generally in compliance with thelocal laws or regulations that are currently in effect, and each of the agreements among the primary beneficiary, the VIEs and/or the VIE Shareholdersis valid, binding and enforceable, and do not and will not result in any violation of such laws or regulations that are currently in effect.F-25Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(b)VIE structure (continued)However, there are substantial uncertainties regarding the interpretation and application of current and future local laws and regulations.Accordingly, the Company cannot be assured that the local regulatory authorities will not ultimately take a contrary view to its opinion. If thecurrent ownership structure of the Company and its contractual arrangements with the VIEs are found to be in violation of any existing or futurelocal laws and regulations, the Company may be required to restructure its ownership structure and operations in certain countries to comply withthe changing and new local laws and regulations. To the extent that changes and new local laws and regulations prohibit the Company’s VIEarrangements from complying with the principles of consolidation, the Company would have to deconsolidate the financial position and results ofoperations of its VIEs. In the opinion of management, the likelihood of loss in respect of the Company’s current ownership structure or thecontractual arrangements with the VIEs is remote based on current facts and circumstances.(c)VIE disclosuresThere were no pledges or collateralization of the VIEs’ assets. Creditors of the VIEs have no recourse to the general credit of the primarybeneficiaries of the VIEs, and such amounts have been parenthetically presented on the face of the consolidated balance sheets. The Company hasnot provided any financial or other support that it was not previously contractually required to provide to the VIEs during the periods presented.F-26Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(c)VIE disclosures (continued)The following tables represent the financial information of the VIEs whom the Company does not have majority voting interest as of December 31,2021 and 2022 and for the years ended December 31, 2020, 2021 and 2022 before eliminating the intercompany balances and transactions between theVIEs and other entities within the group: As of December 31, 2021 2022 $ $ ASSETS Current assets Cash and cash equivalents 141,985 79,922 Amounts due from intercompanies(1) 159,349 153,070 Others 69,746 85,787 Total current assets 371,080 318,779 Non-current assets Property and equipment, net 40,246 86,229 Long-term investments 14,141 14,500 Deferred tax assets 43,961 40,561 Others 23,611 18,059 Total non-current assets 121,959 159,349 Total assets 493,039 478,128 LIABILITIES Current liabilities Accrued expenses and other payables 104,186 110,526 Deferred revenue 203,382 192,243 Amounts due to intercompanies(1) 157,251 88,639 Others 20,076 12,658 Total current liabilities 484,895 404,066 Non-current liabilities Deferred revenue 36,189 23,886 Amounts due to intercompanies(1) 27,596 83,958 Others 7,910 4,579 Total non-current liabilities 71,695 112,423 Total liabilities 556,590 516,489 (1)Amounts due from or to intercompanies consist of intercompany receivables or payables to the other companies within the group arising fromintercompany transactions, and funds advanced for working capital purpose.F-27Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)1.ORGANIZATION (continued)(c)VIE disclosures (continued) Year ended December 31, 2020 2021 2022 $ $ $ Revenue - Third-party customers 562,347 690,383 722,607 - Intercompanies 145,848 195,639 176,072 Net (loss) income (30,435) 22,390 20,425 Year ended December 31, 2020 2021 2022 $ $ $ Net cash generated from operating activities 134,060 61,875 22,449 Net cash used in investing activities (27,399) (14,847) (89,160)Net cash (used in) generated from financing activities (13,023) 15,030 44,442 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a)Basis of preparationThe accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S.GAAP”).(b)Principles of consolidationThe consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIEs for which the Company or asubsidiary of the Company is the primary beneficiary. All significant intercompany transactions and balances between the Company, its subsidiariesand the VIEs are eliminated upon consolidation.(c)Use of estimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during the period. Areas where management uses subjective judgment include, butare not limited to, revenue recognition, estimating the useful lives and impairment assessment of long-lived assets and goodwill, accounting for andimpairment assessment of investments, impairment assessment of loans receivable, accounting for deferred income taxes and accounting for share-based compensation arrangements. Changes in facts and circumstances may result in revised estimates. Given the global economic climate andunforeseen effects from COVID-19 pandemic, the process of estimation has become more challenging. Actual results could differ from thoseestimates, and as such, differences may be material to the consolidated financial statements.F-28Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(d)Foreign currencyThe functional currency of the Company is the United States dollar (“$” or “USD”), whereas the functional currency of the Company’s subsidiariesand its VIEs are the respective local currencies as determined based on the criteria of ASC 830, Foreign Currency Matters. The Company uses theUSD as its reporting currency. Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange ratesprevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchangerate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated statements of operations.Assets and liabilities of the Company’s subsidiaries and its VIEs that have functional currencies other than USD are translated into USD at fiscalyear-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. The resultingtranslation adjustments are recorded in accumulated other comprehensive income (loss), a component of shareholders’ equity.Exchange differences arising on monetary items that form part of the Company’s net investments in foreign operations are recognized initially inother comprehensive income and accumulated under accumulated other comprehensive income (loss) in equity. The other comprehensive gain orloss arising from exchange differences is reclassified from equity to profit or loss of the Company on disposal of the foreign operations.(e)Cash and cash equivalentsThe Company considers cash equivalents to be short-term, highly-liquid investments that are both readily convertible to cash and have a maturityof three months or less at the time of purchase. Cash and cash equivalents consist of cash on hand, demand deposits and money market fundsplaced with banks and other financial institutions which are unrestricted as to withdrawal and use.(f)Restricted cashRestricted cash mainly comprises monies received held in escrow in connection with the Company’s e-commerce business and mobile wallet inconnection with the Company’s digital financial services business that are restricted and not available for the Company’s use.F-29Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(g)Accounts receivable, loans receivable and allowance for credit lossesAccounts receivable and loans receivable are carried at net realizable value. Loans principal and interest receivables are placed on non-accrualstatus when payments are 90 days past due contractually. When a loan principal and interest receivable is placed on non-accrual status, interestaccrual ceases. If the loan is non-accrual, the cost recovery method is used and cash collected is applied to first reduce the carrying value of theloan. Otherwise, interest income may be recognized to the extent cash is received. Loans principal and interest receivables may be returned toaccrual status when all of the borrower’s delinquent balances of loans principal and interest have been settled and the borrower continue to performin accordance with the loan terms.The Company has established a provision matrix applied on the portfolio segmented by factors such as geographic region and products that areconsidered to have similar credit characteristics and risk of loss. The allowance for credit losses is computed based on its historical lifetime creditloss experience, adjusted for forward-looking factors specific to the receivable and economic environment. The Company utilizes models such astransition matrix method based on roll rates and then transformed, taking into account expected future delinquency rate to estimate the likelihoodthat a loan will default over a given period of time, net of any recoveries. These models utilize information that is available at the reporting dateabout past events, current conditions and macro-economic forecasts. The macro-economic forecast varies by countries and include factors such asunemployment rates, growth rates in gross domestic product.(h)InventoriesInventories which comprise mainly merchandise products sold through the Company’s e-commerce business platform are valued at the lower of costand net realizable value.Costs incurred in bringing each product to its present location and condition are accounted at purchase cost on first-in-first-out basis.Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costsnecessary to make the sale.F-30Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(i)Property and equipmentProperty and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any.Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:- Computers3 to 5 years- Office equipment, furniture and fittings3 to 10 years- Leasehold improvementsOver the shorter of lease term or the estimated useful lives of the assets- Transportation assets4 to 10 years- Warehouse equipment3 to 10 years- Land use rightOver the land use term- Building6 to 20 yearsFreehold land has unlimited useful life and therefore is not depreciated. The useful lives and methods of depreciation of property and equipment arereviewed at each financial year end and adjusted prospectively, if appropriate.Repair and maintenance costs are charged to expense as incurred, whereas the costs of betterments that extend the useful lives of property andequipment are capitalized as additions to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost andaccumulated depreciation with any resulting gain or loss reflected in the consolidated statements of operations.Property and equipment that are purchased or constructed which require a period of time before the property and equipment are ready for theirintended use are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including installation costs.Construction-in-progress is transferred to specific property and equipment accounts and commences depreciation when these property andequipment are ready for their intended use.(j)GoodwillGoodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired andliabilities assumed from the acquired entity as a result of the Company’s acquisitions of interests in its subsidiaries and consolidated VIEs. Duringthe measurement period, which does not exceed one year from the acquisition date, the Company may record adjustments to the assets acquired andliabilities assumed with the corresponding adjustment to goodwill. Upon conclusion of the measurement period, any adjustments are recorded in theconsolidated statements of operations.F-31Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(j)Goodwill (continued)Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that itmight be impaired. In testing goodwill for impairment, the Company evaluates whether it is more likely than not that the fair value of a reporting unitis less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company applies a one-step quantitative test and record the amount of goodwill impairment as the excess of goodwill allocated to the reporting unit’s carrying amount overits fair value, not to exceed the total amount of goodwill allocated to the reporting unit.(k)Intangible assetsIntangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets arising from business combinations are measured at fair value upon acquisition. Other intangibleassets are carried at cost less accumulated amortization and any recorded impairment.Costs incurred in connection with the planning and post implementation phases of the development of software for internal use are expensed. Costsincurred in the application development phase are capitalized when certain criteria are met. Capitalization ceases and the costs are amortized over thesoftware’s estimated useful life when the software is ready for its intended use.Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior totechnological feasibility being established for the product. Once technological feasibility is established, all software costs are capitalized until theproduct is available for general release to customers. Technological feasibility is established upon completion of all the activities that are necessaryto substantiate that the software product can be produced in accordance with its design specifications, including functions, features, and technicalperformance requirements. None of such costs were capitalized for any of the periods presented. Intangible assets with finite useful lives are amortized over the estimated economic lives of the intangible assets as follows: - Licensing feeOver the shorter of licensing period or the estimated useful lives of the intangible assets- IP right1 to 5 years- Trademarks7 to 10 years- Technology6 years- Software3 to 6 years- Customer relationships3 to 8 years The useful lives and methods of amortization of intangible assets are reviewed at each financial year end and adjusted prospectively, if appropriate.F-32Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(l)InvestmentsThe Company’s investments consist of available-for-sale investments, held-to-maturity investments, equity security investments, investmentscarried at fair value and equity method investments.In accordance with ASC 320, Investments – Debt Securities, the Company classifies the investments in debt securities as “held-to-maturity”,“trading” or “available-for-sale”, whose classification determines the respective accounting methods stipulated by ASC 320. Dividend and interestincome for all categories of investments in securities are included in earnings. Any realized gains or losses, if any, on the sale of the investments aredetermined on a specific identification method, and such gains and losses are reflected in earnings during the period in which gains or losses arerealized. The debt securities that the Company has positive intent and ability to hold to maturity are classified as held-to-maturity securities andstated at amortized cost. The securities that are bought and held principally for the purpose of selling them in the near term are classified as tradingsecurities and measured at fair value. Unrealized holding gains and losses for trading securities are included in earnings. Investments not classifiedas trading or as held-to-maturity are classified as available-for-sale investments. Available-for-sale investments are reported at fair value, withunrealized gains and losses recorded in accumulated other comprehensive income (loss). Realized gains or losses are included in earnings duringthe period in which the gain or loss is realized.Credit losses related to available-for-sale investments to be recorded through an allowance for credit losses. The Company compares the presentvalue of cash flows expected to be collected from the investment with the amortized cost basis of the security to determine if a credit loss exists. Ifthe present value of cash flows expected to be collected is less than the amortized cost basis of the investment, a credit loss exists and an allowancefor credit losses are recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis. An available-for-saleinvestment is written off in the period the investment is deemed uncollectible. The Company has the ability and intent to hold these investmentswith unrealized losses for a reasonable period of time sufficient for the recovery of their amortized cost bases.In accordance with ASC 946-320, Financial Services – Investment Companies, Investments – Debt and Equity Securities, the Company accountsfor non-marketable equity securities and limited partnerships held by consolidated investment company at fair value.F-33Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(l)Investments (continued)In accordance with ASC 321, Investments – Equity Securities, for investments in an investee over which the Company does not have significantinfluence, the Company carries the investments at fair value with unrealized gains and losses included in earnings. In accordance with ASC 820,Fair Value Measurements, for investments that do not have readily determinable fair value, the Company has elected to measure its equity securityinvestments at net asset value (or its equivalent), if it qualifies for the NAV practical expedient or at cost minus impairment, if any, plus or minuschanges resulting from observable price changes in orderly transactions for the identical or a similar investment of the same investee (“measurementalternative”). The Company’s management regularly evaluates the impairment of its equity security investments based on the performance andfinancial position of the investee as well as other evidence of estimated market values. Such evaluation includes, but is not limited to, reviewing theinvestee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and current and future financingneeds. An impairment loss is recognized in the consolidated statements of operations equal to the excess of the investment’s cost over its fair valueat the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis ofinvestment. Investments in equity investees represent investments in (a) entities in which the Company can exercise significant influence but does not own amajority equity interest or control and (b) limited partnership in which the Company holds a five percent or greater interest. Such investments areaccounted for using the equity method of accounting in accordance with ASC 323-10, Investments – Equity Method and Joint Ventures: Overall.Under the equity method, the Company initially records its investments at cost and prospectively recognizes its proportionate share of each equityinvestee’s net income or loss into its consolidated statements of operations. The difference between the cost of the equity investee and the amountof the underlying equity in the net assets of the equity investee is recognized as equity method goodwill included in equity method investments onthe consolidated balance sheets. The Company evaluates its equity method investments for impairment under ASC 323-10. An impairment loss onthe equity method investments is recognized in the consolidated statements of operations when the decline in value is determined to be other-than-temporary.F-34Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(l)Investments (continued)The Company discontinues applying equity method if an investment (and additional financial supports to the investee, if any) has been reduced tozero. When the Company has other investments in the investee that have liquidation preferences more senior than the ordinary shares and theequity-method investment in the ordinary shares is reduced to zero, the Company continues to report its share of equity losses in the consolidatedstatements of operations, to the extent of and as an adjustment to the adjusted basis of the other investments in the investee. The order in which theequity losses are applied to the other investments follows the seniority of the other investments in the same investee.(m)Impairment of long-lived assetsThe Company evaluates its long-lived assets or asset groups, including intangible assets with finite lives, for impairment whenever events orchanges in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that thecarrying amount of an asset or a company of long-lived assets may not be recoverable. When these events occur, the Company evaluates forimpairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets andtheir eventual disposition. If the sum of the forecasted undiscounted cash flows is less than the carrying amount of the assets, the Company wouldrecognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value. Fair value is generally determined bydiscounting the cash flows expected to be generated by the assets, when the market prices are not readily available for the long-lived assets.(n)Fair value of financial instrumentsAvailable-for-sale investments are measured at fair value with the change in fair value recognized in accumulated other comprehensive income(loss). Marketable equity securities, investments carried at fair value, certain other assets, derivative assets, derivative liabilities and shareappreciation rights are measured at fair value with corresponding changes in the assets and liabilities’ fair values reflected in consolidatedstatements of operations.(o)Revenue recognitionRevenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to whichthe Company expects to be entitled to for those goods or services. Revenue is measured based on the amount of consideration that the Companyexpects to receive reduced by discounts, incentives and rebates. Revenue also excludes any amounts collected on behalf of third parties, includingsales taxes and indirect taxes.F-35Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(o)Revenue recognition (continued)The Company evaluates revenue from services and sales of goods to determine if it controls such services and goods to be the principal (i.e., reportrevenues on a gross basis) or agent (i.e., report revenues on a net basis). The key indicators that the Company evaluates in determining grossversus net treatment include, but are not limited to, (i) which party is primarily responsible for fulfilling the promise to provide the specified good orservice; (ii) which party bears inventory risks before the specified good or service has been transferred to a customer; and (iii) which party hasdiscretion in establishing the price for the specified good or service.(i)Digital entertainment revenueThe Company distributes online games, including self-developed games and licensed games from game developers, through its PC andmobile based applications and certain app stores.The Company offers many ways for users to purchase virtual goods (consisting of virtual currencies and virtual items), including theShopeePay and Shopee platform, other online payment gateways, bank transfers, credit cards, mobile phone billing and prepaid cards,including its own prepaid cards, which are sold through agents. As the Company controls the service of providing games to the users, andit has a direct contractual arrangement with the paying users and has the right to determine the price to be paid by such users, the grossproceeds collected from these channels represent revenue to be recognized by the Company and the amounts retained by these channelsbased on a predetermined percentage represent cost of revenue to be recognized by the Company.Proceeds from these sales are initially recognized as “Escrow payables and advances from customers” and subsequently reclassified to“Deferred revenue” when the users make in-game purchases of the virtual goods within the games operated by the Company and suchpurchases are no longer refundable. Deferred revenue recognized as revenue during the respective years ended December 31, 2021 and2022 was $2,296,486 and $2,551,285.For the licensed games, the Company records revenue inclusive of the royalties payable to game developers, which are based on revenue-sharing ratios, as it controls the service of providing the games to the users, and is primarily responsible to the customers and has latitudein establishing the pricing of the virtual goods.Revenue is recognized over the performance obligation period. For purposes of determining the performance obligation period, theCompany has determined that an implied obligation exists to the paying users to continue providing hosting services and access to thepurchased virtual goods within the online games over an estimated service period. Such service period is determined in accordance withthe estimated average lifespan of the virtual items sold or the estimated average lifespan of the paying users of the said games or similargames.F-36Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(o)Revenue recognition (continued)(i)Digital entertainment revenue (continued) (a)Item-based revenue modelVirtual items have different lifespan patterns: time-based, consumable and durable. Time-based virtual items are items with a statedexpiration time, for which revenue is recognized ratably over the period based on the time unit of the virtual items. Consumablevirtual items are items that can be consumed by a specific user action, and have limitations on repeated use. Revenue attributableto consumable virtual items is recognized upon consumption. Durable virtual items are items that provide the user with continuingbenefits over an extended period of time. Revenue attributable to durable virtual items is recognized ratably over their averagelifespan, which are estimated based on the users’ historical usage patterns and playing behaviors for the virtual items. TheCompany assesses the estimated average lifespan of the durable virtual items on a quarterly basis. (b)User-based revenue modelThe Company tracks paying users’ activeness within each game where the user-based revenue model is used to estimate payingusers’ average lifespan. Paying users are defined as inactive when they have reached a period of inactivity for which it isreasonable to believe that these users will not return to a specific game. The Company determines the inactive rate of these payingusers and revises the estimated paying users’ average lifespan on a quarterly basis.The Company believes the current revenue recognition provides reasonable depiction of the service transferred patterns to the customersand represents the best estimation of the time period the customers are likely to play the respective games. Determining the estimatedservice period is subjective and requires management’s judgment. Future users’ usage patterns and playing behaviors may change anddiffer from the historical usage patterns and playing behaviors, and therefore the estimated service period may change accordingly in thefuture.F-37Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(o)Revenue recognition (continued)(ii)E-commerceThe Company’s e-commerce business (“Shopee”) charges its sellers on its marketplace a fixed rate commission fee based on grossmerchandise value in selected markets. Fees are charged when the transactions are completed and settled. Such commission fees chargedare recognized on a net basis.The Company also provides logistic services to end customers. Revenue from logistic services is recognized over time as the customersimultaneously receives and consumes the benefits provided by the Company’s performance as it performs.Shopee operates a customer loyalty program, where end users who purchase merchandises and participate in activities through Shopee’splatform are given Shopee coins which entitle them to offset future purchases, participate in activities and redeem vouchers throughShopee’s platform. A portion of the revenue attributable to Shopee coins is deferred until they are redeemed, used or expired.The Company charges its sellers advertising fees through its paid ads service on Shopee’s platform. The paid ads service allows the sellersto bid for keywords that match their product or service listing appearing in search or browser results on Shopee marketplace. Their productor service listing will show higher in search rankings when users search for their bid keywords. Sellers prepay for paid ads services and theadvertising income is recognized based on the number of clicks on the product or service listings during the service period.Sellers and buyers are customers of Shopee.(iii)Digital financial servicesThe Company earns interest and fees from loans granted to customers. Interest and fees earned are recognized over the period of the loanbased on the effective interest method.The Company also earns commissions from merchants when transactions are completed and settled through its digital financial servicesplatform. Such commissions are generally determined as a percentage based on the value of the merchandise being sold by the merchants.Commissions are recognized in the consolidated statements of operations at the time when the underlying transaction is completed.(iv)Rendering of servicesThe Company also recognizes revenue from other services when the services are rendered.F-38Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(o)Revenue recognition (continued)(v)Sales of goodsThe Company recognizes revenue from sales of goods at the point in time that the customer obtains control of the goods, which generallyoccurs upon delivery to the customer.(p)Cost of revenueCost of revenue consists primarily of purchase price of inventories, depreciation expenses, amortization expenses, channel costs, royalty expenses,hosting charges, payroll related costs, bank transaction fees, cost of logistics and the other overhead expenses.(q)Advertising expenditureAdvertising expenditures are expensed as incurred and are included in sales and marketing expenses. As part of the advertising expenditure, salesincentives given to end users as a result of a concurrent sale are recognized as reductions of the corresponding consideration that the Companyexpects to receive. In some instances, the Company may record losses from transactions when the sales incentives provided exceeds the revenueearned from the customer on a transaction-by-transaction basis. Such losses are then reclassified and recorded in sales and marketing expenses.(r)Research and development expensesResearch and development expenses consist primarily of payroll and related personnel costs related to product development. Research anddevelopment expenses are expensed as incurred, except for qualifying costs relating to the development of software for internal use as described inNote 2(k).(s)LeasesLeases are classified at the inception date as either a finance lease or an operating lease. As the lessee, a lease is a finance lease if any of thefollowing conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the leaseterm is at least 75% of the asset’s estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of thelease term is 90% or more of the fair value of the leased asset to the lessor at the inception date.Finance lease assets are included in property and equipment, net, and finance lease liabilities are included in accrued expenses and other payables,current and non-current.F-39Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(s)Leases (continued)All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of theirrespective leases. Operating leases (with an initial term of more than 12 months) are included in operating lease right-of-use (“ROU”) assets,operating lease liabilities (current), and operating lease liabilities (non-current) in the consolidated balance sheets. ROU assets represent theCompany’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease paymentsarising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of leasepayments over the lease term. The Company utilizes a market-based approach to estimate the incremental borrowing rate based on the informationavailable at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any leaseprepayments, reduced by lease incentives and accrued rent. The lease terms may include options to extend or terminate the lease when it isreasonably certain that the Company will exercise that option.The Company has lease agreements with lease and non-lease components. The Company has elected to account for lease and non-leasecomponents as a single lease component for data center leases only. In addition, leases with an initial term of 12 months or less are not recorded onthe consolidated balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain leaseagreements contain rent holidays and escalating rent are considered when determining the straight-line rent expense to be recorded over the leaseterm. The lease term begins on the date of initial possession of the lease property for purposes of recognizing lease incentives.(t)Income taxesThe Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based onthe difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period inwhich the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based on the weight ofavailable evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of achange in tax rates is recognized in income in the period that includes the enactment date. The Company applies ASC 740, Accounting for IncomeTaxes, to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold a tax position is required to meet before beingrecognized in the financial statements.The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of “Income taxexpense” in the consolidated statements of operations.F-40Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(u)Share-based compensationAll share-based compensation, including share options, restricted share awards, restricted share units and share appreciation rights under shareincentive plan are accounted for under ASC 718, Compensation – Stock Compensation, which requires that share-based awards granted toemployees to be measured at fair value and recognized as compensation expense over the requisite service period (which is generally the vestingperiod) in the consolidated statements of operations. The Company has elected to recognize compensation expense using the straight-line methodfor equity-classified share-based awards granted with service conditions that have a graded vesting schedule. Forfeitures are accounted for as theyoccur.The Company, with the assistance of an independent third-party valuation firm, determined the estimated fair value of the share options using theBlack-Scholes pricing model (Note 14).(v)Loss per shareIn accordance with ASC 260, Earnings per Share, basic loss per share is computed by dividing net loss attributable to ordinary shareholders by theweighted average number of unrestricted ordinary shares outstanding during the year using the two-class method. Under the two-class method, netloss is allocated between ordinary shares and other participating securities based on their participating rights. Partially paid shares are included inthe computation of basic loss per share to the extent that these shares are entitled to dividends in proportion to the amount paid.Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinaryequivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period.Ordinary equivalent shares consist of the ordinary shares issuable upon the conversion of the convertible notes using the if-converted method andoutstanding share-based awards, using the treasury stock method, when the impact is dilutive. Ordinary share equivalents are excluded from thecomputation of diluted loss per share if their effects would be anti-dilutive.(w)Segment reportingThe Company identifies a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incurexpenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to make decisions about resources to beallocated to the segment and assess its performance; and iii) it has available discrete financial information. The CODM reviews financial informationat the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment.The Company has three operating and reportable segments: digital entertainment, e-commerce and digital financial services. Accordingly, thefinancial statements include segment information which reflects the current composition of the reportable segments in accordance with ASC 280,Segment Reporting.F-41Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(x)Employee benefits(i)Defined contribution planThe Company participates in the national pension schemes as defined by the laws of the jurisdictions in which it has operations.Contributions to defined contribution pension schemes are recognized as an expense in the period in which the related service isperformed.(ii)Employee leave entitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to the employees. The undiscounted liability forleave expected to be settled wholly before twelve months after the end of the reporting period is recognized for services rendered byemployees up to the end of the reporting period.(y)Transfers of financial assets The Company accounts for transfers of financial assets as true sales when the transferred assets have been legally isolated from the Company, thetransferee has the right to pledge or exchange transferred assets and the Company does not maintain effective control over the transferred assets.Transfers of financial assets that do not qualify for sale accounting continue to be reported on the Company’s consolidated balance sheets as if thetransfer had not occurred. Accordingly, the sale proceeds are recognized as secured borrowings.(z)Recently adopted accounting pronouncementsIn August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives andHedging – Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting For Convertible Instruments and Contracts in an Entity’s OwnEquity (“ASU 2020-06”), which simplifies the accounting and disclosures for convertible instruments and contracts in an entity’s own equity byremoving certain separation models in Subtopic 470-20 for convertible instruments, and requires the use of the if-converted method whencalculating diluted earnings per share. Convertible debt instruments will be accounted for as a single liability measured at amortized cost.F-42Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(z)Recently adopted accounting pronouncements (continued)The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. As a result of this adoption, the cumulative effectof the changes made on its January 1, 2022 consolidated balance sheet for the adoption of the ASU 2020-06 was as follows: Balances as ofDecember 31,2021 Adjustments Balances as ofJanuary 1,2022 $ $ $ Non-current liabilities Convertible notes 3,475,708 697,759 4,173,467 Shareholders’ equity Additional paid-in capital 14,622,292 (811,483) 13,810,809 Accumulated deficit (7,201,498) 113,724 (7,087,774)(aa)Prior period reclassification Certain prior period amounts related to provision for credit losses, net (loss) gain on debt extinguishment, deposits payable, escrow payables andadvances from customers have been reclassified to conform to the current period presentation.3.CONCENTRATION OF RISKS(a)Credit riskFinancial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cashequivalents, restricted cash, accounts receivable, other receivables, loans receivable, held to maturity investments, available-for-sale investments,and amounts due from related parties. As of December 31, 2021 and 2022, substantially all of the Company’s cash and cash equivalents were held atmajor financial institutions in their respective locations. Management believes that these financial institutions are of high credit quality andcontinually monitors the credit worthiness of these financial institutions. Due to the relatively small dollar amount of individual loans receivable, theCompany generally does not require collateral on these balances. As of December 31, 2021 and 2022, no single loan customer’s balance accountedfor more than 5% of net loans receivable.F-43Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)3.CONCENTRATION OF RISKS (continued)(b)Business, supplier, customer and economic riskThe Company participates in relatively dynamic and competitive industries that are heavily reliant on operational excellence. The Company believesthat changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations orcash flows:(i)Business risk – The Company derives a significant portion of its net revenues from its digital entertainment and e-commerce operations. Ifcompetitors introduce new online games or new marketplace platforms that compete with, or surpass the online games or marketplaceplatform operated by the Company, the Company’s operating performance in its digital entertainment or e-commerce operations will beaffected.(ii)Supplier risk – The Company’s digital entertainment business licenses certain games from third-party game developers. The term of thegame license agreements with the game developers ranges from two to seven years and is renewable upon both parties’ consent. TheCompany may not be able to develop or procure new games or renew existing licenses on terms acceptable to both parties. The Company’sgame developer partners may terminate its agreements prior to their expiration if the Company is not in compliance with the relevant termsor conditions and the Company may fail to remedy such non-compliance in time, or the game developer partners may refuse to renew theagreements. The Company’s e-commerce and digital financial service businesses engage third-party logistics service providers, paymentchannels and other third parties as its service providers. No individual third-party game developer, third-party logistics services provider orother third-party business partner accounted for more than 10% of the Company’s net cost of revenue for the years ended December 31,2020, 2021 and 2022.(iii)Customer risk – No individual customer accounted for more than 10% of net revenues for the years ended December 31, 2020, 2021 and2022. The Company relied on several distribution channels to publish its mobile games. Revenue generated through one of the distributionchannels accounted for approximately 22%, 19% and 13% of the Company’s net revenues for the years ended December 31, 2020, 2021 and2022, respectively.(iv)Political, economic, social, legal and regulatory uncertainties – The Company’s businesses could be adversely affected by the varyingpolitical, economic, social, legal and regulatory uncertainties in the diverse markets that it operates in. In addition, the Company may beunsuccessful in adapting its business practices, culture and operations.(v)Regulatory restrictions – Certain laws, rules and regulations currently prohibit foreign ownership of companies in some of the marketswhere the Company operates. As a result, this may hinder the Company’s expansions in new markets.F-44Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)3.CONCENTRATION OF RISKS (continued)(c)Currency convertibility riskA significant portion of the Company’s revenue and expenses are denominated in currencies subject to exchange control. If revenue denominated insuch currencies increase or expenses denominated in such currencies decrease in the future, the Company may need to convert a portion of itsrevenue into other currencies to meet its foreign currency obligations. Currently, in Taiwan, a single remittance by a company for an amount over $1million or its equivalent in foreign currency shall be reported and documents supporting the accuracy of such report shall be provided to the bankhandling such remittance before the remittance is conducted. In addition, remittances by a company in annual aggregate amount exceeding $50million or its equivalent in foreign currency may not be processed without the approval of the Central Bank of the Republic of China (Taiwan). InVietnam, exchanging Vietnamese dong into foreign currency must be conducted at a licensed credit institution such as a licensed commercial bank.Conversion of Thai baht to another currency is subject to regulations promulgated by the Ministry of Finance and Bank of Thailand. Conversion ofIndonesian rupiah into any foreign currency that exceeds certain specific threshold is required to have an underlying transaction and supported byunderlying transaction documents. In Malaysia, the foreign exchange policy requires the approval of the Central Bank of Malaysia (“BNM”) forcross border remittances which are either set out in the foreign exchange notices or applied for on an ad hoc basis. BNM has the discretion whetherto grant its approval, and to impose any condition on such approval so there is no assurance that its approval will be granted. The Company may beunable to convert such local currencies into U.S. dollars or other foreign currencies to pay dividends or for other purposes on a timely basis or at all.(d)Foreign currency riskThe Company operates in multiple markets, which exposes it to the effects of fluctuations in currency exchange rates as it reports its financials andkey operational metrics in USD. The Company earns revenue denominated in local currencies of Southeast Asia, Taiwan and Brazil, among othercurrencies, while some of its costs and expenses are paid in other foreign currencies. The Company generally pays license fees to game developersin USD and incur expenses for employee compensation and other operating expenses in the local currencies in the markets in which it operates.Fluctuations in the exchange rates among the various currencies that the Company uses could cause fluctuations in its operational and financialresults.F-45Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)4.GOODWILL AND ACQUISITIONSThe changes in the carrying amount of goodwill are as follows: Year ended December 31, 2021 2022 $ $ At the beginning of the financial year 216,278 539,624 Acquisitions 327,026 60,695 Impairment – (354,943)Foreign currency translation (3,680) (15,168)At the end of the financial year 539,624 230,208 During the year ended December 31, 2022, the Company acquired four companies and its underlying subsidiaries for an aggregate consideration of $86,192.As a result, these companies were consolidated as subsidiaries of the Company from the date of acquisition. These acquisitions support the growth of theCompany.The allocation of the purchase price as of the date of acquisition is summarized as follows: $ Cash and cash equivalent 26,312 Others 31,056 Total assets acquired 57,368 Total liabilities assumed (19,311)Net assets acquired 38,057 Fulfilled by: Cash consideration 84,387 Contingent consideration 1,805 Fair value of non-controlling interests(1) 12,560 Goodwill 60,695 (1)Measured based on the fair value of the Company’s ordinary shares on the date of acquisition less control premium.The goodwill, which is not tax deductible, is mainly attributable to synergies expected to be achieved from the acquisition. The goodwill is allocated toreporting units within the digital entertainment and digital financial services segments.F-46Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)4.GOODWILL AND ACQUISITIONS (continued)The revenue and results since the acquisition date included in the consolidated statement of comprehensive loss for the year ended December 31, 2022 wereinsignificant. The Company’s revenue and results for the period would not be materially different should the acquisitions have otherwise occurred onJanuary 1, 2022.The related transaction costs of the acquisitions were not material to the Company’s consolidated financial statements.Due to the negative events, trends in the broader market environment and management’s business decision, the Company determined that the carryingamount of three reporting units within digital entertainment segment and two reporting units within the Other services segment exceeded its respective fairvalues and recorded impairment losses of $354,943. For one of the reporting units within Other services, the Company determined the fair value using themarket approach. The key valuation inputs used were valuation multiples derived from comparable companies that were applied to operating performance ofthe reporting unit. For the remaining reporting units, the Company made a strategic decision to shut down or dispose the businesses and as a result, theCompany recorded a full impairment on the goodwill.Accumulated impairment losses on goodwill were nil and $354,943 as of December 31, 2021 and 2022, respectively.5.PREPAID EXPENSES AND OTHER ASSETS As of December 31, 2021 2022 $ $ Current Deferred channel costs 517,545 271,194 Other receivables 570,176 782,022 Prepaid expenses 120,753 121,049 Security deposits 18,725 16,828 Taxes receivable 145,401 168,266 Securities purchased under agreements to resell 11,418 390,002 Assets held for sale – 25,954 Others 17,845 23,336 1,401,863 1,798,651 Non-current Deferred channel costs 14,367 8,476 Other receivables 3,303 6,821 Prepayment of long-lived assets (including renovation-in-progress) 44,056 61,733 Security deposits 48,770 47,314 Others 14,025 11,272 124,521 135,616 F-47Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)6.LOANS RECEIVABLE, NETLoans receivable represents loans granted to commercial and consumer customers. The Company monitors credit quality for all loans receivable on arecurring basis by evaluating the customers’ prior repayment history available internally and external sources information, where applicable. The Companyuses delinquency status and trends to assist in making new and ongoing credit decisions, and to plan its collection practices and strategies. The followingtable presents the loans receivable by each of the loan portfolio: As of December 31, 2021$ 2022$ Commercial 107,357 45,405 Consumer 1,520,237 2,268,844 1,627,594 2,314,249 Allowance for credit losses (97,676) (238,819) 1,529,918 2,075,430 Transfers of loans receivable that do not qualify for sale accounting continue to be reported on the Company’s consolidated balance sheets. As of December31, 2021 and 2022, nil and $39,001, respectively, of such loans receivable remained outstanding (see Note 12).F-48Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)6.LOANS RECEIVABLE, NET (continued)The following table is a summary of the delinquency status of the loans receivable by year of origination: As of December 31, 2021 Year of origination Commercial 2021$ 2020$ 2019$ 2018$ 2017$ Prior$ Total$ Delinquency: Current 18,642 66,088 10,332 3,744 1,985 1,127 101,918 Past due - 1 to 30 days 11 143 277 102 96 – 629 - 31 to 60 days 36 1,187 2 – 73 – 1,298 - 61 to 90 days 11 215 155 38 11 – 430 - More than 90 days 71 616 1,685 627 38 45 3,082 18,771 68,249 12,451 4,511 2,203 1,172 107,357 Consumer Delinquency: Current 1,414,709 1,091 6,501 4,551 2,098 96 1,429,046 Past due - 1 to 30 days 28,758 418 263 265 76 32 29,812 - 31 to 60 days 17,632 105 1,017 1,290 475 85 20,604 - 61 to 90 days 11,956 38 183 100 8 1 12,286 - More than 90 days 27,008 1,158 58 122 88 55 28,489 1,500,063 2,810 8,022 6,328 2,745 269 1,520,237 F-49Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)6.LOANS RECEIVABLE, NET (continued) As of December 31, 2022 Year of origination Commercial 2022$ 2021$ 2020$ 2019$ 2018$ Prior$ Total$ Delinquency: Current 918 6,159 30,778 4,134 1,282 923 44,194 Past due - 1 to 30 days 10 37 117 148 13 – 325 - 31 to 60 days – – 38 249 32 – 319 - 61 to 90 days – 22 – 1 42 2 67 - More than 90 days – 64 105 212 79 40 500 928 6,282 31,038 4,744 1,448 965 45,405 Consumer Delinquency: Current 2,050,721 641 807 2,790 1,702 786 2,057,447 Past due - 1 to 30 days 70,761 206 143 97 66 14 71,287 - 31 to 60 days 49,493 341 96 490 560 190 51,170 - 61 to 90 days 44,065 581 18 16 22 – 44,702 - More than 90 days 26,308 16,718 913 146 39 114 44,238 2,241,348 18,487 1,977 3,539 2,389 1,104 2,268,844 F-50Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)6.LOANS RECEIVABLE, NET (continued)An analysis of the loans receivable’s allowance for credit losses by portfolio segment is as follows: Commercial$ Consumer$ Total$ Balance as of January 1, 2021 28,324 12,160 40,484 Provision for credit losses 7,343 107,722 115,065 Write-off of loans receivable (27,311) (29,497) (56,808)Exchange differences (657) (408) (1,065)Balance as of December 31, 2021 7,699 89,977 97,676 Provision for credit losses (1,202) 494,815 493,613 Write-off of loans receivable (4,772) (331,401) (336,173)Exchange differences (285) (16,012) (16,297)Balance as of December 31, 2022 1,440 237,379 238,819 7.INVESTMENTSThe following table sets forth a breakdown of the categories of short-term and long-term investments held by the Company: As of December 31, 2021 2022 $ $ Short-term investments Debt securities: Held to maturity 869,931 557,249 Available-for-sale 28,166 304,453 Equity securities 13,184 2,556 911,281 864,258 Long-term investments Debt securities: Held to maturity 66,071 64,790 Available-for-sale 192,139 292,724 Equity securities 463,934 521,742 Equity method investments 152,419 196,104 Investments carried at fair value 178,298 178,233 1,052,861 1,253,593 F-51Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)7.INVESTMENTS (continued)Debt securitiesHeld to maturity investments include time deposits placed with financial institutions and sovereign bonds. Available-for-sale investments include sovereignbonds, convertible loans, corporate bonds and redeemable preference shares of investees. An impairment loss on available-for-sale investments of $51,000,nil and nil had been recognized in the consolidated statements of operations as “Net investment loss” during the years ended December 31, 2020, 2021 and2022, respectively.Marketable equity securitiesThe net unrealized fair value (loss) gain of ($24,150), ($63,434) and $146 related to the marketable equity securities had been recognized in the consolidatedstatements of operations as “Net investment loss” during the years ended December 31, 2020, 2021 and 2022, respectively.Non-marketable equity securitiesAs a result of the deterioration in economic and market conditions, the Company determined an impairment indicator existed as of December 31, 2022 and thefair value of certain investments was less than their carrying amount. An impairment loss of $6,845, nil and $104,645 had been recognized in the consolidatedstatements of operations as “Net investment loss” during the years ended December 31, 2020, 2021 and 2022, respectively.Equity method investmentsAn impairment loss on equity method investments of $3,393, nil and $4,201 had been recognized in the consolidated statements of operations as “Netinvestment loss” during the years ended December 31, 2020, 2021 and 2022, respectively. F-52Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)7.INVESTMENTS (continued)The following table summarizes the cost or amortized cost, gross unrecognized gains and losses, gross unrealized gains and losses, and fair value of theCompany’s debt securities and investments carried at fair value as of December 31, 2021 and 2022: As of December 31, 2021 Cost oramortizedcost Grossunrecognizedgains Grossunrecognizedlosses Grossunrealizedgains Grossunrealizedlosses Fair value $ $ $ $ $ $ Short-term investments Debt securities: Held to maturity 869,931 26 (10) – – 869,947 Available-for-sale 28,190 – – 40 (64) 28,166 Long-term investments Debt securities: Held to maturity 66,071 2,354 (181) – – 68,244 Available-for-sale 192,257 – – 1,287 (1,405) 192,139 Investments carried at fair value 151,227 – – 27,071 – 178,298 1,307,676 2,380 (191) 28,398 (1,469) 1,336,794 As of December 31, 2022 Cost oramortizedcost Grossunrecognizedgains Grossunrecognizedlosses Grossunrealizedgains Grossunrealizedlosses Fair value $ $ $ $ $ $ Short-term investments Debt securities: Held to maturity 557,249 4 (2) – – 557,251 Available-for-sale 304,649 – – 26 (222) 304,453 Long-term investments Debt securities: Held to maturity 64,790 551 (756) – – 64,585 Available-for-sale 301,020 – – 151 (8,447) 292,724 Investments carried at fair value 225,709 – – 27,071 (74,547) 178,233 1,453,417 555 (758) 27,248 (83,216) 1,397,246 F-53Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)8.PROPERTY AND EQUIPMENT, NET As of December 31, 2021 2022 $ $ Computers 883,249 1,381,797 Office equipment, furniture and fittings 43,060 62,262 Leasehold improvements 252,778 381,443 Transportation assets 208,701 123,835 Warehouse equipment 20,796 36,023 Land 196,421 272,042 Building 1,956 14,702 Construction-in-progress 22,952 51,575 1,629,913 2,323,679 Less: accumulated depreciation (599,950) (935,784) 1,029,963 1,387,895 Depreciation expenses recognized for each of the years ended December 31, 2020, 2021 and 2022 were included in the following captions: Year ended December 31, 2020$ 2021$ 2022$ Cost of revenue 118,691 180,140 261,582 Sales and marketing expenses 4,965 7,960 10,733 General and administrative expenses 41,384 64,187 117,593 Research and development expenses 4,027 8,395 15,019 169,067 260,682 404,927 F-54Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)9.LEASESThe Company has entered into commercial operating leases for the use of offices, warehouses and data centers as lessee. These leases have original termsnot exceeding 15 years. These leases have varying terms, escalation clauses and renewal rights.Information pertaining to lease amounts recognized in the Company’s consolidated financial statements is summarized as follows: Year ended December 31, 2020$ 2021$ 2022$ Lease cost Operating lease cost 73,273 138,766 257,359 Short-term lease cost 6,451 14,831 24,507 79,724 153,597 281,866 Supplemental cash flow information Operating cash flows from operating leases 72,756 128,751 228,604 ROU assets obtained in exchange for new operating lease liabilities 95,020 520,354 596,887 As of December 31, 2021 2022 Weighted-average remaining lease term Operating leases 4.99 years 5.66 years Weighted-average discount rate Operating leases 7.5% 7.8% Maturities of operating lease liabilities as of December 31, 2022 were as follows: $ 2023 281,666 2024 243,623 2025 214,524 2026 178,379 2027 121,458 Thereafter 266,602 Total lease payments 1,306,252 Less: imputed interest (279,466)Present value of lease liabilities 1,026,786 The Company has additional operating leases, primarily for offices, warehouses and data centers that have not yet commenced of $803,770 with lease termsnot exceeding 12 years and $810,652 with lease terms not exceeding 14 years, as of December 31, 2021 and 2022, respectively.F-55Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data) 10.INTANGIBLE ASSETS, NET As of December 31, 2021$ 2022$ Licensing fee 36,654 18,629 IP right 45,918 42,943 Trademarks 10,679 10,679 Technology 15,200 – Software, including internal use software under development 30,202 66,117 Others 5,269 5,267 Total intangible assets, gross 143,922 143,635 Accumulated amortization: Licensing fee (33,704) (15,713)IP right (39,357) (37,538)Trademarks (4,806) (5,873)Technology (4,856) –Software (7,060) (17,203)Others (1,622) (2,289)Total accumulated amortization (91,405) (78,616)Total intangible assets, net 52,517 65,019 The estimated aggregate amortization expenses of intangible assets, excluding internal use software under development, for each of the five succeeding fiscalyears and thereafter are as follows: $ 2023 20,363 2024 16,756 2025 7,691 2026 1,725 2027 1,114 Thereafter 56 47,705 Amortization expenses related to intangible assets was $11,694, $18,350 and $23,417 for the years ended December 31, 2020, 2021 and 2022, respectively.F-56Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)11.ACCRUED EXPENSES AND OTHER PAYABLESThe components of accrued expenses and other payables are as follows: As of December 31, 2021$ 2022$ Current Accrued cost of revenue and sales and marketing expenses 810,010 761,199 Accrued interest for convertible notes 4,540 3,917 Accrued office-related operating expenses 6,509 7,113 Business and other taxes payables 118,237 133,636 Other payables 177,293 173,560 Accrued payroll and welfare expenses 277,774 213,369 Payables and accruals for long-lived assets 56,874 38,473 Finance lease liabilities 1,516 3,138 Liabilities directly associated with the assets held for sale – 12,020 Others 67,185 50,188 1,519,938 1,396,613 Non-current Finance lease liabilities 7,022 11,844 Others 69,212 75,228 76,234 87,072 12.BORROWINGSBank borrowingsDuring the years ended December 31, 2021 and 2022, the Company entered into revolving credit facilities that allowed the Company to borrow up to $200,000and $475,000, respectively. As of December 31, 2021, the Company had $100,000 outstanding balance and $100,000 of undrawn revolving credit facilities. Theamount drawn down bears a weighted average interest of 0.93% per annum. As of December 31, 2022, the Company had $49,000 outstanding balance and$426,000 of undrawn revolving credit facilities. The amount drawn down bears a weighted average interest of 3.98% per annum.Secured borrowingsSale proceeds from transfers of loans receivable that do not qualify for sale accounting are reported as secured borrowings. As of December 31, 2021 and2022, nil and $39,410, respectively, remained outstanding. Net cash proceeds received from these transfers are presented in “Proceeds from securedborrowings, net” in the consolidated statements of cash flows. F-57Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)13.CONVERTIBLE NOTES As of December 31, 2021$ 2022$ 2023 Convertible Notes 28,207 31,237 2024 Convertible Notes 131,528 151,459 2025 Convertible Notes 928,683 1,144,794 2026 Convertible Notes 2,387,290 2,042,497 3,475,708 3,369,987 The Company issued the following convertible notes and the terms are as follows: 2023 Convertible Notes2024 Convertible Notes2025 Convertible Notes2026 Convertible NotesIssuance date June 18, 2018November 18, 2019May 22, 2020September 14, 2021Maturity date July 1, 2023December 1, 2024December 1, 2025September 15, 2026Principal amount $575,000$1,150,000$1,150,000$2,875,000Interest rate 2.25%1.00%2.375%0.25%Initial conversion rate 50.5165 American DepositaryShares(“ADSs”) per $1 principalamount,equivalent to $19.80 per ADS19.9475 ADSs per $1 principalamount,equivalent to $50.13 per ADS11.0549 ADSs per $1 principalamount,equivalent to $90.46 per ADS2.0964 ADSs per $1 principalamount,equivalent to $477.01 per ADSAgreed conversion date January 1, 2023June 1, 2024September 1, 2025June 15, 2026The Convertible Notes holders (the “Holders”) have the right, at their option, to convert the outstanding principal amount of the convertible notes, in wholeor in part in integral multiples of $1 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to theclose of business day immediately preceding the agreed conversion date; or (ii) anytime on or after the agreed conversion date until the close of business onthe second scheduled trading day immediately preceding the maturity date (the “Conversion Option”).F-58Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)13.CONVERTIBLE NOTES (continued)The conversion is subject to the anti-dilution and make-whole fundamental change adjustments. Upon conversion, the Company has the right, at its option,to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to the Holders.If certain events of default, changes in tax laws of the relevant taxing jurisdiction or fundamental change, optional redemption or clean up redemption asdefined in the indenture were to occur, of which the optional redemption and clean up redemption only applies to the 2024 Convertible Notes, 2025Convertible Notes and 2026 Convertible Notes, the outstanding obligations under the respective convertible notes could be immediately due and payable(the “Contingent Redemption Options”).The Company evaluated the Conversion Option and Contingent Redemption Options in accordance with ASC 815, Derivatives and Hedging, to determine ifthese features require bifurcation and accounted for as a derivative at fair value with changes in fair value recorded in earnings. The Conversion Option andContingent Redemption Options were not required to be bifurcated in accordance with ASC 815 and the Convertible Notes were accounted for as a singleliability measured at amortized cost as discussed in Note 2(z).The following table presents the carrying amount of the Convertible Notes: As of December 31, 2021 As of December 31, 2022 2023ConvertibleNotes$ 2024ConvertibleNotes$ 2025ConvertibleNotes$ 2026 ConvertibleNotes$ Total$ 2023ConvertibleNotes$ 2024ConvertibleNotes$ 2025ConvertibleNotes$ 2026ConvertibleNotes$ Total$ Principal 31,305 152,048 1,149,500 2,875,000 4,207,853 31,300 152,048 1,149,500 2,057,784 3,390,632 Less: unamortizedissuance cost anddebt discount (3,098) (20,520) (220,817) (487,710) (732,145) (63) (589) (4,706) (15,287) (20,645)Net carrying amount 28,207 131,528 928,683 2,387,290 3,475,708 31,237 151,459 1,144,794 2,042,497 3,369,987 F-59Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)13.CONVERTIBLE NOTES (continued)During the years ended December 31, 2020, 2021 and 2022, the Company recognized total interest expense for coupon interest of $35,527, $36,191 and$36,544, respectively and amortization of discount and debt issuance costs on the liability component amounted to $88,198, $100,141 and $7,536,respectively. As a result of the adoption of ASU 2020-06, remaining discount on liability component had been derecognized and therefore amortization ofdiscount on the liability component is no longer recognized.As of December 31, 2021, the if-converted value of 2023, 2024 and 2025 Convertible Notes exceeded the principal amount by $322,474, $526,459 and$1,693,319. As of December 31, 2022, the if-converted value of 2023 and 2024 Convertible Notes exceeded the principal amount by $50,968 and $5,758.Capped call transactionsIn connection with the offering of 2024 Convertible Notes and 2025 Convertible Notes, the Company entered into separately negotiated capped calltransactions with certain counterparties (collectively, the “Capped Calls”). The details of the Capped Calls are as follows: 2024 ConvertibleNotes 2025 ConvertibleNotes Initial strike price per share $50.13 $90.46 Initial cap price per share $70.36 $136.54 The Capped Calls are generally intended to reduce or offset the potential economic dilution to the Class A ordinary shares upon any conversion of the 2024Convertible Notes and 2025 Convertible Notes, respectively, with such reduction or offset, as the case may be, subject to a cap based on the cap price. Asthe Capped Calls are considered indexed to the Company’s own stock and are equity classified, they are recorded in shareholders’ equity and are notaccounted for as derivative. The costs of $97,060 and $135,700 incurred in connection with the Capped Calls of the 2024 Convertible Notes and 2025Convertible Notes, respectively, were recorded as reductions to additional paid-in capital. Capped Calls are excluded from the calculation of diluted earningsper share, as they would be antidilutive under treasury stock method.F-60Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)14.SHARE-BASED COMPENSATIONWith effect on January 1, 2022, the maximum number of shares which may be issued pursuant to all awards under its 2009 share incentive plan (the “Plan”)increased to 176,775,641 Class A ordinary shares. The Company amended the Plan in April 2022 to automatically increase on January 1 of each of 2023, 2024,2025 and 2026 by 3% of the total number of ordinary shares of all classes of the Company outstanding on that day immediately before the increase. Under thePlan, the Company may grant options, restricted share award (“RSA”), restricted share unit (“RSU”) or share appreciation right (“SAR”) to its officers,employees, directors and other eligible persons (collectively known as “Eligible Persons”). The Plan is administered by an authorized administrator appointedby the Board of Directors of the Company set forth in the Plan (the “Plan Administrator”).During the years ended December 31, 2021 and 2022, the Company granted 4,162,121 options, 3,551,491 RSUs and 51,464 SARs and 30,000,000 options,7,320,443 RSUs and 54,186 SARs, respectively to the Eligible Persons. All options granted have a contractual term of ten years. The options vest accordingto the stated vesting period in the grantee’s option agreement. The RSUs and SARs generally vest 25% on the first anniversary year from the stated vestingcommencement date and the remaining 75% will vest in 12 substantially equal quarterly instalments.On April 17, 2022, 4,000,000 existing options were cancelled and 4,000,000 new options were granted concurrently to the same grantee with an exercise priceof US$120 per share on the same date. The new options will vest every three months over a period of five years commencing April 30, 2022 and will expire 10years after the grant date. This is accounted for as a modification and resulted in an incremental share-based compensation cost of US$99,198, which shall berecognised over the new vesting period of the new options of five years commencing April 30, 2022.F-61Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)14.SHARE-BASED COMPENSATION (continued)(a)Option granted to Eligible PersonsThe following table summarizes the Company’s share option activity under the Plan: Number ofoptions Weightedaverageexerciseprice Weightedaverageremainingcontractualterm Aggregateintrinsicvalue $ Years $ Outstanding, January 1, 2020 47,188,554 13.89 Granted 5,809,024 18.59 Exercised (5,486,180) 11.29 Forfeited (45,678) 14.09 Outstanding, December 31, 2020 47,465,720 14.76 7.57 8,747,373 Vested and expected to vest at December 31, 2020 47,465,720 14.76 Exercisable as of December 31, 2020 25,298,368 13.73 7.03 4,688,260 Outstanding, January 1, 2021 47,465,720 14.76 Granted 4,162,121 269.09 Exercised (5,405,228) 14.44 Forfeited – Outstanding, December 31, 2021 46,222,613 37.70 6.89 8,822,987 Vested and expected to vest at December 31, 2021 46,222,613 37.70 Exercisable as of December 31, 2021 30,707,210 14.13 6.32 6,435,641 Outstanding, January 1, 2022 46,222,613 37.70 Granted 30,000,000 120.00 Cancelled (4,000,000) 280.00 Exercised (3,676,911) 13.82 Forfeited (12,516) 14.10 Outstanding, December 31, 2022 68,533,186 60.87 7.30 1,433,420 Vested and expected to vest at December 31, 2022 68,533,186 60.87 Exercisable as of December 31, 2022 36,880,548 22.99 5.97 1,274,793 The aggregate intrinsic value is calculated to be the difference between the exercise price of the underlying awards and the fair value of theunderlying stock at each reporting date, for those awards that have an exercise price below the estimated fair value of the Company’s ordinaryshares.F-62Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)14.SHARE-BASED COMPENSATION (continued)(a)Option granted to Eligible Persons (continued)The Company calculated the estimated fair value of the options on the respective grant dates using the Black-Scholes option pricing model with thefollowing assumptions: Granted in 2020 Granted in 2021 Granted in 2022 Risk-free interest rates 0.39% – 1.66% 0.74% – 1.07% 2.79% – 2.84%Expected term 5.5 – 7.5 years 5.6 – 7.5 years 5.1 – 7.5 yearsExpected volatility 32.4% – 33.7% 32.1% – 33.0% 48.7% – 55.9%Expected dividend yield – – –The Black-Scholes option pricing model was applied in determining the estimated fair value of the share options granted to Eligible Persons. Themodel requires the input of highly subjective assumptions including the estimated expected stock price volatility and the expected term of the optionfor which employees are likely to exercise their share options. The risk-free rate for periods within the contractual life of the option is based on theUS Treasury Yields at the time of grant. The Company has used the simplified method to determine the expected term due to insufficient historicalexercise data to provide a reasonable basis to estimate expected term. The Company’s management is ultimately responsible for the determination ofthe estimated fair value of its ordinary shares.The weighted-average grant-date fair value of share options granted during the years of December 31, 2020, 2021 and 2022 were $37.86, $75.83 and$57.74, respectively. The total fair value of share options vested during the years ended December 31, 2020, 2021 and 2022 was $88,114, $88,507 and$389,734, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2020, 2021 and 2022 was $767,203,$1,361,800 and $143,176, respectively.As of December 31, 2022, there were $1,616,133 total unrecognized share-based compensation cost related to unvested options which is expected tobe recognized over a weighted-average period of 4.30 years. Total unrecognized compensation cost may be adjusted for future changes in actualforfeitures.F-63Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)14.SHARE-BASED COMPENSATION (continued)(b)RSAs/RSUs granted to Eligible PersonsThe following table summarizes the Company’s RSAs/RSUs activity under the Plan: Number ofRSAs/RSUs Weightedaverage grantdate fair value Weightedaverageremainingcontractual life Aggregateintrinsicvalue $ Years $ Unvested, January 1, 2020 8,081,437 18.02 8.93 325,035 Granted 5,034,735 72.37 Vested (3,332,063) 19.25 Forfeited (442,181) 28.74 Unvested, December 31, 2020 and January 1, 2021 9,341,928 46.36 8.64 1,859,511 Granted 3,551,491 258.97 Vested (4,127,006) 40.59 Forfeited (637,193) 102.92 Unvested, December 31, 2021 and January 1, 2022 8,129,220 137.76 8.47 1,818,588 Granted 7,320,443 99.25 Vested (3,864,257) 110.34 Forfeited (1,933,175) 133.12 Unvested, December 31, 2022 9,652,231 120.48 8.81 502,206 Share-based compensation cost for RSAs and RSUs is measured based on the fair value of the Company’s ordinary shares on the date of grant.The weighted-average grant-date fair value of RSAs and RSUs granted during the years ended December 31, 2020, 2021 and 2022 was $72.37,$258.97 and $99.25, respectively. The total fair value of RSAs and RSUs vested during the years ended December 31, 2020, 2021 and 2022 was$64,153, $167,507 and $426,398, respectively.As of December 31, 2022, there was $1,162,883 of unrecognized share-based compensation cost related to RSAs and RSUs which is expected to berecognized over a weighted-average vesting period of 2.80 years. Total unrecognized compensation may be adjusted for future changes in actualforfeitures.F-64Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)14.SHARE-BASED COMPENSATION (continued)(c)SARs granted to Eligible PersonsFair value of the SARs is measured based on the fair value of the Company’s ordinary shares at the end of each reporting period.Total compensation expense relating to share options, RSAs, RSUs and SARs granted to employees after deducting forfeitures recognized for the yearsended December 31, 2020, 2021 and 2022 is as follows: Year ended December 31, 2020 2021 2022 $ $ $ Share options: Cost of revenue 130 390 – Sales and marketing expenses 69 5 – General and administrative expenses 179,544 207,204 313,917 Research and development expenses 401 33 254 180,144 207,632 314,171 Cash received for the exercise in the respective years 61,949 77,639 50,211 RSAs/ RSUs: Cost of revenue 4,385 8,318 11,104 Sales and marketing expenses 10,100 23,350 36,812 General and administrative expenses 37,433 67,421 67,388 Research and development expenses 45,820 148,592 283,747 97,738 247,681 399,051 SARs: Cost of revenue 2,867 3,389 (1,928)Sales and marketing expenses 5,462 6,850 (1,762)General and administrative expenses 3,534 3,658 (2,993)Research and development expenses 501 1,114 (643) 12,364 15,011 (7,326)F-65Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)15.ORDINARY SHARESThe Company has $7,500,000 authorized share capital which divided into (i) 14,800,000,000 Class A ordinary shares with a par value of $0.0005 each and (ii)200,000,000 Class B ordinary shares with par value of $0.0005 each. Holders of Class A ordinary shares and Class B ordinary shares shall at all times votetogether as one class on all resolutions submitted to a vote for shareholders’ approval or authorization, except for certain class consents required under theMemorandum and Articles of Association. Each Class A ordinary share shall be entitled to one vote, and each Class B ordinary share shall be entitled tofifteen votes, on all matters subject to the vote at general meetings of the Company. During the years ended December 31, 2021 and 2022, 4,200,000outstanding Class B ordinary shares were converted to 4,200,000 Class A ordinary shares and 102,447,910 outstanding Class B ordinary shares wereconverted to 102,447,910 Class A ordinary shares, respectively.The Company completed the follow-on offering in December 2020 and September 2021, and issued an aggregate of 15,180,000 and 12,650,000 ADSs,respectively, representing 15,180,000 and 12,650,000 Class A ordinary shares for total proceeds, net of issuance costs of $2,908,299 and $3,972,416,respectively. The Company’s shareholders approved as a special resolution to increase the voting power of each Class B ordinary share from three votes tofifteen votes on all matters subject to vote at general meetings of the Company in February 2022.16.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)The changes in accumulated other comprehensive income (loss) by component, net of tax, are as follows: Unrealizedfair valuegain (loss)on available-for-saleinvestments Foreigncurrencytranslation Total $ $ $ Balance as of January 1, 2020 5,400 49 5,449 Current year other comprehensive (loss) income (4,419) 3,603 (816)Transactions with non-controlling interests – 48 48 Balance as of December 31, 2020 981 3,700 4,681 Current year other comprehensive loss (1,278) (32,263) (33,541)Transactions with non-controlling interests – 341 341 Balance as of December 31, 2021 (297) (28,222) (28,519)Current year other comprehensive loss (6,263) (78,297) (84,560)Capital contributed by non-controlling interest – 1,864 1,864 Balance as of December 31, 2022 (6,560) (104,655) (111,215)F-66Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)17.RESTRICTED NET ASSETSCertain of the Company’s subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to the Company in accordance with thelocal laws and regulations.Certain jurisdictions where the Company has subsidiaries or VIEs require those subsidiaries or VIEs to establish and fund statutory reserves, details of whichare listed below:Statutory reserveThe changes in statutory reserve are as follows: Year ended December 31, 2021$ 2022$ At the beginning of the financial year 2,363 6,144 Transferred from retained earnings 3,781 6,346 At the end of the financial year 6,144 12,490 TaiwanThe subsidiary in Taiwan is required to set aside 10% of its profit after tax to legal reserve in accordance with Taiwanese regulations until the legal reserveamount equals to its total paid-up capital. In the event that the subsidiary incurred no loss, the portion of legal reserve exceeding 25% of the paid-up capitalcan be used for distribution to shareholders in the form of new shares or cash. As of December 31, 2021 and 2022, the subsidiary in Taiwan had anaccumulated reserve of $76 and $272, respectively.ThailandThe Thailand regulations require that a private limited liability company shall allocate not less than 5% of its retained earnings to a legal reserve, until thisaccount reaches an amount not less than 10% of the registered authorized capital. The legal reserve is not available for dividend distribution. As of December31, 2021 and 2022, the subsidiary in Thailand had an accumulated reserve of $13 and $13, respectively.The PRCThe PRC subsidiaries of the Company are required to provide for certain statutory reserves, namely a general reserve, an enterprise expansion fund and astaff welfare and bonus fund. As of December 31, 2021 and 2022, the Company’s PRC subsidiaries had an accumulated reserve of $6,055 and $12,205,respectively.IndonesiaThe Indonesian regulations require a limited liability company to reserve a certain amount from its net income each year as a reserve fund until such fundamounts to at least 20% of its issued and paid-up capital. As of December 31, 2021 and 2022, the Company’s Indonesia subsidiaries have not appropriatedany funds into the statutory reserve account.F-67Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)18.TAXATIONEnterprise income taxCayman IslandsThe Company is a company incorporated in the Cayman Islands and conducts its primary business operations through its subsidiaries and its consolidatedVIEs. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains.SingaporeSubsidiaries incorporated in Singapore are subject to the Singapore Corporate Tax rate of 17% for the years ended December 31, 2020, 2021 and 2022. GarenaOnline was granted an additional five-year Development and Expansion Incentive (“DEI”) by the Singapore Economic Development Board (the “EDB”)commencing from January 1, 2017, with another five-year extension commencing from January 1, 2022, which grant a concessionary tax rate of 10% fromJanuary 1, 2017 to December 31, 2021 and 10.5% from January 1, 2022 to December 31, 2026 on qualifying income, subject to certain terms and conditionsimposed by the EDB.OthersSubsidiaries incorporated in other countries are subject to the respective applicable corporate income tax rates of the countries where they are resident.Domestic statutory corporate income tax rate in Indonesia was reduced from 25% to 22% with effect from the financial year 2020.In March 2021, the Philippines reduced its corporate income tax rate from 30% to 25%, effective retroactively from July 1, 2020.Income tax expense comprises: Year ended December 31, 2020$ 2021$ 2022$ Current income tax 117,649 289,998 272,070 Deferred tax (27,451) (975) (140,553)Withholding tax expense 51,442 43,842 36,878 141,640 332,865 168,395 F-68Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)18.TAXATION (continued)Enterprise income tax (continued)The reconciliation of tax computed by applying the tax rate of 17% which is also the statutory corporate income tax rate for its Singapore’s corporate officefor the years ended December 31, 2020, 2021 and 2022 is as follows: Year ended December 31, 2020$ 2021$ 2022$ Loss before income tax and share of results of equity investees (1,483,238) (1,715,184) (1,500,533) Tax expense computed at tax rate of 17% (252,150) (291,581) (255,091)Changes in valuation allowance 403,329 828,141 389,129 Non-deductible expenses 9,554 19,569 28,397 Effect of concessionary tax rate and tax reliefs (82,951) (183,962) (117,558)Withholding tax expense 51,442 43,842 36,878 Foreign earnings at different tax rates 15,103 (82,388) 85,204 Others (2,687) (756) 1,436 141,640 332,865 168,395 Deferred taxThe significant components of deferred taxes are as follows: As of December 31, 2021$ 2022$ Deferred tax assets Property and equipment 3,290 11,039 Deferred revenue 145,003 93,163 Unutilized tax losses and unused capital allowances 1,690,773 2,049,196 Provision and accrued expenses 28,807 58,650 Allowance for credit losses 13,012 41,002 Others 7,811 19,844 Valuation allowance (1,768,957) (2,013,288)Total deferred tax assets 119,739 259,606 Deferred tax liabilities Property and equipment (6,949) (14,456)Intangible assets (1,174) (1,292)Deferred channel costs (13,783) (7,111)Others (1,070) (1,488)Total deferred tax liabilities (22,976) (24,347)Net deferred tax assets 96,763 235,259 F-69Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)18.TAXATION (continued)Deferred tax (continued)The use of these tax losses and capital allowances is subject to the agreement of the tax authorities and compliance with certain provisions of the taxlegislation of the jurisdiction in which the entity operates. These tax losses have no expiry date except tax losses approximating to $1,671,044, $3,473,098 and$2,661,916 as of December 31, 2020, 2021 and 2022, respectively. The tax losses of $2,661,916 as of December 31, 2022 will expire from 2023 to 2042.The utilization of deferred tax assets recognized by the Group is dependent upon future taxable income in excess of income arising from the reversal ofexisting taxable temporary differences.As of December 31, 2022, no deferred tax liability has been recognised on the undistributed earnings of its foreign subsidiaries as the Company either intendsto permanently reinvest the undistributed earnings to fund its future operations or no withholding tax is imposed on the remittance of undistributed earningsin certain jurisdiction.19.LOSS PER SHAREBasic and diluted loss per share for each of the periods presented is calculated as follows: Year ended December 31, 2020$ 2021$ 2022$ Numerator: Net loss attributable to ordinary shareholders (1,618,056) (2,046,759) (1,651,421) Denominator: Weighted-average number of shares outstanding – basic and diluted 477,264,888 532,705,796 558,119,948 Basic and diluted loss per share: (3.39) (3.84) (2.96)The following potential common shares were excluded from calculation of diluted net loss per share because their effect would have been anti-dilutive for theperiods presented: Year ended December 31, 2020 2021 2022 Share options 50,090,731 46,225,613 68,800,110 RSAs/RSUs 9,341,928 8,129,220 9,652,231 Convertible notes 37,370,919 23,349,154 21,635,690 96,803,578 77,703,987 100,088,031 F-70Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)19.LOSS PER SHARE (continued)The denominator for diluted loss per share for the years ended December 31, 2020, 2021 and 2022 does not include any effect from the Capped Calls (Note 13)because it would be anti-dilutive. In the event of conversion of any or all of the 2024 Convertible Notes and 2025 Convertible Notes, the shares that would bedelivered to the Company under the Capped Calls are designed to neutralize the dilutive effect of the shares that the Company would issue under theconvertible notes.During the years ended December 31, 2021 and 2022, respectively, the Company issued 12,000,000 and 7,000,000 Class A ordinary shares to its sharedepositary bank which will be used to settle share incentive awards. No consideration was received by the Company for this issuance of Class A ordinaryshares. These Class A ordinary shares are legally issued and outstanding but are treated as escrowed shares for accounting purposes and therefore, havebeen excluded from the computation of loss per share. Any Class A ordinary shares not used in the settlement of share incentive awards will be returned tothe Company.20.RELATED PARTY TRANSACTIONS(a)Related parties(1)Name of related partiesRelationship with the Company Tencent Limited and its affiliates (“Tencent”)A shareholder of the Company(1)These are the related parties that have engaged in significant transactions with the Company for the years ended December 31, 2020, 2021 and2022. On September 5, 2022, the director who is an executive officer of Tencent resigned from the Board of Directors of the Company andTencent granted an irrevocable voting proxy with respect to all its shares in the Company to the Board of Directors of the Company to vote onmatters that are subject to the vote of shareholders of the Company. Accordingly, Tencent is no longer a related party of the Company.(b)The Company had the following significant related party transactions for the years ended December 31, 2020, 2021 and 2022: Year ended December 31, 2020$ 2021$ 2022$ Royalty fee and license fee to: - Tencent 110,686 139,930 99,628 Services provided by: - Tencent 23,352 24,981 9,794 F-71Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)20.RELATED PARTY TRANSACTIONS (continued)(c)The Company had the following significant related party balances as of December 31, 2021 and 2022: As of December 31, 2021$ 2022$ Amounts due to related parties: - Tencent 73,244 – 21.SEGMENT REPORTINGThe Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The CODM reviews the performance ofeach segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to andevaluating financial performance of each segment.Description of Reportable SegmentsDigital entertainment – Garena offers mobile and PC online games and develops mobile games for the global market. Garena also promotes eSports.E-commerce – Shopee’s platform is a mobile-centric, social-focused marketplace. It provides users with a convenient, safe, and trusted shopping environmentwith integrated payment, logistics infrastructure and comprehensive seller services. Products from manufacturers and third parties are also purchased andsold directly to buyers on the Shopee platform.Digital financial services – SeaMoney provides a variety of payment services and loans to individuals and businesses. It is an important paymentinfrastructure supporting the Company’s digital entertainment and e-commerce businesses. In addition, SeaMoney also integrates with third-party merchantpartners and covers a broad set of consumption use cases.A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as“Other services”.F-72Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)21.SEGMENT REPORTING (continued)Information about segments for the years ended December 31, 2020, 2021 and 2022 presented were as follows: Year ended December 31, 2020 DigitalEntertainment$ E-Commerce$ Digital FinancialServices$ OtherServices$ Unallocatedexpenses(1)$ Consolidated$ Revenue 2,015,972 2,167,149 60,785 131,758 – 4,375,664 Operating income (loss) 1,016,793 (1,442,593) (520,075) (49,006) (308,444) (1,303,325)Non-operating loss, net (179,913)Income tax expense (141,640)Share of results of equity investees 721 Net loss (1,624,157) Year ended December 31, 2021 DigitalEntertainment$ E-Commerce$ Digital FinancialServices$ OtherServices$ Unallocatedexpenses(1)$ Consolidated$ Revenue 4,320,013 5,122,959 469,774 42,444 – 9,955,190 Operating income (loss) 2,500,081 (2,766,566) (640,422) (177,633) (498,520) (1,583,060)Non-operating loss, net (132,124)Income tax expense (332,865)Share of results of equity investees 5,019 Net loss (2,043,030)F-73Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)21.SEGMENT REPORTING (continued) Year ended December 31, 2022 DigitalEntertainment$ E-Commerce$ Digital FinancialServices$ OtherServices$ Unallocatedexpenses(1)$ Consolidated$ Revenue 3,877,163 7,288,677 1,221,996 61,869 – 12,449,705 Operating income (loss) 1,971,416 (2,013,360) (277,264) (252,162) (916,138) (1,487,508)Non-operating loss, net (13,025)Income tax expense (168,395)Share of results of equity investees 11,156 Net loss (1,657,772)(1)Unallocated expenses are mainly relating to share-based compensation, impairment of goodwill of prior acquisitions that are not under the Company’sreportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated tosegments. These expenses are excluded from segments results as they are not reviewed by the CODM as part of segment performance.F-74Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)21.SEGMENT REPORTING (continued)Revenue from external customers is classified based on the geographical locations where the services were provided. Year ended December 31, 2020$ 2021$ 2022$ Revenue Southeast Asia 2,791,894 6,316,782 8,321,249 Latin America 790,308 1,850,861 2,043,918 Rest of Asia 655,007 1,394,342 1,727,187 Rest of the world 138,455 393,205 357,351 Consolidated revenue 4,375,664 9,955,190 12,449,705 Long-lived assets consist of property and equipment, operating lease right-of-use assets and intangible assets. As of December 31, 2021$ 2022$ Long-lived assets Southeast Asia 1,412,748 1,804,846 Rest of Asia 262,978 348,116 Rest of the world 56,434 257,792 1,732,160 2,410,754 22.FAIR VALUE MEASUREMENTSFair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants atthe measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used tomeasure fair value:Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active marketsLevel 2 – Inputs that are based on quoted prices and market observable data of similar instruments in active marketsLevel 3 – Unobservable inputs that are supported by little or no market activitiesThe fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Derivative instruments are categorized within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and marketobservable data of similar instruments in active markets, such as currency spot and forward rates.F-75Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)22.FAIR VALUE MEASUREMENTS (continued)As of December 31, 2021 and 2022, assets and liabilities categorized within Level 3 of the fair value hierarchy included investments in convertible loan,investments in sovereign bonds, investments carried at fair value, investments in equity securities accounted under measurement alternative, redeemablepreference shares of investees and other assets.Investments in debt securities – the carrying amount approximates fair value due to its short-term nature.Investments carried at fair value or measurement alternative – the Company used market adjusted option pricing model backsolve, which is determined byusing information including but not limited to the pricing of recent rounds of financing of the investees, liquidity factors and a selection of comparablecompanies.The significant unobservable input used to determine the fair value of investments carried at fair value or measurement alternative under the market adjustedoption pricing model backsolve is as follows:Unobservable input(1) Weightedaverage(2) RangeMarket adjustment (20%)(90%) to 7% (1)Significant increase (decrease) in the input would result in a significantly higher (lower) fair value measurement, depending on the materiality of theinvestment. (2)Input was weighted based on the fair value of the investments included in the range.Convertible Notes – the Company used commonly accepted valuation methodology to determine the fair value. The valuation methodology takes intoaccount the volatility and implied credit yield.Other assets – the Company used market approach to determine the fair value of certain assets by comparing to the sale and purchase transactions ofcomparable assets in the market, adjusted with differences such as size, physical condition, location and etc.F-76Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)22.FAIR VALUE MEASUREMENTS (continued)Assets and liabilities measured or reported at fair value on a recurring basis are summarized below: As of December 31, 2021 Quoted prices inactive markets foridentical assets(Level 1)$ Significant otherobservable inputs(Level 2)$ Unobservableinputs(Level 3)$ Total$ Held to maturity investments 937,741 – 450 938,191 Available-for-sale investments 185,929 – 34,376 220,305 Equity securities 13,184 – – 13,184 Investments carried at fair value – – 178,298 178,298 Other assets – – 11,711 11,711 Derivative assets(1) – 694 – 694 Share appreciation rights (15,401) – – (15,401) 1,121,453 694 224,835 1,346,982 As of December 31, 2022 Quoted prices inactive markets foridentical assets(Level 1)$ Significant otherobservable inputs(Level 2)$ Unobservableinputs(Level 3)$ Total$ Held to maturity investments 621,346 – 490 621,836 Available-for-sale investments 562,051 – 35,126 597,177 Equity securities 2,008 548 – 2,556 Investments carried at fair value – – 178,233 178,233 Other assets – – 9,668 9,668 Derivative assets(1) – 3 – 3 Derivative liabilities(2) – (2,277) – (2,277)Share appreciation rights (5,420) – – (5,420)2023 Convertible Notes – – (82,666) (82,666)2024 Convertible Notes – – (190,646) (190,646)2025 Convertible Notes – – (1,148,639) (1,148,639)2026 Convertible Notes – – (1,454,421) (1,454,421) 1,179,985 (1,726) (2,652,855) (1,474,596) (1)Included in prepaid expenses and other assets in the consolidated balance sheets and not designated as hedges. (2)Included in accrued expenses and other payables in the consolidated balance sheets and not designated as hedges.F-77Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)22.FAIR VALUE MEASUREMENTS (continued)Certain long-term equity securities that were accounted for using measurement alternative were measured at fair value on a non-recurring basis and werecategorized within Level 3 of the fair value hierarchy because significant unobservable inputs were used to estimate its fair value. Assets remeasured at fairvalue within Level 3 of the fair value hierarchy on a non-recurring basis were nil and $264,899 as of December 31, 2021 and 2022, respectively.Reconciliations of assets and liabilities measured at fair value on a recurring basis and are categorized within Level 3 of the fair value hierarchy are as follows: $ Available-for-sale investments Balance as of January 1, 2020 128,418 Additions 20,429 Conversion into ordinary shares of investees (72,000)Net investment loss included in earnings (51,000)Net unrealized loss included in other comprehensive income (4,490)Balance as of December 31, 2020 21,357 Additions 35,298 Conversion into ordinary shares of investees (21,340)Net unrealized loss included in other comprehensive income (958)Translation gain included in other comprehensive income 19 Balance as of December 31, 2021 34,376 Additions 3,198 Settlement (1,266)Net unrealized loss included in other comprehensive income (1,193)Translation gain included in other comprehensive income 11 Balance as of December 31, 2022 35,126 Investments carried at fair value Balance as of January 1, 2020 and January 1, 2021 – Additions 151,227 Net investment gain included in earnings 27,071 Balance as at December 31, 2021 178,298 Additions 74,482 Net investment loss included in earnings (74,547)Balance as of December 31, 2022 178,233 F-78Table of ContentsSEA LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts expressed in thousands of US dollars (“$”) except for number of shares and per share data)22.FAIR VALUE MEASUREMENTS (continued) $ Other assets Balance as of January 1, 2020 – Acquisition of subsidiaries 8,860 Additions 13,340 Disposals (363)Write-down included in earnings (3,713)Translation gain included in other comprehensive income 900 Balance as of December 31, 2020 19,024 Additions 186 Disposals (3,513)Write-down included in earnings (3,627)Translation loss included in other comprehensive income (359)Balance as of December 31, 2021 11,711 Additions 56 Disposals (679)Write-down included in earnings (476)Translation loss included in other comprehensive income (944)Balance as of December 31, 2022 9,668 23.COMMITMENTS AND CONTINGENCIESPurchase commitmentsThe Company has commitments to purchase property and equipment and hosting services of $362,592 and $99,050, committed licensing fee payable for thelicensing of game titles of $13,671 and $13,677 and commitments to invest in certain companies of $183,562 and $125,733 as of December 31, 2021 and 2022,respectively.Minimum guarantee commitmentsThe Company has commitments to pay minimum guarantee of royalty fee to game developers for certain online games it licensed from those gamedevelopers. As of December 31, 2021 and 2022, the minimum guarantee commitments amounted to $62,300 and $45,257, respectively, for its launched games aswell as licensed but yet to be launched games.OthersThe Company has commitments to extend credit to customers on demand and interest receivables on non-performing assets which is not accrued. As ofDecember 31, 2021, the undrawn credit facilities and interest receivables on non-performing assets amounted to $4,212 and $5,042, respectively. As ofDecember 31, 2022, the undrawn credit facilities and interest receivables on non-performing assets amounted to $233 and $10,947, respectively.F-79

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