Sogou Inc.
Annual Report 2017

Plain-text annual report

Morningstar® Document Research℠ FORM 20-FSOGOU INC. - SOGOFiled: February 28, 2018 (period: December 31, 2017)Annual and transition report of foreign private issuers under sections 13 or 15(d)The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 20-F (Mark One) ooREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGEACT OF 1934 OR xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017 OR ooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 OR ooSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 Commission file number: 001-38279 SOGOU INC.(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) Level 15, Sohu.com Internet PlazaNo. 1 Unit Zhongguancun East Road, Haidian DistrictBeijing 100084People’s Republic of China+86 10-5689-9999(Address of principal executive offices) Joe ZhouChief Financial OfficerLevel 15, Sohu.com Internet PlazaNo. 1 Unit Zhongguancun East Road, Haidian DistrictBeijing 100084People’s Republic of ChinaTelephone: (86 10) 5689-9999Email: IR@sogou-inc.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 class)(Name of each exchange on which registered)American Depositary Shares, each representing one Class Aordinary share, par value US$0.001 per shareNew York Stock Exchange LLC Securities registered or to be registered pursuant to Section 12(g) of the Act:Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None 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 annual report:118,408,437 Class A Ordinary Shares, par value $0.001 per share, and 278,757,875 Class B Ordinary Shares, par value $0.001 per share, as of December 31,2017. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.o Yes x 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.o Yes x 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 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.x Yes o No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).x Yes o 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. See thedefinitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer o Non-accelerated filer x Emerging growth company x 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 theExchange Act. x Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing. U.S. GAAP x International Financial Reporting Standards as issuedby the International Accounting Standards Board o Other o 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.o Item 17 o 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).o Yes x No Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents TABLE OF CONTENTS PageNumberINTRODUCTION FORWARD-LOOKING INFORMATION2 PART I Item 1.Identity of Directors, Senior Management and Advisers3Item 2.Offer Statistics and Expected Timetable3Item 3.Key Information3Item 4.Information on the Company31Item 4A.Unresolved Staff Comments66Item 5.Operating and Financial Review and Prospects66Item 6.Directors, Senior Management and Employees83Item 7.Major Shareholders and Related Party Transactions90Item 8.Financial Information95Item 9.The Offer and Listing96Item 10.Additional Information97Item 11.Quantitative and Qualitative Disclosures About Market Risk106Item 12.Description of Securities Other than Equity Securities107 PART II Item 13.Defaults, Dividend Arrearages and Delinquencies108Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds108Item 15.Controls and Procedures108Item 16A.Audit Committee Financial Expert108Item 16B.Code of Ethics108Item 16C.Principal Accountant Fees and Services109Item 16D.Exemptions from the Listing Standards for Audit Committees109Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers109Item 16F.Change in Registrants’ Certifying Accountants109Item 16G.Corporate Governance109Item 16H.Mine Safety Disclosure110 PART III Item 17.Financial Statements111Item 18.Financial Statements111Item 19.Exhibits112 Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents INTRODUCTION In this annual report, except where the context otherwise requires and for purposes of this annual report only: · “Amended and Restated Articles of Association” refers to our Third Amended and Restated Articles of Association; · “Amended and Restated Memorandum of Association” refers to our Seventh Amended and Restated Memorandum of Association; · “China” or the “PRC” refers to the People’s Republic of China, and for the purpose of this annual report, excludes Hong Kong, Macau, andTaiwan; · “Class A Ordinary Shares” refers to our Class A Ordinary Shares, par value of $0.001 per share, carrying one vote per share; · “Class B Ordinary Shares” refers to our Class B Ordinary Shares, par value of $0.001 per share, carrying ten votes per share; · “China Literature” refers to China Literature Limited, China’s largest online literature platform; · “DAU,” for active users quoted from iResearch, for any given month, refers to the average number of active users per day during that month. A userwho uses the applicable product more than once in any such day is counted as one active user for that day. Each distinguishable device orapplication is treated as a separate user for purposes of calculating such DAU; · “MAU,” for active users quoted from iResearch, for any given month, refers to the number of active users during that month. A user who uses theapplicable product more than once in any such month is counted as one active user for that month. Each distinguishable device or application istreated as a separate user for purposes of calculating such MAU; · “Mobile DAU” for our Sogou Mobile Keyboard (the mobile application of Sogou Input Method), for any given month, refers to the averagenumber of active users per day during that month. A user who uses Sogou Mobile Keyboard more than once in any such day is counted as oneactive user for that day. We treat each distinguishable device as a separate user for purposes of calculating such DAU, although it is possible thatsome people may use more than one device, and multiple people may share one device; · “Mobile MAU” for our Sogou Mobile Keyboard, for any given period, refers to the number of active users during the last month of such givenperiod. A user who uses Sogou Mobile Keyboard more than once in that month is counted as one active user for that month. We treat eachdistinguishable device as a separate user for purposes of calculating such MAU, although it is possible that some people may use more than onedevice, and multiple people may share one device; · “Mobile MAU” for our Sogou mobile search, for any given period, refers to the number of active users during the last month of such given period.A user who uses Sogou mobile search more than once in that month is counted as one active user for that month. We treat each distinguishablemobile browser or each Sogou mobile search application as a separate user for purposes of calculating such MAU, although it is possible that onany given device, some people may use more than one mobile browser, and multiple people may share one mobile browser or one Sogou mobilesearch application; · “Paid clicks” refers to the number of paid clicks, including clicks by our users on advertisers’ promotional links displayed on our search resultpages and other Internet properties and third parties’ Internet properties; · “PC DAU” for our Sogou Input Method, for any given month, refers to the average number of active users per day during that month. A user whouses Sogou Input Method more than once in any such day is counted as one active user for that day. We treat each distinguishable device as aseparate user for purposes of calculating such DAU, although it is possible that some people may use more than one device, and multiple peoplemay share one device; · “Pre-IPO Class A Ordinary Shares” refers to our Class A ordinary shares, carrying one vote per share, that were authorized and outstanding prior tothe completion of our initial public offering; · “Pre-IPO Class B Ordinary Shares” refers to our Class B ordinary shares, without voting rights, that were authorized and outstanding prior to thecompletion of our initial public offering; 1Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · “Pre-IPO Ordinary Shares” refers to our Pre-IPO Class A Ordinary Shares and our Pre-IPO Class B Ordinary Shares; · “Pre-IPO Series A Preferred Shares” refers to our Series A preferred shares, carrying one vote per share, that were authorized and outstanding priorto the completion of our initial public offering, and were categorized as “mezzanine equity” in our consolidated financial statements appearingelsewhere in this annual report; · “Pre-IPO Series B Preferred Shares” refers to our Series B preferred shares, carrying one vote per share, that were authorized and outstanding priorto the completion of our initial public offering, and were categorized as “mezzanine equity” in our consolidated financial statements appearingelsewhere in this annual report; · “Pre-IPO Preferred Shares” refers to our Pre-IPO Series A Preferred Shares and our Pre-IPO Series B Preferred Shares, collectively; · “RMB” refers to Renminbi, or Yuan, the official currency of the PRC; · “Sogou” refers to Sogou Inc., a Cayman Islands company, and unless the context requires otherwise, includes its subsidiaries and variable interestentities, or VIEs; · “Sohu.com Inc.” refers to our ultimate parent and controlling shareholder, whose shares of common stock are listed on the Nasdaq Global SelectMarket under the symbol “SOHU”; · “Sohu” refers to Sohu.com Inc. and its subsidiaries and VIEs, not including Sogou and its subsidiaries and VIEs; · “Sohu Group” refers to Sohu.com Inc. and its subsidiaries and VIEs, including Sogou and its subsidiaries and VIEs; · “Tencent” or “Tencent group” refers to Tencent Holdings Limited and its subsidiaries under International Financial Reporting Standards; · “we,” “us,” “our company,” and “our” refer to Sogou Inc. and, unless the context requires otherwise, include its subsidiaries and VIEs; · “Weixin Official Accounts” refers to Weixin/WeChat accounts where individuals and enterprises, as account owners, provide content and servicesto subscribers; and · “Zhihu” refers to Zhihu Technology Limited and its affiliates, the leading online knowledge-sharing platform in China. This annual report on Form 20-F includes our audited consolidated statements of comprehensive income for the years ended December 31, 2015, 2016,and 2017 and audited consolidated balance sheets as of December 31, 2016 and 2017. We completed an initial public offering of our ADSs on November 13, 2017. Our ADSs are traded on the New York Stock Exchange under the symbol“SOGO.” FORWARD-LOOKING INFORMATION This annual report on Form 20-F contains “forward looking statements.” These statements are made under the “safe harbor” provisions of the U.S.Private Securities Litigation Reform Act of 1995. Whenever you read a statement that is not simply a statement of historical fact (such as when we describewhat we “believe,” “expect,” or “anticipate” will occur, and other similar statements), you must remember that our expectations may not be correct, eventhough we believe that they are reasonable. We do not guarantee that the transactions and events described in this annual report will happen as described orthat they will happen at all. You should read this annual report completely, with the understanding that actual future results may be materially different fromwhat we expect. See “Item 3 - Key Information—Risk Factors.” The forward-looking statements made in this annual report relate only to events as of the date on which the statements are made. We undertake noobligation, beyond that required by law, to update any forward-looking statement to reflect events or circumstances after the date on which the statement ismade, even though our situation will change in the future. Whether actual results will conform with our expectations and predictions is subject to a number of risks and uncertainties, many of which are beyondour control, and reflect future business decisions that are subject to change. Some of the assumptions, future results, and levels of performance expressed orimplied in the forward-looking statements we make inevitably will not materialize, and unanticipated events may occur which will affect our results. 2Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents These forward-looking statements include: · our ability to maintain and strengthen our position as a leader in China’s Internet industry and an innovator in AI; · our expected development and launch, and market acceptance, of our products and services; · our various initiatives to implement our business strategies to expand our business; · our future business development, results of operations, and financial condition; · the expected growth of and change in the online search industry in China; and · PRC laws, regulations, and policies relating to the Internet and Internet content providers, including online search and search-related servicesproviders. 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 Selected Consolidated Financial Data The following selected consolidated statements of comprehensive income data and selected consolidated statements of cash flow data for the threeyears ended December 31, 2017 and selected consolidated balance sheet data as of December 31, 2016 and 2017 have been derived from our auditedconsolidated financial statements included in this annual report beginning on page F-1. The selected consolidated statements of comprehensive(loss)/income data for the year ended December 31, 2014 and our consolidated balance sheet data as of December 31, 2014 and 2015 have been derived fromaudited consolidated financial statements that are not included in this annual report. Our consolidated financial statements are prepared and presented inaccordance with U.S. GAAP. You should read the following information in conjunction with our consolidated financial statements and related notes and“Item 5. Operating and Financial Review and Prospects” below. Our historical results do not necessarily indicate results to be expected for any future period. 3Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Selected Consolidated Statements of Comprehensive (Loss)/Income Data For the Year Ended December 31, 2014 2015 2016 2017 (US$ in thousands, except for per ADS data) Revenues:Search and search-related advertising revenues357,839539,521597,213801,551Other revenues28,54352,28263,195106,806Total revenues386,382591,803660,408908,357Cost of revenues165,650248,279302,736457,401Gross profit220,732343,524357,672450,956Operating expenses:Research and development123,339131,072138,364172,829Sales and marketing78,07493,998123,119156,420General and administrative51,24416,66624,56727,821Total operating expenses252,657241,736286,050357,070Operating (loss)/income(31,925)101,78871,62293,886Interest income2,7735,3325,1989,126Foreign currency exchange (loss)/gain(149)6675,346(7,082)Other income/(expenses), net2,4621,142(26,027)692(Loss)/income before income tax expenses(26,839)108,92956,13996,622Income tax expenses—9,4302714,422Net (loss)/income(26,839)99,49956,11282,200Net (loss)/income per ADS—basic(0.41)(0.04)0.120.22Net (loss)/income per ADS—diluted(0.41)(0.04)0.110.20 Share-based compensation expense included in:Cost of revenues1,092330171540Research and development21,0116,8625,61516,470Sales and marketing4,1419431,8164,299General and administrative37,7982,2445,2592,41464,04210,37912,86123,723 Selected Consolidated Balance Sheet Data As of December 31, 2014 2015 2016 2017 (US$ in thousands) Cash and cash equivalents224,273244,484286,078694,207Total current assets280,682306,444359,9241,121,242Total assets339,173413,971524,8181,321,036Total current liabilities232,250300,909358,556412,795Total liabilities232,250300,909358,556412,795Total mezzanine equity263,577244,426244,404—Total shareholders’ (deficit)/equity(156,654)(131,364)(78,142)908,241 Presented giving effect to the redesignation on a one-for-one basis upon the completion of our initial public offering of all Pre-IPO Series APreferred Shares into Class A Ordinary Shares and all Pre-IPO Series B Preferred Shares into Class B Ordinary Shares. Risk Factors Risks Related to Our Business The online search industry in China is extremely competitive, and if we are unable to compete successfully, it will be difficult for us to maintain orincrease our revenues and profitability. We operate our business in an extremely competitive industry. We face intense competition in every aspect of our business, including competitionfor users, advertisers, technology, and talent. We face competition for our search and search-related services in China primarily from Baidu Inc., or Baidu, andShenMa, operated by UCWeb Inc., or UCWeb, which is a subsidiary of Alibaba Group Holding Limited, or Alibaba. Both Baidu and Alibaba haveconsiderably greater financial and technical resources available to them than we do. We also face competition for both users and advertisers from websitesand mobile applications that provide specialized search services in China, including travel services and information platforms such as Ctrip and Qunar;group-buy platforms such as Meituan Dianping; online classified advertisement platforms such as 58.com; and newsfeeds such as Toutiao. We compete foradvertisers not only with Internet companies, but also with other types of advertising media such as newspapers and magazines, billboards and busadvertisements, television, and radio. It is also possible that multinational businesses with considerably greater financial and other resources than ours couldexpand their offerings in China, making it harder for us to gain market share. 4(1)(1)(1)(1)(1)(1)(1)(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Our existing and potential competitors compete with us for users and advertisers on the basis of the quality and quantity of search results; thefeatures, availability, and ease of use of products and services; and the number and quality of advertising distribution channels. They also compete with usfor talent with technological expertise, which is critical to the sustained development of our products and services. If we are unable to differentiate ourselvesfrom our competitors in each of these areas, we may not be able to maintain or increase our user and advertiser base, which would have an adverse impact onour business, results of operations, and growth potential. In addition, we may have difficulty in successfully promoting and differentiating our new products,services, and features as a result of the market power of our competitors. We must expand our user base to grow our business, and we must continually innovate and adapt our business in an evolving online search industry inorder to do so. If we fail to continue to innovate and introduce products and services to enhance user experience, we may not be able to generatesufficient user traffic to remain competitive. The Internet industry in general and the online search industry in particular have been undergoing rapid changes in technology and in userpreferences. Our future success in expanding our user base will depend on our ability to respond to, as well as anticipate and apply, rapidly evolvingtechnologies. We must adapt our existing products and services and develop new products and product areas that will meet the evolving demands of users,deliver attractive experiences for our users that enhance user engagement, and cause our users to return to our services and increase the frequency of theirsearches on our platforms. Our development and introduction of new products, features, and services are subject to additional risks and uncertainties.Unexpected technical, operational, distribution, or other problems could delay or prevent the development and introduction of one or more of our currentlyplanned and any future new products and services. There are constant innovations in the market regarding search services, search and search-relatedadvertising, and providing information to users. If we are unable to predict user preferences or industry changes, or if we are unable to modify our productsand services on a timely basis, we may lose users. Our operating results will also suffer if our innovations are not responsive to the needs of our users, are notappropriately timed with market opportunity, or are not effectively brought to market. As search technology continues to develop, there may be offered in theChina market products and services that are, or that are perceived to be, substantially similar to or better than those generated by our search services. Asworldwide focus on the development of AI technologies has intensified, it has become increasingly important to apply AI technologies to online searchproducts and features in order to attract and retain users, and we cannot be sure that we will be able to apply such technologies successfully. Our competitors may develop and offer new products, services, and features that are similar to ours and may introduce them to the market before wecan, and such new offerings from our competitors may be found by users to be more attractive than ours. Moreover, we cannot be sure that any of our newproducts, services, and features will attract additional users and lead to the generation of incremental revenue. As users increasingly use mobile devices to access search services and other Internet services in China, we will need to continue to design, develop,promote, and operate new products and services tailored for mobile devices. Our design and development of new products and services that are optimized formobile devices may not be successful. We may encounter difficulties with the installation and delivery of such new products and services, and they may notfunction smoothly. As new mobile devices are released or updated, we may encounter problems in developing and upgrading our products and services forthe new releases and updates, and we may need to devote significant resources to such development and upgrades. If we are not successful in adapting ourofferings for mobile devices as described above, maintenance and growth of our business will be impeded. If our collaboration with Tencent is terminated or curtailed, our business and prospects for growth will be adversely affected. We have extensive collaboration with Tencent, one of our largest shareholders. We are the default general search engine in various Tencent productsthat provide general search offerings, such as Mobile QQ Browser, qq.com, and the PC Web directories daohang.qq.com and hao.qq.com. Approximately 38%of our total search traffic, measured by page views, was contributed by Tencent’s Internet properties in December 2017. Sogou Weixin Search is currently thesole general search engine with access to all content published on Weixin Official Accounts, but it is possible that Tencent will grant such access to othergeneral search engines. We cannot assure you that we will be able to maintain the current level of cooperation with Tencent in the future. If our collaborativerelationship with Tencent is terminated or curtailed due to Tencent’s initiating its own general search service or partnering with other search enginecompanies, or if any of the commercial terms were to be revised or made less favorable to us, or if Tencent does not continue to deliver to us an adequate levelof access to its platforms or adequately promote our products and services, our business and prospects will be adversely affected. For a detailed discussion ofour collaborative arrangements with Tencent, see “Related Party Transactions - Business Collaboration with Tencent.” 5Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Our efforts to expand our collaboration with Tencent may not be successful. Since October 2017, Tencent has been testing, on a trial basis and for purposes of assessment, the integration of Sogou Search into Weixin/WeChat.With this initiative, users of Weixin/WeChat can use Sogou Search as a general search function within Weixin/WeChat to access Internet information outsideWeixin/WeChat. We are working closely with Tencent on product testing and optimization and intend to discuss commercial arrangements upon thecompletion of the trial stage. However, we cannot assure you that product testing will be successful or that we will be able to reach agreement with Tencent asto commercial terms that would apply to such an integration. If the integration of Sogou Search into Weixin/WeChat is not successful or, even if it issuccessful, if we are unable to agree with Tencent as to commercial terms and Tencent terminates the integration, we will lose the potential to expand our userbase by offering general search services in Weixin/WeChat to its users, which would have an adverse impact on our prospects for growth. In addition,although Tencent has agreed that Sogou Search will be offered as the default general search engine for Tencent products that offer general search functions,such agreement will terminate as to Weixin/WeChat (and as to Tencent products other than Mobile QQ Browser and PC Web navigation products) afterSeptember 2018, rather than 2023, if Tencent is able to demonstrate that offering Sogou Search as the default general search engine will “harm the userexperience.” See “Related Party Transactions—Business Collaboration with Tencent.” It is difficult for us to predict the potential impact of the inclusion ofSogou Search as the default general search engine in Weixin/WeChat measured under the standard of “harm the user experience.” Even if our general searchengine is integrated into Weixin/WeChat, the potential for growth of our business through such integration will be limited if Tencent does not make SogouSearch the default general search engine and a Tencent search engine or a search engine of one of our competitors is given priority over ours inWeixin/WeChat. Our existing business and our expansion strategy depend on certain additional key collaborative arrangements, and any inability to maintain ordevelop such relationships could have an adverse effect on our business and prospects for growth. Our existing business, and our strategy for developing our business, involve maintaining and developing various types of collaborations with thirdparties, which provide us with access to additional user traffic, search services, products, and technology. For example, our Sogou Wise Doctor delivershealthcare information, and receives healthcare data, through partnerships that provide us with access to articles written by physicians and to a PRC-government sponsored healthcare encyclopedia; our partnership with Zhihu provides us with access to a knowledge-sharing platform; our partnership withMicrosoft’s Bing provides us with the technology to provide our users with English content on the Internet that we translate to Chinese in connection withour cross-language search service; and our partnership with China Literature enables our users to access literature from a large online collection. In addition,our various partnerships with third-party Internet properties provide our advertisers significant exposure to users beyond our core search user base. Weconsider these collaborations to be important to our ability to deliver attractive service, product, and content offerings to our users, in order to maintain andexpand our user and advertiser bases, and we believe that it will continue to be important for us to develop similar partnerships in the future. Our inability tomaintain and grow such relationships could have an adverse impact on our existing business and our growth prospects. We also have existing, and hope to develop additional, relationships with mobile device manufactures for pre-installation of our search, inputmethod, and related applications. If we are unable to maintain and expand such relationships, the quality and reach of delivery of our services will beadversely affected, and it may also be difficult for us to maintain and expand our user base and enhance awareness of our brand. In addition, our competitorsmay establish the same relationships as those we have, which would tend to diminish any advantage we might otherwise gain from these relationships. If we fail to maintain and expand our collaborations with third-party operators of Internet properties, our revenues and growth may be adverselyaffected. We place certain of our advertisers’ promotional links on the Internet properties of third parties, thereby expanding the base of users accessing theadvertisements beyond our own user base, and increasing our pay-for-click revenues. If these third parties decide to use a competitor’s or their own onlinesearch services, or do not prominently display our advertisements in comparison to those of other advertisers on their properties, or if we fail to attractadditional third-party operators of Internet properties, our advertising revenues and growth may be adversely affected. We may not be able to sustain our historical growth. We have grown significantly over a relatively short period. Our total Web search page views grew by 22.3%, and our mobile Web search page viewsgrew by 47.0%, on an annualized basis from December 2015 to December 2017. Our revenues grew from US$591.8 million for the year ended December 31,2015, to US$660.4 million for the year ended December 31, 2016, and to US$908.4 million for the year ended December 31, 2017. However, our 2016revenues were affected by tightened PRC regulation of the online advertising industry during 2016, which had an adverse impact on the search and search-related advertising market in China in general. See “—Risks Related to China’s Regulatory and Economic Environment—PRC regulations relating tosponsored search have had, and may continue to have, an adverse effect on our results of operations.” We may not be able to sustain a rate of growth in futureperiods similar to that we experienced in the past, and our revenues may even decline. Accordingly, you should not rely on the results of any prior period asan indication of our future financial and operating performance. 6Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We depend on online advertising for a significant majority of our revenues. If we fail to retain existing advertisers or attract new advertisers for ouronline advertising services, our business and growth prospects could be harmed. We earn most of our revenues from our search and search related advertising services. Advertisers will not use our services if they do not find them tobe effective in producing a sufficient volume of click-throughs and desired results for advertisers. Our advertisers are generally able to terminate theirrelationships with us at any time without penalty if they are not satisfied with our services, choose our competitors for similar services, or advertise in mediachannels other than Internet search. Therefore, it could be difficult for us to maintain or increase our advertiser base, and our revenues and profits coulddecline or fail to increase. We rely on third-party advertising agencies for most of our online advertising revenues. We rely heavily on third-party advertising agencies for our sales to our advertisers. It is important that we maintain good relationships with theseagencies. We do not enter into long-term agreements with any of the advertising agencies and cannot assure that we will continue to maintain favorablerelationships with them. Further, we provide various types of discounts and rebates to advertising agencies in order to incentivize them to maximize thevolume of advertising business that they bring to us. In order to retain or properly incentivize our advertising agencies, it may become necessary in the futurefor us to increase the levels of such rebates and discounts, which could have an adverse effect on our results of operations. If we fail to maintain and enhance awareness of and loyalty to our brand, it will be difficult for us to maintain and increase our user and advertiserbases. It is critical for us to maintain and further enhance our brand if we are to succeed in expanding our user and advertiser bases. Our success inpromoting and enhancing our brand, and our ability to remain competitive, will depend on our success in delivering superior user experience and on ourmarketing efforts. Enhancing our brand awareness may require substantial marketing and promotion expenses. If we are unable to maintain and enhance ourbrand, or incur significant marketing and promotion expenses that do not achieve anticipated business growth, or are subject to negative publicity that harmsour brand, our business and results of operations may be adversely affected. Our success depends on the continuing efforts of our senior management team and key employees, and our business may be harmed if we losetheir services. Our business heavily depends upon the services of our key executives, particularly Xiaochuan Wang, our Chief Executive Officer. If any of our keyexecutives is unable or unwilling to continue in his or her present position, joins a competitor, or forms a competing company, our business may be severelydisrupted. Although executive officers have entered into employment agreements, confidentiality agreements, and non-competition agreements with us, thedegree of protection afforded to an employer pursuant to confidentiality and non-competition undertakings by persons employed in the PRC may be morelimited when compared to the degree of protection afforded with respect to employees in some other jurisdictions. We do not maintain key-man life insurancefor any of our key executives. We also rely on key highly-skilled personnel for our business. Given the competitive nature of the industry, and in particular our competitors’increasingly aggressive efforts to provide competitive compensation packages to attract talent in the markets where we operate, it may be difficult for us torecruit and retain qualified personnel, and the risk of members of our key staff leaving us is high. Any such departure could have a disruptive impact on ouroperations, and if we are unable to recruit, retain and motivate key personnel, we may not be able to grow effectively. Our strategy of investments in and acquiring complementary businesses and assets may fail, which could result in impairment losses. In addition to organic growth, we may take advantage of opportunities to invest in or acquire additional businesses, services, assets or technologies.However, we may fail to select appropriate investment or acquisition targets, or we may not be able to negotiate optimal arrangements, includingarrangements to finance any acquisitions. Acquisitions and the subsequent integration of new assets and businesses into our own could require significantmanagement attention and could result in a diversion of resources away from our existing business. Investments and acquisitions could result in the use ofsubstantial amounts of cash, increased leverage, potentially dilutive issuances of equity securities, goodwill impairment charges, amortization expenses forother intangible assets and exposure to potential liabilities of the acquired business, and the invested or acquired assets or businesses may not generate thefinancial results we expect. Moreover, the costs of identifying and consummating these transactions may be significant. In addition to obtaining thenecessary corporate governance approvals, we may also need to obtain approvals and licenses from relevant governmental authorities for the acquisitions tocomply with applicable laws and regulations, which could result in increased costs and delays. 7Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Requirements of U.S. GAAP regarding the recognition of share-based compensation expense may adversely affect our results of operations and ourcompetitiveness in the employee marketplace. Our performance is largely dependent on talented and highly-skilled individuals. Our future success depends on our continuing ability to identify,develop, motivate, and retain highly-skilled personnel. We have a history of using low or nominally-priced employee share options as an importantcomponent of competitive pay packages, in order to align our employees’ interests with the interests of our company and our shareholders and to encouragequality employees to join and remain with us. We have adopted guidance on accounting for share-based compensation that requires the measurement andrecognition of compensation expense for all share-based compensation based on estimated fair values. As a result, our operating results contain charges forshare-based compensation expense related to employee share options. The historical and future recognition of share-based compensation in our statements ofcomprehensive income has had and will have an impact on our results of operations. On the other hand, if we alter our employee share incentive plans tominimize the corresponding share-based compensation expense, it may limit our ability to continue to use share-based awards as a tool to attract and retainour employees, and it may adversely affect our operations. In addition, there may be future changes in the U.S. GAAP requirements for recognition of share-based compensation expense, which could have similar effects on our results operations and our competitiveness in the market for key employees. Our user metrics and other estimates are subject to inherent challenges in measuring our operating performance, which may harm our reputation. We regularly review MAU, DAU, number of advertisers, page views, and other operating metrics to evaluate growth trends, measure our performance,and make strategic decisions. These metrics are calculated using internal company data, have not been validated by an independent third party, and may notbe indicative of our future financial results. While these numbers are based on what we believe to be reasonable estimates for the applicable period ofmeasurement, there are inherent challenges in measuring how our platforms are used across a large population in China. For example, we may not be able todistinguish individual users who have multiple accounts. Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significantunderstatement or overstatement of active users were to occur, we might expend resources to implement unnecessary business measures or fail to takerequired actions to remedy an unfavorable trend. If partners or investors do not perceive our user, geographic, or other operating metrics to accuratelyrepresent our user base, or if we discover inaccuracies in our user, geographic, or other operating metrics, our reputation may be harmed. We have not independently verified the accuracy or completeness of data, estimates, and projections in this annual report that we obtained from thirdparty sources, and such information involves assumptions and limitations. Certain facts, forecasts, and other statistics relating to the industries in which we compete contained in this annual report have been derived fromvarious public data sources and commissioned third-party industry reports. In connection with our preparation of this annual report, we commissionediResearch to conduct market research concerning the online search and AI industries in China, and we also referred to market research reports of IDC that wehad previously commissioned concerning the same industries in the United States. In deriving the market size of these industries, these industry consultantsmay have adopted different assumptions and estimates for certain metrics, such as MAU. While we generally believe such reports to be reliable, we have notindependently verified the accuracy or completeness of such information. Such reports may not be prepared on a comparable basis or may not be consistentwith other sources. Industry data and projections involve a number of assumptions and limitations. Our industry data and market share data should be interpreted in thelight of the defined industries in which we operate. Any discrepancy in the interpretation of such data could lead to different measurements and projections,and actual results could differ from the projections. 8Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We may not be able to prevent others from making unauthorized use of our intellectual property, which could harm our business and competitiveposition. We regard our patents, copyrights, trademarks, trade secrets, and other intellectual property as critical to our business. Unauthorized use of ourintellectual property by third parties may adversely affect our business and reputation. We rely on a combination of intellectual property laws and contractualarrangements to protect our proprietary rights. It is often difficult to register, maintain, and enforce intellectual property rights in the PRC. Statutory laws andregulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutoryinterpretation in the PRC. In addition, contractual agreements may be breached by counterparties, and there may not be adequate remedies available to us forany such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Policingany unauthorized use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent the misappropriation of ourintellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and adiversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may beleaked or otherwise become available to, or be independently discovered by, our competitors. Pending or future litigation could have an adverse impact on our financial condition and results of operations. The online search industry in China is highly competitive and litigious. From time to time, we have been, and may in the future be, subject tolawsuits brought by our competitors, individuals, or other entities against us. We are currently involved in several lawsuits in PRC courts where ourcompetitors instituted proceedings or asserted counterclaims against us and we instituted proceedings or asserted counterclaims against our competitors. Forexample, there are various legal proceedings currently pending between us and Baidu in which we allege that Baidu’s input method infringes certain of ourpatents relating to Sogou Input Method and seek monetary damages, while Baidu has asserted in counterclaims or in legal proceeding that it has initiatedagainst us that Sogou Input Method infringes certain of its patents, and seeks monetary damages. In addition, we are subject to ongoing unfair competitionclaims against us brought by Baidu, UCWeb, and Qihoo 360 Technology Co., Ltd., or Qihoo360, separately, in which they allege that certain functions ofour Sogou Input Method unfairly divert users to us, and seek monetary damages and cessation of the alleged unfair competitive practices. Where we can make a reasonable estimate of the liability relating to pending litigation against us and determine that an adverse liability resultingfrom such litigation is probable we record a related contingent liability. As additional information becomes available, we assess the potential liability andrevise estimates as appropriate. However, due to the inherent uncertainties relating to litigation, the amount of our estimates may be inaccurate, in which caseour financial condition and results of operation may be adversely affected. In addition, the outcomes of actions we institute may not be successful orfavorable to us. Lawsuits against us may also generate negative publicity that significantly harms our reputation, which may adversely affect our user andadvertiser base. In addition to the related cost, managing and defending litigation and related indemnity obligations can significantly divert ourmanagement’s and Board of Directors’ attention from operating our business. We may also need to pay damages or settle lawsuits with a substantial amountof cash. While we do not believe that any currently pending proceedings are likely to have a material adverse effect on our business, financial condition,results of operations, and cash flows, if there were adverse determinations in legal proceedings against us, we could be required to pay substantial monetarydamages or adjust our business practices, which could have an adverse effect on our financial condition and results of operations, and cash flows. We are currently subject to, and in the future may from time to time face, intellectual property infringement claims, which could be time-consuming andcostly to defend, and could have an adverse impact on our financial position and results of operations, particularly if we are required to pay significantdamages or cease offering any of our products or curtail any key features of our products. We cannot be certain that the products, services and intellectual property used in our normal course of business do not or will not infringe validpatents, copyrights or other intellectual property rights held by third parties. We currently are, and may in the future be, subject to claims and legalproceedings relating to the intellectual property of others in the ordinary course of our business, and may in the future be required to pay damages or to agreeto restrict our activities. See “—Pending or future litigation could have an adverse impact on our financial condition and results of operations.” In particular,if we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, may be ordered to paydamages, and may incur licensing fees or be forced to develop alternatives. We may incur substantial expense in defending against third-party infringementclaims, regardless of their merit. Successful infringement claims against us may result in substantial monetary liability or may materially disrupt the conductof our business by restricting or prohibiting our use of the intellectual property in question. 9Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We may not have exclusive rights to technology, trademarks, and designs that are crucial to our business. We have applied for various patents relating to our business. While we have succeeded in obtaining some patents, some of our patent applicationsare still under examination by the State Intellectual Property Office of the PRC. Approvals of our patent applications are subject to determinations by theState Intellectual Property Office of the PRC and relevant overseas authorities that there are no prior rights in the applicable territory. In addition, we haveapplied for initial registrations in the PRC and overseas, and/or changes in registrations relating to transfers of our Sogou logos and other of our keytrademarks in the PRC, and the corresponding Chinese versions of the trademarks, so as to establish and protect our exclusive rights to these trademarks.While we have succeeded in registering the trademarks for most of these marks in the PRC under certain classes, the applications for initial registration,and/or changes in registrations relating to transfers, of some marks and/or of some of trademarks under other classes are still under examination by theTrademark Office of the State Administration for Industry and Commerce, or SAIC, and relevant overseas authorities. Approvals of our initial trademarkregistration applications, and/or of changes in registrations relating to such transfers, are subject to determinations by the Trademark Office of the SAIC andrelevant overseas authorities that there are no prior rights in the applicable territories. We cannot assure you that these patent and trademark applications willbe approved. Any rejection of these applications could adversely affect our rights to the affected technology, marks, and designs. In addition, even if theseapplications are approved, we cannot assure you that any issued patents or registered trademarks will be sufficient in scope to provide adequate protection ofour rights. If our search results contain information that is inaccurate or harmful to our users, our business and reputation may be adversely affected. We could be exposed to liability arising from our search results listings if information accessed through our services contains errors, and third partiesmay make claims against us for losses incurred in reliance on that information. Investigating and defending such claims could be expensive even if they didnot result in liability, and we do not carry any liability insurance against such risks. In addition, if users do not perceive information that they access through our search services to be authoritative, useful, and trustworthy, we may notbe able to retain these users or attract additional users, and our reputation, business, and results of operation may be harmed. In addition, if such contentcontains inaccuracies, it is possible that users will seek to hold us liable for damages, because we provide links to such content, even though such content isprovided by third parties and any negative publicity regarding the accuracy of such content could harm our reputation, and reduce user traffic. In addition,any negative publicity or incident involving our peer companies could have an adverse impact on our industry as a whole, which in turn could harm ourreputation and reduce our user traffic. For example, in early 2016 it was widely reported that an unsuccessful experimental cancer treatment had beenpromoted in a sponsored search listing on third party’s Internet property. Even though our search results listings were not involved, we believe that the broadnegative publicity surrounding the incident adversely affected the reputation of the online search industry in China in general with an adverse impact on ouruser traffic and results of operations in 2016. We may be subject to regulatory investigations and sanctions for inappropriate or illegal content that is accessed through our search results. The online search industry in China is subject to extensive regulation. If content accessed through our search services includes information that PRCgovernmental authorities find illegal or inappropriate, we may be required to curtail or even shut down our search services, and we may be subject to otherpenalties. Although we seek to prevent fraudulent or otherwise illegal or inappropriate websites and information from being included in our search results,such measures may not be effective. See “—Risks Related to China’s Regulatory and Economic Environment—Regulation and censorship of informationdistribution in China may have an adverse effect on our business”; and “—Risks Related to China’s Regulatory and Economic Environment—The PRCgovernment may prevent us from distributing, and we may be subject to liability for, content that it believes is inappropriate.” We may be subject to potential liability for claims that search results violate the intellectual property rights of third parties. It is possible that content that is made available by us through our search results may violate the intellectual property rights of third parties. PRClaws and regulations are evolving, and uncertainties exist with respect to the legal standards for determining the potential liability of online search serviceproviders for search results that provide links to content on third-party websites that infringes copyrights of third parties. In December 2012, the SupremePeople’s Court of the PRC promulgated a judicial interpretation providing that PRC courts will place the burden on Internet service providers to remove notonly links or content that has been specifically-mentioned in notices of infringement from persons and entities claiming copyright in such content, but alsolinks or content that the providers “should have known” contained infringing content. This interpretation could subject us to significant administrativeburdens and might expose us to civil liability and penalties. Further, we rely on content provided by professional researchers and writers, either developed bythe outlets themselves or adapted from content of parties separate from such outlets, and it is difficult for us to fully monitor such content, which could makeus more vulnerable to potential infringement claims. 10Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We may be subject to legal liability associated with online activities on our platforms. We host and provide a wide variety of products and services that enable advertisers to advertise products and services, and users to exchangeinformation and engage in various online activities. We may be subject to claims, investigations, or negative publicity relating to such activities. PRC lawsand regulations relating to the liability of providers of online products and services for activities of their users are undeveloped, and their current and futurereach are unclear. We also place advertisements on third-party Internet properties, and we offer products and services developed or created by third parties.We may be subject to claims concerning these products and services based on our involvement in providing access to them, even if we do not offer theproducts and services directly. We could be required to spend considerable financial and managerial resources defending any such claims, and they couldresult in our having to pay monetary damages or penalties or ceasing certain aspects of our business, which could have an adverse effect on our business andresults of operations. Privacy concerns or security breaches relating to our platforms could damage our reputation, deter current and potential users and advertisers fromusing our products and services, and expose us to legal penalties and liability. We collect, process, and store on our servers significant amounts of data concerning our users. While we have taken steps to protect our user data, oursecurity measures could be compromised, because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally arenot recognized until they are launched against a target, and we may be unable to anticipate these techniques or to implement adequate preventativemeasures. In addition, we are subject to various regulatory requirements relating to the security and privacy of such data, including restrictions on thecollection and use of personal information of users and steps we must take to prevent personal data from being divulged, stolen, or tampered with. Regulatoryrequirements regarding the protection of such data are constantly evolving and can be subject to significant change, making the extent of our responsibilityin that regard uncertain. For example, the PRC Cybersecurity Law became effective in June 2017, but it is unclear as to the circumstances and standard underwhich the law would apply and violations would be found, and there are great uncertainties as to the interpretation and application of the law. It is possiblethat our data protection practice is or will be inconsistent with regulatory requirements. See “PRC Regulation—Provision of Internet Content—InformationSecurity and Censorship.” Complying with such requirements could cause us to incur substantial expenses or to alter or change our practice in a manner thatcould harm our business. Any systems failure or compromise of our security, including through employee error, that results in the release of our user datacould seriously harm our reputation and brand, impair our ability to retain and attract users and advertisers, expose us to liability to users whose data isreleased, and subject us to sanctions and penalties from governmental authorities. We also could be liable for any security breaches of our advertisers’confidential information. Any security breaches exposing such information could damage our reputation and deter current and potential users and advertisersfrom using our services. Our network operations may be vulnerable to hacking and viruses, which may reduce the use of our products and services and expose us to liability. Our user traffic may decline if any well-publicized compromise of security occurs. “Hacking” involves efforts to gain unauthorized access toinformation or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware, or other computer equipment. Techniques usedby hackers to obtain unauthorized access or sabotage systems change frequently and often are not recognized until launched against a target, which meansthat we may be unable to anticipate new hacking methods or implement adequate security measures. Hackers, if successful, could misappropriate proprietaryinformation or cause disruptions in our service. We may be required to expend capital and other resources to protect our Internet platforms against hackers,and measures we may take may not be effective. In addition, the inadvertent transmission of computer viruses could expose us to a risk of loss or litigationand possible liability, as well as damage our reputation and decrease our user traffic. Our business may be adversely affected by third-party software applications or practices that interfere with our receipt of information from, orprovision of information to, our users, which may impair our users’ experience. Our business may be adversely affected by third-party software applications, which may be unintentional or malicious, that make changes to ourusers’ PCs or mobile devices and interfere with our products and services. These software applications may change our users’ experience by hijacking queries,altering or replacing our search results, or otherwise interfering with our ability to connect with our users. Such interference can occur without disclosure to orconsent from users, and users may associate any resulting negative experience with our products and services. Such software applications are often designedto be difficult to remove, block, or disable. Further, software loaded on or added to mobile devices on which our search or other applications, such as SogouInput Method, are pre-installed may be incompatible with or interfere with or prevent the operation of such applications, which might deter the owners ofsuch devices from using our services. 11Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In addition, third-party website owners, content providers, and developers may implement applications and systems that interfere with our ability tocrawl and index their webpages and content, which is critical to the operation of our search services. If we are unable to successfully prevent or limit any suchapplications or systems that interfere with our products and services, or if a significant number of third-party website owners, content providers, anddevelopers prevent us from indexing and including their webpages and content in our search results, our ability to deliver high-quality search results and asatisfactory user experience will be impeded. Adoption of Internet advertisement blocking technologies may have an adverse impact on our business and results of operations. The development of software that blocks Internet advertisements before they appear on a user’s screen may hinder the growth of online advertising.Since our advertising revenues are generally based on user click-throughs, the expansion of advertisement-blocking on the Internet may decrease ouradvertising revenues, because when advertisements are blocked they are not downloaded from the server, which means such advertisements will not betracked as a delivered advertisement. In addition, advertisers may choose not to advertise on the Internet or on or through our sites because of the use by thirdparties of Internet advertisement blocking measures. In addition, increasing numbers of browsers include technical barriers designed to prevent Internetinformation service providers such as us to track the browsing history of their Internet users, which is also likely to adversely affect the growth of onlineadvertising and hence our business and growth prospects. If we fail to detect click-through fraud, we could lose the confidence of our advertisers and our revenues could decline. Our business is exposed to the risk of click-through fraud on our paid search results. Click-through fraud occurs when a person clicks paid searchresults for a reason other than to view the underlying content of search results. If we fail to detect significant fraudulent clicks or otherwise are unable toprevent significant fraudulent activity, the affected search advertisers may experience a reduced return on their investment in our pay-for-click services andlose confidence in the integrity of our pay-for-click service systems, and we may have to issue refunds to our advertisers and may lose their future business. Ifthis happens, we may be unable to retain existing advertisers and attract new advertisers for our pay-for-click services, and our search revenues could decline.In addition, affected advertisers may also file legal actions against us claiming that we have over-charged or failed to refund them. Any such claims or similarclaims, regardless of their merit, could be time-consuming and costly for us to defend against and could also adversely affect our brand and our searchadvertisers’ confidence in the integrity of our pay-for-click services and systems. Web spam and content farms, as well as our attempts to block them, could decrease the quality of our search results, and could deter our current andpotential users from using our products and services. The proliferation of search engine spam websites, commonly referred to as Web spam, which attempt to manipulate search indexing to cause them toappear higher in search results ranking hierarchies than they would without such manipulation, can have the effect of weakening the integrity of our searchresults and causing users to lose confidence in our search products and services. “Content farm” websites, which commission very large amounts of content,often of low quality, for the purpose, similar to that of Web spam, of causing such content farms’ links to obtain relatively high ranking in Internet providers’search results, can have similar adverse effects. While we use, and continually improve, technology designed to detect and block Web spam, the algorithms we apply may nevertheless result inexcessive filtering that blocks desirable websites from our search results. Therefore, both the existence of Web spam and content farms, and our attempts toblock them, could deter our current and potential users from using our products and services. In addition, as some of our third-party Internet-propertycollaborators could include Web spam or content farm websites, our advertising revenues could be reduced by our efforts to filter such websites. If our effortsto combat these and other types of index spamming are unsuccessful, our reputation for delivering relevant information could be diminished. This couldresult in a decline in user traffic, which would damage our business. The successful operation of our business depends upon the performance and reliability of the Internet infrastructure in China. Our growth will depend in part on the PRC government and state-owned telecommunications services providers maintaining and expanding Internetand telecommunications infrastructure, standards, protocols, and complementary products and services to facilitate our reaching a broader base of Internetusers in China. Almost all access to the Internet in China is maintained through China Mobile, China Unicom and China Telecom under the administrative controland regulatory supervision of the Ministry of Industry and Information Technology, or MIIT. We rely on this infrastructure and China Mobile, ChinaUnicom, and China Telecom to provide data communications capacity primarily through local telecommunications lines. Although the government hasannounced aggressive plans to develop the national information infrastructure, this infrastructure may not be developed and the Internet infrastructure inChina may not be able to support the continued growth of Internet usage. In addition, we will be unlikely to have access to alternative networks and serviceson a timely basis, if at all, in the event of any infrastructure disruption or failure. 12Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Interruption or failure of our information technology and communications systems may result in reduced user traffic and harm to our reputationand business. Interruption or failure of any of our information technology and communications systems or those of the operators of third-party Internet propertieswith which we collaborate could impede or prevent our ability to provide our search and search-related services. In addition, our operations are vulnerable tonatural disasters and other events. Our disaster recovery plan for our servers cannot fully ensure safety in the event of damage from fire, floods, typhoons,earthquakes, power loss, telecommunications failures, hacking, and similar events. If any of the foregoing occurs, we may experience a partial or completesystem shutdown. Furthermore, our servers, which are hosted at third-party Internet data centers, are also vulnerable to break-ins, sabotage and vandalism.Some of our systems are not fully redundant, and our disaster recovery planning does not account for all possible scenarios. The occurrence of a naturaldisaster or a closure of an Internet data center by a third-party provider without adequate notice could result in lengthy service interruptions. Any system failure or inadequacy that causes interruptions in the availability of our services, or increases the response time of our services, couldhave an adverse impact on our users’ experience and reduce our users’ satisfaction, our attractiveness to users and advertisers, and future user traffic andadvertising on our platform. Furthermore, we do not carry any business interruption insurance. To improve the performance and to prevent disruption of our services, we mayhave to make substantial investments to deploy additional servers or one or more copies of our Internet platforms to mirror our online resources. We face risks related to natural disasters, health epidemics, or terrorist attacks. Our business could be adversely affected by natural disasters, such as earthquakes, floods, landslides, and tsunamis, outbreaks of health epidemicssuch as an outbreak of avian influenza; severe acute respiratory syndrome, or SARS; Zika virus; or Ebola virus, as well as terrorist attacks, other acts ofviolence or war, or social instability. If any of these occurs, we may be required to temporarily or permanently close and our business operations may besuspended or terminated. Risks Related to Our Corporate Structure In order to comply with PRC regulatory requirements, we operate a portion of our business through our primary VIE, Sogou Information, a companywith which we have contractual relationships but in which we do not have an actual ownership interest, and its three direct and indirect wholly-ownedsubsidiaries. If these contractual arrangements and our current ownership structure were found to be in violation of current or future PRC laws andregulations we could be subject to severe penalties. Various regulations in the PRC restrict or prohibit foreign-owned companies from operating in specified industries, such as the provision of Internetinformation, online games, mobile applications, Internet access, and certain other industries. As we are a Cayman Islands company and our direct and indirectwholly-owned subsidiaries Sogou (BVI) Limited, or Sogou BVI, Sogou Hong Kong Limited, or Sogou HK, and Vast Creation Advertising Media ServicesLimited, or Vast Creation, are incorporated in the British Virgin Islands and Hong Kong, our indirect wholly-owned PRC subsidiaries, Beijing SogouTechnology Development Co., Ltd., or Sogou Technology, and Beijing Sogou Network Technology Co., Ltd. or Sogou Network, are wholly foreign-ownedenterprises, or WFOEs, under PRC law and are considered to be foreign-owned. In order to comply with PRC regulatory requirements, we conduct certain ofour Internet and other value-added telecommunication operations in the PRC through our VIE Sogou Information, which is incorporated in the PRC and isowned 10% by our Chief Executive Officer, 45% by our controlling shareholder Sohu, and 45% by a Tencent group entity; and through three direct andindirect subsidiaries of Sogou Information, which are also considered to be our VIEs. Through a series of contractual arrangements, Sogou Information, ofwhich we are the primary beneficiary, and Sogou Information’s three direct and indirect subsidiaries are effectively controlled by our subsidiary SogouTechnology. Revenues generated by our VIEs represented 18.6%, 24.1%, and 28.3%, respectively, of our total revenues for the years ended December 31,2015, 2016, and 2017. 13Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents On January 19, 2015, the Ministry of Commerce, or MOFCOM, released on its Website for public comment a proposed PRC law, or the Draft FIELaw, that could be interpreted to include VIEs within the scope of entities that could be considered to be foreign invested enterprises, or FIEs, that would besubject to restrictions under existing PRC laws on foreign investment in certain categories of industry. Specifically, the Draft FIE Law introduces the conceptof “actual control” for determining whether an entity is considered to be an FIE. In addition to control through direct or indirect ownership or equity, theDraft FIE Law includes control through contractual arrangements within the definition of “actual control.” If the Draft FIE Law is passed by the People’sCongress of the PRC and goes into effect in its current form, these provisions regarding control through contractual arrangements could be construed to reachour VIE arrangements, and as a result our VIEs could become explicitly subject to the current restrictions on foreign investment in certain categories ofindustry. The Draft FIE Law includes provisions that would exempt from the definition of foreign invested enterprises entities where the ultimate controllingshareholders are either entities organized under PRC law or individuals who are PRC citizens. The Draft FIE Law is silent as to what type of enforcementaction might be taken against existing VIEs, such as ours, that operate in restricted or prohibited industries and are not controlled by entities organized underPRC laws or individuals who are PRC citizens. There remain significant uncertainties as to how various provisions of the Draft FIE Law might be interpreted.If the restrictions and prohibitions on FIEs included in the Draft FIE Law are enacted and enforced in their current form, our ability to use our VIEarrangements and our ability to conduct business through them could be severely limited. In addition, pursuant to Circular 6 and the MOFCOM Security Review Rules, a security review is required for mergers and acquisitions by foreigninvestors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire “de facto control” ofdomestic enterprises with “national security” concerns and prohibit foreign investors from bypassing the security review requirement by structuringtransactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements, or offshore transactions. These nationalsecurity review-related regulations are relatively new and there is a lack of clear statutory interpretation regarding the implementation of the rules. PRCgovernmental authorities may interpret these regulations to mean that the transactions implementing our VIE structures should have been submitted forreview. For a discussion of these PRC national security review requirements, see “PRC Regulation—Regulation of M&A and Overseas Listings.” In the opinion of Commerce & Finance Law Offices, our PRC legal counsel, our current ownership structure, the ownership structure of our PRCsubsidiaries and VIEs and the contractual arrangements between our PRC subsidiaries, VIEs and its shareholders are in compliance with existing PRC laws,rules, and regulations. Our PRC legal counsel also advises us that there are uncertainties regarding the interpretation and application of current or futurePRC laws and regulations. Accordingly, we and our PRC legal counsel cannot assure you that PRC governmental authorities will not ultimately take a viewcontrary to that of our PRC legal counsel. If we were found to be in violation of any existing or future PRC laws or regulations relating to foreign ownershipof value-added telecommunications businesses, online search services, online games, and other online information and content services, including the DraftFIE Law if it becomes effective, and security reviews of foreign investments in such businesses, governmental authorities with jurisdiction over the operationof our business would have broad discretion in dealing with such a violation, including levying fines, confiscating our income, revoking the business oroperating licenses of our PRC subsidiaries and/or VIEs, requiring us to restructure our ownership structure or operations, requiring us to discontinue or divestourselves of all or any portion of our operations or assets, restricting our right to collect revenues, blocking our Internet platforms, or imposing additionalconditions or requirements with which we may not be able to comply. Any of these actions could cause significant disruption to our business operations andhave an adverse impact on our business, financial condition, and results of operations. Further, if changes were required to be made to our ownershipstructure, our ability to consolidate our VIEs’ assets and operating results into our consolidated financial statements could be adversely affected. We depend upon contractual arrangements with our VIE Sogou Information and its shareholders for the success of our business and thesearrangements may not be as effective in providing operational control as direct ownership of the entities and may be difficult to enforce. Due to the restrictions or prohibitions on foreign ownership over online search services, online games operations and other value-addedtelecommunication business in the PRC, we depend on our VIEs, in which we have no direct ownership interest, to provide those services through contractualagreements with our VIE Sogou Information and to hold some of our assets, including some of the domain names and trademarks relating to our business.These arrangements may not be as effective in providing control over our business operations as would direct ownership of our VIEs. For example, if we haddirect ownership of our VIEs, we would be able to exercise our rights as a shareholder to effect changes in their boards of directors, which in turn could effectchanges at the management level. Due to our VIE structure, we have to rely on contractual rights to affect control and management of our VIEs, whichexposes us to the risk of potential breach of VIE contracts by the VIEs or their shareholders, such as their failing to use the domain names and trademarks heldby them, or failing to maintain our Internet platforms, in an acceptable manner or taking other actions that are detrimental to our interests. In addition, as ourVIE Sogou Information is jointly owned by its shareholders, it may be difficult for us to change our corporate structure if such shareholders refuse tocooperate with us. In addition, some of our subsidiaries and VIEs could fail to take actions required for our business, such as entering into business contractswith potential suppliers or failing to maintain the necessary permits for the business. Furthermore, if the shareholders of Sogou Information were involved inproceedings that had an adverse impact on their shareholder interests in Sogou Information or on our ability to enforce relevant contracts related to the VIEstructure, our overall business, financial condition, and results of operations could be adversely affected. 14Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The shareholders of Sogou Information may breach, or cause Sogou Information to breach, the VIE contracts for a number of reasons. For example,their interests as shareholders of Sogou Information and the interests of our subsidiaries may conflict and we may fail to resolve such conflicts; theshareholders may believe that breaching the contracts will lead to greater economic benefit for them; or the shareholders may otherwise act in bad faith. If anyof the foregoing were to happen, we may have to rely on legal or arbitral proceedings to enforce our contractual rights. In addition, disputes may arise amongthe shareholders of Sogou Information with respect to their ownership of Sogou Information, which could lead them to breach their agreements with us. Sucharbitral and legal proceedings and disputes may cost us substantial financial and other resources, and result in disruption of our business, and the outcomemight not be in our favor. For example, a PRC court or arbitration panel could conclude that our VIE contracts violate PRC laws or are otherwiseunenforceable. If the contractual arrangements with Sogou Information were found by PRC governmental authorities with appropriate jurisdiction to beunenforceable, we could lose control over the assets owned by Sogou Information and our other VIEs and lose our ability to consolidate such VIEs’ results ofoperations, assets, and liabilities in our consolidated financial statements and/or to transfer the revenues of our VIEs to our corresponding PRC subsidiarySogou Technology. As all of the contractual arrangements with Sogou Information and its shareholders are governed by PRC laws and provide for the resolution ofdisputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC laws and any disputes would be resolved inaccordance with PRC legal procedures. We would have to rely for enforcement on legal remedies under PRC laws, including specific performance, injunctiverelief, or damages, which might not be effective. For example, if we sought to enforce the equity interest purchase right agreement for the transfer of equityinterests in Sogou Information, if the transferee was a foreign company the transfer would be subject to approval by PRC governmental authorities such as theMIIT and the MOFCOM, and the transferee would be required to comply with various requirements, including qualification and maximum foreignshareholding percentage requirements. As these PRC governmental authorities have wide discretion in granting such approvals, we could fail to obtain suchapprovals. In addition, our VIE contracts might not be enforceable in China if PRC governmental authorities, courts or arbitral tribunals took the view thatsuch contracts contravened PRC laws or were otherwise not enforceable for public policy reasons. Furthermore, the legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in thePRC legal system could further limit our ability to enforce these contractual arrangements. In the event we were unable to enforce these contractualarrangements, we would not be able to exert effective control over our VIEs, and our ability to conduct our business, and our financial condition and resultsof operation would be severely adversely affected. The contractual arrangements between our subsidiary Sogou Technology and our VIE Sogou Information may result in adverse tax consequencesto us. PRC laws and regulations emphasize the requirement of an arm’s-length basis for transfer pricing arrangements between related parties. The laws andregulations also require enterprises with related party transactions to prepare transfer pricing documentation to demonstrate the basis for determining pricing,the computation methodology and detailed explanations. Related party arrangements and transactions may be subject to challenge or tax inspection by PRCtax authorities. Under a tax inspection, if our transfer pricing arrangements between our China-based subsidiary Sogou Technology and our VIE Sogou Informationare judged as tax avoidance, or related documentation does not meet the requirements for such arrangements, Sogou Information and Sogou Technology maybe subject to adverse tax consequences, such as a transfer pricing adjustment. A transfer pricing adjustment could result in a reduction, for PRC tax purposes,of adjustments recorded by Sogou Information, which could adversely affect us by (i) increasing Sogou Information’s tax liabilities without reducing SogouTechnology’s tax liabilities, which could further result in interest and penalties being levied on us for unpaid taxes or (ii) limiting the ability of our PRCcompanies to maintain preferential tax treatment and other financial incentives. In addition, if for any reason we need to cause the transfer of any of theshareholders’ equity interest in any Sogou Information to a different nominee shareholder, we might be required to pay individual income tax, on behalf ofthe transferring shareholder, on any gain deemed to have been realized by such shareholder on such transfer. If one or more of our VIEs declare bankruptcy or become subject to a dissolution or liquidation proceeding, we may lose the ability to use and enjoyassets held by those VIEs. Our VIEs hold assets, such as our core intellectual property, licenses, and permits, that are critical to our business operations. Although the equityinterest purchase rights agreement among our PRC subsidiaries, our VIE Sogou Information, and the shareholders of Sogou Information contains terms thatspecifically obligate such shareholders to ensure the valid existence of Sogou Information and our other VIEs, in the event these shareholders breached theirobligations and voluntarily liquidated our VIEs, or if any of our VIEs declared bankruptcy and all or part of its assets became subject to liens or rights ofthird-party creditors, we might be unable to continue some or all of our business operations. Furthermore, if any of our VIEs were to undergo a voluntary orinvoluntary liquidation proceeding, their shareholders or unrelated third-party creditors might claim rights to some or all of such VIEs’ assets and their rightscould be senior to our rights under the VIE contracts with Sogou Information, which could hinder our ability to operate our business. 15Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Risks Related to China’s Regulatory and Economic Environment PRC regulations relating to sponsored search have had, and may continue to have, an adverse effect on our results of operations. On April 13, 2016, the SAIC and sixteen other PRC government agencies jointly issued a Notice of Campaign to Crack Down on Illegal InternetFinance Advertisements and Other Financial Activities in the Name of Investment Management, or the Campaign Notice, pursuant to which a campaign wasconducted between April 2016 and January 2017 targeting, among other things, online advertisements for Internet finance and other financial activitiesposted on online search portals such as ours. The Cyberspace Administration of China, or the CAOC, issued the Interim Measures for the Administration ofOnline Search, or the CAOC Interim Measures, which became effective on August 1, 2016 and require that providers of online search services verify thecredentials of pay-for-click advertisers, specify a maximum percentage that pay-for-click search results may represent of results on a search page, and requirethat providers of search services conspicuously identify pay-for-click search results as such. The SAIC issued the Interim Measures for the Administration ofOnline Advertising, or the SAIC Interim Measures, which became effective on September 1, 2016 and treat pay-for-click search results as advertisementssubject to PRC laws governing advertisements, require that pay-for-click search results be conspicuously identified on search result pages as advertisementsand subject revenues from such advertisements to a 3% PRC tax that is applied to advertising revenues. In order to comply with these regulations, we haveestablished more stringent standards for selecting advertisers for our pay-for-click services and have turned down certain existing advertisers, and havelowered the percentage that pay-for-click search results represent of results on our search pages, which had an adverse impact on our search and search-relatedrevenues and overall results of operations for 2016 and, along with the tax on advertising, are likely to continue to have such an impact. We cannot assureyou that PRC governmental authorities will not issue new laws or regulations specifically regulating sponsored search services, which could further impactour revenues. Political, economic, and social policies of the PRC government could affect our business. Substantially all of our business, operating assets, fixed assets and operations are located in China, and substantially all of our revenues are derivedfrom our operations in China. Accordingly, our business may be adversely affected by changes in political, economic or social conditions in China,adjustments in PRC government policies or changes in laws and regulations. The economy of China differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development in anumber of respects, including: · structure; · level of government involvement; · level of development; · level of capital reinvestment; · growth rate; · control of foreign exchange; and · methods of allocating resources. Since 1949, China has been primarily a planned economy subject to a system of macroeconomic management. Although the PRC government stillowns a significant portion of the productive assets in China, economic reform policies since the late 1970s have emphasized decentralization, autonomousenterprises and the utilization of market mechanisms. We cannot predict the future effects of the economic reform and macroeconomic measures adopted bythe PRC government on our business or results of operations. Furthermore, the PRC government began to focus more attention on social issues in recent yearsand has promulgated or may promulgate additional laws or regulations in this area, which could affect our business in China. While the Chinese economy has grown significantly over the past 30 years, the growth has been uneven geographically among various sectors of theeconomy, and during different periods. The Chinese economy may not continue to grow, and if there is growth, such growth may not be steady and uniform;if there is a slowdown, such a slowdown may have a negative effect on our business. The Chinese economy experienced high inflation in 2010 and 2011, andto curb the accelerating inflation the PBOC, China’s central bank, raised benchmark interest rates three times in 2011. The level of exports from the PRC alsodeclined significantly recently. According to the National Bureau of Statistics of China, the growth rate of China’s gross domestic product, compared to thatof the same period in the previous year, slowed from 7.7% in 2013, to 7.4% in 2014, to 6.9% in 2015, to 6.7% in 2016, and to 6.9% in 2017. Variousmacroeconomic measures and monetary policies adopted by the PRC government to guide economic growth and manage inflation and the allocation ofresources may not be effective in sustaining the growth rate of the Chinese economy. In addition, such measures, even if they benefit the overall Chineseeconomy in the long run, may have an adverse effect on us if they reduce the amount of money that our existing or future advertisers devote to onlineadvertising. 16Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The PRC legal system embodies uncertainties that could limit the legal protections available to us and you, or could lead to penalties on us. The PRC legal system is a civil law system based on written statutes and regulations. Unlike common law systems, it is a system in which decidedlegal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governingeconomic matters in general. Our PRC operating subsidiaries Sogou Technology and Sogou Network are WFOEs that are incorporated in China and whollyowned by our indirect offshore subsidiaries. As WFOEs, Sogou Technology and Sogou Network are subject to laws and regulations applicable to foreigninvestment in China. All of our subsidiaries and VIEs incorporated in China are also subject to all other applicable PRC laws and regulations. Because of therelatively short period for enacting such a comprehensive legal system, it is possible that the laws, regulations and legal requirements are relatively recent,and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to us and other foreigninvestors, including you. Such uncertainties may also make it easier for others to infringe our intellectual property without significant cost, and new entrantsto the market may tend to use gray areas to compete with us. In addition, uncertainties in the PRC legal system may lead to penalties imposed on us becauseof a difference in interpretation of the applicable laws between the relevant PRC governmental authorities and us. For example, under current tax laws andregulations, we are responsible for paying value-added tax. However, since there is no clear guidance as to the applicability of certain areas of preferential taxtreatment, we may be found to be in violation of the tax laws and regulations based on the interpretation of competent PRC tax authorities with regard to thescope of taxable services and the applicable tax rates, and therefore might be subject to penalties, including monetary penalties. In addition, we cannotpredict the effect of future developments in the PRC legal system, particularly with regard to the Internet, including the promulgation of new laws, changes toexisting laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and resultsof operations. The Standing Committee of the National People’s Congress enacted the Labor Contract Law in 2008, and amended it on December 28, 2012. TheLabor Contract Law introduced specific provisions related to fixed-term employment contracts, part-time employment, probationary periods, consultationwith labor unions and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining to enhanceprevious PRC labor laws. Under the Labor Contract Law, an employer is obligated to sign an unlimited-term labor contract with any employee who hasworked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already beenentered into twice consecutively, the resulting contract, with certain exceptions, must have an unlimited term, subject to certain exceptions. With certainexceptions, an employer must pay severance to an employee where a labor contract is terminated or expires. In addition, PRC governmental authorities havecontinued to introduce various new labor-related regulations since the effectiveness of the Labor Contract Law. Under the PRC Social Insurance Law and the Administrative Measures on Housing Fund, employees are required to participate in pension insurance,work-related injury insurance, medical insurance, unemployment insurance, maternity insurance, and housing funds and employers are required, togetherwith their employees or separately, to pay the social insurance premiums and housing funds for their employees. If we fail to make adequate social insuranceand housing fund contributions, we may be subject to fines and legal sanctions, and our business, financial condition and results of operations may beadversely affected. These laws designed to enhance labor protection tend to increase our labor costs. In addition, as the interpretation and implementation of theseregulations are still evolving, our employment practices may not be at all times be deemed in compliance with the regulations. As a result, we could besubject to penalties or incur significant liabilities in connection with labor disputes or investigations. If we are found to be in violation of current or future PRC laws and regulations regarding Internet-related services and telecom-related activities, wecould be subject to penalties or restrictions on our business activities. The PRC has enacted laws and regulations that apply to Internet-related services and telecom-related activities. While many aspects of theseregulations remain unclear, they purport to require licenses on various aspects of the provision of Internet information and content, such as online video andmusic, online games, online publishing, and newsfeed services. 17Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Although we do not directly provide video and music content, our video and music link-aggregation services may be considered to be the provisionof Internet audio-visual programs, which would require us to obtain an Internet audio-visual program transmission license. None of our VIEs currently holdssuch a license. In addition, current PRC laws and regulations require an applicant for an Internet audio-visual program transmission license to be a whollystate-owned or state-controlled entity unless the applicant had been operating a business involving transmission of Internet audio-visual programs prior toDecember 20, 2007. None of our VIEs currently is an eligible applicant for such a license, as none of them was operating Internet audio-visual services priorto December 20, 2007. If our video and music link-aggregation services were found to violate the applicable laws and regulations, we could be subject tofines, forced to remove all of the audio-visual links from our platform, and subject to a penalty equal to one to two times our total investment in the affectedbusiness. As of the date of this annual report, we are in the process of negotiating to acquire an entity that holds a valid Internet audio-visual programtransmission license. Such negotiation is at a preliminary stage, and there is no assurance that we will be able to reach a deal on commercially reasonableterms in a timely manner, or at all. Current PRC laws and regulations require us to obtain an Internet publishing license for our online literature services and Sogou Ask. An Internetpublishing license may also be required for our image search services and the distribution of online games through our Sogou Game Center, as these servicesmay be considered to be “online publication services,” which require an Internet publishing license under current PRC laws and regulations. None of ourVIEs currently holds such a license. In addition, none of our VIEs currently holds an online news service license, which is required for our news search andnewsfeed services. Operating without an Internet publishing license and an online news service license may subject us to various administrative sanctions,including fines and suspension of our relevant services. We are in the process of preparing an application for an Internet publishing license as of the date ofthis annual report. While PRC laws and regulations require relevant governmental authorities to decide on an application for the Internet publishing licensewithin 60 days after receiving a completed application, and we believe that we meet the qualifications for obtaining such a license, the approval process maytake longer in practice, and we may not be able to receive approval for the license in a timely manner, or at all. As of the date of this annual report, we are alsoin the process of preparing applications for an online news search license. However, it appears that the competent governmental authority may not currentlybe accepting new applications for online news search licenses, except applications for the renewal of licenses previously obtained. We plan to submit anapplication for an online news search license as soon as it becomes clear that the competent governmental authority is accepting new applications. However,uncertainties remain as to when the relevant governmental authority will begin to accept new applications for online news search licenses and, even after wehave submitted an application if and when the governmental authority begins to accept applications, there is no assurance that we will be granted the licensein a timely manner, or at all. Although we are committed to complying with the above-described PRC laws and regulations applicable to Internet-related service and telecom-related activities, we cannot guarantee that we are now or will in the future be in full compliance with any such laws and regulations that apply to our servicesand activities. In the past, PRC governmental authorities have imposed warnings and fines on us for conducting business without the aforementionedlicenses. We cannot guarantee that PRC governmental authorities will not impose similar or greater penalties on us in the future, which may includewarnings, fines, mandates to remedy any violations, and/or cease providing all services and activities for which the licenses are required. The PRCgovernment may also promulgate new laws and regulations that require additional licenses, permits and/or approvals for the operation of any of our existingand/or future businesses. If we are unable to obtain such licenses, permits, and/or approvals in a timely fashion, we could be subject to further penalties andoperational disruption and our financial condition and results of operations could be adversely affected. For more details regarding PRC regulations, see“PRC Regulation.” The approval of the China Securities Regulatory Commission, or the CSRC, may have been required in connection with our corporate structure andour initial public offering, and the failure to obtain any required approval could have an adverse effect on our business and results of operations and thetrading price of our ADSs. In 2006, six PRC regulatory agencies, including the MOFCOM and the CSRC, jointly adopted the Rules on Mergers and Acquisitions of DomesticEnterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and were amended on June 22, 2009. See “PRCRegulation—Regulation of M&A and Overseas Listings.” Under the M&A Rules, the prior approval of the CSRC is required for the overseas listing ofoffshore special purpose vehicles that are directly or indirectly controlled by PRC companies or individuals and used for the purpose of listing PRC onshoreinterests on an overseas stock exchange. The application of the M&A Rules remains unclear. Currently, there is no consensus among the leading PRC lawfirms regarding the scope and applicability of the CSRC approval requirement. Our PRC legal counsel, Commerce & Finance Law Offices, has advised us thatbased on its understanding of the current PRC laws, rules and regulations and the M&A Rules, prior approval from the CSRC was not required under theM&A Rules for the listing and trading of our ADSs because, among other reasons, (i) Sogou Technology and Sogou Network were incorporated as whollyforeign-owned enterprises by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company ownedby PRC companies or individuals as defined under the M&A Rules that are the beneficial owners of the Company; and (ii) no provision in the M&ARules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules. Although we did not apply for approval from the CSRCfor our initial public offering based on the advice of our PRC legal counsel, we and our PRC legal counsel cannot assure you that the relevant PRCgovernment agencies, including the MOFCOM and the CSRC, would not reach a different conclusion. 18Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Commerce & Finance Law Offices has further advised us that uncertainties still exist as to how the M&A Rules will be interpreted and implementedand its opinions summarized above are subject to any current or future laws, rules and regulations or detailed implementations and interpretations in any formrelating to the M&A Rules. If the CSRC or other PRC regulatory agency subsequently determines that we needed to obtain CSRC approval for our initialpublic offering, either by interpretation, clarification, or amendment of the M&A Rules or by any new rules, regulations, or directives promulgated after thedate of this annual report, we may face sanctions by the CSRC or other PRC regulatory agency. These sanctions may include fines and penalties on ouroperations in China, limitations on our operating privileges in China, delays or restrictions on the repatriation of the proceeds from our initial public offeringinto the PRC, restrictions on or prohibition of the payment or remittance of dividends by our China-based subsidiaries, or other actions that could have anadverse effect on our business and results of operations, as well as the trading price of our ADSs. We cannot predict when the CSRC will promulgateadditional rules or other guidance. Moreover, additional rules or guidance, to the extent issued, may fail to resolve ambiguities under the M&A Rules.Uncertainties or negative publicity regarding the M&A Rules also could have an adverse effect on the trading price of our ADSs. PRC laws and regulations mandate complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it moredifficult for us to make acquisitions in China. PRC laws and regulations, such as the M&A Rules, and other relevant rules, established additional procedures and requirements that are expected tomake merger and acquisition activities in China by foreign investors more time-consuming and complex, including requirements in some instances that theMOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that theapproval from the MOFCOM be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquireaffiliated domestic companies. PRC laws and regulations also require certain merger and acquisition transactions to be subject to a merger control securityreview. In August 2011, the MOFCOM promulgated the Rules on Implementation of Security Review System, or MOFCOM Security Review Rules, effectivefrom September 1, 2011, further provide that, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subjectto a security review by the MOFCOM, the principle of substance over form should be applied and foreign investors are prohibited from bypassing thesecurity review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangementsof offshore transaction. Factors that the MOFCOM considers in its review are whether (i) an important industry is involved, (ii) such transaction involvesfactors that have had or may have an impact on national economic security and (iii) such transaction will lead to a change in control of a domestic enterprisethat holds a well-known PRC trademark or a time-honored PRC brand. If a business of any target company that we plan to acquire falls into the ambit ofsecurity review, we may not be able to successfully acquire such company. Complying with the requirements of the relevant regulations to complete any suchtransaction could be time-consuming, and any required approval process, including approval from the MOFCOM, may delay or inhibit our ability tocomplete such transactions, which could affect our ability to expand our business. We entered into a series of transactions with Tencent in 2013 that resulted in Tencent being our largest shareholder and a Tencent group entity alsoholding a 45% interest in Sogou Information. If Tencent’s investment in us ended due to competitive or regulatory reasons, our collaboration with Tencentmay also be adversely affected. The PRC government may prevent us from distributing, and we may be subject to liability for, content that it believes is inappropriate. The PRC has enacted regulations governing Internet access and the distribution of news and other information. In the past, the PRC government hasstopped the distribution of information over the Internet that it believes to violate PRC laws, including content that is obscene, incites violence, endangersnational security, is contrary to the national interest or is defamatory. In addition, we may not publish certain news items, such as news relating to nationalsecurity, without permission from the PRC government. Furthermore, the Ministry of Public Security has the authority to make any local Internet serviceprovider block any Website maintained outside the PRC at its sole discretion. Even if we comply with PRC governmental regulations relating to licensingand foreign investment prohibitions, if the PRC government were to take any action to limit or prohibit the distribution of information through our networkor to limit or regulate any current or future content or services available to users on our network, our business would be harmed. We are also subject to potential liabilities for content delivered through our services that is deemed inappropriate and for any unlawful actions ofusers of our products and services under regulations promulgated by the MIIT, such potential liabilities including the imposition of fines or even the shuttingdown of the Internet platforms. 19Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Furthermore, we are required to delete content that clearly violates PRC laws and report content that may violate PRC laws. We may have difficultydetermining the type of content that may result in liability for us and, if we are wrong, we may be prevented from operating our Internet platforms. Dividends we receive from our operating subsidiaries located in the PRC are subject to PRC profit appropriation and PRC withholding tax. PRC legal restrictions permit payment of dividends by our PRC subsidiaries only out of their accumulated profits, if any, determined in accordancewith PRC accounting standards and regulations. Under PRC law, our PRC subsidiaries are also required to set aside 10% of their net income each year to fundcertain reserve funds until these reserves equal 50% of the amount of registered capital. These reserves are not distributable as cash dividends. Furthermore, the PRC Corporate Income Tax Law, or the CIT Law, provides that a withholding tax at a rate of up to 10% may be applicable todividends payable to non-PRC investors that are “non-resident enterprises,” to the extent that such dividends are derived from sources within the PRC. Underthe Arrangement Between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of FiscalEvasion with Respect to Taxes on Income and Capital, or the China-HK Tax Arrangement, which became effective on January 1, 2007, the dividendwithholding tax rate may be reduced to 5% if a Hong Kong resident enterprise is considered a non-PRC resident enterprise and holds at least 25% of theequity interests in the PRC enterprise distributing the dividends, subject to approval of the competent PRC tax authorities. However, if the Hong Kongresident enterprise is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividends may remain subjectto withholding tax at a rate of 10%. On October 27, 2009, the SAT issued a Notice on How to Understand and Determine the Beneficial Owners in TaxAgreement (“Circular 601”), which provides guidance on determining whether an enterprise is a “beneficial owner” under China’s tax treaties and taxarrangements. Circular 601 provides that, in order to be a beneficial owner, an entity generally must be engaged in substantive business activities. Acompany that is set up for the purpose of avoiding or reducing taxes or transferring or accumulating profits will not be regarded as a beneficial owner and willnot qualify for treaty benefits such as preferential dividend withholding tax rates. If any of our Hong Kong subsidiaries is, in the light of Circular 601,considered to be a non-beneficial owner for purpose of the China-HK Tax Arrangement, any dividends paid to it by any of our PRC Subsidiaries would notqualify for the preferential dividend withholding tax rate of 5%, but rather would be subject to the usual rate of 10%. All of our foreign-invested enterprisesare subject to withholding tax, generally at a 10% rate. Our offshore entities may need to rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash requirements thoseoffshore entities may have. Our offshore entities may not be able to obtain cash from distributions because our subsidiaries and VIEs in China aresubject to restrictions imposed by PRC law on paying such dividends and making other payments. Sogou Inc. is a holding company with no operating assets other than investments in Chinese operating entities through our intermediate holdingcompanies, our subsidiaries in the Cayman Islands, and our VIEs. Our offshore entities may need to rely on dividends and other distributions on equity paidby our PRC subsidiaries for their cash requirements in excess of any cash raised from investors and retained by us or our other offshore entities. The primarysource of any dividend payments to our offshore entities would need to be our PRC subsidiaries. It is possible that our PRC subsidiaries will not continue toreceive payments in accordance with our VIE contracts with Sogou Information if such payments become subject to restrictions imposed by PRC laws. If oursubsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make otherdistributions to us through the intermediate companies. In addition, dividends paid out of the PRC are generally subject to a withholding tax of 10%. The PRC government also imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance ofcurrencies out of the PRC. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currencies. If weor any of our subsidiaries are unable to receive the revenues from our operations through these service agreements and other arrangements, we may be unableto effectively fund any cash requirements we may have. Regulation and censorship of information distribution in China may have an adverse effect on our business. China has enacted regulations governing Internet access and the distribution of news and other information. Furthermore, the PropagandaDepartment of the Chinese Communist Party takes the responsibility to censor news published in China to ensure, supervise, and control a particular politicalideology. In addition, the MIIT has published implementing regulations that subject online information providers to potential liability for content includedin websites and the actions of users of their systems, including liability for violation of PRC laws prohibiting the distribution of content deemed to besocially destabilizing. Furthermore, because many PRC laws, regulations, and legal requirements with regard to the Internet are relatively new and untested,their interpretation and enforcement may involve significant uncertainties. As a result, in many cases an Internet platform operator may have difficultydetermining the type of content that may subject it to liability. 20Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Periodically, the Ministry of Public Security has stopped the distribution over the Internet of information which it believes to be sociallydestabilizing. Meanwhile, the Ministry of Public Security also has the authority to require any local Internet service provider to block any Websitemaintained outside China at its sole discretion. If the PRC government were to take action or exercise its authority to limit or eliminate our provision ofaccess to information or to limit or regulate current or future applications available to our users, our business would be adversely affected. The State Secrecy Bureau, which is directly responsible for the protection of state secrets of all PRC government and Chinese Communist Partyorganizations, is authorized to block any Website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection ofstate secrets in the distribution of online information. Under the applicable regulations, we may be held liable for any content transmitted by us. Furthermore,where the transmitted content clearly violates the PRC laws, we will be required to delete it. Moreover, if we consider transmitted content suspicious, we arerequired to report such content. We must also undergo computer security inspections, and if we fail to implement required safeguards against securitybreaches, we may be shut down. As the implementing rules of these new regulations have not been issued, we do not know how or when we will be expectedto comply, or how our business will be affected by the application of these regulations. We may be subject to the PRC government’s ongoing crackdown on Internet pornographic content. The PRC government has stringent prohibitions on online pornographic information and has launched several crackdowns on Internet pornographyrecently. On December 4, 2009, the MIIT and other three PRC governmental authorities jointly issued the Incentives Measures for Report of Pornographic,Obscene and Vulgar Messages on Internet and Mobile Media, or the Anti-Pornography Notice, to further crack down on online pornography. Pursuant to thisAnti-Pornography Notice, monetary rewards will be provided to Internet users who report websites that feature pornography. On April 13, 2014, the NationalWorking Group on Anti-Pornography and three other PRC governmental authorities jointly issued the Anti-Pornography Proclamation, under which Internetservice providers, including search companies such as us, must put in place software or other filters to prevent from appearing in search results, andimmediately remove texts, images, video, advertisements, and other information that contain pornographic content. The relevant PRC governmentalauthorities may order enterprises or individuals who flagrantly produce or disseminate pornographic content to stop conducting business, and may revokerelevant administrative permits. It is possible that our users may engage in obscene conversations or activities on our platform that may be deemed illegalunder PRC laws and regulations, and there is no assurance that content considered vulgar by PRC governmental authorities will not appear through oursearch services in the future. We may be subject to fines or other disciplinary actions, including in serious cases suspension or revocation of the licensesnecessary to operate our platform, if we are deemed under PRC laws and regulations to have facilitated the accessing of inappropriate content through on ourplatform. In addition, if we are alleged by the government of providing access to vulgar content, our reputation could be adversely affected. PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capitalor distribute profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liability and penalties under PRC laws. In July 2014, SAFE promulgated Circular 37, which replaced Circular 75, promulgated by SAFE in October 2005 Circular 37 requires PRC residents,including PRC institutions and individuals, to register with the local SAFE office in connection with their direct establishment or indirect control of anoffshore entity, referred to in Circular 37 as a “special purpose vehicle,” for the purpose of holding domestic or offshore assets or interests. PRC residents mustalso file amendments to their registrations in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease ofcapital contributed by PRC individuals, share transfer or exchange, merger, division, or other material event. Under these regulations, PRC residents’ failureto comply with specified registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entities,including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRCentities, including restrictions on the ability to contribute additional capital to the PRC entities. We have requested all of our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fallwithin the scope of Circular 37 and other related rules, and requested such shareholders and beneficial owners, upon learning they are PRC residents, to makethe necessary applications, filings and amendments as required under Circular 37 and other related rules prior to our initial public offering. However, we maynot be informed of the identities of all the PRC residents holding indirect interest in our company, and we cannot provide any assurances that these PRCresidents will comply with our request to make or obtain any applicable registrations or comply with other requirements required by Circular 37 or relatedrules. 21Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Failure by any of our current or future shareholders or beneficial owners who are PRC residents to comply with the SAFE regulations may subject usto fines or other legal sanctions, or limit our ability to contribute additional capital to our PRC subsidiaries, or limit our PRC subsidiaries’ ability to makedistributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects. It is possible that some or all of ourshareholders who are PRC residents will not comply with all the requirements required by Circular 37 or related rules. Any future failure by any of ourshareholders who is a PRC resident, or controlled by a PRC resident, to comply with relevant requirements under these regulations could subject us to fines orlegal sanctions imposed by the PRC government, including restrictions on our subsidiaries’ ability to pay dividends or make distributions to us and ourability to increase our investment in these subsidiaries and restrict our cross-border investment activities, which could in turn limit our ability to distributedividends to holders of our ordinary shares and ADSs. PRC regulatory requirements with respect to transfers by offshore holding companies, such as us, to their PRC subsidiaries and VIEs and governmentalcontrol of currency conversion may limit or delay our ability to transfer the net proceeds of our initial public offering to our PRC subsidiaries andVIEs, which could have an adverse effect on our ability to fund and expand our business. As a holding company incorporated in the Cayman Islands, we will need to comply with applicable PRC laws and regulations in order to transfer thenet proceeds of our initial public offering to our PRC subsidiaries, Sogou Technology and Sogou Network, which are WFOEs under PRC law and are treatedas FIEs, or to our VIEs in the PRC. We intend to contribute some or all of the net proceeds of our initial public offering to our PRC subsidiaries, and toconvert the contributed net proceeds into RMB. In order to make a capital contribution to either of our PRC subsidiaries, and convert the contributed amountfrom U.S. dollars into RMB, we will need to increase the PRC subsidiary’s registered capital by registering and/or filing the increase with the MOFCOM orone of its local branches, the SAFE or one of its local branches, or an authorized bank. If we transfer any of the proceeds of our initial public offering to one ofour PRC subsidiaries or VIEs through loans, under current PRC law we will also need to register such loans with the SAFE or one its local branches, and theamount that we may convert into RMB and loan to one of these entities will be limited by applicable SAFE regulations, in the case of a loan to one of ourPRC subsidiaries, to the greater of (i) the difference between the subsidiary’s approved total investment and the subsidiary’s total registered capital and(ii) two times the PRC subsidiary’s net assets and, in the case of one of our VIEs, to two times the VIE’s net assets. The need to comply with such requirements could prevent us from making timely transfers of the net proceeds of our initial public offering to ourPRC subsidiaries and, in the event we wish to make such transfers through loans to our PRC subsidiaries or VIEs, will limit the amounts of the net proceedsthat we may transfer, which could limit our ability to fund or expand our business in accordance with our intended use of the proceeds of our initial publicoffering. The amounts of total investment and registered capital of Sogou Technology as of December 31, 2017 were approximately US$100.0 million andUS$40.0 million, and two times its net assets was equal to US$596.5 million, meaning that the limit on the proceeds of our initial public offering that wewould be permitted to loan to Sogou Technology as of December 31, 2017 would be US$596.5 million. The amounts of total investment and registeredcapital of Sogou Network as of December 31, 2017 were both approximately US$0.8 million, and two times its net assets was equal to negativeUS$54.5 million, meaning that amount of the proceeds of our initial public offering that we would be permitted to loan to Sogou Technology Network wouldbe US$nil. Two times the net assets of our four VIEs was equal to US$78.6 million (Sogou Information), US$18.1 million (Chengdu Easypay), US$7.0 million(Shi Ji Si Su), and negative US$2.3 million (Shi Ji Guang Su), respectively, as of December 31, 2017, which represent the respective statutory limits on theamounts of loans we would be permitted to make to them as of December 31, 2017. On March 30, 2015, SAFE promulgated the Circular on Reforming Management of the Settlement of Foreign Exchange Capital of Foreign-InvestedEnterprises, or Circular 19, which replaced previous regulations limiting a foreign-invested company’s use of its RMB-settled registered capital. AlthoughCircular 19 has lifted certain restrictions on the use by a foreign-invested enterprise of its RMB registered capital converted from foreign currencies, itcontinues to apply certain limits, including that such registered capital must be used only for purposes within the foreign-invested enterprise’s approvedbusiness scope, and provides that violations of the regulations can result in severe penalties, including large fines. These regulations may limit our ability totransfer the net proceeds of our initial public offering through contributions or loans to our PRC subsidiaries and VIEs to invest in or acquire other businessesor establish additional VIEs as it is unclear whether the SAFE would consider such uses to be within the respective scopes of business of our PRC subsidiariesand VIEs. We may be subject to fines and legal sanctions if we or our employees who are PRC citizens fail to comply with PRC regulations relating to employeeshare options. Under the Administration Measures on Individual Foreign Exchange Control issued by the PBOC and the related Implementation Rules issued theSAFE, all foreign exchange transactions by a PRC citizen involving an employee incentive plan of an overseas publicly-listed company may be conductedonly with the approval of the SAFE. Under the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating inStock Incentive Plan of Overseas Listed Company, or the Offshore Share Incentives Rules, issued by the SAFE on February 15, 2012, PRC citizens who aregranted share options, restricted share units or restricted shares by an overseas publicly-listed company under such employee share incentive plans arerequired to register with the SAFE or its local offices and comply with a series of other requirements. The Offshore Share Incentives Rules also specifyrequirements for registration of share incentive plans, the opening and use of special accounts for the purpose of participation in incentive plans, and theremittance of funds for exercising options and gains realized from such exercises and sales of such options or the underlying shares, both outside and insidethe PRC. We, and any of our PRC employees or members of our board of directors who have been granted share options or other share-based awards, aresubject to the Administration Measures on Individual Foreign Exchange Control, the related Implementation Rules, and the Offshore Share Incentives Rules.In addition, pursuant to Circular 37, a privately-held special purpose vehicle’s grant of equity incentives to a PRC citizen is subject to foreign exchangeregistration and, prior to making an investment in or receiving a grant of a share-based award in such an entity, a PRC citizen is required to apply with therelevant PRC governmental authorities for foreign exchange registration of the investment. Our PRC employees who have been granted share-based awardsor held shares have not made the required registrations. We have applied for registration of our 2017 Share Incentive Plan with the SAFE, and we are in inprocess of applying for such registration of our 2010 Share Incentive Plan. If our 2017 Share Incentive Plan and 2010 Share Incentive Plan are not acceptedfor registration by the SAFE, we may not be able to grant further share-based awards to our PRC employees, we and those who have received awards may besubject to fines and legal sanctions, and our ability to contribute additional capital to our PRC subsidiaries and our PRC subsidiaries’ ability to distributedividends to us may be limited. 22Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents If the status of certain of our PRC subsidiaries and VIEs as “High and New Technology Enterprises,” “Key National Software Enterprises,” or“Software Enterprises” is revoked or expires, we may have to pay additional taxes or make up any previously unpaid taxes and may be subject to ahigher tax rate, which would adversely affect our results of operations. The CIT Law generally imposes a uniform income tax rate of 25% on all enterprises, but grants preferential treatment to “High and New TechnologyEnterprises,” or HNTEs, pursuant to which HNTEs are instead subject to an income tax rate of 15%, subject to a requirement that they re-apply for HNTEstatus every three years. During this three-year period, an HNTE must conduct a qualification self-review each year to ensure it meets the HNTE criteria, andwill be subject to the regular 25% income tax rate for any year in which it does not meet the criteria. The CIT Law and its implementing rules provide that a“Software Enterprise” is entitled to an income tax exemption for two years beginning with its first profitable year before December 31, 2017 and a 50%reduction to a rate of 12.5% for the subsequent three years. An entity that qualifies as a “Key National Software Enterprise,” or KNSE, is entitled to a furtherreduced preferential income tax rate of 10%. Enterprises wishing to enjoy the status of Software Enterprises or KNSEs must perform a self-assessment eachyear to ensure they meet the relevant criteria for qualification. If at any time during the preferential tax treatment years an enterprise uses the preferential CITrates but the relevant PRC governmental authorities determine that it failed to meet applicable criteria for qualification, PRC governmental authorities mayrevoke the enterprise’s Software Enterprise or KNSE status, as applicable. There are uncertainties regarding future interpretation and implementation of the CIT Law and its implementing regulations. It is possible that theHNTE, Software Enterprise, and KNSE qualifications of our operating entities currently qualified as such, or their entitlement to an income tax exemption orrefund of their value-added tax, or VAT, will be challenged by higher-level tax authorities and be repealed, or that there will be future implementingregulations that are inconsistent with current interpretation of the CIT Law. For example, in 2016 the SAT issued a circular with new criteria for certifying aSoftware Enterprise. Therefore, it is possible that the qualification of one or more of our PRC Subsidiaries or VIEs as a Software Enterprise will be challengedin the future or that such companies will not be able to take any further actions, such as re-application for Software Enterprise qualification, to enjoy suchpreferential tax treatment. If those operating entities cannot qualify for such preferential income tax status, our effective income tax rate will be increasedsignificantly and we may have to pay additional income taxes to make up the previously unpaid taxes, which would reduce our net income. We may be deemed a PRC resident enterprise under the CIT Law and be subject to PRC taxation on our worldwide income. The CIT Law provides that enterprises established outside of the PRC whose “de facto management bodies” are located within the PRC areconsidered “resident enterprises” and are generally subject to the uniform 25% enterprise income tax rate on their worldwide income (including dividendincome received from subsidiaries). Under the Implementing Regulations for the Corporate Income Tax Law, “de facto management body” is defined as abody that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances andtreasury, and acquisition and disposition of properties and other assets of an enterprise. Since substantially all of our operational management is currentlybased in the PRC, it is unclear whether PRC tax authorities would require us to be treated as a PRC-resident enterprise. If we are treated as a resident enterprisefor PRC tax purposes, we will be subject to PRC taxes on our worldwide income at the 25% uniform tax rate, which could have an impact on our effective taxrate and an adverse effect on our net income and the results of operations, even though dividends distributed from our PRC Subsidiaries to us could beexempted from Chinese dividend withholding tax under the CIT Law for PRC-resident recipients. Dividends paid by us to our foreign investors and profits on the sale of our shares or ADSs may be subject to tax under PRC tax laws. Under the Implementing Regulations for the Corporate Income Tax Law, PRC income tax at the rate of 10% is applicable to dividends paid toinvestors that are “non-resident enterprises,” without an establishment or place of business in the PRC, or which do have such establishment or place ofbusiness but the relevant income is not effectively connected with the establishment or place of business, to the extent that such dividends have their sourceswithin the PRC. In addition, any profits realized through the transfer of shares by such investors are subject to 10% PRC income tax if such profits areregarded as income derived from sources within the PRC. It is unclear whether dividends we pay with respect to our shares, or the profits you may realize fromthe transfer of our shares, would be treated as income derived from sources within the PRC and be subject to PRC taxes if we were treated as a PRC residententerprise under the CIT Law. Non-resident individual investors may be liable for PRC income tax at a rate of 20% on dividend payments or in respect ofprofits on transfer of ADSs if such amounts are deemed to arise from sources within the PRC. In the case of dividend payments, we would be required towithhold the tax at source. Any PRC tax liability may be reduced under applicable tax treaties. If we are required under the Implementing Regulations for theCorporate Income Tax Law to withhold PRC income tax on dividends paid to our non-PRC investors that are “non-resident enterprises,” or if you arerequired to pay PRC income tax on the transfer of our ADSs, the value of your investment in our ADSs may be adversely affected. 23Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Restrictions on currency exchange may limit our ability to use our revenues effectively. Substantially all of our revenues and operating expenses are denominated in RMB. The RMB is not freely tradable in “capital account” transactions,which include foreign direct investment. Foreign exchange transactions classified as capital account transactions are subject to limitations and requireapproval from the SAFE. This could affect our China-based subsidiaries’ ability to obtain foreign exchange through debt or equity financing, including bymeans of loans or capital contributions from us. Further, the RMB is at present freely convertible in “current account” transactions, which include dividends, and trade and service-related foreignexchange transactions, and our China-based subsidiaries may purchase and retain foreign exchange for settlement of such transactions, including payment ofdividends, without the approval of the SAFE. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase and retainforeign currencies in the future. Since a significant amount of our future revenues are likely to be in the form of RMB, these existing restrictions, and any future restrictions, oncurrency exchange may limit our ability to use revenues generated in RMB to fund our business activities outside of the PRC, or to make expendituresdenominated in foreign currencies. We may suffer currency exchange losses if the RMB depreciates relative to the U.S. dollar, which could reduce the value on an investment in our ADSs. Our reporting currency is the U.S. dollar. However, substantially all of our revenues are denominated in RMB. If the RMB depreciates relative to theU.S. dollar, our revenues and assets as expressed in our U.S. dollar financial statements will decline in value. In addition, to the extent that we need to convertU.S. dollars we receive from our initial public offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverseeffect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of payingdividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on theU.S. dollar amount available to us. Risks Related to Our Class A Ordinary Shares and ADSs We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands lawthan that under U.S. law, our shareholders may have less protection for their shareholder rights than they would under U.S. law. Our corporate affairs are governed by our Amended and Restated Memorandum of Association and Amended Restated Articles of Association andwe are governed by the Companies Law of the Cayman Islands, and the common law of the Cayman Islands. The rights of shareholders to legal take actionagainst our directors and us, actions by minority shareholders, and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a largeextent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicialprecedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. Therights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be understatutes or judicial precedent in some jurisdictions in the United States, such as the State of Delaware where many United States-based corporations areorganized. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and provides significantly lessprotection to investors. In addition, shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative action inU.S. federal courts. As a result, our public shareholders may have more difficulty in protecting their interests through actions against us, our management, ourdirectors, or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States such as Delaware. 24Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents It may be difficult to enforce any civil judgments against us or our Board of Directors or officers, because most of our operating and/or fixed assets arelocated outside the United States. Although we are incorporated in the Cayman Islands, most of our operating and fixed assets are located in the PRC. As a result, it may be difficult forinvestors to enforce judgments outside the United States obtained in actions brought against us in the United States, including actions predicated upon thecivil liability provisions of the federal securities laws of the United States or of the securities laws of any state of the United States. In addition, certain of ourdirectors and officers (principally based in the PRC) and all or a substantial portion of their assets are located outside the United States. As a result, it may notbe possible for investors to effect service of process within the United States upon those directors and officers, or to enforce against them or us judgmentsobtained in United States courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States or of thesecurities laws of any state of the United States. We have been advised by our PRC legal counsel that, in their opinion, there are substantial uncertainties as tothe enforceability in the PRC, in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated solely uponthe federal securities laws of the United States or the securities laws of any state of the United States. From time to time, press reports in the United States questioning the VIE structure used by us and various Chinese companies publicly traded in theUnited States may create concern among investors that may cause our ADS price to fluctuate. In recent years various prominent Western news outlets have questioned the use by Chinese companies that are publicly traded in the United Statesof VIE structure as a means of complying with PRC laws prohibiting or restricting foreign ownership of certain businesses in China, including businesses weare engaged in such as sponsored search, Internet information and content, online advertising, online game, and value-added telecommunication services.Some of such news reports have also sought to draw a connection between widely-reported accounting issues at certain Chinese companies and the use ofVIE structure. Such news reports appear to have had the effect of causing concern among investors in several Chinese companies that are publicly traded inthe United States. While we are not aware of any causal connection between the reported accounting scandals and the use of VIE structure, it is possible thatinvestors in our ADSs will believe that such a connection exists. Any of such circumstances could lead to further loss of investor confidence in Chinesecompanies such as ours and cause fluctuations in the market prices of our ADSs and, if such prices were to drop sharply, could subject us to shareholderlitigation, which could cause the price for our ADSs to drop further. Registered public accounting firms in China, including our independent registered public accounting firm, are not inspected by the U.S. PublicCompany Accounting Oversight Board, which deprives us and our investors of the benefits of such inspection. Auditors of companies whose shares are registered with the U.S. Securities and Exchange Commission and traded publicly in the United States,including our independent registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board (the “PCAOB”)and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United Statesand professional standards applicable to auditors. Our independent registered public accounting firm is located in, and organized under the laws of, the PRC,which is a jurisdiction where the PCAOB, notwithstanding the requirements of U.S. law, is currently unable to conduct inspections without the approval ofthe Chinese authorities. In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation withthe CSRC and the PRC Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of auditdocuments relevant to investigations undertaken by the PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively.The PCAOB continues to be in discussions with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that areregistered with the PCAOB and audit Chinese companies that trade on U.S. exchanges. This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independentregistered public accounting firm. As a result, we and investors in our common stock are deprived of the benefits of such PCAOB inspections. The inability ofthe PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accountingfirm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections, which could causeinvestors and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financialstatements. 25Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independent registered public accountingfirm, in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC, we could be unable to timelyfile future financial statements in compliance with the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In December 2012, the SEC instituted administrative proceedings against the Big Four PRC-based accounting firms, including our independentregistered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing toprovide to the SEC the firms’ audit workpapers with respect to certain PRC-based companies that are publicly traded in the United States. On January 22,2014, the administrative law judge presiding over the matter rendered an initial decision that each of the firms had violated the SEC’s rules of practice byfailing to produce audit workpapers to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period ofsix months. On February 6, 2015, the four China-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoidsuspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and toseek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If future document productions fail to meet specified criteria, the SECretains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. While we cannot predict if the SECwill further review the four China-based accounting firms’ compliance with specified criteria or if the results of such a review would result in the SECimposing penalties such as suspensions or restarting the administrative proceedings, if the accounting firms are subject to additional remedial measures, ourability to file our financial statements in compliance with SEC requirements could be impacted. A determination that we have not timely filed financialstatements in compliance with SEC requirements could ultimately lead to the delisting of our ADSs from the New York Stock Exchange or the termination ofthe registration of our ADSs and Class A ordinary shares under the Exchange Act, or both, which would substantially reduce or effectively terminate thetrading of our ADSs in the United States. If we fail to maintain an effective system of internal control over financial reporting, we may lose investor confidence in the reliability of our financialstatements. We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002,adopted rules requiring every public company to include a management report on the company’s internal control over financial reporting in its annual report,which contains management’s assessment of the effectiveness of our internal control over financial reporting. In addition, an independent registered publicaccounting firm must attest to and report on the effectiveness of our internal control over financial reporting. If we fail to maintain effective internal control over financial reporting in the future, our management and our independent registered publicaccounting firm may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. This could inturn result in loss of investor confidence in the reliability of our financial statements and negatively impact the trading price of our ADSs. Furthermore, wehave incurred and anticipate that we will continue to incur considerable costs, management time and other resources in our efforts to comply withSection 404 and other requirements of the Sarbanes-Oxley Act. We are a “controlled company” within the meaning of the New York Stock Exchange Listed Company Manual and as a result we are entitled to, and do,rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. We also have invokedone of the “home country practice” exceptions to the corporate governance requirements of the New York Stock Exchange Listed Company Manualthat are available to foreign private issuers such as us, and we may invoke additional such exceptions in the future. Sohu, through its ownership of Class B Ordinary Shares and the Voting Agreement with Tencent, will have the power to appoint a majority of ourboard of directors. As a result, we will be a “controlled company” under the New York Stock Exchange Listed Company Manual. We will rely on certainexemptions that are available to controlled companies from NYSE corporate governance requirements, including the following, which we do not intend tomeet voluntarily: · that we have a majority of independent directors on our board; · that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’spurpose and responsibilities; and · for an annual performance evaluation of the nominating/corporate governance committee and the compensation committee. We are not required to and will not voluntarily meet these requirements. If we are no longer a “controlled company,” we may in the future invoke“home country” exceptions available to foreign private issuers, such as us, under the New York Stock Exchange Listed Company Manual which are similar tothe exemptions for controlled companies, and also include the possibility of additional exceptions from the New York Stock Exchange Listed CompanyManual, such as the requirement that equity-compensation plans be approved by shareholders. As a result of our use of the “controlled company”exemptions, and any future use by us of the “home country” exceptions, holders of our ADSs will not have the same protection afforded to shareholders ofcompanies that are subject to all of NYSE corporate governance requirements. 26Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Sohu, through its ownership of Class B Ordinary Shares and a voting agreement with Tencent, has the power to appoint a majority of our board ofdirectors and Sohu and Tencent together have the voting power to control the outcome of shareholder actions in our company. Our ordinary shares are divided into Class A Ordinary Shares and Class B Ordinary Shares. Holders of Class A Ordinary Shares are entitled to onevote per share, while holders of Class B Ordinary Shares are entitled to 10 votes per share. Sohu, through its ownership of Class B Ordinary Shares and avoting agreement with Tencent, has the power to appoint a majority of our board of directors. Sohu and Tencent together have indirect shareholdings totalingapproximately 71.2% of the total of our outstanding Class A and Class B Ordinary Shares and totaling approximately 96.1% of the total voting power of thecombined total of our outstanding Class A and Class B ordinary shares, due to the additional voting power of the Class B Ordinary Shares. Sohu’s andTencent’s combined voting power give them the power to control actions that require shareholder approval under Cayman Islands law, our Amended andRestated Memorandum of Association and Amended and Restated Articles of Association, and the New York Stock Exchange Listed Company Manual,including significant mergers and acquisitions and other business combinations, changes to our Amended and Restated Memorandum of Association andAmended and Restated Articles of Association, the number of shares available for issuance under share incentive plans, and the issuance of significantamounts of our ordinary shares in private placements. Due to the disparate voting powers attached to the two classes of our ordinary shares, Sohu and Tencent will continue to have this power even if, atsome point in the future, they hold considerably less than a majority of the combined total of our outstanding Class A and Class B ordinary shares. Sohu’s and Tencent’s voting control may cause transactions to occur that might not be beneficial to the holders of our ADSs, and may preventtransactions that would be beneficial to them. For example, Sohu’s and Tencent’s voting control may prevent a transaction involving a change of control ofus, including transactions in which a holder of our ADSs might otherwise receive a premium for such securities over the then-current market price. Inaddition, Sohu and Tencent are not prohibited from selling their interests in us to a third party. Subject to certain limitations, if Sohu or Tencent is acquiredor otherwise undergoes a change of control, or sells a controlling interest in us, any acquirer or successor will be entitled to exercise the voting control andcontractual rights of Sohu or Tencent, as applicable, and may do so in a manner that could vary significantly from that of Sohu or Tencent. We may have conflicts of interest with Sohu and Tencent, and such conflicts may not be resolved in our favor. Conflicts of interest may arise between Sohu and Tencent, on the one hand, and us, on the other hand, in a number of areas relating to our past andongoing relationships. Potential conflicts of interest that we have identified include the following: · Employee recruiting and retention. Because Sohu, Tencent, and we operate primarily in China and the main focus of the businesses of each ofus is Internet services, we may compete with Sohu and Tencent in the hiring of new employees, in particular with respect to technology researchand development. We have non-solicitation arrangements with Sohu and Tencent that would restrict either Sohu or Tencent, on the one hand, orus, on the other hand from hiring any of the other’s employees. · Our board members and executive officers may have conflicts of interest. Dr. Charles Zhang, who is our Chairman of the Board, is currentlyalso serving as Sohu’s chairman and chief executive officer. By virtue of the high-vote Class B Ordinary Shares held by Sohu and Tencent andthe voting agreement between Sohu and Tencent, Sohu will have the power and right to appoint a majority of our Board of Directors andTencent will have the right to appoint two of the member of our Board of Directors. These relationships could create, or appear to create,conflicts of interest when these persons are faced with decisions with potentially different implications for Sohu or Tencent and us. · Sale of shares in our company. Although there are restrictions in the Voting Agreement among us, Sohu, and Tencent on transfers by Sohu orTencent to competitors of ours, if the Voting Agreement were to terminate, Sohu or Tencent would no longer be subject to such transferrestrictions and may decide to sell all or a portion of our shares that it holds to one of our competitors, thereby giving that third party substantialinfluence over our business and our affairs. Such a sale could be contrary to the interests of certain of our shareholders, including our employeesand holders of our ADSs. · Allocation of business opportunities. Business opportunities may arise that both we and Sohu or Tencent find attractive, and which wouldcomplement our respective businesses. Sohu or Tencent may decide to take the opportunities itself, which would prevent us from takingadvantage of the opportunity ourselves. 27Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Developing business relationships with competitors of Sohu and Tencent. For so long as Sohu retains the power to appoint a majority of ourBoard of Directors and Sohu and Tencent voting together retain the power to decide all other matters put to a vote of our shareholders, we maybe limited in our ability to do business with the competitors of either of them, such as other providers of various Internet services in China. Thismay limit our ability to enter into business relationships that might be in our best interests and those of our shareholders other than Sohuor Tencent. Although we are a stand-alone entity separate from Sohu and Tencent, we expect to operate, for as long as Sohu has the right to appoint a majority ofour Board of Directors, as a part of the Sohu Group. Sohu may from time to time make strategic decisions that it believes are in the best interests of itsbusiness as a whole, including our company. These decisions may be different from the decisions that we would have made on our own. Sohu’s decisionswith respect to us or our business may be resolved in ways that favor Sohu and therefore Sohu’s own shareholders, which may not coincide with the interestsof shareholders other than Sohu. We may not be able to resolve any potential conflicts, and even if we do so, the resolution may be less favorable to us than ifwe were dealing with an unaffiliated shareholder. Even if both Sohu and we and Tencent seek to transact business on terms intended to approximate thosethat could have been achieved among unaffiliated parties, this may not succeed in practice. The market price for our ADSs may fluctuate. The trading price of our ADSs has been and may continue to be subject to fluctuations. During the period from November 9, 2017, the first day oftrading of our ADSs on the New York Stock Exchange, until February 21, 2018, the trading price of our ADSs ranged from US$8.08 to US$14.70 per ADS,and the closing sale price on February 21, 2018 was $9.34 per ADS. Among the factors that could affect the price of our ADSs are the various risk factorsdescribed in this annual report and other factors, including: · announcements of competitive developments by our competitors; · regulatory developments in our target markets affecting us, our customers or our competitors; · actual or anticipated fluctuations in our operating results; · failure of our financial and operating results to meet market expectations or failure to meet our previously announced guidance; · changes in financial estimates by securities research analysts; · changes in the economic performance or market valuations of other Internet companies; · additions or departures of our executive officers and other key personnel; · announcements regarding litigation involving us or any of our directors and officers; · fluctuations in the exchange rates between the U.S. dollar and the RMB; · release or expiration of transfer restrictions on our outstanding ordinary shares and ADSs; · sales of our ordinary shares or ADSs in the market by Sohu or Tencent; and · sales or perceived sales of additional shares or ADSs. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operatingperformance of particular industries or companies. Such market fluctuations may have an adverse effect on the market price of our ADSs. Our dual-class ordinary share structure could have an adverse effect on the market price of our ADSs Our dual-class ordinary share structure, and the consequent concentration of voting power in Sohu and Tencent as a result of their ownership of ourClass B Ordinary Shares, could adversely affect perceptions of us in the equity capital markets and could result in a lower market price for our ADSs. Forexample, apparently as a result of public criticism by commentators and shareholder advisory firms of companies with classes of shares with disparate votingrights, certain providers of indexes of publicly-traded equity shares, including FTSE Russell, S&P Dow Jones, and MSCI, have recently announced that theyhave either implemented, or are considering implementing, policies excluding companies with certain types of multiple-class voting structures from some oftheir published equity indexes. If our ADSs were to be excluded from such indexes, the market price of our ADSs could be adversely affected. 28Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Holders of our ADSs may be subject to limitations on transfer of their ADSs. While Our ADSs are transferable on the books of the depositary, the depositary may close its transfer books at any time or from time to time when itdeems it expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSsgenerally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of anyrequirement of law or of any government or governmental body, or under any provision of the Deposit Agreement, or for any other reason. Holders of ADSs have limited voting rights and may not receive voting materials in time to be able to exercise their right to vote. Except as described in this annual report and in the Deposit Agreement, holders of our ADSs will not be able to exercise voting rights attaching tothe shares represented by our ADSs on an individual basis. Holders of our ADSs may instruct the depositary how to exercise the voting rights attaching to theshares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote, however, and it is possible that direct holdersof ADSs, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a vote. In addition, due tothe different voting powers attached to the two classes of our ordinary shares and a voting agreement between Sohu and Tencent, Sohu, our controllingshareholder, has the right to appoint a majority of our Board of Directors, Tencent has the right to appoint two of our directors, and Sohu and Tencenttogether control all other matters put to a shareholder vote. As a result, as a holder of our ADSs you will have no ability to affect the outcome of any mattersubject to shareholder vote. ADS holders’ right to participate in any future rights offerings may be limited, which may cause dilution to their holdings and ADS holders may notreceive cash dividends if it is impractical to make them available to such holders. We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights availableto ADS holders in the United States unless we register the securities to which the rights relate under the Securities Act of 1933, or the Securities Act, or anexemption from registration requirements is available. Also, under the Deposit Agreement, the depositary bank will not make rights available to ADS holdersunless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registrationunder the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such aregistration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act.Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings. In addition, the depositary bank for our ADSs has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receiveson our ordinary shares or other deposited securities after deducting its fees and expenses. ADS holders will receive these distributions in proportion to thenumber of ordinary shares such holders’ ADSs represent. However, the depositary bank may, at its discretion, decide that it is inequitable or impractical tomake a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain propertythrough the mail, or that the value of certain distributions may be less than the cost of mailing them, or that the distribution requires certain governmentalapproval, such as requirement for registration or approval for currency conversion. In these cases, the depositary may decide not to distribute that propertyand ADSs holders will not receive that distribution. You will experience dilution as outstanding share options are exercised. You will experience dilution to the extent that additional Class A Ordinary Shares are issued upon settlement of outstanding share options or othershare-based awards that we may grant from time to time. As of the date of this annual report, there are options outstanding exercisable for the purchase of anaggregate of 4,236,754 Class A Ordinary Shares. We may need additional capital and may sell additional ADSs or other equity securities or incur indebtedness, which could result in additional dilutionto our shareholders or increase our debt service obligations. We may require additional cash resources due to changed business conditions or other future developments, including any investments oracquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debtsecurities or obtain a credit facility. The sale of additional equity securities or equity-linked debt securities could result in additional dilution to ourshareholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that wouldrestrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. 29Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Substantial future sales of our ADSs or ordinary shares in the public market, or the perception that these sales could occur, could cause the price of ourADSs to decline. Additional sales of our ADSs or Class A ordinary shares in the public market, or the perception that these sales could occur, could cause the marketprice of our ADSs to decline. As of December 31, 2017 there were 118,408,437 Class A ordinary shares and 278,757,875 Class B ordinary shares outstanding.The ordinary shares held by our officers and directors and certain shareholders will be available for sale upon the expiration of the 180-day lock-up periodbeginning November 8, 2017, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. Any of these shares may bereleased prior to the expiration of the lock-up period at the discretion of the lead underwriters for our initial public offering. Under the lock-up agreement between Xiaochuan Wang, our Chief Executive Officer, and the underwriters, Mr. Wang and his affiliates may pledgeor create other security interests in the Class A Ordinary Shares or ADSs they hold, or the Pledged Securities, to secure any of Mr. Wang’s or his affiliates’payment obligations under a loan agreement that provides for a principal amount of 38 million. In addition, if the market price of our ADSs were to declineconsiderably, Mr. Wang could be required by the lender to increase the number of Class A Ordinary Shares subject to the pledge. In the event of anyenforcement by the lender under such loan agreement of its security interests in the Pledged Securities and any such additional Class A Ordinary Sharesfollowing a default, the lender will be entitled to resell the Pledged Securities and such additional Class A Ordinary Shares without regard to the lock-upagreement entered into by Mr. Wang. Any such enforcement by the lender and sale of the Pledged Securities or such additional Class A Ordinary Shares inthe open market, either during the 180-day lock-up period or after the expiration of Mr. Wang’s lock-up agreement with the underwriters, could cause themarket price of our ADSs to decline. In addition, Sohu, Tencent, and Photon Group Limited, a British Virgin Islands company of which Dr. Charles Zhang, the Chairman of or Board ofDirectors may be deemed to be the beneficial owner, which held approximately 33.0%, 38.2%, and 8.1% of the combined total of our outstanding Class Aand Class B Ordinary Shares as of December 31, 2017, are parties to a registration rights agreement that gives them rights that, if exercised, will permit themto sell some or all of their shares freely in the open market after the expiration of the 180-day lock-up period beginning November 8, 2017 without regard tothe restrictions of Rule 144 under the Securities Act. As of the date of this annual report, there are options outstanding exercisable for the purchase of anaggregate of 4,236,754 Class A Ordinary Shares. We also may grant or issue additional share options, restricted share units, or other share-based awards in thefuture under our share incentive plan to our management, employees and other persons, the settlement and sale of which may further dilute our shares anddrive down the price of our ADSs. We may be a passive foreign investment company, which could result in adverse U.S. federal income tax consequence to U.S. Holders of our ADSs orordinary shares. If we are a passive foreign investment company, or PFIC, for any taxable year during which a U.S. holder, as defined under “Taxation—United StatesFederal Income Taxation—Passive Foreign Investment Company”, held an ADS or a Class A ordinary share, certain adverse United States federal income taxconsequences likely would apply to the U.S. holder. See “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.” We expect that we will not be treated as a PFIC for U.S. federal income tax purposes for our 2017 taxable year ended November 30, 2017. Ourexpectation is based on our current and anticipated operations and the composition of our earnings and assets for the 2017 taxable year, including the currentand expected valuation of our assets based on the price of our ADSs in the market. However, we currently hold, and expect to continue to hold following thedate of this annual report, a substantial amount of cash, and the value of our other assets may be based in part on the market price of our ADSs, which is likelyto fluctuate in the future (and may fluctuate considerably given that market prices of Internet companies historically have been especially volatile).Furthermore, it is not entirely clear how the contractual arrangements between us and our consolidated VIEs will be treated for purposes of the PFIC rules. Inaddition, our PFIC status for any taxable year cannot be determined until the close of such taxable year. Accordingly, there is no guarantee that we will not bea PFIC for any taxable year. U.S. holders and prospective holders of our ADSs are urged to consult their own tax advisors regarding the application of the PFIC rules to aninvestment in our ADSs or Class A ordinary shares. 30Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting or disclosure requirementsapplicable to emerging growth companies could make our ADSs less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act, and we may choose to take advantage of exemptions available to us under theJOBS Act from certain of the reporting or disclosure requirements that are otherwise applicable to public companies in the United States. It is possible thatinvestors will find our ADSs less attractive if we choose to rely on these exemptions. If some investors find our ADSs less attractive as a result of any choicesto reduce future disclosure, there may be a less active trading market for our ADSs and the market prices of our ADSs may be more volatile. As an emerging growth company under the JOBS Act, we have elected to opt out of the extended transition period for complying with new orrevised accounting standards provided by JOBS Act. This election is irrevocable. We will remain as an emerging growth company until the earliest of (i) the end of our first fiscal year in which our annual gross revenues exceedUS$1,070,000,000; (ii) the end of our 2022 fiscal year (which will be the fiscal year in which the fifth anniversary of the completion of our initial publicoffering occurred); (iii) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) thedate on which we qualify as a “large accelerated filer” under the Exchange Act, which may take place if the aggregate worldwide market value of our ordinaryshares that are held by non-affiliates is at least US$700 million as of the last business day of our then most recently completed second fiscal quarter. If andafter we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. ITEM 4. INFORMATION ON THE COMPANY History and Development of the Company Sogou Inc. was incorporated in the Cayman Islands in December 2005 by Sohu. Prior to February 2006, our search and search-related businesses were operated by various entities owned or controlled by Sohu. In February 2006,Sohu undertook a reorganization of its search and search-related businesses, whereby most of the business was transferred to us. As part of the reorganization,Sohu established Sogou BVI, Sogou Technology, and Sogou HK. In October 2010, Sohu undertook another reorganization in preparation for our issuance of Pre-IPO Series A Preferred Shares in a financingtransaction, and transferred other businesses and employees related to the search and search-related businesses to us. We then issued and sold 24,000,000,14,400,000, and 38,400,000 Pre-IPO Series A Preferred Shares to Alibaba, China Web, and Photon. In June 2012, Sohu repurchased the 24,000,000 Pre-IPOSeries A Preferred Shares held by Alibaba. In September 2013, Tencent invested an amount of US$448.0 million in cash in us and transferred its Soso search-related businesses and certainother assets to us, in exchange for which we issued 65,431,579 Pre-IPO Series B Preferred Shares and 79,368,421 Pre-IPO Class B Ordinary Shares to Tencent. In connection with Tencent’s investment, we also entered into (i) a repurchase option agreement with Sohu, exercisable commencing on March 16,2014, granting us the right to repurchase 24,000,000 Pre-IPO Series A Preferred Shares held by Sohu for an aggregate purchase price of US$78.8 million; (ii) arepurchase option agreement with Photon, also exercisable commencing on March 16, 2014, granting us the right to repurchase 6,400,000 Pre-IPO Series APreferred Shares held by Photon for an aggregate purchase price of US$21.0 million; and (iii) a repurchase/put option agreement with China Web, granting usthe right to repurchase at any time from March 16, 2014 to July 31, 2014, and granting China Web the right to put to us at any time prior to July 31, 2014,14,400,000 Pre-IPO Series A Preferred Shares held by China Web for an aggregate purchase price of US$47.3 million. Also in connection with Tencent’s investment, Sohu, Photon, our Chief Executive Officer Xiaochuan Wang, four other members of our management,and Tencent entered into a shareholders’ agreement, which terminated upon the completion of our initial public offering. Sohu, Photon, Xiaochuan Wangand four other members of our management, and we also entered into a voting agreement in which Photon, Xiaochuan Wang, and the four other members ofour management agreed to vote their Pre-IPO Series A Preferred Shares and Pre-IPO Class A Ordinary Shares to appoint Sohu’s designees to our Board ofDirectors. This voting agreement remained in effect following the completion of our initial public offering as to the Class A Ordinary Shares that were issuedto the parties upon redesignation of their Pre-IPO Series A Preferred Shares and Pre-IPO Class A Ordinary Shares, but does not cover Class A Ordinary Sharesthat were acquired by Xiaochuan Wang in the public market following the completion of our initial public offering. 31Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In September 2013, also in connection with Tencent’s investment, we paid a special dividend to the three holders of Pre-IPO Series A PreferredShares in the aggregate amount of US$300.9 million, of which Sohu received US$161.2 million, Photon received US$43.0 million, and China Web receivedUS$96.7 million. Also in connection with its investment in us, in December 2013, Tencent acquired a 45% equity interest in our VIE Sogou Information forUS$1.5 million, and Sohu also acquired a 45% equity interest in Sogou Information for US$1.5 million. In December 2013, Tencent purchased 6,757,875 Pre-IPO Class A Ordinary Shares from various shareholders, a majority of whom were ouremployees. In March 2014, we repurchased 14,400,000 Pre-IPO Series A Preferred Shares from China Web for an aggregate purchase price of US$47.3 millionpursuant to the repurchase/put option agreement we had entered into in September 2013 with China Web. During the year ended December 31, 2014, we repurchased 4,185,800 Pre-IPO Class A Ordinary Shares from various shareholders, a majority ofwhom were our employees, for an aggregate purchase price of US$41.9 million. In September 2015, we repurchased from Sohu and Photon, pursuant to the repurchase option agreements we had entered into in September 2013,24,000,000 and 6,400,000 Pre-IPO Series A Preferred Shares of Sogou, for aggregate purchase prices of US$78.8 million and US$21.0 million, respectively. In August 2017, in preparation for our initial public offering, Sohu, Tencent, and we entered into a voting agreement that provides for theredesignation of all of our authorized and outstanding equity shares outstanding immediately prior to the completion of our initial public offering into eitherClass A Ordinary Shares or Class B Ordinary Shares effective upon the completion of our initial public offering and also provides, among things, that,effective upon the completion of such offering, subject to certain conditions, for so long as Sohu and Tencent together hold a majority of the combinedvoting power of our Class A Ordinary Shares and Class B Ordinary Shares, Sohu will continue to have the right to appoint a majority of our Board ofDirectors. The Class A Ordinary Shares are entitled to one vote per share, and the Class B Ordinary Shares, which will be held solely by Sohu and Tencent, areentitled to 10 votes per share. As a result, Sohu and Tencent together have the power to decide all matters that are put to a vote of our shareholders. See“Related Party Transactions—Voting Agreement Between Sohu and Tencent.” We completed an initial public offering of our ADSs on November 13, 2017. Our ADSs are traded on the New York Stock Exchange under thesymbol “SOGO.” Our principal executive offices are located at Level 15, Sohu.com Internet Plaza, No. 1 Unit Zhongguancun East Road, Haidian District, Beijing100084, People’s Republic of China. Our telephone number at this address is +86 10-5689-9999. Our registered office in the Cayman Islands is located at theoffices of Vistra (Cayman) Limited at P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 Cayman Islands. Ouragent for service of process in the United States is CT Corporation System, 111 Eighth Avenue, New York, New York 10011. Business Overview Our mission is to make it easy to communicate and get information. We are an innovator in search and a leader in China’s Internet industry. Our Sogou Search is the second largest search engine in China by mobilequeries and we are the fourth largest Internet company in China based on MAU in December 2017, according to iResearch. Our industry-leading Sogou InputMethod, the robust ecosystem we have built and shared with Tencent and other strategic partners, and significant breakthroughs in AI uniquely position us tocapture opportunities in China’s search and Internet industry. Sogou Search had an 18.2% market share in China based on mobile queries in December 2017, as compared to 15.2% in March 2017, according toiResearch. Meanwhile, our mobile search MAU increased from 457 million in December 2016 to 545 million in December 2017. We have grownsignificantly, with mobile Web search page views having grown by 31% from December 2016 to December 2017. Powered by AI, Sogou Search offersinnovative products and services. For example, our cross-language search service eliminates the Chinese-English language barrier, enabling users to discoverEnglish content on the Internet by querying in Chinese and reading content that we have translated into Chinese. Chinese language input software is a must-have for users to type in Chinese. Sogou Input Method is the largest Chinese language input software byboth mobile and PC MAUs in December 2017, according to iResearch, and is the first cloud-based Chinese language input software. Sogou Searchcontinually captures Chinese expressions and phrases on the Internet, which enables Sogou Input Method to build a comprehensive and up-to-datevocabulary library. This allows us to improve the efficiency and accuracy of predictive text. In December 2017, Sogou Input Method had 331 million mobileDAU and 86 million PC DAU. It was the number two PC software in China by DAU and the number three mobile application in China by DAU inDecember 2017, according to iResearch. Sogou Input Method interfaces with virtually all applications that involve Chinese language input, generatingmassive and high-quality data that is critical to our big data capabilities. Sogou Input Method has the ability to anticipate users’ search intentions in real-time and allows users to search directly with Sogou Search through its embedded search function, generating a significant portion of our organicsearch traffic. 32Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We have built and shared a robust ecosystem with Tencent and other strategic partners. We deliver differentiated content to our users throughservices such as search access to the vast content from Tencent’s Weixin Official Accounts. We have also broadened our user acquisition channels bycollaborating with our strategic partners and third parties. Sogou Search is the default general search engine in Tencent’s Mobile QQ Browser and qq.com.We are exploring potential opportunities to deepen collaborations with Tencent. Since October 2017, Tencent has been testing, on a trial basis and forpurposes of assessment, the integration of Sogou Search into Weixin/WeChat. With this initiative, users of Weixin/WeChat can use Sogou Search as a generalsearch function within Weixin/WeChat to access Internet information outside Weixin/WeChat. We are working closely with Tencent on product testing andoptimization and intend to discuss commercial arrangements upon the completion of the trial stage. We are at the forefront of AI development with a clear roadmap. Focusing on natural interaction and knowledge computing, we have madesignificant breakthroughs in language-centered AI capabilities, including voice and image technologies, machine translation, and question answering, orQ&A, which have been successfully integrated into our products and services. In addition to the implementation of machine translation in cross-languagesearch services, we provide our users with a more natural search experience through AI-based voice and image technologies. Q&A technology enables us toprovide direct answers in response to user queries, instead of displaying a list of Web links. Our proven AI capabilities will facilitate our launch of moredisruptive products and services, such as virtual personal assistants, or VPAs, to serve users anytime, anywhere. We have recorded substantial revenue growth, with an increase from US$591.8 million in 2015 to US$660.4 million in 2016 and US$908.4 million in2017. We generate revenues primarily from search and search-related advertising services, which represented 88.2% of our total revenues in the year endedDecember 31, 2017. Our Business Products and Services for Users Our suite of products and services for users focuses on search and search-related services that cover a wide variety of use cases, from online search toinput methods. Through our products and services, depicted in the table below, we have built a massive, engaged, and fast-growing user base. 33Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Sogou Search We make information easily accessible for Chinese Internet users. Through Sogou Search, we enable our users to conveniently find relevant, high-quality, and comprehensive information anytime, anywhere. We offer users general and vertical search services through our website sogou.com and ourmobile search application. In addition, Sogou Search is the default general search engine for popular Internet portals such as qq.com and sohu.com, andpopular browsers such as the Mobile QQ Browser and Sogou Browser. Sogou Search was the second largest search engine in China with an 18.2% marketshare by mobile queries in December 2017, according to iResearch. General Search Our general search is the core product of our search services. After a user types in a query in the search box, our search engine quickly returns a list ofranked search results (appearing as hypertexts), snippets, and sometimes direct answers in response to the user query. In many cases, the search snippetsappearing underneath the hypertexts, or the direct answers appearing at the top of the search result page, provide users with the desired information. In othercases, users click on the hypertexts to visit the linked websites. Search Features To help users find the information they desire more quickly and conveniently, Sogou Search offers the following features: · Query Suggestion: As the user is typing in the search box, a drop-down list will appear under the search box, offering dynamic predictions andrecommendations of search queries based on the words that the user is typing. Users can select the desired search query from the drop-down listto avoid typing in additional characters. · Query Correction: Many search queries contain errors. Erroneous search queries often produce fewer and/or inaccurate or less relevant searchresults, thereby adversely affecting the user experience. Our query correction identifies and corrects apparent errors in search queries to helpdeliver a high-quality search experience. · Rich Search Snippets: Rich search snippets displayed on search result pages present content from webpages in the form of structured data tohelp users better understand the content and find the desired information directly in the snippet. For example, when a user searches a restaurant,our search engine will return structured data such as the address of the restaurant and reviews. · Webpage Translation: Chinese language information accounts for only a small fraction of the information available on the Internet. Atremendous amount of high-quality information, such as academic publications, is in English. To allow Chinese users to read English webpages,Sogou Search applies our machine translation technology to translate the content of English-language webpages into Chinese with justone click. · Search Result Recommendations: Using big data analytics and sophisticated algorithms, we recommend relevant and interesting products andservices to users based on search queries and display the recommendations on search result pages. Key Mobile Search Features Given the growing use of mobile devices, we have developed additional features that are optimal for mobile search to enhance user experience, suchas: · Direct Answers: Within the limited screen space on mobile devices, we offer direct and easy-to-read answers and recommendations in responseto queries submitted by users in question form. 34Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Multi-modal inputs: In addition to inputting search queries by typing, users can input queries by voice and image. For example, users canupload an image of an item to search for where to buy it. Such input options give users a convenient and interactive mobile search experience. · Audio response: In response to search queries submitted through voice input, we can provide answers through audio response. · Local services information: We have integrated a wide range of third-party vertical services, such as travel information from Ctrip, into ourgeneral search to build a comprehensive service system that fully and accurately meets users’ search needs in verticals such as entertainment,sports, and travel. · Newsfeeds: On the Sogou Search homepage, we display personalized newsfeeds containing up-to-the-minute information and content tailoredto users’ interests. Users can also subscribe to newsfeeds on certain topics to ensure that they receive real-time updates on such topics. Vertical Search Services We strive to offer differentiated content in our search products and services in order to improve our search results and provide an enhanced searchexperience for our users. Through collaborations with industry-leading content providers, we offer the following vertical search services: · Sogou Weixin Search: Weixin/WeChat is China’s largest mobile community. With over 20 million accounts covering a wide range of topics,Weixin Official Accounts have become a key information platform for Chinese users. Sogou Weixin Search is the sole general search enginewith access to search all content published on Weixin Official Accounts. · Sogou Wise Doctor: A large number of online searches in China relates to healthcare. Sogou Wise Doctor provides authoritative healthcareinformation through collaboration with third-party healthcare information platforms. 35Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Sogou English: Supported by the technology of Microsoft’s Bing, Sogou English is our cross-language search service that enables Chineseusers to discover English content on the Internet by querying in Chinese and reading content that we have translated into Chinese. · Sogou Zhihu: Zhihu is the leading online knowledge-sharing platform in China, according to iResearch. Through our collaboration withZhihu, Zhihu exclusively pushes key content to us in real time, allowing us to index Zhihu content rapidly and comprehensively. · Sogou Encyclopedia: Sogou Encyclopedia is an Internet-based encyclopedia compiled by netizens, offering search, browsing, editing, andother services to help users obtain information. It integrates rich forms of content, such as texts, audio, images, and videos. · Sogou Ask: Sogou Ask is a platform open to the general public for Q&A. Users ask each other questions and help other users solve problems.Sogou Ask also connects users with professionals. · Sogou Image Search: Sogou Image Search allows users to search for images by entering text, and provides users with advanced searchcapabilities to filter search results of images by color, file formats, and file sizes. Users can also upload an image or enter an image URL to searchfor an image’s source or search for similar images on the Internet. Sogou Image Search can automatically recognize certain elements embeddedin online images and search for similar elements in its image library. · Sogou Shopping Search: Sogou Shopping Search collects product data from e-commerce platforms in China. Users can search for products byentering the product brand, category, or model and can view product specifications and price. Sogou Shopping Search also provides users withreal-time product comparisons based on price, sales volume, reviews, and shipping information to help users make better purchasing decisions. · Sogou Video Search: We collect the metadata of videos from multiple Chinese video platforms to allow users to search from a large collectionof online videos by title, actor, or genre and to filter search results by length, upload date, or source. · Sogou News Search: Sogou News Search allows users to search for the most up-to-date news by aggregating news from various online newsportals. Sogou Input Method The Chinese language is a logographic language, while traditional keyboards are designed for alphabetic languages. Due to the complexities ofinputting Chinese characters using alphabetic keyboards, Chinese language input software allows users to input Chinese using alphabetical letters based onthe Chinese pronunciation and select the correct Chinese character from a list of Chinese characters with the same pronunciation. We launched Sogou Input Method, the first cloud-based Chinese language input software, in 2006. Sogou Input Method has become anindispensable Chinese language input software tool for PC and mobile users. Sogou Input Method had achieved a penetration rate of 98% among PC Internetusers in China in December 2017, according to iResearch. It was the second most widely used PC software in China by DAU and the number one Chineselanguage input software for PC users in terms of MAU in December 2017, according to iResearch, with 242 million PC MAU. Sogou Mobile Keyboard, themobile application of Sogou Input Method, had achieved a penetration rate of over 70% among mobile users of third-party Chinese language inputapplications in December 2017, according to iResearch. It was the third most widely used mobile application in China by DAU and the number one Chineselanguage input application for mobile users in terms of MAU in December 2017, according to iResearch, with 451 million mobile MAU. Sogou MobileKeyboard is the default Chinese input method for many Chinese mobile device brands, including Vivo, Oppo and Xiaomi. In order to meet the evolvingneeds of input method on mobile devices, in addition to text input, Sogou Mobile Keyboard allows users to input through voice, image, and handwriting,and has other capabilities such as language translation and direct search. Sogou Mobile Keyboard possesses a large library of language data, and in the fourthquarter of 2017 processed an average of over 90 billion Chinese character inputs, over 230 million voice inputs, and millions of text scanning and translationrequests per day. The diagrams below illustrate how Sogou Mobile Keyboard has made Chinese language input easy and efficient for mobile users. 36Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In addition to making input easy and fast for users, Sogou Input Method has a comprehensive library of the latest colloquialisms, emojis, emoticons,and other multimedia resources, enabling user expression to be more rich, natural, and lively. It also has a collection of over 170,000 graphical skins. SogouInput Method also provides tools for users to create their own expressions and video clips to further enhance the communication experience. Sogou Input Method has embedded functions such as SmartShare, SmartCorrect, and SmartReply. Our SmartShare function (depicted below) allowsusers to search and conveniently share their search results while chatting in social platforms such as Weixin/WeChat. SmartShare can also predict user intentbased on what they are typing to make intelligent recommendations of content, such as videos, that can be shared with other users while chatting. 37Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Additionally, SmartCorrect automatically corrects typing errors, while SmartReply formulates automatic replies by analyzing chatting context inorder to make communication more efficient. Due to our rich content offering and practical features and functionality, Sogou Input Method has become the dominant Chinese language inputsoftware across a wide variety of Internet use cases, such as social media, news, entertainment, shopping, travel, and financial services. We are able to leveragethe massive data that our users have generated through Sogou Input Method to more accurately and rapidly predict user intent, which enables us tocontinually enhance our existing products and services and innovate and develop new products and services. Other Products Sogou Browser Sogou Browser is designed to make Web navigation fast and easy. We continually upgrade the browser to expand functionality from a browsing toolto a content distribution platform for an enriched user experience. Based on users’ browsing habits and history, and leveraging our big data capabilities, weprovide personalized recommendations of content and vertical services for users. Sogou Web Directory Sogou Web Directory, a content aggregation and distribution platform, is a one-stop shop for navigation of the Chinese Web. The news aggregationservice in Sogou Web Directory helps users quickly obtain access to the latest news and information. The video content aggregation service compilescomprehensive online video resources, allowing users to find and watch movies, TV shows, music videos, animations, and video clips related to theirinterests. The shopping assistant service provides users with diverse online shopping recommendations. 38Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Sogou Map Sogou Map provides Internet-based map and navigation services across PCs, mobile devices, and smart wearables. In addition to point-to-pointnavigation on static road networks, Sogou Map also provides users with dynamic traffic information to significantly increase the accuracy of estimated timeof arrival (ETA). Sogou Map provides traffic congestion information in real-time and provides route optimization recommendations through multipledimensions, such as distance and travel time. Sogou Map has established a massive global Wi-Fi and base station database for positioning calculation andconstantly optimizes positioning accuracy by using neural network models. In addition, Sogou Map has been pre-installed in third-party mobile devices andsmart wearables, including Google’s Android Wear smart watch for the Chinese market. Sogou Smart Driving Assistant Sogou Smart Driving Assistant is an application that provides full voice-enabled in-vehicle services, allowing the driver to interact with the systemusing natural language to accomplish various tasks such as setting destinations for GPS navigation and checking traffic and weather conditions. Our drivingassistant application has been built into in-vehicle assistant systems for industry partners such as automakers and map service providers. Sogou Mobile Assistant Sogou Mobile Assistant provides users with access to a large selection of mobile applications and online mobile games, which are authenticated byus in order to ensure the safety of the content for users’ phones. Using big data and AI technologies, we have built an intelligent recommendation system inSogou Mobile Assistant to help users find mobile applications related to their interests. Sogou Mobile Assistant also optimizes phone performance byclearing cache and junk files, cleaning phone memory, and preserving phone battery life. Sogou Game Center Sogou Game Center, our gaming platform, offers Web and mobile games developed by third parties. Sogou Translation Sogou Translation incorporates neural machine translation technology and massive corpus to deliver language translation. It is web-based and alsoavailable as a mobile application. In addition to written text translation, the Sogou Translation mobile application, incorporating voice recognition and OCRtechnologies, can translate voice and textual image inputs. Sogou Reading Sogou Reading provides users with access to online literature and is available on the Web and as a mobile application. We have access to a wealthof copyrighted literary works through our collaboration with third-party online reading platforms, including China Literature, a leading online literatureplatform in China. Smart Hardware Teemo Watch In 2014, we launched Teemo Watch, our self-developed smart watch for children that rapidly became one of the leading domestic brands for smartwatches, according to IDC. In July 2017, we launched Teemo Hero Watch, our latest generation of 4G smart watch for children. Teemo Hero Watch offers a dual high-definitioncamera, which supports two-way HD video calls and HD video sharing. It also integrates our Q&A technology and supports various other AI-poweredapplications. We frequently upgrade Teemo Watch features, and offer unique content-based services to differentiate our product from those of competitors. Ourvalue-added content service model has evolved from story-pushing in our early days to now offering Teemo news, bedtime stories, “know-ahead-of-time,”headlines, FM radio, photos, cloud-based video storage services, and other value-added services. 39Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Teemo Home In September 2017, we launched Teemo Home, a home-based smart device with a video-chat function and smart assistance features through voicetechnologies. Other Devices in Development After three years of developing smart hardware products and our supply chain, we have achieved strong research and development and quality-control capabilities and a wide distribution network, which provides a solid foundation for the development and success of new smart hardware products. InJanuary 2018, we announced the launch in March 2018 of an AI-powered portable translation device, Sogou Travel Translator, as well as a Sogou SmartTranslation Recorder and translation software. Distribution of User Products and Services We distribute our search and search-related products and services for users organically through our own properties, such as our mobile searchapplication, Sogou Browser, and Sogou Input Method. We also distribute such products and services through third-party platforms such as the MobileQQ Browser, qq.com, and the PC Web directories daohang.qq.com and hao.qq.com. Additionally, we collaborate with mobile device manufacturers such asOppo, Vivo and Xiaomi, who use Sogou Search as the default general search engine in browsers that are pre-installed on certain phone models. For our smart hardware products, we have established a nationwide online and offline sales distribution network in China that includes third-party e-commerce platforms and retail stores. Monetization We generate revenue primarily from our search and search-related advertising services. Search and search-related advertising services enableadvertisers’ promotional links to be displayed on our search result pages and other properties and third parties’ Internet properties where the links are relevantto search queries and such properties. Our large user base and big data capabilities allow us to enhance the effectiveness of our targeted advertising services,thereby strengthening our monetization capabilities. We also generate revenue from other business by offering Internet value-added services, or IVAS, primarily with respect to our operation of gamesdeveloped by third parties and provision of online reading services, as well as by offering other products and services, including smart hardware products. Online Advertising Search and Search-Related Advertising Products and Services Search and search-related advertising services consist primarily of auction-based pay-for-click services, for which we charge advertisers on a perclick basis when users click on the advertisers’ promotional links displayed on our and third parties’ Internet properties. Revenue generated from our auction-based pay-for-click services accounted for 76.7%, 77.6%, and 83.0%, respectively, of the total revenue derived from our search and search-related advertisingservices in 2015, 2016, and 2017. The following are the types of advertising products and services that we offer: · Rising Sun Advertising: A majority of our auction-based pay-for-click advertising services are managed through our Rising Sun system.Advertisers choose and bid on keywords and set other parameters or criteria for when they want their advertisements to be triggered. Advertisers’promotional links will be ranked and displayed on our search results page according to our system’s computation, which takes into account thekeywords, price, and other information that advertisers have entered into the Rising Sun system. · Advertising on Third-Party Internet Properties: We work with a large number of third-party websites and mobile application providers toprovide additional high-quality avenues for our advertisers to market themselves. Under this advertising service, we typically charge ouradvertisers when users click on the advertisers’ promotional links displayed on such third parties’ Internet properties. The price per click istypically auction based. We share a portion of the revenue with the applicable third parties. · Milky Way Advertising: Milky Way advertising is an online marketing solution that we offer to advertisers of certain vertical sectors such asonline games, e-commerce, financial services, and education. This advertising service provides various advertisement formats, organized andcustomized according to the advertisers’ industries in order to enhance the effectiveness of their advertisements. Milky Way advertisementsusually appear in the center of our search result pages. We charge advertisers on an auction-based pay-for-click basis. 40Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Web Directory Advertising: We also offer advertising space on Sogou Web Directory. We charge advertisers based on the duration of theplacement of their advertisements or on a per-click basis. · Brand Advertising: Our brand advertising services primarily consist of Special Brand Zone, where advertisements are displayed in a prominentdesignated space on our search result pages; Brand Start Line, where advertisements appear in Sogou Input Method and on our search resultpages; and Brand Landmark, where advertisements appear on the right side of our search result pages on PCs. Advertisers pay for such servicesbased on the duration of the placement of their advertisements on our search result pages. Advertisers and Sales Network Our advertisers consist of small and medium-sized enterprises, or SMEs, in China; and large domestic Chinese companies and multinationalcompanies, or Key Accounts. Our advertisers are from a broad range of industries, including healthcare, online games, e-commerce, merchant services, andbusiness services. Most of our advertisers are represented by third-party advertising agencies. We generally require the agencies representing SMEs to pre-pay for ouradvertising services, but we offer them discounts to incentivize their marketing efforts. For agencies representing Key Accounts, we ask for pre-payment on acase-by-case basis and offer discounts depending on the industry practice, the account, and our marketing goals at the time. Other Monetization Models Games We operate third-party games on Sogou Game Center and Sogou Mobile Assistant. We generate revenue by charging players for virtual items thatthey purchase in such games, and share a portion of the revenue with the game developers. We also operate third-party web-based games on third-party onlinegame platforms. These platforms charge players directly for virtual items and share a portion of the revenue with us. Sogou Reading Under our agreements with third-party online reading platforms that provide us access to a wealth of copyrighted literary works, users pay us to readcertain copyrighted literary works on Sogou Reading, and we share a percentage of that payment with the third-party platforms. Smart Hardware We generate revenue from sales of Teemo Watch and Teemo Home. We have established a nationwide online and offline distribution network inChina that includes third-party e-commerce platforms and retail stores. Technology Search and Other Technologies Search Technology Our search technologies consist primarily of the following: · Large-scale system (cluster, storage, distributed computation, and index): With large-scale cluster management capabilities, our clusterreaches over 10,000 servers and supports massive petabyte-level distributed data storage, 100 terabytes of daily data increments, and hundredsof thousands of computational analysis tasks. Leveraging our large-scale system, we can access, store, and index information on the ChineseInternet and serve hundreds of millions of page views per day. · Webpage crawling, page analysis, and link analysis: Our intelligent and efficient distributed crawling system can crawl and index theChinese Internet. It also allows us to index new Internet content within a few minutes after it is generated, and update all indexes in a few weeks.By adopting big data and AI technologies, our page quality analysis algorithm can identify junk and spam and other low-quality webpages. Inaddition, we can evaluate the authority of webpages using link analysis technology in order to enhance the authenticity of search results. 41Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Open data platform: Through input from website developers and owners, our open data platform allows certain previously unsearchableinformation on the Web to be picked up by our search engine, thereby providing users with additional sources of information and generatingmore valuable traffic for these websites. · Information extraction: Information extraction can accurately analyze the content, structures, and styles of webpages and then extractstructured and unstructured data from them, including text, links, images, and other multimedia material. Besides the static content, ourinformation extraction technology can also quickly and accurately access and analyze the dynamic content of webpages through large-scalewebpage rendering technology. · Natural language processing: Our natural language processing technology applies computational linguistics, machine learning, data mining,and other algorithms to process, analyze, and understand natural language text, especially in users’ search queries and webpage content. Ournatural language processing technology includes word segmentation, part-of-speech tagging, name entity recognition, entity linking, syntaxand semantic analysis, sentiment analysis, and text generation. In search scenarios, natural language processing can enhance the understandingof user queries and webpages, such as query classification, webpage classification, topic modeling, and semantic matching, and consequently,improve user satisfaction of search results. For Q&A, natural language processing helps us to understand user questions submitted in naturallanguage and to extract concise answers from webpages. · Search ranking: We rank search results according to our evaluation of how relevant and useful they are to a user’s query. Many factors areconsidered, such as matches between queries and webpages and freshness. Machine learning algorithms are employed to integrate these factorsto return a list of search results. Question Answering Our question answering, or Q&A, technology finds answers to questions posed in natural language. Instead of limiting their search queries tokeywords, users can search using natural language, and in response, get direct answers in addition to a list of Web links. Since Q&A technology improves theefficiency of user access to information, we believe Q&A is an increasingly prevalent form of search. For factoid questions, we use knowledge graph as a data source and exploit semantic parsing, deep learning, and inference technologies to generateanswers. Our knowledge graph is a knowledge base that expresses and stores facts about the world in the form of entities and their relationships. We build ourknowledge graph by extracting semi-structured and unstructured data from Web information and classifying such data into different entities andrelationships. For more complex natural language questions, we have developed deep Q&A technology, which applies advanced natural language processing,information extraction, information retrieval, and machine learning algorithms to understand and directly answer questions. Our Q&A technology has been incorporated in various smart hardware, such as our AI robot, Wangzai, which was the first robot to defeat humancompetitors in the popular Chinese TV quiz show “Who’s still standing?” Artificial Intelligence We are at the forefront of AI development with a clear roadmap for future developments. Our strong AI capabilities center around natural interactionand knowledge computing. Through voice recognition and synthesis, image recognition, semantic understanding, machine translation, and othertechnologies, our AI has achieved a more natural interaction between human and machine. The goal of our AI development and investment is to identifydifferent use cases and bring effortless and human-like solutions to users in those cases. In 2017, we rolled out Sogou Smart Driving Assistant, a voice-enabled interactive driving assistant application that integrates Sogou Map, voice recognition, and semantic understanding technology. Below are further details on our key AI technologies: · Voice recognition: Voice recognition is the core technology enabling human-machine voice interaction. We have advanced voice recognitiontechnology that achieves a 97% accuracy rate. Users have generated a vast amount of voice data that reinforces our voice recognitioncapabilities to make voice recognition more accurate. In the fourth quarter of 2017 we had, on average, over 230 million voice inputs throughSogou Mobile Keyboard per day. 42Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Image recognition: Image recognition is the core technology enabling vision-based human-machine interaction. Through deep learning andmassive data generated from our core products, we have developed capabilities in handwriting recognition, OCR, image search, and facialrecognition. · Semantic understanding: Semantic understanding is the key in human-machine interaction. With natural language processing and dialoguemodeling techniques, we enable machines to understand the intentions in users’ text, voice, and image inputs. · Machine translation: We have developed advanced machine translation technology. We were the global champion in the 2017 WMT(Workshop on Machine Translation) Chinese-to-English translation competition. We successfully applied deep neural network technology tooptimize and commercialize real-time machine translation technology, with the ability to simultaneously recognize voice and translate Chineseinto English. · Knowledge computing: Knowledge computing refers to a series of technologies that includes the representation, storage, retrieval, andreasoning of knowledge. By extracting and mining information on the Internet, we are able to build a Chinese knowledge graph that helpsanswer factoid questions. Moreover, leveraging search, natural language understanding, data mining, machine learning, and many othertechnologies, we have developed deep Q&A technology to answer complex natural language questions from users. Our key AI technologies are integrated in our proprietary natural interaction interface Zhiyin OS and our knowledge computing platform DeepIntelligence Engine, both of which can be applied in home, in-vehicle, and work environments. · Zhiyin OS: Zhiyin OS is our voice-enabled conversational human-machine interface that leverages our voice recognition and synthesis andsemantic understanding capabilities. Smart hardware with Zhiyin OS enables users to perform tasks, such as turning on lights and appliances,searching for information, and asking questions in a natural, conversational way. · Deep Intelligence Engine: Deep Intelligence Engine is our knowledge computing platform that combines a variety of our knowledgecomputing technologies with natural language processing at the core, including Q&A, conversation, machine translation, smart customerservice, and knowledge graph. This platform provides technological support for our and our partners’ products and services. Additionally, in April 2016, we made a donation to Tsinghua University and jointly established with them the Tiangong Research Institute forIntelligent Computing, which is dedicated to research and development in the field of AI. In July 2017, we launched a cloud-based platform to allow mobileInternet developers to use our voice recognition, OCR, natural language processing, Q&A, and machine translation technologies. Such platform has allowedus to promote the integration of our AI technologies into different products across various industries. Big Data Capabilities Users have generated a vast amount of data across a wide variety of use cases. Our big data capabilities include: · Data integration and management: We research and develop a multi-level and highly-reliable data access system and data warehouse toaddress the technological challenges in data acquisition, data preprocessing, and distributed storage of massive heterogeneous data; and toaddress real-time streaming data access and processing, as well as data security management. · Data mining and analytics: We continue to build and strengthen our user profile label system from massive data mined from multipleplatforms (PC and mobile) and multiple scenarios (search, browser and other client products) that allows such information to be effectively usedunder different application scenarios. Our user profile system allows for sorting based on, among other things, basic attributes labels (e.g., age,location, device), general interest preference labels (e.g. news), and specific interest labels (e.g. hobbies, sports, travel). These labels can beapplied to targeted advertising and personalized content recommendations. · Data application and services: We continue to improve and innovate our existing products by leveraging our big data capabilities. We alsodevelop a variety of data analysis products for individuals and business customers, such as marketing analytics products for advertisers. 43Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Intellectual Property We regard our patents, copyrights, service marks, trademarks, trade secrets, and other intellectual properties as critical to our success. We rely onpatents, trademarks, and copyrights; trade secret protection; and non-competition, confidentiality, and license agreements with our employees, customers,partners, and others to protect our intellectual property rights. Before we launch any new products or services, we apply for registration of related patents,trademarks, and software copyrights. Despite our precautions, it may be possible for third parties to obtain and use our intellectual properties withoutauthorization. Furthermore, the validity, enforceability, and scope of protection of intellectual property rights in Internet-related industries are uncertain andstill evolving. The laws of the PRC do not protect intellectual properties to the same extent as do the laws of the United States. As of December 31, 2017, we have been issued 781 patents in China and 25 patents in countries and regions outside of China covering inventions,utility models, and designs; we have 878 patent applications currently pending in China and 93 patent applications currently pending in countries andregions outside of China; we have submitted 59 international patent applications through the procedures under the Patent Cooperation Treaty, or PCT; andwe intend to apply for more patents to protect our core technologies and intellectual properties. As of December 31, 2017, we have registered 381 trademarkswith the Trademark Office of the State Administration for Industry and Commerce in China, including our company’s name “Sogou,” Sogou logos,trademarks relating to our products such as Sogou Input Method, Sogou Map and Teemo, and their corresponding Chinese version marks; and we are in theprocess of applying for the registration of 364 other trademarks. In addition, as of December 31, 2017, we are in the process of applying for recognition ofcertain of our marks as famous Beijing trademarks and well-known Chinese trademarks. We also have registered trademarks in various countries and regions,such as Taiwan, Hong Kong, and Macau, and we are in the process of applying for the registration of trademarks in the United States, Australia, and theEuropean Union. As of December 31, 2017, we are the registered owner of 154 software copyrights in China, each of which we have registered with the StateCopyright Bureau of China. As of December 31, 2017, we own the rights to 151 domain names that we use in connection with the operation of our business,including our Sogou website sogou.com. Many parties are actively developing search and AI technologies. We expect these parties to continue to take steps to protect these technologies,including seeking patent protection. There may be patents issued or pending that are held by others and cover significant parts of our technology, businessmethods, or services. We cannot be certain that our products do not or will not infringe valid patents, copyrights, and other intellectual property rights heldby third parties. We may be subject from time to time to legal proceedings and claims relating to the intellectual property of others in the ordinary course ofour business. See “—Legal Proceedings”; and “Risk Factors—Risks Related to Our Business—We are currently subject to, and in the future may from time totime face, intellectual property infringement claims, which could be time-consuming and costly to defend, and could have an adverse impact our financialposition and results of operations, particularly if we are required to pay significant damages or cease offering any of our products or curtail any key features ofour products.” We have licensed 280 patents from Tencent and intend to continue to license technology from Tencent and other third parties. The market isevolving and we may need to license additional technologies to remain competitive. We may not be able to license these technologies on commerciallyreasonable terms, or at all. In addition, we may fail to successfully integrate any licensed technology into our services. Our inability to obtain or integrate anyof these licenses could delay product and service development until alternative technologies can be identified, licensed, and integrated. Technology Infrastructure We have built what we believe is a reliable and secure network infrastructure that will fully support our operations. As of December 31, 2017, weowned approximately 31,000 servers located in seven Internet data centers in China. We have also obtained what we believe is a sufficient amount ofconnectivity bandwidth to meet the current and anticipated needs of our operations, and have established a large-scale GPU service cluster to providecomputing power for our AI technologies. As of December 31, 2017, we had 51 technical support employees to maintain our current technology infrastructure and develop new softwarefeatures to further enhance the functionality of our management and security systems. We monitor the operation of our server network 24 hours a day, sevendays a week. Our remote control system allows us to discover and fix problems in the operation of hardware and software in our server network in atimely fashion. Marketing We focus on delivering superior user experience through better products and services, which we believe can expand our user base and enhance ourbrand. Since inception, our user base has grown primarily through word-of-mouth referrals; thus, we have built our brand with modest marketing costs. 44Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents While we have significantly benefited from the effects of word-of-mouth marketing, we have in recent years initiated, and plan to continue,marketing campaigns designed to further promote our brand, products, and technologies. For example, in 2017 we initiated a themed marketing campaignfocused on Sogou mobile search, with outdoor advertisements and a marketing summit attracting many industry partners, to demonstrate our branding andbusiness strengths. Since February 2017, our AI robot “Wangzai” has been participating in a well-known Chinese TV quiz show, which has showcased our AIcapabilities in machine-based interactive Q&A. At the fourth World Internet Conference held in China in December 2017, we used voice synthesistechnology to simultaneously broadcast translated text in the simulated voice of the speaker, which turned simultaneous machine interpretation into areality. Competition Our business consists primarily of search and search-related services. We face intense competition in these areas primarily from Baidu and ShenMa.We also face competition for both users and advertisers from websites that provide specialized search services in China, including travel services andinformation platforms such as Ctrip and Qunar; group-buy platforms such as Meituan Dianping; online classified advertisement platforms such as 58.com;and newsfeeds such as Toutiao. We compete for advertisers not only with Internet companies, but also with other types of advertising media such asnewspapers and magazines, billboards and bus advertisements, television, and radio. Our existing and potential competitors compete with us for users and advertisers on the basis of the quality and quantity of search results; thefeatures, availability, and ease of use of products and services; and the number and quality of advertising distribution channels. They also compete with usfor talent with technological expertise, which is critical to the sustained development of our products and services. Employees We had 2,081, 2,101, and 2,295 employees as of December 31, 2015, 2016, and 2017, respectively. We also employ independent contractors tosupport our research and development, product development, sales and marketing departments, and had approximately 413 independent contractors onaverage during the 2017 fiscal year. As of December 31, 2017, 43% of our employees held Master’s degrees or Ph.D.s, and 71% of our employees worked inthe research and development department. None of our employees is represented under collective bargaining agreements. The table below sets forth thenumber of our employees in each functional area as of December 31, 2017. EmployeeBusiness operations145Research and development1,627Sales and marketing408General and administrative115Total2,295 We have entered into standard employment agreements with our employees, including our executive officers. These agreements may be terminatedby either party, and a terminated employee may be entitled to certain severance benefits upon termination, pursuant to the Labor Contract Law of the PRC.Under the Labor Contract Law, we must pay severance to all employees who are Chinese nationals and who are terminated without cause or terminate theiremployment with us for good reason, or whose employment agreements expire and we do not continue their employment. The severance benefits required tobe paid under the Labor Contract Law equal the average monthly compensation paid to the terminated employee (including any bonuses or other paymentsmade in the twelve months prior to the employee’s termination) multiplied by the number of years the employee has been employed with us, plus anadditional month’s salary if 30 days’ prior notice of such termination is not given. However, if the average monthly compensation to be received by theterminated employee exceeds three times the average monthly salary in the employee’s local area as determined and published by the local government, suchaverage monthly compensation is capped at three times the average monthly salary in the employee’s local area. 45Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In addition, our employees have entered into standard confidentiality and non-competition agreements with us. Under the confidentialityagreements, the employees agree not to disclose or otherwise use our confidential information while employed and indefinitely thereafter. Under the non-competition agreements the employees agree not to compete with us during and up to 24 months after the termination of employment with us as long as wepay additional compensation during the non-competition period. The non-competition agreements also provide that the employees’ work product is assignedto us. We believe the dedication and talent of our employees are critical for our business, and retention of employees is our priority. As part of ourretention strategy, we are committed to offering employees an attractive opportunity to work with us as a leading and reputable technology company,providing many opportunities for employees to participate in the development of our new technologies and products, and offering employees competitivesalaries and performance-based cash bonuses and equity incentives. Facilities We currently lease from Sohu, on an arms-length basis, approximately 18,228 square meters of office space at Sohu.com Internet Plaza in Beijing,China under a lease that expires on December 31, 2019 and may be renewed subject to terms agreed to by Sohu and us. In addition to the office space leasedfrom Sohu, we lease a total of approximately 9,319 square meters of office space in Beijing, Chengdu, and Tianjin, China from other third parties. Legal Proceedings From time to time, we become subject to legal proceedings and claims in the ordinary course of our business. We are currently involved in severallawsuits in PRC courts where our competitors instituted proceedings or asserted counterclaims against us or we instituted proceedings or assertedcounterclaims against our competitors. While we do not believe that such currently pending proceedings are likely to have a material adverse effect on ourbusiness, financial condition, results of operations, and cash flows, we cannot guarantee that they will be decided or resolved favorably for us, and suchpending proceedings or any future legal proceedings or claims, even if not meritorious, could result in our expenditure of significant financial, legal, andmanagement resources. For further information about our ongoing litigation, please see “Risk Factors—Risks Related to Our Business—Pending or futurelitigation could have an adverse impact on our financial condition and results of operations.” PRC Regulation The following description of PRC regulation is based upon the opinion of Commerce & Finance Law Offices, our PRC counsel. For a description oflegal risks relating to our ownership structure and business, see “Risk Factors”. Value-added Telecommunications Services The Telecommunications Regulations of the People’s Republic of China, or the Telecom Regulations, implemented on September 25, 2000 andamended on July 29, 2014 and February 6, 2016, are the primary PRC law governing telecommunication services, and set out the general framework for theprovision of telecommunication services by domestic PRC companies. The Telecom Regulations require that telecommunications service providers procureoperating licenses prior to commencing operations. The Telecom Regulations draw a distinction between “basic telecommunications services,” which wegenerally do not provide, and “value-added telecommunications services.” The Telecom Regulations define value-added telecommunications services astelecommunications and information services provided through public networks. The Catalogue of Telecommunications Business, or the Catalogue, whichwas issued as an attachment to the Telecom Regulations and updated in February 2003 and December 2015, identifies information services, Internet datacenters, Internet access as value-added telecommunications services. We engage in business activities that are value-added telecommunications services asdefined and described by the Telecom Regulations and the Catalogue. On March 5, 2009, the MIIT issued the Measures on the Administration of Telecommunications Business Operating Permits, or the Telecom LicenseMeasures, which initially became effective on April 10, 2009 and was amended on July 3, 2017, effective on September 1, 2017, to supplement the TelecomRegulations. The Telecom License Measures confirm that there are two types of telecom operating licenses for operators in China, one for basictelecommunications services and one for value-added telecommunications services. A distinction is also made as to whether a license is granted for “intra-provincial” or “trans-regional” (inter-provincial) activities. An appendix to each license granted will detail the permitted activities of the enterprise to whichit was granted. An approved telecommunication services operator must conduct its business (whether basic or value-added) in accordance with thespecifications recorded in its Telecommunications Services Operating License. The business activities of Sogou Information include providing search services and content to mobile phone users through the platforms of China’smain three telecommunications operators, which will be regarded as information services under the Catalogue. On June 2, 2016, the MIIT issued to SogouInformation Value-Added Telecommunications Services Operating Licenses which authorize the provision of information services, Internet data center andInternet access, which are classified as value-added telecommunication services. The licenses are subject to annual inspection. 46Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Foreign Direct Investment in Value-Added Telecommunications Companies Various PRC regulations currently restrict foreign-invested entities from engaging in value-added telecommunication services, including providingInternet information services and operating online games. Foreign direct investment in telecommunications companies in China is regulated by theRegulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which were issued by the PRC StateCouncil, or State Council, on December 11, 2001, became effective on January 1, 2002 and were amended on September 10, 2008 and February 6, 2016,respectively. The FITE Regulations stipulate that foreign invested telecommunications enterprises in the PRC (“FITEs”) must be established as Sino-foreignequity joint ventures. Under the FITE Regulations and in accordance with WTO-related agreements, the foreign party to a FITE engaging in value-addedtelecommunications services may hold up to 50% of the equity of the FITE, with no geographic restrictions on the FITE’s operations. On June 30, 2016, theMIIT issued an Announcement of the Ministry of Industry and Information Technology on Issues concerning the Provision of Telecommunication Services inMainland China by Service Providers from Hong Kong and Macau, or the MIIT Announcement, which provides that investors from Hong Kong and Macaumay hold more than 50% of the equity in FITEs engaging in certain specified categories of value-added telecommunications services. For a FITE to acquire any equity interest in a value-added telecommunications business in China, it must satisfy a number of stringent performanceand operational experience requirements, including demonstrating a track record and experience in operating a value-added telecommunications businessoverseas. FITEs that meet these requirements must obtain approvals from the MIIT and the MOFCOM or their authorized local branches, which retainconsiderable discretion in granting approvals. On July 13, 2006, the MIIT issued the Notice of the Ministry of Information Industry on Intensifying the Administration of Foreign Investment inValue-added Telecommunications Services, or the MIIT Notice, which reiterates certain provisions of the FITE Regulations. Under the MIIT Notice, if a FITEintends to invest in a PRC value-added telecommunications business, the FITE must be established and must apply for a telecommunications businesslicense applicable to the business. Under the MIIT Notice, a domestic company that holds a license for the provision of Internet information services, or anICP license, is considered to be a type of value-added telecommunications business in China, and is prohibited from leasing, transferring or selling thelicense to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors to conductvalue-added telecommunications businesses illegally in China. Trademarks and domain names that are used in the provision of Internet content services mustbe owned by the ICP license holder or its shareholders. The MIIT Notice requires each ICP license holder to have appropriate facilities for its approvedbusiness operations and to maintain such facilities in the regions covered by its license. Our VIEs, rather than our subsidiaries, hold ICP licenses, own ourdomain names, and hold or have applied for registration in the PRC of trademarks related to our business and own and maintain facilities that we believe areappropriate for our business operations. In view of these restrictions on foreign direct investment in the value-added telecommunications sector, we established domestic VIEs to engage invalue-added telecommunications services. For a detailed discussion of our VIEs, please refer to “Our History and Corporate Structure” above. Due to a lack ofinterpretative materials from the relevant PRC governmental authorities, there are uncertainties regarding whether PRC governmental authorities wouldconsider our corporate structure and contractual arrangements to constitute foreign ownership of a value-added telecommunications business. See “RisksRelated to Our Corporate Structure.” In order to comply with PRC regulatory requirements, we operate a portion of our business through our VIEs, with whichwe have contractual relationships but in which we do not have an actual ownership interest. If our current ownership structure is found to be in violation ofcurrent or future PRC laws, rules or regulations regarding the legality of foreign investment in the PRC Internet sector, we could be subject to severepenalties. 47Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Provision of Internet Content Internet Information Services On September 25, 2000, the State Council issued the Measures for the Administration of Internet Information Services, or the ICP Measures. Underthe ICP Measures, entities that provide information to online users on the Internet, or ICPs, are obliged to obtain an operating license from the MIIT or itslocal branch at the provincial or municipal level in accordance with the Telecom Regulations described above. The ICP Measures further stipulate that entities providing online information services regarding news, publishing, education, medicine, health,pharmaceuticals and medical equipment must procure the consent of the national authorities responsible for such areas prior to applying for an operatinglicense from the MIIT or its local branch at the provincial or municipal level. Moreover, ICPs must display their operating license numbers in conspicuouslocations on their home pages. ICPs are required to police their Internet platforms and remove certain prohibited content. Many of these requirements mirrorInternet content restrictions that have been announced previously by PRC ministries, such as the MIIT, the MOC, and the SAPPRFT, that derive theirauthority from the State Council. On October 25, 2017, the Beijing Telecom Administration, or the BTA, issued to Sogou Information a renewed Telecommunications andInformation Services Operating License, or ICP license. The ICP license is subject to annual inspection. In 2000, the MIIT promulgated the Internet Electronic Bulletin Service Administrative Measures, or the BBS Measures. The BBS Measures requiredICPs to obtain specific approvals before they provided BBS services, which included electronic bulletin boards, electronic forums, message boards and chatrooms. On September 23, 2014, the MIIT abolished the BBS Measures in a Decision on Abolishment and Amendment Certain Regulations and Rules.However, in practice certain local authorities still require operating companies to obtain approvals or make filings for the operation of BBS services. The ICPlicense held by Sogou Information includes such specific approval of the BBS services that we provide. Online News Search Services On May 2, 2017, the Administrative Regulations for Internet News Information Services, or the News Regulations, were promulgated by theCyberspace Administration of China to replace the previous Administrative Regulations for Internet News Information Services, or the Old NewsRegulations, issued by the SCIO and the MIIT on September 25, 2005, pursuant to which Internet news information services include services of collecting,editing, and releasing Internet news information, reposting such news information, and providing a platform to spread such news information. On May 22,2017, the Detailed Implementing Rules of Administration of Internet News Information Services Approval, or the Detailed Implementing Rules, werepromulgated by the Cyberspace Administration of China, effective on June 1, 2017. The News Regulations and the Detailed Implementing Rules require thegeneral Websites of non-news organizations to apply to the SCIO at the national level for approval after securing the consent of the SCIO at the provinciallevel before they commence providing news dissemination services. There is uncertainty as to whether the provision of news search services and aggregationof news links fit within the definition of news dissemination services. Sogou Information is currently in the process of applying for an online news servicelicense. Internet Publishing On February 4, 2016, the SAPPRFT and MIIT jointly issued the Rules for the Administration for Internet Publishing Services, or the InternetPublishing Rules, which took effect on March 10, 2016, to replace the Provisional Rules for the Administration for Internet Publishing that had been jointlyissued by the SAPPRFT and the MIIT on June 27, 2002. The Internet Publishing Rules define “Internet publications” as digital works that are edited,produced, or processed to be published and provided to the public through the Internet, including (a) original digital works, such as pictures, maps, games,and comics; (b) digital works with content that is consistent with the type of content that, prior to the Internet age, typically was published in media such asbooks, newspapers, periodicals, audio-visual products, and electronic publications; (c) digital works in the form of online databases compiled by selecting,arranging, and compiling other types of digital works; and (d) other types of digital works identified by the SAPPRFT. Under the Internet PublishingRules, Internet operators distributing such Internet publications via information network are required to apply for an Internet publishing license with therelevant governmental authorities and submit the application, if approved, to the SAPPRFT for approval before distributing Internet publications. SogouInformation plans to apply for an Internet publishing license. Internet Audio-visual Program Services On December 20, 2007, the SAPPRFT and MIIT jointly issued the Administrative Provisions for the Internet Audio-Video Program Service, or theAudio-visual Program Provisions, which came into effect on January 31, 2008 and was amended on August 28, 2015. The Audio-visual Program Provisionsdefine “Internet audio-visual programs services” as the production, edition and integration of audio-video programs, the supply of audio-video programs tothe public via the Internet, and the provision of upload and audio-video programs transmission services to a third party. Entities engaging in Internet audio-visual programs services must obtain an internet audio-visual program transmission license, which will only be issued to state-owned or state-controlledentities unless the license applicant has obtained an Internet audio-visual program transmission license prior to the promulgation of the Audio-visualProgram Provisions in accordance with the then-in-effect laws and regulations. According to the Categories of the Internet Audio-Video Program Servicespromulgated by SAPPRFT on March 10, 2017, “aggregation of Internet audio-visual programs”, which means “editing and arranging the Internet audio-visual programs on the same website and providing searching and watching services to public users”, falls into the definition of the aforementioned “Internetaudio-visual programs services.” Sogou information is currently in the process of negotiating with an entity that had obtained an Internet audio-visualprogram transmission license in order to acquire all of the equity interests in such entity. 48Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Online Cultural Products On May 10, 2003, the MOC issued the Provisional Regulations for the Administration of Online Culture, or the Online Culture Regulations, whichtook effect on July 1, 2003 and were amended on July 1, 2004. On February 17, 2011, the MOC issued the new Provisional Regulations for theAdministration of Online Culture, or the New Online Culture Regulations, which took effect on April 1, 2011, to replace the previous regulations. TheNew Online Culture Regulations apply to entities engaging in activities related to “Internet cultural products,” which include those cultural products that areproduced specially for Internet use, such as online music and entertainment, online games, online plays, online performances, online works of art and Webanimations, and those cultural products that, through technical means, produce or reproduce music, entertainment, games, plays and other art works forInternet dissemination. Pursuant to the New Online Culture Regulations, commercial entities are required to apply to the relevant local branch of the MOCfor an Online Culture Operating Permit if they engage in any of the following types of activities: · the production, duplication, importation, release or broadcasting of Internet cultural products; · the dissemination of online cultural products on the Internet or transmission thereof via Internet or mobile phone networks to users’ terminalssuch as computers, fixed-line or mobile phones, television sets, gaming consoles and Internet surfing service sites such as Internet cafés for thepurpose of browsing, using or downloading such products; or · the exhibition or holding of contests related to Internet cultural products. On July 1, 2016, the MOC issued a Notice on Strengthening the Administration of Online Performance, or the Online Performance Notice and onDecember 2, 2016, issued the Measures of Administration of Online Performance Operating Activities, or Online Performance Measures, which becameeffective on January 1, 2017. The Online Performance Notice and the Online Performance Measures both stipulate that online performance service providersmust obtain an Online Culture Operating Permit and that online performances must not contain any content that is horrific, cruel, violent, vulgar orhumiliating in nature, mocks persons with disabilities, includes photographs or video clips that infringe third parties’ privacy or other rights, features animalabuse, or presents characters and other features of online games that have not been registered and approved for publication by applicable PRC governmentalauthorities. On November 3, 2017, the MOC issued a renewed Online Culture Operating Permit to Sogou Information authorizing Sogou Information to providerelevant online services. Mobile Internet Applications Information Services On June 28, 2016, the CAOC issued the Provisions on the Administration of Mobile Internet Applications Information Services, or the APPProvisions, which became effective on August 1, 2016. Under the APP Provisions, mobile application providers and application store service providers areprohibited from engaging in any activity that may endanger national security, disturb the social order, or infringe the legal rights of third parties, and may notproduce, copy, issue or disseminate through mobile applications any content prohibited by laws and regulations. The APP Provisions also require applicationproviders to procure relevant approval to provide services through such applications and require application store service providers to register with localbranches of the CAOC within 30 days after they start providing application store services. Sogou information has filed an application for registration with thecompetent local branch of the CAOC with respect to our provision of application store services. Internet Map Services Under the Opinions on Strengthening the Supervision of Internet Map and Geographic Information Services and the Notices on FurtherStrengthening the Management of Internet Map Services Permit issued on February 25, 2008 and December 23, 2011, respectively, by the StateAdministration of Surveying, Mapping and Geo-information (the “SASMG,” formerly known as the State Bureau of Surveying and Mapping) and theAdministrative Regulations on Maps issued by the State Council on November 26, 2015, effective on January 1, 2016, any provider of Internet map servicesmust obtain the approval of the SASMG or its local branches and a Surveying and Mapping Qualification Certificate in order to provide such services. Inaddition, providers of Internet map services must use maps obtained through government-approved channels and display the SASMG approval number, theSurveying and Mapping Qualification Certificate number and the Telecommunications Services Operating License number in conspicuous locations ontheir Websites. 49Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents On July 1, 2014, the SASMG issued new Administrative Regulations on Surveying and Mapping Qualification Certificate and ClassificationStandard on Surveying and Mapping Qualification Certificate, or the “SASMG Regulations and Standards,” effective on August 1, 2014, to replaceprevious regulations issued on February 16, 2004 and March 12, 2009. Under the SASMG Regulations and Standards, there are two types of Surveying andMapping Qualification certificates that may be issued to providers of Internet map services. A Class A certificate allows a holder to provide (i) map-locationservices, (ii) geo-information uploading and dimension services, and (iii) geo-information database development services, while a holder of a Class Bcertificate may only provide the first two types of services. On July 26, 2016, the SASMG and the Office of the Central Leading Group for Cyberspace Affairs (the “OCLGCA”) jointly issued a Notice onStandardizing the Usage of Maps by Internet Services Providers (the “Maps Usage Notice”), which stipulates that all the Internet service providers mustreview and use maps in accordance with the PRC Surveying and Mapping Law and Administrative Regulations on Maps. The Maps Usage Notice requiresthat maps displayed by Internet service providers be obtained through government-approved channels and identify their sources and censor numbers. Internetservice providers are prohibited from using maps obtained from unaccredited sources, including foreign Websites. All maps, other than scenic maps, blockmaps, subway maps and other simple maps, must be reviewed by PRC governmental authorities before they are published, and must not contain anyinformation or content specified as prohibited in the Maps Usage Notice. On January 1, 2015, Sogou Information obtained a renewed Class A Certificate of Surveying and Mapping Qualification from the SASMG. Internet Pharmaceuticals Information Dissemination Under the Measures for the Administration of Internet Pharmaceuticals Information Services (the “Pharmaceuticals Information ServicesMeasures”) issued by the State Food and Drug Administration (“SFDA”) on July 8, 2004, the formal approval of the SFDA or one of its local branches isrequired before a Website may disseminate information concerning pharmaceuticals. Under the Pharmaceuticals Information Services Measures, pharmaceutical (including medical equipment) information provided by Websites mustbe scientific and accurate. Furthermore, medical and pharmaceutical (including medical equipment) advertisements published by such Websites must bereviewed and approved by SFDA and must not exaggerate the efficacy or promote the medical uses of such products. Sogou Information received renewed SFDA approval on October 31, 2017. Online Advertising Services On April 24, 2015, the Standing Committee of the National People’s Congress enacted the Advertising Law of the People’s Republic of China, orthe “New Advertising Law”, effective on September 1, 2015. The New Advertising Law, which was a major overhaul of an advertising law enacted in 1994,increases the potential legal liability of providers of advertising services, and includes provisions intended to strengthen identification of false advertisingand the power of governmental authorities. On July 4, 2016, the SAIC issued the Interim Measures of the Administration of Online Advertising (the “SAICInterim Measures”), effective on September 1, 2016. The New Advertising Law and the SAIC Interim Measures both provide that advertisements posted orpublished through the Internet may not affect users’ normal usage of a network, and advertisements published in the form of pop-up windows on the Internetmust display a “close” sign prominently and ensure one-key closing of the pop-up windows. The SAIC Interim Measures provide that all onlineadvertisements must be marked “Advertisement” so that viewers can easily identify them as such. Moreover, the SAIC Interim Measures treat pay-for-clicksearch results as advertisements that are subject to PRC advertisement laws, and require that pay-for-click search results be conspicuously identified on searchresult pages as advertisements. The New Advertising Law and SAIC Interim Measures will require us to conduct more stringent examination and monitoringof our advertisers and the content of their advertisements. On April 13, 2016, the SAIC and sixteen other PRC government agencies jointly issued a Notice of Campaign to Crack Down on Illegal InternetFinance Advertisements and Other Financial Activities in the Name of Investment Management, or the Campaign Notice, pursuant to which a campaign wasconducted between April 2016 and January 2017 targeting, among other things, online advertisements for Internet finance and other financial activitiesposted on online search portals, such as ours, and other portal, financial, real estate, P2P, and investment product sales services Websites. The SAIC issued theInterim Measures for the Administration of Online Advertising, or the SAIC Interim Measures, which became effective on September 1, 2016 and treat pay-for-click search results as advertisements subject to PRC laws governing advertisements, require that pay-for-click search results be conspicuously identifiedon search result pages as advertisements and subject revenues from such advertisements to a 3% PRC tax that is applied to advertising revenues. In order tocomply with these regulations, we have established more stringent standards for selecting advertisers for our pay-for-click services, have turned down certainexisting advertisers, and have lowered the percentage that pay-for-click search results represent of results on our search pages, 50Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Search Services On August 18, 2009, the MOC issued a Notice on Strengthening and Improving the Content Censorship of Online Music Content, or theMOC Notice, which was abolished by the MOC on August 25, 2016. On October 23, 2015, the MOC issued a Notice on Further Strengthening andImproving the Administration of Content of Online Music, or the MOC Further Notice, which became effective on January 1, 2016. The MOC Notice and theMOC Further Notice provide that providing direct links to online music will constitute engaging in the online music business, and that therefore an OnlineCulture Operating Permit is required for providing such search services. Sogou Information applied for an Online Culture Operating Permit and received it onDecember 31, 2010. The permit was renewed on November 3, 2017. On June 25, 2016, the CAOC issued Measures for the Administration of Online Information Search Services, or the CAOC Interim Measures, whichbecame effective on August 1, 2016. The CAOC Interim Measures, like the SAIC Interim Measures, require that providers of online search services verify thecredentials of pay-for-click advertisers, specify a maximum percentage that pay-for-click search results may represent of results on a search page,conspicuously identify pay-for-click search results as such. Online Games and Cultural Products In September 2009, the SAPPRFT, together with the National Copyright Administration, and the National Office of Combating Pornography andIllegal Publications jointly issued the Notice on Further Strengthening on the Administration of Pre-examination and Approval of Online Game and theExamination and Approval of Imported Online Game, the SAPPRFT Online Game Notice. The SAPPRFT Online Game Notice states that foreign investors arenot permitted to invest in online game operating businesses in the PRC via wholly foreign-owned entities, Sino-foreign equity joint ventures or cooperativejoint ventures or to exercise control over or participate in the operation of domestic online game businesses through indirect means, such as other jointventure companies or contractual or technical arrangements. If the VIE structure of Sogou was deemed under the SAPPRFT Online Game Notice to be an“indirect means” for foreign investors to exercise control over or participate in the operation of a domestic online game business, the VIE structure of Sogoumight be challenged by the SAPPRFT. We are not aware of any online game companies which use the same or similar VIE contractual arrangements as thoseSogou uses having been challenged by the SAPPRFT as using those VIE arrangements as an “indirect means” for foreign investors to exercise control over orparticipate in the operation of a domestic online game business or having been penalized or ordered to terminate operations since the SAPPRFT Online GameNotice first became effective. However it is unclear whether and how the SAPPRFT Online Game Notice might be interpreted or implemented in the future. On February 21, 2008, the SAPPRFT issued the Rules for the Administration of Electronic Publications, or the Electronic Publication Rules, whichwere amended on August 28, 2015. The Electronic Publication Rules regulate the production, publishing and importation of electronic publications in thePRC and outline a licensing system for business operations involving electronic publishing. Under the Electronic Publication Rules and other relatedregulations issued by the SAPPRFT, online games are classified as a type of electronic publication or Internet publication that may only be provided by alicensed electronic publishing entity with a standard publication code, and establishment of an electronic publishing entity must be approved by theSAPPRFT. Electronic publishing entities are responsible for assuring that the content of electronic publications comply with relevant PRC laws andregulations, and must obtain the approval of the SAPPRFT before publishing foreign electronic publications. The Tentative Measures for InternetPublication Administration, or the Internet Publication Measures, which were jointly promulgated by the SAPPRFT and the MIIT and became effective in2002, impose a license requirement for any company that intends to engage in Internet publishing, which is defined as any act by an ICP to select, edit andprocess content or programs and to make such content or programs publicly available on the Internet. As the provision of online games is deemed to be anInternet publication activity, an online game operator must obtain an Internet publishing license and an authorization code for each of its games in operationin order to directly make those games publicly available in the PRC. Although the Internet Publication Measures do not specifically authorize such apractice, an online game operator is generally able to publish its games and obtain authorization codes for those games through third-party licensedelectronic publishing entities and register the games with the SAPPRFT as electronic publications. The New Internet Publication Measures issued by theSAPPRFT and the MIIT, which became effective on March 10, 2016 and replaced the Internet Publication Measures, require that entities in the Internetpublishing business must apply for an online publication license and obtain approval from the SAPPRFT prior to the publication of new online games. Inaddition, under the New Internet Publication Measures Sino-foreign joint ventures and foreign-invested entities are not permitted to engage in Internetpublication services, and the legal representative of an entity providing Internet publication services may not be a foreigner. As the New Internet PublicationMeasures are new, the actual implications and reach of this regulation are still uncertain. 51Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The MOC issued the New Provisional Regulations for the Administration of Online Culture, or the Online Culture Regulations, which took effecton April 1, 2011 and replaced the Provisional Regulations for the Administration of Online Culture. The Online Culture Regulations apply to entitiesengaging in activities related to “Internet cultural products,” which include cultural products that are produced specifically for Internet use, such as onlinemusic and entertainment, online games, online plays, online performances, online works of art and Web animation, and other online cultural products thatthrough technical means, produce or reproduce music, entertainment, games, plays and other art works for Internet dissemination. Under the New OnlineCulture Regulations, commercial entities are required to apply to the relevant local branch of the MOC for an Online Culture Operating Permit if they engagein the production, duplication, importation, release or broadcasting of Internet cultural products, the dissemination of online cultural products on the Internetor the transmission of such products via Internet or mobile phone networks to user terminals, such as computers, phones, television sets and gaming consoles,or Internet surfing service sites such as Internet cafés; or the holding or exhibition of contests related to Internet cultural products. The Interim Measures for the Administration of Online Games, or the Online Game Measures, issued by the MOC, which took effect on August 1,2010, regulate a broad range of activities related to the online games business, including the development, production and operation of online games, theissuance of virtual currencies used for online games, and the provision of virtual currency trading services. The Online Game Measures provide that anyentity that is engaged in online game operations must obtain an Online Culture Operating Permit, and require the content of an imported online game to beexamined and approved by the MOC prior to the game’s launch and a domestic online game to be filed with the MOC within 30 days after its launch. TheNotice of the Ministry of Culture on the Implementation of the Interim Measures for the Administration of Online Games, which was issued by the MOC onJuly 29, 2010 to implement the Online Game Measures, (i) requires online game operators to protect the interests of online game users and specifies certainterms that must be included in service agreements between online game operators and the users of their online games, (ii) specifies content review of importedonline games and filing procedures for domestic online games, (iii) emphasizes the protection of minors playing online games, and (iv) requests online gameoperators to promote real-name registration by their game users. The Notice on Strengthening the Approval and Administration of Imported Online Games, or the SAPPRFT Imported Online Game Notice, whichwas issued by the SAPPRFT and took effect in July 2009, states that the SAPPRFT is the only governmental department authorized by the State Council toapprove the importation of online games from offshore copyright owners, and that any enterprise which engages in online game publication and operationservices within the PRC must have the game examined and approved by the SAPPRFT and receive from the SAPPRFT an Internet publishing license. The Notice Regarding Improving and Strengthening the Administration of Online Game Content, or the Online Game Content Notice, issued by theMOC in November 2009, calls for online game operators to improve and adapt their game models by (i) mitigating the predominance of the “upgrade bymonster fighting” model, (ii) limiting the use of the “player kill” model (where one player’s character attempts to kill another player’s character), (iii) limitingin-game marriages among game players, and (iv) improving their compliance with legal requirements for the registration of minors and game time-limits. The Administrative Measures for Content Self-Review by Internet Culture Business Entities, or the Content Self-Review Administrative Measure,which took effect in December 2013, requires Internet culture business entities to review the content of products and services to be provided prior toproviding such content and services to the public. The content management system of an Internet culture business entity is required to specify theresponsibilities, standards and processes for content review as well as accountability measures, and is required to be filed with the local provincial branch ofthe MOC. In January 2014, the SAIC promulgated the Administrative Measures for Online Trading, or the Online Trading Measures, which took effect onMarch 15, 2014, and replaced the Interim Measures for the Administration of Online Commodities Trading and Relevant Services, issued by the SAIC, whichtook effect on July 1, 2010. The Online Trading Measures regulate online commodity trading and related activities. The Online Trading Measures requirethat when selling commodities or providing services to consumers, online operators must comply with all applicable laws with respect to the protection ofconsumer rights and interests, intellectual property rights of others and the prevention of unfair competition. Information provided with respect tocommodities and services provided by online commodity operators or related service operators must be accurate. If they fail to comply with all requirementsof the Online Trading Measures, the local branch of the SAIC or other governmental authorities could impose fines or other penalties on them. Information Security and Censorship On November 7, 2016, the Standing Committee of the National People’s Congress promulgated the PRC Cybersecurity Law, which took effect onJune 1, 2017. The PRC Cybersecurity Law applies to the construction, operation, maintenance, and use of networks as well as the supervision andadministration of Internet security in the PRC. The PRC Cybersecurity Law defines “networks” as systems that are composed of computers or otherinformation terminals and relevant facilities used for the purpose of collecting, storing, transmitting, exchanging, and processing information in accordancewith certain rules and procedures. “Network operators,” who are broadly defined as owners and administrator of networks and network service providers, aresubject to various security protection-related obligations including: 52Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · complying with security protection obligations in accordance with tiered requirements with respect to maintenance of the security of Internetsystems, which include formulating internal security management rules and developing manuals, appointing personnel who will be responsiblefor Internet security, adopting technical measures to prevent computer viruses and activities that threaten Internet security, adopting technicalmeasures to monitor and record status of network operations, holding Internet security training events, retaining user logs for at least six months,and adopting measures such as data classification, key data backup, and encryption for the purpose of securing networks from interference,vandalism, or unauthorized visits, and preventing network data from leakage, theft, or tampering; · verifying users’ identities before signing agreements or providing services such as network access, domain name registration, landlinetelephone or mobile phone access, information publishing, or real-time communication services; · formulating Internet security emergency response plans, timely handling security risks, initiating emergency response plans, taking appropriateremedial measures, and reporting to governmental authorities; and · providing technical assistance and support for public security and national security authorities for the protection of national security and incriminal investigations. Under the PRC Cybersecurity Law, network service providers must inform users about and report to the relevant governmental authorities anyknown security defects or bugs, and must provide constant security maintenance services for their products and services. Network products and serviceproviders may not contain or provide malware. Network service providers who do not comply with the PRC Cybersecurity Law may be subject to fines,suspension of their businesses, shutdown of their websites, and revocation of their business licenses. On May 2, 2017, the Cyberspace Administration issued the Measures for Security Review of Cyber Products and Services (for Trial Implementation),or the Cybersecurity Review Measures, which came into effect on June 1, 2017. Under the Cybersecurity Review Measures, the following cyber products andservices will be subject to cybersecurity review: · important cyber products and services purchased by networks, and information systems related to national security; and · the purchase of cyber products and services by operators of critical information infrastructure in key industries and fields, such as publiccommunications and information services, energy, transportation, water resources, finance, public service, and electronic administration, andother critical information infrastructure, that may affect national security. The Cyberspace Administration is responsible for organizing and implementing cybersecurity reviews, while the competent departments in keyindustries such as finance, telecommunications, energy, and transport are responsible for organizing and implementing security review of cyber products andservices in their respective industries and fields. There are still substantial uncertainties with respect to the interpretation and implementation of theCybersecurity Review Measures. Internet content in the PRC is also regulated and restricted from a State security standpoint. The Standing Committee of the National People’sCongress enacted the Decision Regarding the Safeguarding of Internet Security, or the Decision in 2000, and amended it in August, 2009. The Decisionmakes it unlawful to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leakState secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The Ministry of Public Security has promulgated measuresthat prohibit the use of the Internet in ways which, among other things, result in a leakage of State secrets or distribution of socially destabilizing content.The Ministry of Public Security has supervision and inspection rights in this regard. If an ICP license holder violates these measures, the PRC governmentmay revoke its ICP license and shut down its Websites. In May 2004, the MOC issued a Notice Regarding the Strengthening of Online Game Censorship, or the Online Game Notice. The Online GameNotice mandates the establishment of a new committee under the MOC that will screen the content of imported online games. In addition, all imported anddomestic online games are required to be filed with the MOC. We have submitted the relevant filing documents to the MOC for the filing of all the gamesin operation. In July 2005, the MOC and the MIIT jointly promulgated the Opinions on the Development and Administration of Online Games emphasizing thePRC government’s intent to foster and control the development of the online game industry in the PRC and providing that the MOC will censor onlinegames that “threaten state security,” “disturb the social order,” or contain “obscenity” or “violence.” 53Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In April 2009, the MOC issued a Public Announcement on Regulating Applications for the Examination of the Content of Imported Online Games,or the Announcement. The Announcement emphasizes that enterprises operating imported online games must have the content of those games examined andapproved by the MOC. Protection of Minors On April 15, 2007, the MIIT, the SAPPRFT, the Ministry of Education and five other governmental authorities jointly issued a Notice on theImplementation of Online Game Anti-Fatigue System to Protect the Physical and Psychological Health of Minors, or the Anti-Fatigue Notice. Pursuant to theAnti-Fatigue Notice, online game operators are required to install an “anti-fatigue system” that discourages game players from playing games for more thanfive hours per day. Under the anti-fatigue system, three hours or less of continuous play by minors is considered to be “healthy,” three to five hours to be“fatiguing,” and five hours or more to be “unhealthy.” Game operators are required to reduce the value of in-game benefits to a game player by half if thegame player has reached “fatiguing” level, and to zero in the case of “unhealthy” level. To identify whether a game player is a minor and thus subject to the anti-fatigue system, there was adopted a real-name registration system, whichrequires online game players to register their real identity information before they play online games and requires us to submit the identity information ofgame players to the public security authorities for verification. On July 1, 2011, the SAPPRFT, the MIIT, the Ministry of Education and five othergovernmental authorities issued a Notice on Initializing the verification of Real-name Registration for Anti-Fatigue System on Internet Games, or the Real-name Registration Notice, which took effect on October 1, 2011, to strengthen the implementation of the anti-fatigue system and real-name registration. TheReal-name Registration Notice’s main focus is to prevent minors from using an adult’s ID to play Internet games and, accordingly, the Real-nameRegistration Notice imposes stringent punishments on online game operators that do not implement the required anti-fatigue and real-name registrationmeasures properly and effectively. The most severe punishment contemplated by the Real-name Registration Notice is to require termination of the operationof the online game if the game is found to be in violation of the Anti-Fatigue Notice, the Monitor System Circular or the Real-name Registration Notice. Wedeveloped our own anti-fatigue and real-name registration systems for our games, and implemented them beginning in 2007. Under our systems, gameplayers must use real identification in order to create accounts, and in this way, we are able to tell which of our game players are minors and thus subject tothese regulations. For game players who do not register, we assume that they are minors. In order to comply with the anti-fatigue rules, game players under18 years of age only receive half of the experience time they actually earn after three hours of play. And, after five hours of play, minors receive no experiencepoints. We use this system to disincentivize minors from playing in excess of five hours at a time. On January 15, 2011, the MOC, the MIIT and six other central governmental authorities jointly issued a circular entitled Implementation of OnlineGame Monitor System of the Guardians of Minors, or the Monitor System Circular, aiming to provide specific protection measures to monitor the onlinegame activities of minors and curb addictive online game playing behaviors of minors. Under the Monitor System Circular, online game operators arerequired to adopt various measures to maintain a system to communicate with the parents or other guardians of minors playing online games and online gameoperators are required to monitor the online game activities of minors, and must suspend the account of a minor if so requested by the minor’s parents orguardians. The monitor system was formally implemented commencing March 1, 2011. In February 2013, 15, PRC governmental authorities, including the SAPPRFT, the Ministry of Education, the MOC and the MIIT, jointly issued theWork Plan for the Integrated Prevention of Minors Online Game Addiction (“Work Plan”), implementing integrated measures by various authoritiesdesigned to prevent minors from being addicted to online games. Under the Work Plan, the current relevant regulations regarding online games will befurther clarified and additional implementation rules will be issued, and online game operators will be required to implement measures to protect minors. On July 25, 2014, the SAPPRFT promulgated a Notice on Further Carrying out the Verification of Real-name Registration for Anti-Fatigue Systemon Internet Games, or the Verification of Real-name Registration Notice, which took effect on October 1, 2014. The Verification of Real-name RegistrationNotice requires local press and publication administrative departments to strengthen their oversight of enterprises engaged in the publication and operationof online games, and requires such enterprises to strictly abide by anti-fatigue and real-name registration requirements when developing and promotingonline games, excluding, at present, mobile games. Virtual Currency On February 15, 2007, the MOC, the PBOC and other relevant governmental authorities jointly issued the Notice on Further Strengthening theAdministration of Internet Cafés and Online Games, or the Internet Cafés and Online Games Notice. Under the Internet Cafés and Online Games Notice, thePBOC is directed to strengthen the administration of virtual currency in online games to avoid any adverse impact on the economy and financial system. TheInternet Cafés and Online Games Notice limits the total amount of virtual currency that may be issued by online game operators and the amount that may bepurchased by individual game players, and includes a clear division between virtual transactions and real transactions carried out by way of electroniccommerce. The Internet Cafés and Online Games Notice also provides that virtual currency may only be used to purchase virtual items. 54Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents On June 4, 2009, the MOC and the MOFCOM jointly issued the Notice on Strengthening the Administration of Online Game Virtual Currency(the “Virtual Currency Notice”) to regulate the trading of online game virtual currencies. The Virtual Currency Notice defines the meaning of virtual currencyand places a set of restrictions on the trading and issuance of virtual currency. The Virtual Currency Notice also states that online game operators are notallowed to give out virtual items or virtual currency through lottery-based activities, such as lucky draws, betting or random computer sampling, in exchangefor user’s cash or virtual money. The Virtual Currency Notice is mainly targeted at lottery-based activities relating to the “treasure boxes” found in someonline games. On July 20, 2009, the MOC promulgated the Filing Guidelines for Online Game Virtual Currency Issuing Enterprises and Online Game VirtualCurrency Trading Enterprises, which define the terms “issuing enterprise” and “trading enterprise” and stipulate that a single enterprise may not be both anissuing enterprise and a trading enterprise. Laws and Regulations Related to Intellectual Property Protection China has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents and trademarks. Copyright On September 7, 1990, The National People’s Congress promulgated the Copyright Law, which took effect on June 1, 1991 and was amended in2001 and in 2010. The amended Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and softwareproducts. In addition, there is a voluntary registration system administered by the China Copyright Protection Center. The amended Copyright Law alsorequires registration of the pledge of a copyright. In order to further implement the Computer Software Protection Regulations, promulgated by the State Council on December 20, 2001 andamended on January 30, 2013, the National Copyright Administration (the “NCA”) issued Computer Software Copyright Registration Procedures onFebruary 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights. To address the problem of copyright infringement related to content posted or transmitted over the Internet, on April 29, 2005 the NCA and the MIITjointly promulgated the Measures for Administrative Protection of Copyright Related to Internet, which became effective on May 30, 2005. Upon receipt ofan infringement notice from a legitimate copyright holder, an ICP operator must take remedial actions immediately by removing or disabling access to theinfringing content. If an ICP operator knowingly transmits infringing content or fails to take remedial actions after receipt of a notice of infringement harmingpublic interest, the ICP operator could be subject to administrative penalties, including an order to cease infringing activities, confiscation by the authoritiesof all income derived from the infringement activities, or payment of fines. On May 18, 2006, the State Council promulgated the Regulations on the Protection of the Right to Network Dissemination of Information(as amended in 2013). Under these regulations, an owner of the network dissemination rights with respect to written works or audio or video recordings whobelieves that information storage, search or link services provided by an Internet service provider infringe his or her rights may require that the Internetservice provider delete, or disconnect the links to, such works or recordings. We have adopted measures to mitigate copyright infringement risks, such as real-time monitoring and mechanisms for fast removal upon receipt ofnotices of infringement. As of December 31, 2017, we had registered 154 software copyrights in the PRC. Patent Law On March 12, 1984, the Standing Committee of the National People’s Congress promulgated the Patent Law, which was amended in 1992, 2000 and2008. On June 15, 2001, the State Council promulgated the Implementation Regulation for the Patent Law, which was amended in January 9, 2010.According to these laws and regulations, the State Intellectual Property Office is responsible for administering patents in the PRC. The Chinese patent systemadopts a “first to file” principle, which means that where more than one person files a patent application for the same invention, a patent will be granted to theperson who filed the application first. To be patentable, invention or utility models must meet three conditions: novelty, inventiveness and practicalapplicability. A patent is valid for 20 years in the case of an invention and 10 years in the case of utility models and designs. A third-party user must obtainconsent or a proper license from the patent owner to use the patent. Otherwise, third-party use constitutes an infringement of patent rights. As of December 31,2017, we had been issued 781 patents in the PRC. 55Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Trademark Law On August 23, 1982, the Standing Committee of the National People’s Congress promulgated the Trademark Law, or the Trademark Law, which wasamended in 1993, 2001 and 2013. On September 15, 2002, the State Council promulgated the Implementation Regulation for the Trademark Law, which wasamended on April 29, 2014. Under the Trademark Law and the implementing regulation, the Trademark Office of the Administration for Industry andCommerce is responsible for the registration and administration of trademarks. The Administration for Industry and Commerce under the State Council hasestablished a Trademark Review and Adjudication Board for resolving trademark disputes. As with patents, China has adopted a “first-to-file” principle fortrademark registration. If two or more applicants apply for registration of identical or similar trademarks for the same or similar commodities, the applicationthat was filed first will receive preliminary approval and will be publicly announced. For applications filed on the same day, the trademark that was first usedwill receive preliminary approval and will be publicly announced. Registered trademarks are valid for ten years from the date the registration is approved. Aregistrant may apply to renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timelymanner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shallbe deregistered. Renewed registrations are valid for ten years. As of December 31, 2017, we had registered 381 trademarks in the PRC. Consumer Protection and Privacy Protection Consumer Protection The MIIT sets forth various requirements for consumer protection in a notice, issued on April 15, 2004, which addresses certain problems in thetelecommunications sector, including ambiguity in billing practices for premium services, poor quality of connections and unsolicited SMS messages, all ofwhich impinge upon the rights of consumers. On May 26, 2016, the MIIT issued the Measures on the Complaint Settlement of the Telecommunication Services Users, or the “ComplaintSettlement Measures”, which took effect on July 30, 2016. The Complaint Settlement Measures require telecommunication services providers to respond totheir users within fifteen days upon the receipt of any complaint delivered by such users, the failure of which will give the complaining users the right tofile a complaint against the service providers with the provincial branch offices of the MIIT. We are aware of the increasingly strict legal environment covering consumer protection in the PRC, and we strive to adopt all measures necessary toensure that our business complies with these evolving standards. Privacy Protection The PRC Constitution states that PRC law protects the freedom and privacy of the communications of citizens and prohibits infringement of suchrights. In recent years, PRC governmental authorities have issued various regulations on the use of the Internet that are designed to protect personalinformation from unauthorized disclosure. For example, the ICP Measures prohibit an Internet information services provider from insulting or slandering athird party or infringing upon the lawful rights and interests of a third party. In addition, PRC regulations authorize PRC telecommunication authorities todemand rectification of unauthorized disclosure by ICPs. Chinese law does not prohibit ICPs from collecting and analyzing personal information from their users. The PRC government, however, has thepower and authority to order ICPs to submit personal information of an Internet user if such user posts any prohibited content or engages in illegal activitieson the Internet. In addition, the Several Provisions stipulate that ICPs must not, without the users’ consent, collect information on users that can be used,alone or in combination with other information, to identify the user, or User Personal Information, and may not provide any User Personal Information to thirdparties without prior user consent. ICPs may only collect User Personal Information necessary to provide their services and must expressly inform the users ofthe method, content and purpose of the collection and processing of such User Personal Information. In addition, an ICP may use User Personal Informationonly for the stated purposes under the ICP’s scope of services. ICPs are also required to ensure the proper security of User Personal Information, and takeimmediate remedial measures if User Personal Information is suspected to have been disclosed. If the consequences of any such disclosure are expected to beserious, the ICP must immediately report the incident to the telecommunications governmental authorities and cooperate with the authorities in theirinvestigations. We require our users to accept a user agreement whereby they agree to provide certain personal information to us. If we violate theseregulations, the MIIT or its local bureaus may impose penalties and we may be liable for damage caused to our users. 56Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents On December 28, 2012, the Standing Committee of the National People’s Congress enacted the Decision to Enhance the Protection of NetworkInformation, or the Information Protection Decision, to further enhance the protection of User Personal Information in electronic form. The InformationProtection Decision provides that ICPs must expressly inform their users of the purpose, manner and scope of the ICPs’ collection and use of User PersonalInformation, publish the ICPs’ standards for their collection and use of User Personal Information, and collect and use User Personal Information only with theconsent of the users and only within the scope of such consent. The Information Protection Decision also mandates that ICPs and their employees must keepstrictly confidential User Personal Information that they collect, and that ICPs must take such technical and other measures as are necessary to safeguard theinformation against disclosure. On July 16, 2013, the MIIT issued the Order for the Protection of Telecommunication and Internet User Personal Information, or the Order. Most ofthe requirements under the Order that are relevant to ICP operators are consistent with the requirements already established under the MIIT provisionsdiscussed above, except that under the Order the requirements are often more strict and have a wider scope. If an ICP operator wishes to collect or use personalinformation, it may do so only if such collection is necessary for the services it provides. Further, it must disclose to its users the purpose, method and scopeof any such collection or use, and must obtain consent from the users whose information is being collected or used. ICP operators are also required toestablish and publish their protocols relating to personal information collection or use, keep any collected information strictly confidential, and taketechnological and other measures to maintain the security of such information. ICP operators are required to cease any collection or use of the user personalinformation, and de-register the relevant user account, when a given user stops using the relevant Internet service. ICP operators are further prohibited fromdivulging, distorting or destroying any such personal information, or selling or providing such information unlawfully to other parties. In addition, if an ICPoperator appoints an agent to undertake any marketing or technical services that involve the collection or use of personal information, the ICP operator isstill required to supervise and manage the protection of the information. The Order states, in broad terms, that violators may face warnings, fines, anddisclosure to the public and, in the most severe cases, criminal liability. On August 21, 2014, the Supreme People’s Court promulgated the Provisions of the Supreme People’s Court on Application of Laws to CasesInvolving Civil Disputes over Infringement upon Personal Rights and Interests by Using Information Networks, pursuant to which if an ICP operatordiscloses genetic information, medical records, health examination data, criminal record, home address, private events and or other personal information of anatural person online, causing damage to the person, the People’s Court should support a claim by the infringed party for recovery of damages from theinfringing ICP operator. On January 5, 2015, the SAIC promulgated the Measures on Punishment for Infringement of Consumer Rights, pursuant to which business operatorscollecting and using personal information of consumers must comply with the principles of legitimacy, propriety and necessity, specify the purpose, methodand scope of collection and use of the information, and obtain the consent of the consumers whose personal information is to be collected. Business operatorsmay not: (i) collect or use personal information of consumers without their consent; (ii) unlawfully divulge, sell or provide personal information of consumersto others; (iii) send commercial information to consumers without their consent or request, or when a consumer has explicitly declined to receive suchinformation. Our current security measures and those of the third parties with whom we transact business may not be adequate for the protection of user personalinformation. In addition, we do not have control over the security measures of our third-party online payment vendors. Security breaches of our system andthe online payment systems that we use could expose us to litigation and liability for failing to secure confidential customer information and could harm ourreputation, ability to attract customers and ability to encourage customers to purchase virtual items. Security and Censorship The principal pieces of PRC legislation concerning information security and censorship are: · The Law of the People’s Republic of China on the Preservation of State Secrets (1988, as amended in 2010) and related ImplementingRules (2014); · The Law of the People’s Republic of China Regarding Anti-spy (2014); · Rules of the People’s Republic of China for Protecting the Security of Computer Information Systems (1994, as amended in 2011); · Regulations for the Protection of State Secrets for Computer Information Systems on the Internet (2000); · Notice issued by the Ministry of Public Security of the People’s Republic of China Regarding Issues Relating to the Implementation of theAdministrative Measure for the Security Protection of International Connections to Computer Information Networks (2000); and 57Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · The Decision of the Standing Committee of the National People’s Congress Regarding the Safeguarding of Internet Security (2000), which wasamended in 2009. These pieces of legislation specifically prohibit the use of Internet infrastructure where it results in a breach of public security, the provision ofsocially destabilizing content or the divulgence of State secrets, as follows: · “A breach of public security” includes a breach of national security or disclosure of state secrets; infringement on state, social or collectiveinterests or the legal rights and interests of citizens or illegal or criminal activities. · “Socially destabilizing content” includes any action that incites defiance or violation of Chinese laws; incites subversion of state power andthe overturning of the socialist system; fabricates or distorts the truth, spreads rumors or disrupts social order; advocates cult activities; spreadsfeudal superstition; involves obscenities, pornography, gambling, violence, murder, or horrific acts; or instigates criminal acts. · “State secrets” are defined as “matters that affect the security and interest of the state.” The term covers such broad areas as national defense,diplomatic affairs, policy decisions on state affairs, national economic and social development, political parties and “other State secrets that theState Secrecy Bureau has determined should be safeguarded.” Under the aforementioned legislation, it is mandatory for Internet companies in the PRC to complete security filing procedures with the local publicsecurity bureau and for them provide regular updates to the local public security bureau regarding information security and censorship systems for theirWebsites. In this regard, on October 1, 2004, the Administrative Rules on the Filing of Commercial Websites, or the Commercial Websites Filing Rules, werepromulgated by the Beijing Administration of Industry and Commerce (Beijing AIC), to replace the Detailed Implementing Rules for the Measures for theAdministration of Commercial Website Filings for the Record promulgated by the Beijing AIC on September 1, 2000. The Commercial Websites FilingRules state that operators of commercial Websites must comply with the following requirements: · filing with the Beijing AIC and obtain electronic registration marks for the Websites; · placing the registration marks on the Websites’ homepages; and · registering the Website names with the Beijing AIC. The PRC Cybersecurity Law requires providers of services over Internet networks to keep user information that they have collected in strictconfidence and to establish improved systems for the protection of user information. Such service providers must provide notice of the purpose, methods andscope of their collection and use of user information, and obtain the consent of each person whose personal information will be collected. Providers ofservices over Internet networks may not collect any personal information that is not related to the services they provide, or disclose or tamper with personalinformation that they have collected, unless such information is encoded to prevent identification of individuals whose information is so disclosed ortampered with. Service providers who do not comply with the PRC Cybersecurity Law may be subject to fines, suspension of their businesses, shutdown oftheir websites, and revocation of their business licenses. Sogou Information has successfully registered the sogou.com Website with the Beijing AIC. In addition, the State Security Bureau has issued regulations authorizing the blocking of access to any site it deems to be leaking State secrets orfailing to comply with legislation regarding the protection of State secrets in the distribution of information online. Accordingly, we have established an internal security committee and adopted security maintenance measures, employed a full-time supervisor andexchanged information on a regular basis with the local public security bureau with regard to sensitive or censored information and Websites. Internet Content and Anti-Pornography The PRC government has promulgated measures relating to Internet content through a number of governmental authorities, including the MIIT, theMOC, the SAPPRFT and the MPS. These measures specifically prohibit certain Internet activities, including the operation of online games, which results inthe publication of any content which is found to, among other things, propagate obscenity, gambling or violence, instigate crimes, undermine publicmorality or the cultural traditions of the PRC, or compromise State security or secrets. If an ICP license holder violates these measures, the PRC governmentmay revoke its ICP license and shut down its Websites. In addition, the PRC government has issued several regulations concerning the installation of filter software to filter out unhealthy and vulgarcontent from the Internet. In April 1, 2009, the Ministry of Education, the MIIT and certain other PRC ministries and agencies issued a notice requiring that,by the end of May 2009, all computer terminals connected with the Internet at all elementary and secondary schools be able to include and operate GreenDam-Youth Escort, which is software aimed at filtering out unhealthy and vulgar content in text and graphics from the Internet and which, according to theWebsite for the software, may be used to control time spent on the Internet, prohibit access to computer games, and filter out unhealthy Websites. The MIITfurther expanded the scope of required use of this filter software by issuing a notice on May 19, 2009 requiring that, effective as of July 1, 2009, allcomputers manufactured and sold in the PRC have the latest available version of Green Dam-Youth Escort preinstalled when they leave the factory and thatall imported computers have the latest available version of Green Dam-Youth Escort preinstalled before being sold in the PRC. Green-Dam Youth Escort is tobe preinstalled on the hard drive of the computer or in the form of a CD accompanying the computer and is also to be included in the backup partition andsystem restore CD. However, on June 30, 2009, the MIIT postponed the implementation of this requirement regarding pre-installation of Green Dam-YouthEscort. 58Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents On December 4, 2009, the MIIT and three other PRC governmental authorities jointly issued the Incentives Measures for Report of Pornographic,Obscene and Vulgar Messages on Internet and Mobile Media, or the Anti-Pornography Notice, to crack down on online pornography. Pursuant to the Anti-Pornography Notice, monetary rewards will be provided to Internet users who report Websites that feature pornography, and a committee has been establishedto review such reports to determine an appropriate award. During a PRC anti-pornography campaign, which continued during 2014, many Websites(including mobile Websites) that contained pornography were closed down. In addition, China Mobile announced a temporary suspension of billing forWireless Application Protocol, or (“WAP”) services, as a means of fighting against Websites providing pornographic content. On April 13, 2014, the National Working Group on Anti-Pornography and three other PRC governmental authorities jointly issued theProclamation of Special Action Regarding Crackdown on Online Pornographic Content, or the Anti-Pornography Proclamation. Under the Anti-Pornography Proclamation, Internet service providers must immediately remove texts, images, video, advertisements and other information that containpornographic content. The relevant governmental authorities may order enterprises or individuals who flagrantly produce or disseminate pornographiccontent to stop conducting business, and may revoke relevant administrative permits. Moreover, an enterprise or individual who provides telecom operationservices, network access services, advertising services or payment services to facilitate dissemination of pornographic content may have criminal or civilpenalties imposed under the PRC Criminal Law and other relevant laws and regulations. Laws and Regulations Related to Unfair Competition Pursuant to the Anti-Unfair Competition Law, which took effect in 1993, a business operator is prohibited from any of the following unfairactivities: · copying and using the registered trademarks of others; · using the same or similar names, packages or decorations of well-known brand name products so as to mislead buyers; · using the names of other enterprises without authorization so as to mislead buyers; and · forging identification marks, marks indicating good quality and other marks on commodities or falsifying the place of origin or using otherfalse indicators to mislead people with regard to quality. In addition, the Supreme People’s Court has promulgated an Interpretation on Several Issues Relating to the Application of the Law in Civil Trialsfor Unfair Competition Cases, which became effective as of February 1, 2007. This interpretation provides guidance on how to conduct trials involvingunfair competition, protect the legal rights and interests of business operators and maintain orderly market competition. Regulation of M&A and Overseas Listings On August 8, 2006, six PRC regulatory agencies, including the MOC, the State Assets Supervision and Administration Commission, the StateAdministration of Taxation, or the SAT, the SAIC, the China Securities Regulatory Commission (the “CSRC”), and the SAFE, jointly issued the Regulationson Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, which became effective on September 8, 2006 and amended onJune 22, 2009. The M&A Rule includes provisions that purport to require that an offshore special purpose vehicle formed for purposes of the overseas listingof equity interests in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of the CSRC prior to thelisting and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official Website procedures regarding its approval of overseas listings by special purposevehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC. The application of this new PRC regulation remainsunclear, with no consensus currently existing among leading PRC law firms regarding the scope of the applicability of the CSRC approval requirements. The M&A Rules also establish procedures and requirements that could make some acquisitions of Chinese companies by foreign investors moretime-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction inwhich a foreign investor takes control of a Chinese domestic enterprise. 59Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In February 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers andAcquisitions of Domestic Enterprises by Foreign Investors, or the Circular 6, which established a security review system for mergers and acquisitions ofdomestic enterprises by foreign investors. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “nationaldefense and security” concerns and mergers and acquisitions by which foreign investors may acquire “de facto control” of domestic enterprises with“national security” concerns. In August 2011, the MOFCOM promulgated the Rules on Implementation of Security Review System, or the MOFCOM SecurityReview Rules, to replace the Interim Provisions of the Ministry of Commerce on Matters Relating to the Implementation of the Security Review System forMergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated by the MOFCOM in March 2011. The MOFCOM Security ReviewRules, which came into effect on September 1, 2011, provide that the MOFCOM will look into the substance and actual impact of a transaction and prohibitforeign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans,control through contractual arrangements or offshore transactions. Antitrust On August 30, 2007, the Standing Committee of the National People’s Congress of the PRC adopted the PRC Anti-Monopoly Law, or the AML,which became effective on August 1, 2008. In essence, the AML prohibits certain monopolistic acts that result in or could result in the elimination orrestriction of competition. After the promulgation of the AML, the State Council as well as various PRC governmental authorities, including the MOFCOM,the National Development and Reform Commission, or the NDRC, and the SAIC, promulgated a series of regulations from different perspectives to interpretand enforce the AML. Under the AML, monopolistic agreements, abuse of a dominant market position, and business combinations are considered to bemonopolistic acts that result in or could result in the elimination or restriction of competition. Pursuant to the AML, a business operator that possesses a dominant position in a relevant market is prohibited from abusing its dominant marketposition through (i) selling commodities at unfairly high prices or buying commodities at unfairly low prices; (ii) without justifiable reasons, sellingcommodities at prices below cost; (iii) without justifiable reasons, refusing to enter into transactions with its trading counterparties; (iv) without justifiablereasons, allowing trading counterparties to make transactions exclusively with itself or with business operators designated by it; (v) without justifiablereasons, tying commodities or imposing unreasonable trading conditions on transactions; (vi) without justifiable reasons, applying differential prices andother transaction terms among its trading counterparties who are on an equal footing; (vii) other acts determined to be abuse of dominant market position bythe relevant governmental authorities. If a business operator that possesses a dominant market position in a relevant market is deemed to be abusing itsdominant position, the SAIC and other competent PRC governmental authorities, such as the NDRC, may, at their discretion, order the business operator tocease the illegal acts, confiscate any illegal gains, and impose a fine of 1% to 10% of the business operator’s revenues for the preceding financial year. In addition, pursuant to the AML and related regulations, a proposed business combination is required to be reported to the MOFCOM by the partiesinvolved prior to its implementation, if the following thresholds are met: (i) the combined worldwide turnover in the preceding financial of the parties involved year exceeds RMB10 billion (or approximatelyUS$1.47 billion), and the nationwide turnover in the preceding financial year within the PRC of each of at least two of the parties involvedexceeds RMB400 million (or approximately US$58.8 million); or, (ii) the combined nationwide turnover in the preceding financial year within the PRC of all the parties involved exceeds RMB2 billion(or approximately US$294 million), and the nationwide turnover in the preceding financial year within the PRC of each of at least two ofthe parties involved exceeds RMB400 million (or approximately US$58.8 million). “Business Combinations” means any of the following: (i) merger of businesses; (ii) acquisition of control over another business by acquiring equityor assets; or (iii) acquisition of control over, or exercising decisive influence on, another business by contract or by any other means. Under the AML andother related regulations, transactions satisfying the thresholds for mandatory notification are not allowed to be implemented without the parties obtainingapproval from the MOFCOM. In case of any non-compliance with the notification and approval requirement, the MOFCOM may order the parties involved tocease the transactions, dispose of shares or assets, transfer one of the combined businesses by no later than a specified time, or take any other measuresnecessary to restore the status quo as of before the business combination. A fine of up to RMB500,000 (or approximately US$73,000) may also be imposedby the MOFCOM. Furthermore, the parties to the proposed transactions are subject to liability for any loss suffered by an individual or entity or individual asa result of the business combination. 60Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Foreign Currency Exchange and Dividend Distribution The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, or theFX Regulations, which were last amended in August 2008. Under the FX Regulations, the RMB is freely convertible for current account items, including thedistribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as directinvestments, loans, repatriation of investments and investments in securities outside of the PRC, unless the prior approval of the SAFE is obtained and priorregistration with the SAFE is made. Dividends paid by a PRC subsidiary to its overseas shareholder are deemed income of the shareholder and are taxable inthe PRC. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in the PRC maypurchase or remit foreign currency, subject to a cap approved by the SAFE, for settlement of current account transactions without the approval of the SAFE.Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and otherrelevant PRC governmental authorities. In July 2014, the SAFE promulgated the Circular on Issues Concerning Foreign Exchange Administration Over the Overseas Investment andFinancing and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or Circular 37, which replaced Relevant Issues ConcerningForeign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, orCircular 75. Circular 37 requires PRC residents, including PRC institutions and individuals, to register with the local SAFE office in connection with theirdirect establishment or indirect control of an offshore entity, referred to in Circular 37 as a “special purpose vehicle,” for the purpose of holding domestic oroffshore assets or interests. PRC residents must also file amendments to their registrations in the event of any significant changes with respect to the specialpurpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event.Under these regulations, PRC residents’ failure to comply with such regulations may result in restrictions being imposed on the foreign exchange activities ofthe relevant PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from theoffshore entity to the PRC entity, including restrictions on the ability to contribute additional capital to the PRC entity. Further, failure to comply with thevarious SAFE registration requirements could result in liability under PRC laws for evasion of foreign exchange regulations. Under Circular 37, if a non-listed special purpose vehicle uses its own equity to grant equity incentives to any directors, supervisors, seniormanagement or any other employees directly employed by a domestic enterprise which is directly or indirectly controlled by such special purpose vehicle, orwith which such an employee has established an employment relationship, related PRC residents and individuals may, prior to exercising their rights, applyto the SAFE for foreign exchange registration formalities for such special purpose vehicle. However, in practice, different local SAFE offices may havedifferent views and procedures on the interpretation and implementation of the SAFE regulations, and since Circular 37 was the first regulation to regulatethe foreign exchange registration of a non-listed special purpose vehicle’s equity incentives granted to PRC residents, there remains uncertainty with respectto its implementation. On December 25, 2006, the PBOC issued the Administration Measures on Individual Foreign Exchange Control and related ImplementationRules were issued by the SAFE on January 5, 2007. Both became effective on February 1, 2007. Under these regulations, all foreign exchange transactionsinvolving an employee share incentive plan, share option plan, or similar plan participated in by onshore individuals may be conducted only with approvalfrom the SAFE or its local office. The principal regulations governing distribution of dividends of foreign holding companies include the Foreign Investment Enterprise Law (1986),which was amended in October 2000 and October, 2016, and the Administrative Rules under the Foreign Investment Enterprise Law (2001), which wasamended in February 2014. Under these regulations, foreign investment enterprises in China may pay dividends only out of their accumulated profits, if any, determined inaccordance with the PRC accounting standards and regulations. In addition, foreign investment enterprises in the PRC are required to allocate at least 10% oftheir accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises.These reserves are not distributable as cash dividends. Furthermore, under the Corporate Income Tax Law, which became effective on January 1, 2008, themaximum tax rate for the withholding tax imposed on dividend payments from PRC foreign invested companies to their overseas investors that are notregarded as “resident” for tax purposes is 20%. The rate was reduced to 10% under the Implementing Regulations for the PRC Corporate Income Tax Lawissued by the State Council. However, a lower withholding tax rate of 5% might be applied if there is a tax treaty between China and the jurisdiction of theforeign holding companies, such as is the case with Hong Kong, and certain requirements specified by PRC tax authorities are satisfied. 61Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Employee Share Option Plans Pursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan ofOverseas Listed Company, or Circular 7, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors, and other seniormanagement participating in any share incentive plan of an overseas publicly-listed company who are PRC citizens or who are non-PRC citizens residing inChina for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent,which may be a PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, the SAT has issued certain circulars concerning employee share options and restricted shares. Under these circulars, employees workingin the PRC who exercise share options or are granted restricted shares will be subject to PRC individual income tax. The PRC subsidiaries of an overseaslisted company are obligated to file documents related to employee share options and restricted shares with relevant tax authorities and to withholdindividual income taxes of employees who exercise their share option or purchase restricted shares. If the employees fail to pay or the PRC subsidiaries fail towithhold income tax in accordance with relevant laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRCgovernmental authorities. Employment and Social Insurance On June 29, 2007, the National People’s Congress promulgated the Employment Contract Law of PRC, or the Employment Contract Law, whichbecame effective as of January 1, 2008 and amended on December 28, 2012. The Employment Contract Law requires employers to provide written contractsto their employees, restricts the use of temporary workers and aims to give employees long-term job security. Pursuant to the Employment Contract Law, employment contracts lawfully concluded prior to the implementation of the Employment Contract Lawand continuing as of the date of its implementation shall continue to be performed. Where an employment relationship was established prior to theimplementation of the Employment Contract Law but no written employment contract was concluded, a contract must be concluded within one month afterits implementation. On September 18, 2008, the State Council promulgated the Implementing Regulations for the PRC Employment Contract Law which came intoeffect immediately. These regulations interpret and supplement the provisions of the Employment Contract Law. In accordance with the Employment Contract Law, an employer shall control the number of dispatched workers so that they do not exceed a certainpercentage of its total number of workers. An employer that is in violation thereof shall be ordered to make correction by the labor administrative department.Where no correction is made by the prescribed deadline, the employer shall be fined of not less than RMB 5000 but not more than RMB 10,000 perdispatched worker involved. On January 24, 2014, the Ministry of Human Resources and Social Security issued the Interim Provisions on Labor Dispatching,which became effective on March 1, 2014. The Interim Provisions on Labor Dispatching provides that the number of dispatched workers used by anEmployer shall not exceed 10% of the total number of its employees. We could not assure you that Sogou would be always in compliance of suchrequirement. PRC governmental authorities have passed a variety of laws and regulations regarding social insurance and housing funds from time to time,including, among others, the PRC Social Insurance Law, the Regulation of Insurance for Labor Injury, the Regulations of Insurance for Unemployment, theProvisional Insurance Measures for Maternal Employees, and the Interim Provisions on Registration of Social Insurance. Pursuant to these laws andregulations, PRC companies must make contributions at specified levels for their employees to the relevant local social insurance and housing fundauthorities. Failure to comply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the localsocial insurance and housing fund governmental authorities. Organizational Structure Sohu, our ultimate parent company and controlling shareholder; Tencent; and members of our management together have shareholdings in us givingthem approximately 97.0% of the total voting power of the combined total of our outstanding Class A and Class B ordinary shares, due to the additionalvoting power of the Class B Ordinary Shares held by Sohu and Tencent. Sohu, through its ownership of Class B Ordinary Shares and a voting agreement withTencent Holdings Limited, has the right to appoint a majority of our Board of Directors. Sohu and Tencent together, through their ownership of our Class BOrdinary Shares, have the power to decide all matters that are put to a vote of our shareholders. As of the date of the filing of this annual report, the following are our wholly-owned subsidiaries: · Sogou (BVI) Limited, or Sogou BVI, incorporated in the British Virgin Islands on December 23, 2005. 62Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Beijing Sogou Technology Development Co., Ltd., or Sogou Technology, incorporated in the PRC on February 8, 2006. · Sogou Hong Kong Limited, or Sogou HK, incorporated in Hong Kong on December 12, 2007. · Vast Creation Advertising Media Services Limited, or Vast Creation, a Hong Kong Company acquired by us on November 30, 2011. · Beijing Sogou Network Technology Co., Ltd., or Sogou Network, incorporated in the PRC on March 29, 2012. · Sogou Technology Hong Kong Limited, or Sogou Technology HK, incorporated in Hong Kong on August 25, 2015. · Tianjin Sogou Network Technology Co., Ltd., or Tianjin Sogou Network, incorporated in the PRC on May 18, 2017. · Sogou (Shantou) Internet Microcredit Co., Ltd., or Sogou Shantou, incorporated in the PRC on November 22, 2017. In order to comply with PRC regulatory requirements restricting foreign ownership of Internet information and content, Internet access, value-addedtelecommunications, and certain other businesses in China, we conduct a portion of our online search and search-related businesses and other business in thePRC through our VIE Sogou Information, which is incorporated in the PRC. In order to comply with PRC laws, Sogou Technology, Sogou Information, andthe three shareholders of Sogou Information, which are a VIE of Sohu that is a PRC company, a Tencent group entity that is a PRC company, and our ChiefExecutive Officer Xiaochuan Wang, who is a PRC citizen, are parties to a series of contractual arrangements that provide Sogou Technology with effectivecontrol of Sogou Information. Pursuant to these contractual arrangements, we operate a portion our business through Sogou Information and its subsidiariesas our VIEs in the PRC and a portion of our revenues are earned by and paid to Sogou Information. Under these contractual arrangements, Sogou Informationholds a portion of our assets, including licenses and permits required to operate our search and search-related businesses and other business, and SogouTechnology provides product development, technical support and marketing services to Sogou Information and holds most of the intellectual propertyrelating to the technology we use to operate our business. As a result of these contractual arrangements, our VIEs’ results of operations, assets, and liabilitiesare included in our consolidated financial statements. The following is a summary of our VIE Sogou Information and its subsidiaries, Shenzhen Shi Ji Guang Su Information Technology Co., Ltd. (“Shi JiGuang Su”), Beijing Shi Ji Si Su Technology Co., Ltd. (“Shi Ji Si Su”), and Chengdu Easypay Technology Co., Ltd. (“Chengdu Easypay”): Sogou Information · Beijing Sogou Information Service Co., Ltd., or Sogou Information, was incorporated in December 2005. As of December 31, 2017, BeijingCentury High-Tech Investment Co., Ltd., a Sohu Group Company, and Shenzhen Tencent Computer System Co., Ltd., a Tencent group entity,and Xiaochuan Wang, held 45%, 45%, and 10% equity interests, respectively, in this entity. Shi Ji Guang Su · Shenzhen Shi Ji Guang Su Information Technology Co., Ltd., or Shi Ji Guang Su, was acquired in September 2013 in connection with Tencent’sinvestment in us and Tencent’s transfer to us of its Soso search-related businesses. As of December 31, 2017, Sogou Information held 100% ofthe equity interest in this entity. Shi Ji Si Su · Beijing Shi Ji Si Su Technology Co., Ltd., or Shi Ji Si Su, was acquired in April 2015 for nominal consideration. As of December 31, 2017,Sogou Information held 100% of the equity interest in this entity. Chengdu Easypay · Chengdu Easypay Technology Co., Ltd., or Chengdu Easypay, was incorporated in January 2015. As of December 31, 2017, Sogou Informationand Shi Ji Si Su together held 100% of the equity interest in this entity. The following is a summary of the VIE agreements currently in effect: · Loan and share pledge agreements between Sogou Technology and the shareholders of Sogou Information. The loan agreement provides for aloan to Xiaochuan Wang, who holds 10% of the equity interest in Sogou Information, used by him to make contributions to the registeredcapital of Sogou Information in exchange for his equity interest in Sogou Information. The loan is interest free and is repayable on demand, butMr. Wang may repay the loan only by transferring to Sogou Technology his equity interest in Sogou Information. Under the pledge agreement,all of the shareholders of Sogou Information pledge their equity interests to Sogou Technology to secure the performance of their obligationsunder certain of the VIE agreements. If any shareholder of Sogou Information breaches any of his or its obligations under any VIE agreements,Sogou Technology is entitled to exercise its rights as the beneficiary under the share pledge agreement. The share pledge agreement terminatesonly after all of the obligations of the shareholders under the various VIE agreements are no longer in effect. 63Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · Equity interest purchase rights agreement between Sogou Technology, Sogou Information, and the shareholders of Sogou Information.Pursuant to these agreements, Sogou Technology and any third party designated by it have the right, exercisable at any time when it becomeslegal to do so under PRC law, to purchase from the shareholders of Sogou Information all or any part of their equity interests at the lowestpurchase price permissible under PRC law. · Business operation agreement among Sogou Technology, Sogou Information and the shareholders of Sogou Information. The agreement setsforth the right of Sogou Technology to control the actions of the shareholders of Sogou Information in their capacity as such and of SogouInformation. The agreement has a term of 10 years and is renewable at the request of Sogou Technology. · Powers of attorney executed by the shareholders of Sogou Information in favor of Sogou Technology with a term of 10 years that is extendableat the request of Sogou Technology. These powers of attorney give Sogou Technology the right to appoint nominees to act on behalf of each ofthe three Sogou Information shareholders in connection with all actions to be taken by Sogou Information. · Technology consulting and service agreement between Sogou Technology and Sogou Information. Pursuant to this agreement SogouTechnology has the exclusive right to provide technical consultation and other related services to Sogou Information in exchange for a fee. Theagreement has a term of 10 years and is renewable at the request of Sogou Technology. Commerce & Finance Law Offices, our PRC counsel, has advised us that these agreements became effective upon signing, except for the pledgeunder the share pledge agreement, which became effective when the pledge was registered with applicable PRC authorities. In the opinion of our PRCcounsel, Commerce & Finance Law Offices, the ownership structure and the contractual arrangements between Sogou Technology and Sogou Informationand among Sogou Technology, Sogou Information, and the shareholders of Sogou Information comply with current PRC laws and regulations and each of thethese agreements is, and taken as a whole these agreements are, valid and legally binding upon each party to such agreements under the laws of the PRC, andenforceable in accordance with its and their terms. We do not believe that any of these agreements would be deemed under PRC laws and regulations tocreate foreign ownership of the businesses operated through our VIEs that would violate PRC laws and regulations. However, our PRC counsel has alsoadvised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly,PRC governmental authorities may ultimately take a view that is inconsistent with the opinion of Commerce & Finance Law Offices and our belief in thatregard. See “Risk Factors—Risks Related to Our Corporate Structure.” The following diagram illustrates our corporate structure as of the date of this annual report: 64Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The shareholders of Sogou Information are Beijing Century High-Tech Investment Co., Ltd., a VIE of Sohu, Shenzhen Tencent Computer SystemCo., Ltd., a Tencent group entity, and Xiaochuan Wang, our Chief Executive Officer, holding a 45%, 45%, and 10% equity interest, respectively, inthis entity, subject to VIE agreements with Sogou Technology. 65(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 4A. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled“Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this annual report. Thediscussion in this section contains forward-looking statements that involve risks and uncertainties. As a result of various factors, including those set forthunder “Item 3. Key Information—Risk Factors” and elsewhere in this annual report on Form 20-F, our actual future results may be materially different fromwhat we expect. Overview Our mission is to make it easy to communicate and get information. We are an innovator in search and a leader in China’s Internet industry. Our Sogou Search is the second largest search engine in China by mobilequeries and we are the fourth largest Internet company in China based on MAU in December 2017, according to iResearch. Our industry-leading Sogou InputMethod, the robust ecosystem we have built and shared with Tencent and other strategic partners, and significant breakthroughs in AI uniquely position us tocapture opportunities in China’s search and Internet industry. Sogou Search had an 18.2% market share in China based on mobile queries in December 2017, as compared to 15.2% in March 2017, according toiResearch. Meanwhile, our mobile search MAU increased from 457 million in December 2016 to 545 million in December 2017. We have grownsignificantly, with mobile Web search page views having grown by 31% from December 2016 to December 2017. Powered by AI, Sogou Search offersinnovative products and services. For example, our cross-language search service eliminates the Chinese-English language barrier, enabling users to discoverEnglish content on the Internet by querying in Chinese and reading content that we have translated into Chinese. Chinese language input software is a must-have for users to type in Chinese. Sogou Input Method is the largest Chinese language input software byboth mobile and PC MAUs in December 2017, according to iResearch, and is the first cloud-based Chinese language input software. Sogou Searchcontinually captures Chinese expressions and phrases on the Internet, which enables Sogou Input Method to build a comprehensive and up-to-datevocabulary library. This allows us to improve the efficiency and accuracy of predictive text. In December 2017, Sogou Input Method had 331 million mobileDAU and 86 million PC DAU. It was the number two PC software in China by DAU and the number three mobile application in China by DAU inDecember 2017, according to iResearch. Sogou Input Method interfaces with virtually all applications that involve Chinese language input, generatingmassive and high-quality data that is critical to our big data capabilities. Sogou Input Method has the ability to anticipate users’ search intentions in real-time and allows users to search directly with Sogou Search through its embedded search function, generating a significant portion of our organicsearch traffic. We have built and shared a robust ecosystem with Tencent and other strategic partners. We deliver differentiated content to our users throughservices such as search access to the vast content from Tencent’s Weixin Official Accounts. We have also broadened our user acquisition channels bycollaborating with our strategic partners and third parties. Sogou Search is the default general search engine in Tencent’s Mobile QQ Browser and qq.com.We are exploring potential opportunities to deepen our collaboration with Tencent. Since October 2017, Tencent has been testing, on a trial basis and forpurposes of assessment, the integration of Sogou Search into Weixin/WeChat. With this initiative, users of Weixin/WeChat can use Sogou Search as a generalsearch function within Weixin/WeChat to access Internet information outside Weixin/WeChat. We are working closely with Tencent on product testing andoptimization and intend to discuss commercial arrangements upon the completion of the trial stage. We are at the forefront of AI development with a clear roadmap. Focusing on natural interaction and knowledge computing, we have madesignificant breakthroughs in language-centered AI capabilities, including voice and image technologies, machine translation, and question answering, orQ&A, which have been successfully integrated into our products and services. In addition to the implementation of machine translation in cross-languagesearch services, we provide our users with a more natural search experience through AI-based voice and image technologies. Q&A technology enables us toprovide direct answers in response to user queries, instead of displaying a list of Web links. Our proven AI capabilities will facilitate our launch of moredisruptive products and services, such as virtual personal assistants, or VPAs, to serve users anytime, anywhere. 66Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We have recorded substantial revenue growth, with an increase from US$591.8 million in 2015 to US$660.4 million in 2016 and US$908.4 million in2017. We generate revenues primarily from search and search-related advertising services, which represented 88.2% of our total revenues in the year endedDecember 31, 2017. Key Factors Affecting Our Results of Operations Our business and results of operations are affected by trends in and the development of China’s online search market in general. In addition, as ourreporting currency is the U.S. dollar and almost all of our revenues and costs are denominated in RMB, our results of operations as reported in ourconsolidated financial statements are affected by fluctuations in the exchange rate between the RMB and the U.S. dollar. Trends in China’s online search industry The online search market in China has been growing rapidly. According to iResearch, China’s online search industry has grown fromRMB51.6 billion (US$7.7 billion) in 2014 to RMB76.5 billion (US$11.4 billion) in 2016. iResearch expects the industry to continue its rapid growth toRMB204.3 billion (US$30.4 billion) in 2021 with a CAGR of 21.7% from 2016 to 2021. Advertisers have been increasingly shifting their advertisingbudgets toward online advertising, and there has been increased demand for industry-specific online search in key verticals, such as education, e-commerce,online games, financial services, and healthcare. The growth in the online search market has also been underpinned by the increased adoption of mobiledevices and the rapid ramp-up of mobile search traffic. Search engines in China have been adapting to such trends by focusing on mobile search qualitythrough improving technological capabilities and expanding their user acquisition channels on mobile devices, which has generally resulted in increasedexpenditures for mobile traffic acquisition. In addition, the online search industry may be affected by changes in the PRC regulatory environment. For example, tightened PRC regulation ofonline advertising had an adverse effect on the online search industry in 2016. Ability to expand advertiser base In order to expand our advertiser base and increase the average revenue per advertiser, or ARPA, we focus on enhancing the effectiveness of ouradvertising services. We source our advertisers primarily through our network of advertising agencies. From time to time, we may provide discounts andrebates to attract and incentivize advertising agencies. In the last three years, the rates of discounts and rebates have remained relatively stable, but may besubject to change as we respond to market conditions. 67Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Ability to improve user experience We are dedicated to addressing the evolving needs of our users by continually enhancing our suite of products and services. Our focus on enhancinguser experience has led to significant growth of our user base and search traffic. MAU of our mobile search increased by 57.5% from 346 million inMarch 2015 to 545 million in December 2017. MAU of our Sogou Mobile Keyboard increased by 100.4% from 225 million in March 2015 to 451 million inDecember 2017. The following table sets forth MAU data for our mobile search, and MAU and DAU data for our Sogou Mobile Keyboard, for the monthsindicated: Mar.2015 Jun.2015 Sep.2015 Dec.2015Mar.2016Jun.2016Sep.2016Dec.2016Mar.2017Jun.2017Sep.2017Dec.2017Mobile SearchMAU (in millions)346399406415438442447457473483511545Sogou Mobile KeyboardMAU (in millions)225233238248263275311340373403427451DAU (in millions)130136140143154167198226256283307331 We generally do not track DAU for mobile search, as we believe that MAU is a better measure of the user base over time. MAU for search tends to berelatively stable from period to period, whereas DAU can be volatile. We also believe that reporting MAU, and not DAU, for search is consistent with industrypractice in general. However, we believe that there is a benefit to providing DAU, as well as MAU, for Sogou Mobile Keyboard because Sogou MobileKeyboard is a tool that is widely used by many users on a daily basis fairly consistently, so tracking DAU can provide additional relevant information. We plan to continue to optimize experience for our users by improving our products and services through big data and AI technologies andcollaborating with third parties. By doing so, we aim to attract and retain users and enjoy continued MAU and search traffic growth in the future. Ability to strengthen our technological capabilities, especially AI and big data The online search business has undergone constant technological evolution in recent years. In particular, AI and big data have been transforming,and will continue to transform, the search industry. We are dedicated to continually enhancing and applying our technological capabilities to new forms ofsearch and other applications. To maintain our leadership in technology, we have increased our investments in research and development and expect tocontinue to do so. Ability to broaden user acquisition channels As users increasingly use mobile devices to access the Internet, we have actively expanded our user acquisition channels for mobile products, and inparticular, partnerships with mobile device manufacturers. Mobile browsers and search applications serve as major user acquisition channels for search engineservice providers. Hence, we have been focusing, and expect to continue to focus, on increasing the prevalence of our search engine in mobile browsers pre-installed by mobile device manufacturers, and we also plan to expand distribution of our mobile search application. We expect our traffic acquisition costs toincrease as we expand our user acquisition channel partnerships. Key Components of Results of Operations Our Revenues We generate revenues primarily from our search and search-related advertising services, which enable advertisers’ promotional links to be displayedon our search result pages and other Internet properties and third parties’ Internet properties where the links are relevant to the search queries and suchproperties. Our advertising services expand distribution of advertisers’ promotional links and advertisements by leveraging traffic on third parties’ Internetproperties, including Web content, software, and mobile applications. Search and search-related advertising services consist primarily of auction-based pay-for-click services, for which we charge advertisers on a perclick basis when users click on the advertisers’ promotional links displayed on our search result pages and other Internet properties and third parties’ Internetproperties. Revenues generated from our auction-based pay-for-click services accounted for 76.7%, 77.6%, and 83.0%, respectively, of the total revenuesderived from our search and search-related advertising services in 2015, 2016, and 2017. 68Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents We also generate revenues from other business by offering IVAS, primarily with respect to our operation of Web games and mobile games developedby third parties and provision of online reading services, as well as by offering other products and services, including smart hardware products. Cost of Revenues Cost of revenues consists primarily of traffic acquisition costs; bandwidth costs; server and Internet equipment depreciation associated with theoperation of our Internet properties; salary and benefits expenses, and share-based compensation, for our staff employed in network operations; and costsrelated to our other business. Traffic acquisition costs represent the most significant portion of our cost of revenues. Our traffic acquisition costs consist primarily of payments to third parties that direct search queries of their users to our Internet properties ordistribute our advertisers’ promotional links through such third parties’ Internet properties. The traffic acquisitions costs for such arrangements consistprimarily of fees that we pay to the third parties based on an agreed-upon unit price and revenue-sharing payments that we make to the third parties based onan agreed-upon percentage of revenues generated from users’ clicks. Operating Expenses Our operating expenses consist of research and development expenses, sales and marketing expenses, and general and administrative expenses.Share-based compensation expense is included in each of these categories of expense. Research and Development Expenses Research and development expenses consist primarily of salary and benefits expenses and share-based compensation for our research anddevelopment personnel; fees for outsourced technical services associated with our product development; costs associated with the use of facilities forresearch and development purposes; and content and license fees associated with collaboration with some of our business partners. Sales and Marketing Expenses Sales and marketing expenses consist primarily of advertising and promotional expenses; salary and benefits expenses and share-basedcompensation for personnel engaged in sales and marketing. Advertising and promotional expenses generally represent the expenses incurred for promotingour products and services and our brand. General and Administrative Expenses General and administrative expenses consist primarily of professional service fees; and salary and benefits expenses and share-based compensationfor employees involved in general corporate operations. Taxation PRC PRC Corporate Income Tax The PRC Corporate Income Tax Law including its implementing regulations, or the CIT Law, generally applies an income tax rate of 25% to allenterprises incorporated in the PRC, including foreign-invested enterprises, such as our PRC subsidiaries, and domestic companies, such as our VIEs, butgrants preferential tax treatment to “High and New Technology Enterprises,” or HNTEs, qualified Software Enterprises, and “Key National SoftwareEnterprises,” or KNSEs. HNTEs are instead subject to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years. During thisthree-year period, an HNTE must conduct a qualification self-review each year to ensure it meets the HNTE criteria, and will be subject to the regular 25%income tax rate for any year in which it does not meet the criteria. Sogou Technology qualified as an HNTE for the three years ending December 31, 2017,2018, and 2019, and will need to re-apply for HNTE qualification in 2020. Sogou Information qualified as an HNTE for the three years ended December 31,2015, 2016, and 2017, and will need to re-apply for HNTE qualification in 2018. Sogou Network qualified as an HNTE for the year ended December 31,2016, 2017, and 2018, and will need to re-apply for HNTE qualification in 2019. 69Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents A Software Enterprise is entitled to an income tax exemption for two years beginning with its first profitable year and a 50% reduction to a rate of12.5% for the subsequent three years. An entity that qualifies as a KNSE is entitled to a further reduced preferential income tax rate of 10%. Enterpriseswishing to enjoy the status of a Software Enterprise or a KNSE must perform a self-assessment each year to ensure they meet the criteria for qualification andfile required supporting documents with the tax authorities before using the preferential CIT rates. These enterprises are subject to the tax authorities’assessment each year as to whether they are entitled to use the relevant preferential CIT treatments. If at any time during the preferential tax treatment years anenterprise uses the preferential CIT rates but the relevant authorities determine that it fails to meet applicable criteria for qualification, the relevant authoritiesmay revoke the enterprise’s Software Enterprise/KNSE status. Sogou Technology qualified in 2016 and 2017 for the preferential income tax rate of 10% for2015 and 2016 as a KNSE and will follow the same process in 2018. Sogou Network qualified in 2016 for the preferential income tax rate of 12.5% for 2015as a Software Enterprise. If our holding company in the Cayman Islands or any of our subsidiaries outside the PRC is considered as a PRC resident enterprise for tax purposes,then our global income will be subject to PRC enterprise income tax at the rate of 25%. See “Risk Factors—Risks Related to China’s RegulatoryEnvironment—We may be deemed a PRC resident enterprise under the CIT Law and be subject to PRC taxation on our worldwide income.” PRC Withholding Tax on Dividends Under the CIT Law and its implementation rules, the profits of a foreign-invested enterprise arising in 2008 and thereafter that are distributed to itsimmediate holding company outside the PRC are subject to withholding tax at a rate of 10%. A lower withholding tax rate will be applied if there is abeneficial tax treaty between the PRC and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be eligible,with approval of the PRC local tax authority, to be subject to a 5% withholding tax rate under the “Arrangement Between the PRC and the Hong KongSpecial Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital” if suchholding company is considered to be a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign-invested enterprisedistributing the dividends. However, if such Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicablePRC tax regulations, such dividend will remain subject to withholding tax at a rate of 10%. PRC Value-Added Tax We are subject to VAT at a rate of 6% or 17%. Cayman Islands We are not subject to income or capital gains tax under the current laws of the Cayman Islands. There are no other taxes likely to be material to uslevied by the government of the Cayman Islands. British Virgin Islands Under the current laws of British Virgin Islands, Sogou BVI is not subject to tax on income or capital gains. There are no other taxes likely to bematerial to us levied by the government of the British Virgin Islands. Hong Kong Under the current Hong Kong Inland Revenue Ordinance, our Hong Kong subsidiaries Sogou Hong Kong Limited, Vast Creation Advertising MediaServices Limited, and Sogou Technology Hong Kong Limited are subject to income tax at a rate of 16.5%. Hong Kong dose not impose a withholding taxon dividends. 70Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Results of Operations You should read the information set forth and discussed in this section in conjunction with our consolidated financial statements and related notesincluded elsewhere in this annual report. The year-to-year comparisons discussed below may not be indicative of our future trends. The following table summarizes our historical results of operations for the periods indicated: For the Year Ended December 31,2015 2016 2017(US$ in thousands)Revenues:Search and search-related advertising revenues539,521597,213801,551Other revenues52,28263,195106,806Total revenues591,803660,408908,357Cost of revenues248,279302,736457,401Gross profit343,524357,672450,956Operating expenses:Research and development131,072138,364172,829Sales and marketing93,998123,119156,420General and administrative16,66624,56727,821Total operating expenses241,736286,050357,070Operating income101,78871,62293,886Interest income5,3325,1989,126Foreign currency exchange gain/(loss)6675,346(7,082)Other income/(expenses), net1,142(26,027)692Income before income tax expenses108,92956,13996,622Income tax expenses9,4302714,422Net income99,49956,11282,200 Share-based compensation expense included in:Cost of revenues330171540Research and development6,8625,61516,470Sales and marketing9431,8164,299General and administrative2,2445,2592,41410,37912,86123,723 Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 Revenues Our revenues were US$660.4 million and US$908.4 million, respectively, for the years ended December 31, 2016 and 2017, representing a year-over-year increase of 37.5%. The following table sets forth the relative percentage of our revenues in 2016 and 2017 generated from search and search-related advertising servicesand from other business. For the Year Ended December 31 2016 % ofRevenues 2017 % ofRevenues (US$ in thousands) Revenues:Search and search-related advertising revenues597,21390.4%801,55188.2%Other revenues63,1959.6%106,80611.8%Total revenues660,408100.0%908,357100.0% 71(1)(1)(1)(1)(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Revenues generated from our search and search-related advertising services were US$597.2 million and US$801.6 million, respectively, for the yearsended December 31 2016, and 2017, representing a year-over-year increase of 34.2%. The increase in our search and search-related advertising revenuesresulted primarily from the increase in revenues generated from our auction-based pay-for-click services, which accounted for 77.6% and 83.0%, respectively,of our search and search-related advertising revenues in 2016 and 2017. The growth in revenues from auction-based pay-for-click services resulted fromincreases both in ARPA and in the number of our advertisers. The ARPA for auction-based pay-for-click services was US$3,995 and US$4,856, respectively,for the years ended December 31 2016 and 2017, representing a year-over-year increase of 21.6%. The number of our auction-based pay-for-click advertiserswas approximately 116,000 and 137,000, respectively, for the years ended December 31, 2016 and 2017, representing a year-over-year increase of 18.1%.The increase in ARPA was primarily attributable to the increase in the number of paid clicks. The total number of our paid clicks increased by 43.0% from theyear ended December 31, 2016 to the year ended December 31, 2017, primarily driven by strong growth in mobile paid clicks as a result of rapidly-growingmobile traffic and an improved click-through rate on the mobile end, which was partially offset by declining PC paid clicks. Revenues generated from ourmobile auction-based pay-for-click services accounted for 57% and 82%, respectively, of our total auction-based pay-for-click revenues for the years endedDecember 31 2016 and 2017. Other revenues were US$63.2 million and US$106.8 million, respectively, for the years ended December 31, 2016 and 2017, representing a year-over-year increase of 69.0%. The increase in other revenues was primarily attributable to the increase in revenues from IVAS, and sales of smart hardwareproducts. Cost of Revenues Our overall cost of revenues increased from US$302.7 million in 2016 to US$457.4 million in 2017, representing a year-over-year increase of 51.1%.The increase in cost of revenues was primarily attributable to an increase in traffic acquisition costs. We incurred traffic acquisition costs of approximatelyUS$202.5 million and US$303.6 million, respectively, in 2016 and 2017, representing a year-over-year increase of 50.0%. The increase outpaced the increasein our search and search-related advertising revenues during the same period, primarily due to an increase in the portion of our mobile search traffic that wasdirected to us by third parties. Gross Profit Gross profit increased from US$357.7 million in 2016 to US$451.0 million in 2017, representing a year-over-year increase of 26.1%. Gross marginswere 54.2% and 49.6%, respectively, for the years ended December 31, 2016 and 2017. The decrease in our gross margin from 2016 to 2017 was mainly dueto higher traffic acquisition costs as a percentage of our revenues. 72Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Operating Expenses The following table summarizes the components of our operating expenses for 2016 and 2017: For the Year Ended December 31, 2016 % ofRevenues 2017 % ofRevenues (US$ in thousands) Operating expenses:Research and development138,36421.0%172,82919.0%Sales and marketing123,11918.6%156,42017.2%General and administrative24,5673.7%27,8213.1%Total operating expenses286,05043.3%357,07039.3% Research and Development Expenses Our research and development expenses increased from US$138.4 million in 2016 to US$172.8 million in 2017, representing a year-over-yearincrease of 24.9%. The increase was primarily attributable to an increase in salary and benefits expenses for our research and development staff driven byincreased average salary and higher headcount and increased share-based compensation expense driven by an increase in the fair value of share optionsgranted by us to our research and development staff, as well as increased outsourced product development fees, reflecting our continued efforts to strengthenour AI and other technological capabilities. Sales and Marketing Expenses Our sales and marketing expenses increased from US$123.1 million in 2016 to US$156.4 million in 2017, representing a year-over-year increase of27.0%. The increase was attributable to more marketing and promotional activities for our mobile products, including pre-installation by mobile devicemanufacturers and distribution through mobile app stores and other channels and increased sales and marketing staff salary and benefits driven by increasedaverage salary and higher headcount. General and Administrative Expenses Our general and administrative expenses increased from US$24.6 million in 2016 to US$27.8 million in 2017, representing a year-over-year increaseof 13.2%. The increase was primarily due to increase in salary and benefits expenses for employees involved in general corporate operations driven by higherheadcount and increased average salary. Other (Expenses)/Income, Net Other expenses, net was US$26.0 million in 2016, and other income, net was US$0.7 million in 2017. Other expenses, net in 2016 was primarily dueto our one-time donation of approximately US$27.8 million to Tsinghua University in the second quarter of 2016 related to the jointly-established TiangongResearch Institute for Intelligent Computing, which is dedicated to research and development in the field of AI. Income Tax Expenses Our income tax expenses increased from US$27,000 in 2016 to US$14.4 million in 2017. The increase was mainly due to an increase in taxableincome and a relatively smaller tax benefit related to the preferential tax rate that Sogou Technology was entitled to as a KNSE. Net Income As a result of the foregoing, we had net income of US$56.1 million and US$82.2 million, respectively, for 2016 and 2017. 73Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Year Ended December 31, 2016 Compared to Year Ended December 31, 2015 Revenues Our revenues were US$591.8 million and US$660.4 million, respectively, for the years ended December 31, 2015 and 2016, representing a year-over-year increase of 11.6%. The following table sets forth the relative percentage of our revenues in 2015 and 2016 generated from search and search-related advertising servicesand from other business. For the Year Ended December 31, 2015 % ofRevenues 2016 % ofRevenues (US$ in thousands) Revenues:Search and search-related advertising revenues539,52191.2%597,21390.4%Other revenues52,2828.8%63,1959.6%Total revenues591,803100.0%660,408100.0% Revenues generated from our search and search-related advertising services were US$539.5 million and US$597.2 million, respectively, for the yearsended December 31, 2015 and 2016, representing a year-over-year increase of 10.7%. The increase in our search and search-related advertising revenuesresulted primarily from an increase in revenues generated from our auction-based pay-for-click services, which accounted for 76.7% and 77.6%, respectively,of our search and search-related advertising revenues in 2015 and 2016. The growth in revenues from auction-based pay-for-click services resulted fromincreases both in ARPA, and, to a lesser extent, in the number of our advertisers. The ARPA for auction-based pay-for-click services was US$3,630 andUS$3,995, respectively, for the years ended December 31, 2015 and 2016, representing a year-over-year increase of 10.1%. The number of our auction-basedpay-for-click advertisers was approximately 114,000 and 116,000, respectively, for the years ended December 31, 2015 and 2016, representing a year-over-year increase of 1.8%. The increase in ARPA was primarily attributable to an increase in the number of paid clicks, but ARPA was adversely affected bydepreciation of the RMB against the U.S. dollar. The total number of our paid clicks increased by 21.0% from the year ended December 31, 2015 to the yearended December 31, 2016, primarily driven by strong growth in mobile paid clicks as a result of rapidly-growing mobile traffic and an improved click-through rate on the mobile end, which was partially offset by declining PC paid clicks. The revenues generated from our mobile auction-based pay-for-clickservices accounted for 29% and 57%, respectively, of our total auction-based pay-for-click revenues for the years ended December 31, 2015 and 2016. The relatively slower growth in our search and search-related advertising revenues from 2015 to 2016 was primarily due to tightened PRC regulationof the online advertising industry during the second half of 2016, which had an adverse impact on the search and search-related advertising market in Chinain general. See “Risk Factors—Risks Related to China’s Regulatory and Economic Environment—PRC regulations relating to sponsored search have had,and may continue to have, an adverse effect on our results of operations.” Other revenues increased from US$52.3 million in 2015 to US$63.2 million in 2016, representing a year-over-year increase of 20.9%. The increasein other revenues was primarily attributable to an increase in revenues from IVAS, and sales of smart hardware products. Cost of Revenues Our overall cost of revenues increased from US$248.3 million in 2015 to US$302.7 million in 2016, representing a year-over-year increase of 21.9%.The increase in cost of revenues was primarily attributable to an increase in traffic acquisition costs. We incurred traffic acquisition costs of approximatelyUS$162.4 million and US$202.5 million, respectively, in 2015 and 2016, representing a year-over-year increase of 24.7%. The increase outpaced that in oursearch and search-related advertising revenues during the same period, primarily due to an increase in the portion of our mobile search traffic that wasdirected to us by third parties. Gross Profit Gross profit increased from US$343.5 million in 2015 to US$357.7 million in 2016, representing a year-over-year increase of 4.1% from 2015 to2016. Gross margins were 58.0% and 54.2% for the years ended December 31, 2015 and 2016. The decrease in our gross margin was mainly due to highertraffic acquisition costs as a percentage of our revenues. 74Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Operating Expenses The following table summarizes the components of our operating expenses for 2015 and 2016: For the Year Ended December 31, 2015 % ofRevenues 2016 % ofRevenues (US$ in thousands) Operating expenses:Research and development131,07222.1%138,36421.0%Sales and marketing93,99815.9%123,11918.6%General and administrative16,6662.8%24,5673.7%Total operating expenses241,73640.8%286,05043.3% Research and Development Expenses Our research and development expenses increased from US$131.1 million in 2015 to US$138.4 million in 2016, representing a year-over-yearincrease of 5.6% from 2015 to 2016. The increase was primarily attributable to increased salary and benefits expenses for our research and development staff,which was driven by increased average salary and higher headcount, and increased outsourced product development fees, reflecting our continued efforts tostrengthen our AI and other technological capabilities. Sales and Marketing Expenses Our sales and marketing expenses increased from US$94.0 million in 2015 to US$123.1 million in 2016, representing a year-over-year increase of31.0% from 2015 to 2016. The increase was attributable to more marketing and promotional activities for our mobile products, as well as a comprehensivemarketing campaign to promote the Sogou Search brand in 2016. General and Administrative Expenses Our general and administrative expenses increased from US$16.7 million in 2015 to US$24.6 million in 2016, representing a year-over-year increaseof 47.7%. The increase was primarily due to an increase in professional service fees, share-based compensation expense, and salary and benefits expenses.The increase in share-based compensation expense was primarily due to a one-time repurchase at a pre-determined price that was above fair value in 2016from the former president and chief financial officer of the Sohu Group of pre-IPO Class A Ordinary Shares that had been granted to her as a share-based awardfor her contribution to our company. Other Income /(Expenses), Net Other income, net was US$1.1 million in 2015, and other expenses, net was US$26.0 million in 2016, primarily due to our one-time donation ofapproximately US$27.8 million to Tsinghua University in the second quarter of 2016 related to the jointly established Tiangong Research Institute forIntelligent Computing, which is dedicated to research and development in the field of AI. Income Tax Expenses Our income tax expenses decreased from US$9.4 million in 2015 to US$27,000 in 2016. The decrease in income tax expenses mainly resulted from areversal of PRC income tax expenses of US$3.9 million and US$2.6 million, respectively, for the preferential tax rate that Sogou Technology was entitled toin 2016 as a 2015 KNSE and that Sogou Network was entitled to in 2016 as a 2015 Software Enterprise. Net Income As a result of the foregoing, we had net income of US$99.5 million and US$56.1 million, respectively, for 2015 and 2016. 75Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which havebeen prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, included elsewhere in this annual report. Thepreparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues andexpenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and onvarious other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about thecarrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions. When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgmentand other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. Wehave summarized below the critical accounting policies that we believe reflect the most significant judgments and estimates used in the preparation of ourconsolidated financial statements. Consolidation of VIEs Our VIE Sogou Information is owned by our Chief Executive Officer, a VIE of Sohu, and a Tencent group entity, each of which acts as our nomineeshareholder, and our other three VIEs are wholly-owned subsidiaries of Sogou Information. For our consolidated VIEs, our management made evaluation ofthe relationships between us and our VIEs and the economic benefit flow of contractual arrangements with Sogou Information. In connection with suchevaluation, management also took into account the fact that, as a result of such contractual arrangements, we control the shareholders’ voting interests inthese VIEs. As a result of such evaluation, management concluded that we are the primary beneficiary of our consolidated VIEs. We do not have any VIEsthat are not consolidated in our financial statements. Recognition of Revenues Our revenues are derived primarily from search and search-related advertising services. We also derive revenues from IVAS, which consists primarilyof our operation of Web games and mobile games developed by third parties and provision of online reading services, and from other products and services,including smart hardware products. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed ordeterminable, and collectability is reasonably assured, net of VAT and related surcharges. Search and Search-related Advertising Revenues We procure a majority of our search and search-related advertisers through advertising agencies. Discounts and other cash incentives provided to theadvertising agencies are accounted for as a reduction of revenues. Pay-for-click Services Pay-for-click services enable advertisers’ promotional links to be displayed on our search result pages and other Internet properties and third parties’Internet properties where the links are relevant to the subject and content of searches and such properties. For pay-for-click services, we introduce Internetusers to our advertisers through our auction-based pay-for-click systems and charge advertisers on a per click basis when the users click on the displayedlinks. Revenue for pay-for-click services is recognized on a per click basis when the users click on the displayed links. Other Online Advertising Services Other online advertising services mainly consist of displaying advertisers’ promotional links on our Internet properties. Revenue for time-basedadvertising is normally recognized on a straight-line basis over the contract period, provided that our obligations under the contract have been met and allrevenue recognition criteria have been met. Revenue for performance-based advertising services is recognized when our obligations under the contract havebeen met and all revenue recognition criteria have been met. Our online advertising services expand distribution of advertisers’ promotional links and advertisements by leveraging traffic on third parties’Internet properties, including Web content, software, and mobile applications. We are the primary obligor to the advertisers, and payments made to operatorsof third-party Internet properties are included in the traffic acquisition costs. Other Revenues Other revenues consist of IVAS revenues, which are mainly from our operation of Web games and mobile games developed by third parties andprovision of online reading services, as well as revenues from other products and services, including smart hardware products. Other revenues are recognizedwhen our obligations under the applicable agreements and all revenue recognition criteria have been met. 76Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Barter Transactions Revenues or expenses from barter transactions are recognized at fair value during the period in which the advertisements are provided only if the fairvalue of the advertising services surrendered in the transaction is determinable based on the entity’s own historical practice of receiving cash and cashequivalents, marketable securities, or other consideration that is readily convertible to a known amount of cash for similar advertising from buyers unrelatedto the counterparty in the barter transaction. For the years ended December 31, 2015, 2016, and 2017, we engaged in certain advertising barter transactionsfor which the fair value was not determinable and therefore no revenues or expenses derived from these barter transactions were recognized. Cost Allocations Our consolidated statements of comprehensive income comprise all the related costs of our operations, which include an allocation of certainresearch and development expenses paid by Sohu to provide technical support to the search and search-related business and expense related to Sohu stock-based awards granted to our employees. These allocations are based on a variety of factors that depend upon the nature of the expenses being allocated,including the number of employees and the percentage of computer systems’ workload that is for services provided to us. We believe the basis and amounts of the allocations are reasonable. While the expenses allocated to us are not necessarily indicative of the expensesthat would have been incurred if we had been a separate, stand-alone entity, we do not believe that there is any significant difference between the nature andamounts of these allocated expenses and the expenses that would have been incurred if we had been a separate, stand-alone entity. Pursuant to an agreement between us and Sohu, we do not need to repay Sohu for share-based compensation expense related to our employees, andresearch and development expenses allocated from Sohu. Accordingly, we recognize the related amounts as capital contributions from Sohu as the expensesare incurred. Income Taxes and Uncertain Tax Positions Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of income taxes payable or refundable for thecurrent year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or taxreturns. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measuredusing tax rates and tax laws in effect as of the measurement date. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it isconsidered more likely than not that some portion of or all of the deferred tax assets will not be realized. In making such determination, we consider factorsthat include (i) future reversals of existing taxable temporary differences, (ii) future profitability, and (iii) tax planning strategies. Uncertain Tax Positions In order to assess uncertain tax positions, we apply a more likely than not threshold and a two-step approach for financial statement recognition andmeasurement of the tax position. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight ofavailable evidence indicates that it is more likely than not that the position will be sustained, including resolution of any related litigation processes andappeals. The second step is to measure the tax benefit as the largest amount that is more likely than not to be realized upon settlement. Significant judgmentis required in evaluating our uncertain tax positions and determining our provision for income taxes. Impairment of Long-lived Assets The carrying values of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value ofan asset may not be recoverable. Based on the existence of one or more indicators of impairment, we measure any impairment of long-lived assets using theprojected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant management judgment based on ourhistorical results and anticipated results and is subject to many factors. The discount rate that is commensurate with the risk inherent in our business model isdetermined by us. An impairment charge would be recorded if we were to determine that the carrying value of long-lived assets may not be recoverable. Theimpairment to be recognized would be measured by the amount by which the carrying values of the assets exceeded the fair value of the assets. 77Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Fair Value of Financial Instruments U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded atfair value, we consider the principal or most advantageous market in which a transaction would be expected to occur and considers assumptions that marketparticipants would use when pricing the asset or liability. U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financialinstruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fairvalue. The three-tier fair value hierarchy is: Level 1—observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—other inputs that are directly or indirectly observable in the marketplace. Level 3—unobservable inputs that are supported by little or no market activity. Our financial instruments primarily include cash equivalents, short-term investments, accounts receivable, accounts payables, accrued and othershort term liabilities, and amounts due from/to related parties. The carrying values of these balances approximates their fair values due to the current andshort term nature of the balances. Share-Based Compensation Expense Share-based compensation expense arises from share-based awards, including share options for the purchase of our ordinary shares granted by us toour management and other key employees and granted by Sohu to its management and other key employees who to some extent provide services to us andcertain members of our management and other of our key employees, or Sogou Share-based Awards; restricted stock units and stock options for the purchaseof Sohu common stock granted by Sohu to our employees, or Sohu Stock-based Awards; and restricted share units granted by Tencent previously to certainpersons who became our employees when Tencent’s Soso search-related businesses were transferred to us in 2013, or the Tencent Share-based Awards. 78Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Sogou Share-based Awards In determining the fair value of share options granted, a binomial option-pricing model (the “BP Model”) is applied. The determination of the fairvalue is affected by the fair value of the ordinary shares as well as assumptions regarding a number of complex and subjective variables, including risk-freeinterest rates, exercise multiples, expected forfeiture rates, the expected share price volatility rates, and expected dividends. The fair values of the ordinaryshares were assessed using the income approach /discounted cash flow method or based on the mid-point of the estimated IPO price range, in each case with adiscount for lack of marketability, given that the shares underlying the awards were not publicly traded at the time of grant. Share-based compensation expense for share options granted to our employees was measured based on their grant-date fair values and recognizedover the estimated period during which the service period requirement and performance target will be met, which is usually within one year, or, for optionsvesting subject to an IPO, was recognized on an accelerated basis over the requisite service period after the completion of our IPO on November 13, 2017.The number of share-based awards for which the service was not expected to be rendered over the requisite period was estimated, and the relatedcompensation expense was not recorded for the number of awards so estimated. Share-based compensation expense for share options granted to non-employees is measured at fair value at the earlier of the performancecommitment date or the date service is completed and recognized over the period during which the service is provided. We apply the guidance in ASC 505-50 to measure share options granted to non-employees based on the then-current fair value at each reporting date until the service has been provided and theperformance targets have been met. Share-based awards granted by Sohu are deemed to be share-based compensation made by us in exchange for services rendered to us, and werecognize share-based compensation expense accordingly. Because we are not required to reimburse Sohu for such share-based compensation expense, therelated amount was recorded as a capital contribution from Sohu. Sohu Stock-based Awards In determining the fair value of stock option awards for shares of Sohu common stock, the BP Model was applied; in determining the fair value ofrestricted stock units settleable in shares of Sohu common stock, the fair value of the underlying shares on the grant dates was applied. Share-based compensation expense for stock options and restricted stock units granted under Sohu’s share-based incentive plans is recognized on anaccelerated basis over the requisite service period. The number of share awards for which the service is not expected to be rendered over the requisite period isestimated, and the related compensation expense is not recorded for that number of awards. Tencent Share-based Awards Certain persons who became our employees when Tencent’s Soso search-related businesses was transferred to us in 2013 had been granted restrictedshare units under Tencent’s share award arrangements prior to the transfer of the businesses to us. These Tencent restricted share units will continue to vestunder the original Tencent share award arrangements provided the transferred employees continue to be employed by us during the requisite service period.After the transfer of the Soso search-related business to us, we applied the guidance in ASC 505-50 to measure the related compensation expense based on thethen-current fair value at each reporting date, as the expense is deemed to have been incurred by Tencent as an investor on our behalf. To determine the then-current fair value of the Tencent restricted share units granted to these employees, we applied the public market price of the underlying shares at eachreporting date. Because we are not required to reimburse Tencent for such share-based compensation expense, the related amount was recorded by us as acapital contribution from Tencent. For Tencent restricted share units that Tencent had granted to employees who transferred to us with the Soso search-related businesses,compensation expense is recognized by us on an accelerated basis over the requisite service period, and the fair value of the share-based compensation is re-measured at each reporting date until the service has been provided. The number of share-based awards for which the service is not expected to be renderedover the requisite period is estimated, and no compensation expense is recorded for the number of awards so estimated. The assumptions used in share-based compensation expense recognition represent management’s best estimates, but these estimates involveinherent uncertainties and the application of management judgment. If factors change or different assumptions were used for any given period, the share-based compensation expense could be materially different for that period. Moreover, the estimates of fair value are not intended to predict actual futureevents or the value that ultimately will be realized by employees who receive share-based awards, and subsequent events are not indicative of thereasonableness of the original estimates of fair value made by us for accounting purposes. 79Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Liquidity and Capital Resources Our principal sources of liquidity are cash and cash equivalents, short-term investments, and cash flows generated from our operations. Our cash andcash equivalents consist of cash, time deposits with original maturities of three months or less, and demand deposits. As of December 31, 2017, we had cash and cash equivalents and short-term investments of US$1.03 billion. Of our cash and cash equivalents andshort-term investments, 30% were held in eight financial institutions in mainland China, 29% were held in three financial institutions in Hong Kong, and25% were held in one financial institution in Macau. The remaining cash and cash equivalents were held in one financial institutions in New York. Our VIEsheld US$15.9 million of our cash and cash equivalents and short-term investments, and US$1.02 billion was held outside of our VIEs. We believe our current liquidity and capital resources are sufficient to meet anticipated working capital needs, commitments, capital expenditures,and investment activities over the next twelve months. The following table sets forth a summary of our cash flows for the periods indicated: For the Year EndedDecember 31, 2015 2016 2017 (US$ in thousands)Net cash provided by operating activities205,991149,664182,188Net cash used in investing activities(75,881)(94,804)(407,214)Net cash (used in)/provided by financing activities(99,822)4618,942Effect of exchange rate changes on cash and cash equivalents(10,077)(13,270)14,213Net increase in cash and cash equivalents20,21141,594408,129Cash and cash equivalents at beginning of the year224,273244,484286,078Cash and cash equivalents at end of the year or period244,484286,078694,207 Net Cash Provided by Operating Activities For the year ended December 31, 2017, US$182.2 million net cash provided by operating activities consisted primarily of our net income ofUS$82.2 million, adjusted by (i) the add back of non-cash items consisting of US$49.6 million in depreciation and amortization expense andUS$23.7 million of share-based compensation expense, and a US$31.4 million increase in cash due to changes in working capital; (ii) offset by a non-cashitem of US$4.1 million in deferred tax benefit. For the year ended December 31, 2016, US$149.7 million net cash provided by operating activities consisted primarily of our net income ofUS$56.1 million, adjusted by (i) the add back of non-cash items consisting of US$35.2 million in depreciation and amortization expense andUS$12.9 million of share-based compensation expense, and a US$50.0 million increase in cash due to changes in working capital; (ii) offset by non-cash itemof US$3.1 million of deferred tax benefit. For the year ended December 31, 2015, US$206.0 million net cash provided by operating activities consisted primarily of our net income ofUS$99.5 million, adjusted by (i) the add back of non-cash items consisting of US$32.8 million in depreciation and amortization expense andUS$10.4 million of share-based compensation expense, and a US$70.3 million increase in cash due to changes in working capital; (ii) offset by non-cash itemof US$7.8 million of deferred tax benefit. Net Cash Used in Investing Activities For the year ended December 31, 2017, US$407.2 million net cash used in investing activities consisted primarily of US$345.5 million for purchaseof financial instruments, US$64.0 million for fixed asset purchases, and US$7.0 million for purchase of long-term investments. For the year ended December 31, 2016, US$94.8 million net cash used in investing activities consisted primarily of US$86.4 million for fixed assetpurchases and US$8.2 million in long-term investments consisting mainly of amounts invested in equity shares of Zhihu. 80Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents For the year ended December 31, 2015, US$75.9 million net cash used in investing activities consisted primarily of US$61.3 million for fixed assetpurchases and US$14.6 million in long-term investments consisting mainly of amounts invested in equity shares of Zhihu. Net Cash (Used in)/Provided by Financing Activities For the year ended December 31, 2017, US$618.9 million net cash provided by financing activities consisting primarily of US$622.1 millionproceeds from our IPO, offset by US$3.2 million used for the repurchase of Pre-IPO Class A Ordinary Shares from the former president and chief financialofficer of the Sohu Group. For the year ended December 31, 2016, cash movement resulting from financing activities was insignificant. For the year ended December 31, 2015, US$99.8 million net cash used in financing activities was related to the repurchase of Pre-IPO Series APreferred Shares held by Sohu and Photon. Holding Company Structure and Limitations on Cash Transfers to Sogou Inc. Sogou Inc. is a holding company with no operating assets other than investments in our Chinese operating entities through our intermediate holdingcompanies, and our VIEs. Since substantially all of our operations are conducted through our indirect China-based subsidiaries Sogou Technology andSogou Network and our VIEs, we may need to rely on dividends, loans, or advances made by our PRC subsidiaries and VIEs for any cash requirementsSogou Inc. or our other offshore entities may have from time to time in excess of any cash retained by us or our other offshore entities or to pay any dividendsto holders of our ordinary shares, including holders of our ADS. The ability of Sogou Inc. and our other offshore entities to receive dividends and distributions from our China-based subsidiaries and VIEs, and theamount of cash available for distribution to, and use by, Sogou Inc., are subject to certain restrictions and limitations related to PRC law and our subsidiaryand VIE structure. See “—PRC Restrictions Related to Our VIE Structure.” We do not expect any of such restrictions or taxes to have a material impact on ourability to meet our cash obligations. PRC Regulations Related to Profit Appropriation, Withholding Tax on Dividends, and Foreign Currency Exchange Regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated profits as determined in accordance withaccounting standards and regulations in China. Our China-based subsidiaries Sogou Technology and Sogou Network and our VIEs are also required to setaside each year to their general reserves at least 10% of their after-tax profit based on PRC accounting standards, until the cumulative amount reaches 50% oftheir paid-in capital. These reserves may not be distributed as cash dividends, or as loans or advances. Our PRC subsidiaries and VIEs may also allocate aportion of their after-tax profits, at the discretion of their Boards of Directors, to their staff welfare and bonus funds. Any amounts so allocated would not beavailable for distribution to Sogou Inc. or our other offshore entities. The CIT Law imposes a 10% withholding income tax for dividends distributed by foreign-invested enterprises in the PRC to their immediateholding companies outside China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between China and the jurisdiction of theforeign holding company. A holding company in Hong Kong, for example, will be subject to a 5% withholding tax rate under the China-HK TaxArrangement if such holding company is considered a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign investedenterprise distributing the dividends, subject to approval of the PRC local tax authority. However, if the Hong Kong holding company is not considered to bethe beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to withholding tax at a rate of 10%. In addition, under SAFE regulations, the RMB is not convertible into foreign currencies for capital account items, such as loans, repatriation ofinvestments, and investments outside of China, unless prior approval of the SAFE is obtained and prior registration with the SAFE is made. PRC Restrictions Related to Our VIE Structure Part of our operations are conducted through our VIEs, which generate a portion of our revenues and held certain cash balances as of December 31,2017. As our VIE Sogou Information and its subsidiaries (which are also our VIEs) are not owned by Sogou Technology, Sogou Information is not able tomake dividend payments to Sogou Technology. Therefore, in order for Sogou Inc. or our subsidiaries outside of China to receive any dividends originatingfrom our VIEs, we will need to rely on payments made by Sogou Information to Sogou Technology pursuant to a services contract between them. Dependingon the nature of services provided by Sogou Technology to Sogou Information, certain of these payments will subject to PRC taxes, such as VAT, that willeffectively reduce the amount that Sogou Technology receives from Sogou Information. In addition, the PRC government could impose restrictions on suchpayments or change the tax rates applicable to such payments. 81Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Dividend Policy We intend to retain all available funds and any future earnings for use in the operation and expansion of our business, and do not anticipate payingany cash dividends on our Class A and Class B Ordinary Shares for the foreseeable future. Future cash dividends distributed by us, if any, will be declared atthe discretion of our Board of Directors and will depend upon our future operations and earnings, capital requirements and surplus, general financialcondition, contractual restrictions, and such other factors as our Board of Directors may deem relevant. Capital Expenditures Our capital expenditures include the purchase of fixed assets, consisting primarily of servers, Internet network equipment, and leaseholdimprovements. Our expenditures for purchase of fixed assets of US$61.3 million, US$86.4 million, and US$64.0 million, respectively, in 2015, 2016, and2017 were mainly to support increases in our user traffic and new products and services. Contractual Obligations and Commercial Commitments As of December 31, 2017, we had contractual obligation and commercial commitments, relating to operating lease, bandwidth purchase, content andservice purchase, and other obligations, as follows: OperatingLeaseObligations BandwidthPurchases Content andOtherPurchases Others Total(US$ in thousands)201811,80050,4372604,45466,951201910,6231,2214511011,99920201051,12077—1,3022021—32732—3592022—————Thereafter—————Total22,52853,1054144,56480,611 For the years ended December 31, 2015, 2016, and 2017, rental expense included in the operating lease was US$9,948, US$10,075, and US$12,818,respectively. Off-balance Sheet Commitments and Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of third parties. We have not enteredinto any derivative contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated financialstatements. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risksupport to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support tous or that engages in leasing, hedging, or product development services with us. Impact of Recently Issued Accounting Standards In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” This guidance supersedes current guidance onrevenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related to the nature, amount, timing, anduncertainty of revenue recognition. For publicly-traded business entities, Topic 606 is effective for fiscal years, and interim periods within those fiscal years,beginning after December 15, 2017. We have adopted the standard effective January 1, 2018 using the modified prospective method. We have substantiallycompleted the assessments related to the standard and quantification of the related impact on our consolidated financial statements and noted that the onlymajor, but not material, impact of the standard relates to the accounting for advertising barter transactions, as the provision of Topic 605 exemptingadvertising-for-advertising barter transactions from being reported at fair value has been superseded. Revenues and expenses related to advertising bartertransactions will be recognized beginning January 1, 2018 in accordance with the new guidance. 82(1)(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents On January 5, 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which amendscertain aspects of recognition, measurement, presentation and disclosure of financial instruments. This amendment requires all equity investments to bemeasured at fair value, with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting orthose that result in consolidation of the investee). This standard will be effective for fiscal years beginning after December 15, 2017, including interimperiods within those fiscal years. The most significant impact on our consolidated financial statements relates to the recognition and measurement of equityinvestments at fair value in our consolidated statements of income. We have elected to use the measurement alternative that is defined as cost, lessimpairments, adjusted by observable price changes. We will apply the new standard beginning January 1, 2018. On February 25, 2016, the FASB issued ASU 2016-02, “Leases,” which specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet.The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generallystraight-line basis. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. ASU 2016-02 iseffective for publicly-traded companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Earlyadoption is permitted. We are currently evaluating the impact of adopting this standard on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments,” whichclarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for financialstatements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We do notexpect the standard to have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies thedefinition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitionsor disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscalyears. Early adoption is permitted. The standard is to be applied prospectively on or after the effective date. We will evaluate the impact of adopting thisstandard prospectively upon any transactions of acquisitions or disposals of assets or businesses. In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” The guidance removes Step 2 of goodwillimpairment tests, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’scarrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance is to be adopted on a prospective basis for the annual orany interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment testsperformed on testing dates after January 1, 2017. We are currently evaluating the impact of adopting this standard on our consolidated financial statements. In May 2017, the FASB issue ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,” whichprovides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting inTopic 718. This standard is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statementshave not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. We donot expect this standard to have a material impact on our consolidated financial statements. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of the date of this annual report. The business address ofeach of our directors and executive officers is Level 15, Sohu.com Internet Plaza, No. 1 Unit Zhongguancun East Road, Haidian District, Beijing 100084,China. 83Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Directors and Executive Officers Age PositionCharles (Chaoyang) Zhang53Chairman of the Board of DirectorsXiaochuan Wang39Director and Chief Executive OfficerYuxin Ren42DirectorJoanna (Yanfeng) Lu46DirectorLiyun Ru38Chief Operating OfficerHongtao Yang38Chief Technology OfficerTao Hong40Chief Marketing OfficerJoe (Yi) Zhou41Chief Financial OfficerBin Gao55Independent DirectorJanice Lee47Independent DirectorJoseph Chen48Independent Director Mr. Zhou was appointed as our Chief Financial Officer effective January 22, 2018. Mr. James Deng, our former Chief Financial Officer, has resumedhis former role at Sohu, our controlling shareholder. A member of the audit committee of our Board of Directors Charles Zhang is the Chairman of our Board of Directors. Dr. Zhang is the founder of Sohu and has been its chairman of the board of directors andchief executive officer since August 1996. Dr. Zhang received a Ph.D. in experimental physics from MIT and a Bachelor’s degree in science from TsinghuaUniversity. Dr. Zhang is also the chairman of the board of directors of Changyou.com Limited, a Nasdaq-listed company. Xiaochuan Wang has served as our Chief Executive Officer since 2010 and a member of our Board of Directors since 2010. Prior to joining us,Mr. Wang served as the senior vice president of Sohu from 2008 to 2009 and the chief technology officer of Sohu from 2009 to 2013. Mr. Wang received aBachelor’s degree and a Master’s degree in computer science and an Executive MBA from Tsinghua University. Yuxin Ren has served as a member of our Board of Directors since 2013. Mr. Ren joined Tencent in 2000 and was promoted to chief operating officerof Tencent in May 2012, overseeing the operation of several Tencent’s key business units. Mr. Ren received a Bachelor’s degree in computer science andengineering from the University of Electronic Science and Technology of China and an Executive MBA from China Europe International Business School. Dr. Bin Gao founded Invealth Capital in 2016 and currently serves as its Chief Information Officer. Dr. Gao served as the head of strategy for GuardCapital from 2014 to 2015 and as the head of strategy for Bank of America Merrill Lynch’s Asia Pacific Rates from 2005 to 2014. Dr. Gao earned a Ph.D. infinance from New York University, a Master’s degree in astrophysics from Princeton University, and a Bachelor’s degree in space physics from the Universityof Science and Technology of China. Janice Lee is the Managing Director of PCCW Media Group, a position Ms. Lee has held since 2010. Prior to serving as the Managing Director,Ms. Lee was PCCW’s Executive Vice President of TV & New Media. Ms. Lee also serves as a board member of STX Entertainment, a Hollywoodentertainment & film company in the United States. Ms. Lee received a Bachelor’s degree in economics with majors in economics, commercial law, andaccounting from the University of Sydney. Joseph Chen is the founder of RenRen Inc. and has served as its Chairman of the Board of Directors and Chief Executive Officer since its inceptionin 2002. Mr. Chen also served as a senior vice president of Sohu from 2000 to 2001. Mr. Chen received a Bachelor’s degree in physics from the University ofDelaware, a Master’s degree in engineering from the Massachusetts Institute of Technology, and an MBA degree from Stanford University. Joanna Lu has served as a member of our Board of Directors since 2016. Ms. Lu joined Sohu in 2000 and has served as the acting chief financialofficer of Sohu since 2016. Prior to 2016, Ms. Lu served as Sohu’s senior finance director. Ms. Lu received a Bachelor’s degree in economics from the CapitalUniversity of Economics and Business in Beijing and an Executive MBA from Tsinghua University. Liyun Ru has served as our Chief Operating Officer since 2016. Dr. Ru joined us in 2005. Prior to serving as our Chief Operating Officer, Dr. Ruserved as the general manager and oversaw the operation of our search department. Dr. Ru received a Bachelor’s degree and a Ph.D. in computer science fromTsinghua University. Hongtao Yang has served as our Chief Technology Officer since 2016. Mr. Yang joined us in 2003. Prior to serving as our Chief Technology Officer,Mr. Yang served as the general manager and oversaw the operation of our desktop department. Mr. Yang received a Bachelor’s degree and a Master’s degreein computer science from Tsinghua University. 84(1)(2)(2)(2)(1) (2)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Tao Hong has served as our Chief Marketing Officer since 2016. Mr. Hong joined us in 2005. Prior to serving as our Chief Marketing Officer,Mr. Hong served as the general manager and oversaw the operation of our marketing department. Mr. Hong received a Bachelor’s degree in electronicengineering from Tsinghua University and is pursuing an Executive MBA at Cheung Kong Graduate School of Business. Joe Zhou has served as our Chief Financial Officer since January 22, 2018. Prior to serving as our Chief Financial Officer, Mr. Zhou had been ourDeputy Chief Financial Officer since July 2017. Mr. Zhou joined us in 2010. Prior to serving as our Deputy Chief Financial Officer, he served as the generalmanager and oversaw the operation of our finance department. Prior to joining us, Mr. Zhou worked at various positions at PricewaterhouseCoopers and twoNasdaq-listed companies New Oriental Education & Technology Group and TAL Education Group from 2000 to 2010. Mr. Zhou received a Bachelor’sdegree in accounting from Renmin University of China and is pursuing an Executive MBA at Tsinghua University. Board of Directors Our Board of Directors consists of Dr. Charles Zhang, Xiaochuan Wang, Yuxin Ren, Joanna Lu, Bin Gao, Janice Lee, and Joseph Chen. Members ofour Board of Directors are elected by the holders of our ordinary shares and will hold office until their successors are duly elected or appointed, or until theirresignation or removal in accordance with the provisions of our Amended and Restated Memorandum of Association and Amended and Restated Articles ofAssociation, as amended and restated from time to time. A director is not required to hold any shares in our company by way of qualification. A director mayvote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested provided that the nature of such interest isdisclosed prior to any vote thereon. A director may exercise all the powers of our company to borrow money, mortgage or charge our undertakings, property,and uncalled capital or any part thereof, and issue debentures or other securities whether outright or as security for any debt, liability, or obligation of ourcompany or of any third party. A company of which more than 50% of the voting power is held by a single entity is considered a “controlled company” under the New York StockExchange Listed Company Manual. A controlled company need not comply with the applicable NYSE corporate governance rules requiring its Board ofDirectors to have a majority of independent directors and independent compensation and corporate governance/nominating committees. Because more than50% of the voting power in the election of directors of our company is held by Sohu, we qualify as a controlled company under the New York StockExchange Listed Company Manual and avail ourselves of the controlled company exception provided under those rules. In the event that we are no longer acontrolled company, a majority of our Board of Directors will be required to be independent and it will be necessary for us to have compensation andcorporate governance/nominating committees that are composed entirely of independent directors, subject to a phase-in period during the first year we ceaseto be a controlled company, unless we invoke the home country exception to such requirement available to foreign private issuers, such as us, under theNew York Stock Exchange Listed Company Manual. Audit Committee Our audit committee consists of Bin Gao, Janice Lee, and Joseph Chen. Our Board of Directors has determined that each of them satisfies theindependence requirements of Rule 10A-3 under the Exchange Act, and Section 303A of the New York Stock Exchange Listed Company Manual. Inaddition, our Board of Directors has determined that Bin Gao meets the criteria of an audit committee financial expert as set forth in the applicable SECrules and has accounting or related financial management expertise as set forth in the New York Stock Exchange Listed Company Manual. The fullresponsibilities of our audit committee are set forth in its charter, which will be reviewed and updated annually and approved by our Board of Directors, andwill be posted on our website at www.sogou.com. The audit committee is responsible for, among other things: · selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independentauditors; · overseeing our accounting and financial reporting processes and audits of the financial statements of our company; · reviewing with the independent auditors any audit problems or difficulties and management’s response; · reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act and in theNew York Stock Exchange Listed Company Manual; · discussing the annual audited financial statements with management and the independent auditors; · reviewing major issues as to the adequacy of our internal control over financial reporting and any special audit steps adopted in the light of anysignificant deficiencies or materially weakness in our internal controls; and 85Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · meeting separately and periodically with management and the independent auditors. Duties of Directors Under Cayman Islands law, our directors have a fiduciary duty to act honestly in good faith with a view to our best interests. Our directors also havea duty to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care tous, our directors must ensure compliance with our Amended and Restated Memorandum of Association and Amended and Restated Articles of Association. Ashareholder has the right to seek damages if a duty owed by our directors is breached. The functions and powers of our Board of Directors include, among others: · conducting and managing the business of our company; · representing our company in contracts and deals; · appointing attorneys for our company; · selecting senior management such as managing directors and executive directors; · providing employee benefits and pension; · managing our company’s finances and bank accounts; · exercising the borrowing powers of our company and mortgaging the property of our company; and · exercising any other powers conferred by the shareholders meetings or under our Amended and Restated Memorandum of Association andAmended and Restated Articles of Association. Terms of Directors and Officers A director may be removed by ordinary resolution passed by a majority of our shareholders or by way of consent of a majority of the directors then inoffice before the expiration of such director’s term. Officers are elected by and serve at the discretion of the Board of Directors. Sohu, Tencent, and we haveentered into a Voting Agreement that, subject to certain exceptions, gives Sohu the power to appoint a majority of our Board of Directors and for Tencent toappoint two directors. See “Related Party Transactions—Voting Agreement between Sohu and Tencent.” Employment Agreements with Executive Officers All of our executive officers have entered into our standard employment agreements and standard confidentiality and non-competition agreements.See “Business—Employees.” Share Incentive Plans We adopted a share incentive plan in October 2010, as amended from time to time and with the last amendment taking effect on August 22, 2014, orthe 2010 Share Incentive Plan. The maximum number of Class A Ordinary Shares issuable under the 2010 Share Incentive Plan is 41,500,000. Share incentiveawards may be granted under the 2010 Share Incentive Plan to our management and employees, and to management and employees of our present or futureparents, subsidiaries, or VIEs. We also adopted a share incentive plan in October 2017, or the 2017 Share Incentive Plan and, together with the 2010 ShareIncentive Plan, the Share Incentive Plans. The maximum number of Class A Ordinary Shares issuable under the 2017 Share Incentive Plan is 28,000,000.Share incentive awards may be granted under the 2017 Share Incentive Plan to our management and employees and management and employees of any ofour present or future parents or subsidiaries. The maximum term of any share incentive award granted under the Share Incentive Plans is ten years from thegrant date. Plan Administration. Our compensation committee, or our Board of Directors in the absence of such a committee, administers the Share IncentivePlans. The compensation committee or the Board of Directors, as appropriate, determines the terms and conditions of our awards under the 2010 ShareIncentive Plans. 86Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Types of Awards. The following briefly describes the principal features of the various awards that may be granted under the 2010 ShareIncentive Plans. · Options. Options provide for the right to purchase our Class A Ordinary Shares at a specified exercise price subject to vesting according to avesting schedule determined by our board or our compensation committee and provided in an award agreement. · Restricted Shares. A restricted share award is the sale of Class A Ordinary Shares at a price determined by our board or our compensationcommittee or a grant of our ordinary shares, in each case subject to vesting terms. · Restricted Share Units. Restricted share units represent the right to receive our Class A Ordinary Shares, subject to vesting. Restricted shareunits will be settled upon vesting, subject to the terms of the award agreement, either by our delivery to the holder of the number of Class AOrdinary Shares that equals the number of the vested restricted share units or by a cash payment to the holder that equals the then fair marketvalue of the number of underlying Class A Ordinary Shares. Award Document. Awards granted under the Share Incentive Plans are evidenced by an award document that sets forth the terms and conditionsapplicable to each of the awards, as determined by our Board of Directors or compensation committee in its sole discretion. Unless otherwise determined byour board or compensation committee in its sole discretion, our award documents for options previously granted under our 2010 Share Incentive Plan gave usa right to repurchase from a grantee, within a certain time period, up to 50% of a grantee’s Class A Ordinary Shares subject to vested options, upon suchgrantee’s death, disability, or voluntary, or involuntary termination of employment with us (other than for “Cause,” as defined in the 2010 Share IncentivePlan). The repurchase price for such a purchase was equal to the fair market value of our ordinary shares, as determined in an appraisal by an independentprofessional appraisal firm chosen by us in our sole discretion. Our repurchase rights under the award documents terminated upon the completion of ourinitial public offering. 87Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Termination of the Share Incentive Plans. Without further action by our Board of Directors, the 2010 Share Incentive Plan will terminate inOctober 2020 and the 2017 Share Incentive Plan will terminate in October 2027. Our Board of Directors may amend, suspend, or terminate the ShareIncentive Plans at any time; provided, however, that our Board of Directors must first seek the approval of the participants in the Share Incentive Plans if suchamendment, suspension or termination would adversely affect the rights of participants with respect to any of their existing awards. As of the date of this annual report we had contractually granted options for the purchase of 39,727,627 Class A Ordinary Shares under the 2010Sogou Share Incentive Plan. Of such contractually-granted options, options for the purchase of 32,477,627 Class A Ordinary Shares vest and becomeexercisable upon a service period requirement being met, as well as our achievement of performance targets for the corresponding period. In addition, of allcontractually-granted share options, options for the purchase of 7,200,000 Class A Ordinary Shares, which are held by Xiaochuan Wang, our Chief ExecutiveOfficer, will vest and become exercisable in five equal installments, with (i) the first installment vesting upon the IPO and the expiration of the underwriters’lockup period applicable to our initial public offering, and (ii) each of the four subsequent installments vesting on the first, second, third and fourthanniversary dates, respectively, of the completion of our initial public offering. Compensation of Directors and Executive Officers During the year ended December 31, 2017, we paid an aggregate of US$3.28 million in cash compensation to our executive officers, which includedamounts paid to Xiaochuan Wang, our Chief Executive Officer, of annual base salary of US$382,602 for 2017, a performance-based bonus of US$607,485 inconnection with the performance of his duties as our Chief Executive Officer in 2016, and a special bonus of US$15,067 in recognition of his contributionsto the development of certain of our key products. None of our directors have service contracts that provide for benefits upon termination of employment. Grants of Shares and Options to Directors and Executive Officers The following table summarizes, as of the date of this annual report, outstanding share options and Class A Ordinary Shares beneficially held by ourdirectors and executive officers that were granted under our 2010 Share Incentive Plan: Directors and Executive OfficersClass A OrdinaryShares underlyingoutstanding optionsand Class AOrdinary Sharessubject to vesting Exerciseprice Date ofgrant ExpirationdateXiaochuan Wang7,200,000US$0.6251/31/2013N/ALiyun Ru900,000Nominal6/15/2013—Hongtao Yang900,000Nominal6/15/2013—Tao Hong900,000Nominal6/15/2013—Joe (Yi) Zhou200,000Nominal10/17/201710/17/2027James Deng20,000Nominal7/21/20177/21/202730,000Nominal10/17/201710/17/2027 Consists of Class A Ordinary Shares beneficially held by Mr. Wang that were issued in 2013 upon Mr. Wang’s early exercise of share options. SuchClass A Ordinary Shares are subject to vesting in five equal installments over a four-year period, with the first installment vesting upon thecompletion of our initial public offering and the expiration of the underwriters’ lockup periods applicable to this offering and the remaining fourinstallments vesting upon the first four anniversaries of the completion of our initial public offering. Consists of Class A Ordinary Shares beneficially held by Mr. Ru that were issued upon Mr. Ru’s early exercise of share options that carried anominal exercise price. Such Class A Ordinary Shares are subject to vesting in three equal installments upon our achievement of certain annualperformance milestones for 2017, 2018, and 2019. Consists of Class A Ordinary Shares beneficially held by Mr. Yang that were issued upon Mr. Yang’s early exercise of share options that carried anominal exercise price. Such Class A Ordinary Shares are subject to vesting in three equal installments upon our achievement of certain annualperformance milestones for 2017, 2018, and 2019. Consists of Class A Ordinary Shares beneficially held by Mr. Hong that were issued upon Mr. Hong’s early exercise of share options that carried anominal exercise price. Such Class A Ordinary Shares are subject to vesting in three equal installments upon our achievement of certain annualperformance milestones for 2017, 2018, and 2019. 88(1)(2)(3)(4)(5)(6)(6)(6)(1)(2)(3)(4)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Consists of options to purchase Class A Ordinary Shares at a nominal exercise price, subject to vesting in four equal installments upon ourachievement of certain annual performance milestones for 2017, 2018, 2019, and 2020. Consists of an option to purchase Class A Ordinary Shares, at a nominal exercise price, that vests on July 21, 2018. Mr. Deng resigned as our ChiefFinancial Officer effective January 21, 2018. Employees As of December 31, 2017, we had approximately 2,295 employees. We also engaged independent contractors to support our research and development,product development, and sales and marketing departments, and had approximately 413 such independent contractors on average during the 2017 fiscalyear. None of our employees are represented under collective bargaining agreements. Share Ownership Refer to “Item 7: Major Shareholders and Related Party Transactions” below for a description of the share ownership of our directors and seniorexecutive officers. 89(5)(6)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Major Shareholders The following table sets forth information with respect to the beneficial ownership of our shares as of the date of this report by: · each of our directors and executive officers; and · each person known to us to own beneficially more than 5% of our shares. 90Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Class A OrdinaryShares Class BOrdinaryShares Percentage ofClass AOrdinary Sharesand Class BOrdinary Shares Percentageof Total VotingPower Directors and Executive Officers:Charles Zhang32,000,000—8.1%1.1%Xiaochuan Wang21,216,400—5.3%0.7%Yuxin Ren————Joanna Lu*—**Liyun Ru*—**Hongtao Yang*—**Tao Hong*—**Joe Zhou*—**Bin Gao————Janice Lee————Joseph Chen————All directors and executive officers as a group59,378,400—15%2.0%Principal Shareholders:Sohu3,717,250127,200,00033.0%43.9%Tencent151,557,87538.2%52.2%Charles Zhang32,000,000—8.1%1.1% * Less than 1% of our total outstanding voting securities. (1) Includes the number of ordinary shares and percentage ownership represented by ordinary shares determined to be beneficially owned by a person orentity in accordance with rules of the SEC. The number of ordinary shares beneficially owned by a person or entity includes ordinary shares subjectto vesting that will vest, and/or vested share options exercisable for the purchase of our ordinary shares, within 60 days of the date of this annualreport. Ordinary shares issuable upon exercise of such vested share options are deemed outstanding for the purpose of computing the percentage ofoutstanding ordinary shares owned by that person or entity. Such ordinary shares issuable upon such vesting are not deemed outstanding, however,for the purpose of computing the percentage ownership of any other person or entity. In addition, such ordinary shares issuable upon such vestingare not deemed outstanding for the purpose of computing the percentage ownership of all directors and executive officers as a group. (2) Includes an aggregate of 9,900,000 Class A Ordinary Shares beneficially owned by certain of our executive officers that are considered outstandingfor legal purposes and are subject to forfeiture if vesting conditions are not met, but are treated as treasury stock for accounting purposes. (3) Consists of 32,000,000 Class A Ordinary Shares held of record by Photon Group Limited. Dr. Zhang is one of the directors of Photon Group Limitedand may be deemed to beneficially own such 32,000,000 Class A Ordinary Shares. The business address of Photon Group Limited is c/o Level 18,Sohu.com Media Plaza, No. 2 Kexueyuan South Road, Haidian District, Beijing, China. Dr. Zhang disclaims beneficial ownership of such sharesexcept to the extent of his pecuniary interest. (4) Includes (i) 9,216,400 Class A Ordinary Shares held by Winsor Glory Limited, a British Virgin Islands company beneficially owned by Mr. Wang,and (ii) 7,200,000 Class A Ordinary Shares held through a British Virgin Islands trust of which Mr. Wang is the beneficiary, subject to vesting in fiveequal installments over a four-year period, with the first installment vesting upon the completion of our initial public offering and the expiration ofthe underwriters’ lockup periods applied to such offering the remaining four installments vesting upon the first four anniversaries of November 13,2017. The business address of Winsor Glory Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. (5) Sohu is our controlling shareholder. Consists of shares held by Sohu through an indirect wholly-owned subsidiary, Sohu.com (Search) Limited. The3,717,250 Class A Ordinary Shares are held by Sohu for the purpose of issuance upon the exercise of outstanding share-based awards and futureshare-based awards. The 127,200,000 Class B Ordinary Shares are held by Sohu for its own account. In addition to the share ownership disclosed inthe above table, Sohu may be deemed to have beneficial ownership attributable to (i) shared voting power with respect to 45,578,896 Class BOrdinary Shares held by Tencent as a result of the voting agreement between Sohu and Tencent, and (ii) shared voting power with respect to57,889,500 Class A Ordinary Shares beneficially owned by members of our management as a result of the voting agreement dated September 16,2013 among Sohu, Photon Group Limited, and members of our management. Through its ownership of Class B Ordinary Shares and the votingagreement with Tencent, Sohu will have the right to appoint a majority of our Board of Directors. See “Related Party Transactions—VotingAgreement between Sohu and Tencent.” The business address of Sohu.com (Search) Limited is P.O. Box 31119, Grand Pavilion, Hibiscus Way, 802West Bay Road, Grand Cayman, KY1-1205, Cayman Islands. 91(1)(2)(1)(3)(4)(5)(6)(3)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents (6) Consists of shares held by Tencent through a wholly-owned subsidiary, THL A21 Limited. The business address of THL A21 Limited isP.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. In addition to the share ownership disclosed in the abovetable, as a result of the voting agreement between Sohu and Tencent, Tencent may be deemed to have beneficial ownership attributable to sharedvoting power with respect to the 3,717,250 Class A Ordinary Shares and 127,200,000 Class B Ordinary Shares held by Sohu. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. With respect to matters requiring a shareholder vote, holdersof Class A ordinary shares and holders of Class B ordinary shares vote together as one class. Each Class A ordinary share is entitled to one vote and eachClass B ordinary share is entitled to ten votes. We issued Class A ordinary shares represented by our ADSs in our initial public offering. Holders of Class Bordinary shares may choose to convert their Class B ordinary shares into the same number of Class A ordinary shares at any time. Class B ordinary shares areonly transferable to an affiliate of the holder or to an affiliate of us. Related Party Transactions Voting Agreement between Sohu and Tencent Under a voting agreement, or the Voting Agreement, among Sohu, Tencent, and us, Sohu and Tencent have agreed that, subject to certainexceptions, (1) within three years following the completion of our initial public offering, Sohu will vote all Class B Ordinary Shares and any Class AOrdinary Shares held by it and Tencent will vote 45,578,896 of its Class B Ordinary Shares to elect a Board of Directors consisting of seven directors, four ofwhom will be appointed by Sohu, two of whom will be appointed by Tencent, and the seventh of whom will be our then chief executive officer, and (2) afterthree years following the completion of our initial public offering, Sohu will be entitled to choose to change the size and composition of our Board ofDirectors, subject to Tencent’s right to appoint at least one director. The effect of these provisions will be to give Sohu the power to appoint a majority of ourBoard of Directors, and to give Tencent the power to appoint two directors within three years following the completion of our initial public offering and atleast one director after three years after the completion of our initial public offering. The Voting Agreement also provides that for so long as Sohu andTencent together hold more than 50% of the total voting power of our Class A Ordinary Shares and Class B Ordinary Shares, Sohu or Tencent may removeand replace any director appointed by it. These provisions of the Voting Agreement are also reflected in our Amended and Restated Memorandum ofAssociation and Amended and Restated Articles of Association. Due to the additional voting power of the Class B Ordinary Shares that will be held by Sohu and Tencent, Sohu will hold approximately 33.0% ofthe total of our outstanding Class A and Class B Ordinary Shares and control approximately 43.9% of the total voting power of the combined total of ouroutstanding Class A and Class B Ordinary Shares; Tencent will have an indirect shareholding of approximately 38.2% of the total of our outstanding Class Aand Class B Ordinary Shares and control approximately 52.2% of the total voting power of the combined total of our outstanding Class A and Class BOrdinary Shares; and Sohu and Tencent together will have the power to decide all matters that may be brought to a vote of our shareholders. The Voting Agreement and our Amended and Restated Articles of Association also specify that for so long as Sohu or Tencent holds not less than15% of our issued shares (calculated on a fully diluted basis), consent from the holder of 15% or more (either or both of Sohu or Tencent as the case may be)will be required (1) to amend our Amended and Restated Memorandum of Association or Amended and Restated Articles of Association, (2) to make materialchanges in our principal lines of business, (3) to issue any additional Class B Ordinary Shares, (4) to create any new class or series of shares that is pari passuwith or senior to the Class A Ordinary Shares, (5) for us to approve a liquidation, dissolution or winding up of us, or a merger or consolidation resulting in achange in control, or any disposition of all or substantially all of our assets, or (6) for us to enter into any transactions with affiliates of Sohu, other than in theordinary course of business. Of these corporate actions that are subject to consent of Sohu or Tencent (as applicable), shareholder approval is required underthe Companies Law of the Cayman Islands for any amendment of our Amended and Restated Memorandum of Association or Amended and Restated Articlesof Association, any winding-up of Sogou Inc., or any merger or consolidation with a third-party entity. The Voting Agreement and our Amended andRestated Articles of Association further provide that if our shareholders have voted in favor of any of these actions requiring the approval of our shareholdersbut consent from Sohu or Tencent (as applicable) has not been obtained, then the holders of all classes of our shares who have voted against such action willbe deemed to have such number of votes as are equal to the aggregate number of votes cast in favor of such actions plus one additional vote. Under theseprovisions of the Voting Agreement and our Amended and Restated Articles of Association, if an action is proposed for which the consent of either Tencentor Sohu is required, the failure to obtain the consent of Tencent or Sohu will have the effect of the proposed action’s not being approved, even if our othershareholders approve it. 92Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The Voting Agreement and our Amended and Restated Articles of Association also specify that if at any time Sohu alone holds more than 50% ofthe total voting power of our Class A Ordinary Shares and Class B Ordinary Shares, the voting arrangements with respect to the size and composition of ourBoard of Directors will be automatically suspended until such time within five years after the completion of our initial public offering as Sohu’s voting poweragain drops to 50% or less, in which case the original voting arrangements will be reinstated, provided that Tencent will only be required to vote the lower of45,578,896 Class B Ordinary Shares held by it or such number as would give Sohu combined voting power of 50.1%. If such a suspension continues after thefifth anniversary of the completion of our initial public offering, the voting arrangements with respect to the size and composition of our Board of Directorswill terminate. All of the Class B Ordinary Shares held by Sohu will be converted into Class A Ordinary Shares if there is a transaction resulting in change of controlof Sohu that was not approved by Sohu’s board of directors, if specified competitors of Tencent control Sohu, or if a majority of Sohu’s board of directorsconsist of nominees of specified competitors of Tencent. The provisions with respect to the size and composition of our Board of Directors set out in theVoting Agreement and our Amended and Restated Articles of Association will terminate upon occurrence of any such event. Such arrangements will alsoterminate (1) if Dr. Charles Zhang, the chairman of the board of directors of Sohu and its chief executive officer, both ceases being the chairman of the boardof directors of Sohu and ceases being the single largest beneficial owner of Sohu’s outstanding shares; (2) if Sohu transfers 30% or more of the Class BOrdinary Shares that Sohu holds upon the completion of our initial public offering; (3) if we fail to provide irrevocable instructions to the person maintainingour register of members to accept instructions from Tencent, under certain circumstances, with respect to the conversion of Class B Ordinary Shares held bySohu; (4) or we change, without Tencent’s consent, the person that maintains our register of members; (5) or if Tencent ceases to own any Class B OrdinaryShares. Under the Voting Agreement, Sohu and Tencent are subject to certain restrictions on transfer of their Class A and Class B Ordinary Shares. Inparticular, a transfer of Class B Ordinary Shares by either Sohu or Tencent, respectively, to any person or entity that is not a direct or indirect wholly-ownedsubsidiary of Sohu or Tencent, respectively, will cause such Class B Ordinary Shares to be converted into Class A Ordinary Shares. Business Collaboration with Tencent Under our business collaboration arrangements with Tencent, Sogou Search is the default search engine on various Tencent products that providegeneral search offerings, such as the Mobile QQ Browser, qq.com, and the PC Web directories daohang.qq.com and hao.qq.com. We are entitled to retain allrevenues that we generate from searches conducted on daohang.qq.com and hao.qq.com through our search engine. We are responsible for the design andoperation of the PC Web directories daohang.qq.com and hao.qq.com, bear all costs of their operation, and are required to include an agreed-upon minimumamount of advertisement placements of links for use by Tencent on these home pages, free of charge. Tencent has also agreed that for its other products thatoffer general search functions, Sogou Search will be offered as the default general search engine to users of such products until September 2018 and, providedit does not harm the user experience, Tencent and we intend to extend such agreement regarding other products with general search functions until 2023. Ourarrangements with Tencent regarding qq.com, the PC Web directories daohang.qq.com and hao.qq.com, the Mobile QQ Browser, and any other Tencentproducts that offer general search do not prohibit Tencent’s users from choosing general search engines of our competitors. Under our arrangements with Tencent regarding the Mobile QQ Browser, we make revenue-sharing payments to Tencent with respect to our revenuesgenerated from Mobile QQ Browser traffic. Under our arrangements with Tencent, our collaboration regarding the PC Web directories daohang.qq.com and hao.qq.com will continue untilSeptember 2033, and our collaboration regarding the Mobile QQ Browser will continue until September 2023. Search tools that search and extract information only within a specific online community, website, or product, such as the search function offered tousers of Tencent’s Weixin/WeChat, are excluded from the definition of general search functions and are not required to use Sogou Search as the defaultengine. Tencent has agreed to make the content of Tencent’s Weixin Official Accounts accessible to our users through our search services, free of charge. Weare not permitted, however, to collect, retrieve, or otherwise use any content of Tencent’s Weixin Official Accounts using search spider programs or otherthird-party channels. The collaboration period under our agreement with Tencent regarding Weixin Official Accounts expires in February 2019. 93Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Since October 2017, Tencent has been testing, on a trial basis and for purposes of assessment, the integration of Sogou Search into Weixin/WeChat.With this initiative, users of Weixin/WeChat can use Sogou Search as a general search function within Weixin/WeChat to access Internet information outsideWeixin/WeChat. We are working closely with Tencent on product testing and optimization and intend to discuss commercial arrangements upon thecompletion of the trial stage. For the three years ended December 31, 2015, 2016, and 2017, US$28.5 million, US$32.7 million, and US$61.6 million, respectively, wasrecognized as expenses payable to Tencent under these business collaboration arrangements. Voting Agreement with Sohu and Our Management In September 2013, Sohu, Photon (the investment vehicle of Sohu’s chairman and chief executive officer Dr. Charles Zhang), our Chief ExecutiveOfficer Xiaochuan Wang, and four other members of our management entered into a voting agreement with us, pursuant to which Photon, Xiaochuan Wang,and the other four members of our management agreed to vote their Class A Ordinary Shares (not including shares acquired by Xiaochuan Wang in the publicmarket following the completion of our initial public offering) to elect Sohu’s designees to our Board of Directors. Registration Rights Agreement among Sohu, Tencent, Photon, and Us Under a registration rights agreement among Sohu, Tencent, Photon, and us, Sohu, Tencent, and Photon are entitled to registration rights, includingdemand registration rights, Form F-3 registration rights, and piggyback registration rights at any time after the termination of the underwriters’ lockup periodapplicable to our initial public offering. Arrangements with Sohu and Tencent Entered into in the Ordinary Course of Business We have routinely engaged in a number of customary transactions in the ordinary course of business with Sohu, our controlling shareholder, andTencent, our largest shareholder. Related party transactions with Sohu and Tencent consist primarily of online advertising services, joint operation of onlinegames, and other related services. The financial arrangements and other key terms under these arrangements are substantially similar to those that we havewith unrelated third parties. As of December 31, 2015, 2016, and 2017, we had US$74.6 million, US$70.4 million, and US$1.2 million, respectively, due to Sohu and itssubsidiaries and VIEs. As of December 31, 2015, 2016, and 2017, we had US$27.7 million, US$26.7 million, US$3.0 million, respectively, due from Sohu and itssubsidiaries and VIEs. As of December 31, 2015, 2016, and 2017, we had US$5.9 million, US$14.3 million, US$21.9 million, respectively, due to Tencent. The increase inamounts due to Tencent was in line with an increase in spending on mobile search traffic acquired from Tencent in 2016 compared to 2015, and in 2017compared to 2016. As of December 31, 2015, 2016, and 2017, we had US$0.4 million, US$1.4 million, US$2.3 million, respectively, due from Tencent. Contractual Arrangements with our VIE and its Shareholders See “Business — Organizational Structure.” Letter Agreement with Former Chief Financial Officer In connection with the resignation of James Deng as our Chief Financial Officer effective January 21, 2018, we entered into a letter agreement withMr. Deng that provides that Mr. Deng will serve as a consultant to us from January 22, 2018 through July 21, 2018 in return for a fee of RMB480,000 (orapproximately US$74,800), and that options previously granted by us to Mr. Deng for the purchase of 50,000 Class A Ordinary Shares for a nominal exerciseprice will become fully vested on July 21, 2018. Other Transactions with Certain Directors, Shareholders and Affiliates See “Management—Compensation of Directors and Executive Officers.” 94Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Employment Agreements See “Business—Employees” and “Management—Employment Agreements with Executive Officers.” Share Incentive Plans See “Management—Share Incentive Plans.” Interests of Experts and Counsel Not applicable. ITEM 8. FINANCIAL INFORMATION Consolidated Financial Statements Please see Item 18 “Financial Statements” for our audited consolidated financial statements filed as a part of this annual report. Legal Proceedings We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not currently aparty to, nor are we aware of, any legal proceeding, investigation or claim which, in the opinion of our management, is likely to have a material adverse effecton our business, financial condition or results of operations. Dividend Policy Future cash dividends, if any, will be declared at the sole discretion of our Board of Directors and will depend upon our future operations and earnings,capital requirements and surplus, general financial condition, contractual restrictions and other factors as our Board of Directors may deem relevant. Holders of ADSs will be entitled to receive dividends, subject to the terms of the deposit agreement, to the same extent as the holders of our ordinaryshares, less the fees and expenses payable under the deposit agreement. Cash dividends will be paid by the depositary to holders of ADSs in U.S. dollars,subject to the terms of the deposit agreement. Other distributions, if any, will be paid by the depositary to holders of ADSs in any means it deems legal, fairand practical. 95Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 9. THE OFFER AND LISTING Our ADSs are listed on the New York Stock Exchange under the symbol “SOGO.” Trading in our ADSs commenced on November 9, 2017. The following table provides the high and low reported sale prices for our ADSs on the New York Stock Exchange for (1) each quarter in the two mostrecent fiscal years, (2) each of the last three full months, and (3) the month of February 2017 through February 21, 2018. Trading Price (US$)High Low2017Full Year (from November 9)14.7010.85Fourth Quarter (from November 9)14.7010.85November (from November 9)14.7012.10December12.4110.852018January13.0010.16February (through February 21)10.478.08 96Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 10. ADDITIONAL INFORMATION Memorandum and Articles of Association We incorporate by reference into this annual report the description of our seventh amended and restated memorandum of association and our thirdamended and restated articles of association contained in our Registration Statement on Form F-1 (File No. 333-220928) originally filed with the SEC onOctober 13, 2017. Our shareholders adopted our seventh amended and restated memorandum of association and our third amended and restated articles ofassociation by a special resolution on October 13, 2017, which became effective on November 13, 2017. Differences in Corporate Law—Mergers and Similar Arrangements The Companies Law is modeled after similar laws in the United Kingdom but does not follow recent statutory enactments in the United Kingdom. Inaddition, the Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significantdifferences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the State of Delaware. Mergers and Similar Arrangements A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be approved by the directorsof each constituent company and authorization by (a) a special resolution of the members of each constituent company and (b) such other resolution, if any,as may be specified in such constituent company’s articles of association. A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution ofshareholders. For this purpose, a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by theparent company. The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a courtin the Cayman Islands. Save in certain circumstances, a dissenting shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upondissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on thegrounds that the merger or consolidation is void or unlawful. In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement isapproved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition representthree-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting,or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of theCayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can beexpected to approve the arrangement if it determines that: · the statutory provisions as to the required majority vote have been met; · the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of theminority to promote interests adverse to those of the class; · the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and · the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law. When a takeover offer is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two-month periodcommencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. Anobjection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unlessthere is evidence of fraud, bad faith, or collusion. If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which wouldotherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judiciallydetermined value of the shares. 97Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Shareholders’ Suits In principle, we will normally be the proper plaintiff, and, as a general rule, a derivative action may not be brought by a minority shareholder.However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoingprinciple, including when: · a company acts or proposes to act illegally or ultra vires; · the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not beenobtained; and · those who control the company are perpetrating a “fraud on the minority.” Indemnification of Directors and Executive Officers and Limitation of Liability Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors,except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification againstcivil fraud or the consequences of committing a crime. Our Amended and Restated Memorandum of Association and Amended and Restated Articles ofAssociation permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses ordamages arise from fraud or dishonesty of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware GeneralCorporation Law for a Delaware corporation. In addition, we have entered into indemnification agreements with our directors and senior executive officersthat provide such persons with additional indemnification beyond that provided in our Amended and Restated Memorandum of Association and Amendedand Restated Articles of Association. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us underthe foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the SecuritiesAct and is therefore unenforceable as a matter of United States law. Anti-Takeover Provisions in the Memorandum of Association and Articles of Association Some provisions of our Amended and Restated Memorandum of Association and Amended and Restated Articles of Association may discourage,delay, or prevent a change in control of our company or management that shareholders may consider favorable, including provisions that authorize our Boardof Directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shareswithout any further vote or action by our shareholders. However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Amended and RestatedMemorandum of Association and Amended and Restated Articles of Association, as amended and restated from time to time, for what they believe in goodfaith to be in the best interests of our company. Directors’ Fiduciary Duties Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has twocomponents: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent personwould exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material informationreasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the bestinterests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandatesthat the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder andnot shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in thehonest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one ofthe fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of thetransaction, and that the transaction was of fair value to the corporation. As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company andtherefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make aprofit based on his position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of thecompany conflict with his personal interest or his duty to a third party. 98Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibitin the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, Englishand Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followedin the Cayman Islands. Transactions with Interested Shareholders The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless thecorporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging incertain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. Aninterested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting stock within the pastthree years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not betreated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the Boardof Directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encouragesany potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s Board of Directors. Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware businesscombination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it doesprovide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate purpose and not with the effect ofconstituting a fraud on the minority shareholders. Dissolution: Winding-up Under the Delaware General Corporation Law, unless the Board of Directors approves the proposal to dissolve, dissolution must be approved byshareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the Board of Directors may it be approved by asimple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation asupermajority voting requirement in connection with dissolutions initiated by the board. Under the Companies Law of the Cayman Islands and our amendedand restated articles of association, our company may be dissolved, liquidated or wound up by the vote of holders of two-thirds of our shares voting at ameeting or the unanimous written resolution of all shareholders. Under Cayman Islands law, a company may be wound up by either an order of the courts ofthe Cayman Islands or by a special resolution of its shareholders or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of itsshareholders. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just andequitable to do so. Under the Companies Law of the Cayman Islands and our Amended and Restated Articles of Association, our company may be dissolved,liquidated or wound up by the vote of holders of two-thirds of our shares voting at a meeting or the unanimous written resolution of all shareholders. Material Contracts We have not entered into any material contracts within the past two fiscal years other than in the ordinary course of business, other than those listed inItem 19 “Exhibits” or described elsewhere in this annual report. Exchange Controls China’s government imposes control over the convertibility of RMB into foreign currencies. The conversion of RMB into foreign currencies, includingU.S. dollars, has been based on rates announced by the People’s Bank of China. On July 21, 2005, the PRC government changed its decade-old policy ofpegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basketof certain foreign currencies. This change in policy has resulted in significant appreciation of the RMB against the U.S. dollar by the end of 2014. While theinternational reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adoptan even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. Pursuant to the Foreign Exchange Administration Regulations issued by the State Council on January 29, 1996, and effective as of April 1, 1996 (andamended on January 14, 1997 and August 5, 2008) and the Regulations on the Administration of Settlement, Sale and Payment of Foreign Exchange issuedby the People’s Bank of China on June 20, 1996 and effective on July 1, 1996, or the FX Regulations, regarding the administration and control of foreignexchange, conversion of RMB into foreign exchange by foreign investment enterprises for current account items, including the distribution of dividends andprofits to foreign investors in joint ventures, is permissible. Foreign investment enterprises are permitted to remit foreign exchange from their foreignexchange bank accounts in China on the basis of, inter alia, the terms of the relevant joint venture contracts and the board resolutions declaring thedistribution of the dividend and payment of profits. Each conversion of RMB into a foreign currency and each remittance of a foreign currency for capitalaccount items, including direct investment, loans and security investment, is subject to the approval of the SAFE. 99Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Under the Foreign Exchange Administration Regulations, foreign investment enterprises are required to open and maintain separate foreign exchangeaccounts for capital account items (but not for other items). In addition, foreign investment enterprises may only buy, sell and/or remit foreign currencies atthose banks authorized to conduct foreign exchange business upon the production of valid commercial documents and, in the case of capital account itemtransactions, approval of the documents by the SAFE. Currently, foreign investment enterprises are required to apply to the SAFE for “foreign exchange registration certificates for foreign investmententerprises” (which are granted to foreign investment enterprises, upon fulfilling specified conditions and which are subject to review and renewal by theSAFE on an annual basis). With such foreign exchange registration certificates and required underlying transaction documents, or with approval documentsfrom the SAFE if the transactions are under capital account (which are obtained on a transaction-by-transaction basis), foreign-invested enterprises may enterinto foreign exchange transactions at banks authorized to engage in the foreign exchange business to obtain foreign exchange for their needs. Taxation The following summary of the material Cayman Islands, PRC and United States federal income tax consequences of an investment in our ADSs orClass A ordinary shares 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 not discuss all possible tax consequences relating to an investment in our ADSs or Class A ordinary shares, such as the tax consequencesunder United States state, local and other tax laws. Cayman Islands Taxation The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is notaxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any holder of our ADSs and ordinary shares. We will not besubject to Cayman Islands taxation on payments of dividends or upon the repurchase by us of your ADSs or Class A Ordinary Shares, nor will gains derivedfrom the disposal of ADSs or Class A Ordinary Shares be subject to Cayman Islands income or corporation tax. There are no other taxes likely to be materialto us or holders of our ADSs or ordinary shares levied by the Government of Cayman Islands except for stamp duties, which may be applicable on instrumentsexecuted in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on transfers of sharesof Cayman Islands companies, except those which hold interests in land in the Cayman Islands. The Cayman Islands is not party to any double tax treaties.There are no exchange control regulations or currency restrictions in the Cayman Islands. Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Clerk of theCabinet of the Cayman Islands: (1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciationshall apply to us or our operations; and (2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares, debentures orother obligations. The undertaking for us will be for a period of twenty years from the date of issuance. PRC Taxation Under the CIT Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC isconsidered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define theterm “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel,accounts and properties of an enterprise. On April 22, 2009, the SAT issued a circular, known as Circular 82, which provides certain specific criteria fordetermining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China, which will be subjectto PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operationalmanagement is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval byorganizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholderresolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.Circular 82 applies only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, rather than those controlled by PRC individuals orforeigners, like us, but the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should beapplied in determining the tax resident status of all offshore enterprises. Although we believe we are not a PRC tax resident enterprise, it is not clear whetherSogou HK, Vast Creation, and us will be deemed to be PRC tax residents under the CIT Law. If we are considered to be a PRC tax resident under the CIT lawby the PRC tax authorities, our global income will be subject to corporate income tax at a rate of 25%. 100Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The implementation rules of the CIT Law provide that, (i) if an enterprise that distributes dividends is domiciled in the PRC, or (ii) if gains are realizedfrom transferring equity interests of enterprises domiciled in the PRC, then such dividends or capital gains are treated as PRC-sourced income. It is not clearhow “domicile” may be interpreted under the CIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are,or Sogou HK is, considered to be a PRC tax resident enterprise for tax purposes, any dividends we pay to our non-PRC resident shareholders or ADS holdersas well as gains realized by such shareholders or ADS holders from the transfer of our shares or ADSs may be regarded as PRC-sourced income and as a resultbecome subject to PRC tax at the rate up to 10% in the case of enterprises or 20% in the case of individuals. In the case of dividends, we would be required towithhold any PRC tax at source. See “Risk Factors—Risk Related to China’s Regulatory and Economic Environment—Dividends paid by us to our foreigninvestors and profits on the sale of our shares or ADSs may be subject to tax under PRC tax laws.” United States Federal Income Taxation The following is a summary of the material U.S. federal income tax considerations related to the purchase, ownership, and disposition of our ADSsby U.S. holders (as defined below). This summary applies only to U.S. holders that hold the ADSs or Class A Ordinary Shares as capital assets and that havethe U.S. dollar as their functional currency. This discussion does not address any aspect of the U.S. federal gift, estate, or Medicare tax, or state, local, orforeign tax, consequences of an investment in our ADSs or Class A Ordinary Shares. This discussion is based on the tax laws of the U.S. as in effect on thedate of this annual report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial andadministrative interpretations of such tax laws and regulations available on or before such date. All of the foregoing authorities are subject to change, whichchange could apply retroactively and could affect the tax consequences described below. The following discussion does not describe the tax consequences that may be relevant to any particular investor or to persons in special taxsituations such as: · banks or certain financial institutions; · insurance companies; · broker dealers; · traders that elect to mark to market; · tax-exempt entities; · persons liable for alternative minimum tax; · persons holding ADSs or Class A Ordinary Shares as part of a straddle, hedging, conversion transaction or other integrated investment; · regulated investments companies; · persons who acquired ADSs or Class A Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation; · persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares entitled to vote or 10%or more of the total value of all classes of our shares; or · partnerships or other pass-through entities for U.S. federal income tax purposes or persons holding ADSs or Class A Ordinary Shares throughpartnerships or other pass-through entities. 101Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents U.S. holders are urged to consult their own tax advisors about the application of U.S. federal tax rules to their particular circumstances as well asthe state, local and foreign tax consequences to them of the purchase, ownership and disposition of our ADSs or Class A Ordinary Shares. The discussion below of U.S. federal income tax consequences to “U.S. holders” will apply to a beneficial owner of ADSs or Class A Ordinary Shareswho is, for U.S. federal income tax purposes: · a citizen or individual resident of the U.S.; · a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the U.S., any statethereof or the District of Columbia; · an estate whose income is subject to U.S. federal income taxation regardless of its source; or · a trust (1) whose administration is subject to the primary supervision of a court within the U.S. and one or more U.S. persons have the authorityto control all substantial decisions of the trust, or (2) that has a valid election in effect under applicable U.S. Treasury regulations to be treated asa U.S. person. For U.S. federal income tax purposes, the tax treatment of a partner in a partnership or other entity taxable as a partnership that holds ADSs orClass A Ordinary Shares depends on the partner’s status and the activities of the partnership. U.S. holders who hold their ADSs or Class A Ordinary Sharesthrough a partnership, limited liability company, or other entity taxable as a partnership should consult their tax advisers regarding their tax treatment. The discussion below assumes that the representations contained in the Deposit Agreement are true and that the obligations in the DepositAgreement and any related agreement have been and will be complied with in accordance with their terms. Holders of ADSs will be treated as the holders ofthe underlying Class A Ordinary Shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, deposits of Class A Ordinary Shares inreturn for ADSs representing those shares, and surrender of ADSs in return for the underlying Class A Ordinary Shares, will not be subject to U.S. federalincome tax. The U.S. Treasury has expressed concerns that parties to whom ADSs are released before the underlying shares are delivered to the depositary (“pre-release”), or intermediaries in the chain of ownership between holders of ADSs and the issuer of the security underlying the ADSs, may be taking actions thatare inconsistent with the claiming of foreign tax credits by holders of ADSs. These actions would also be inconsistent with the claiming of the reduced rate oftax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditability of PRC taxes, and the availability ofthe reduced tax rate for dividends received by certain non-corporate U.S. Holders, each described below, could be affected by actions taken by such parties orintermediaries. Taxation of Dividends and Other Distributions on ADSs or Class A Ordinary Shares Subject to the PFIC rules discussed below, the gross amount of our distributions to a U.S. holder with respect to ADSs or Class A Ordinary Shares(including any amount withheld in respect of PRC taxes) generally will be included in a U.S. holder’s gross income as foreign source dividend income on thedate of receipt by the depositary, in the case of ADSs, or by the U.S. holder, in the case of Class A Ordinary Shares, but only to the extent that the distributionis paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent, if any, that the amountof any such distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of the U.S. holder’s tax basis inthe ADSs or the Class A Ordinary Shares (thereby increasing the amount of any gain or decreasing the amount of any loss realized on the subsequent sale ordisposition of such ADSs or Class A Ordinary Shares) and thereafter as capital gain. The dividends generally will not be eligible for the dividends-receiveddeduction allowed to corporations in respect of dividends received from other U.S. corporations. Certain non-corporate U.S. holders, including individual U.S. holders, may be taxed on dividend payments at a special rate (the applicable capitalgains rate) that is applicable to “qualified dividend income” provided that (1) the ADSs or Class A Ordinary Shares are readily tradable on an establishedsecurities market in the U.S., (2) we are not treated as a PFIC with respect to the U.S. holder (as discussed below) for our taxable year in which the dividendwas paid and we were not a PFIC in the preceding taxable year, and (3) certain holding period requirements are met. Under Internal Revenue Serviceauthority, our Class A Ordinary Shares, or ADSs representing such shares, will be considered for the purpose of clause (1) above to be readily tradable on anestablished securities market in the U.S. if they are listed, (as our ADSs are intended to be) on the New York Stock Exchange. U.S. holders should consult theirown tax advisors regarding the availability of the lower rate for dividends paid with respect to our ADSs or Class A Ordinary Shares in their particularcircumstances. Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividendincome (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to thegross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normallyapplicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For foreign taxcredit purposes, dividends paid on our Class A Ordinary Shares will generally constitute “passive category income” but could, in the case of certainU.S. holders, constitute “general category income.” 102Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents If PRC withholding taxes apply to dividends paid to a U.S. holder with respect to our ADSs or Class A Ordinary Shares, subject to certain conditionsand limitations, such PRC withholding taxes will be treated as foreign taxes eligible for credit against the U.S. holder’s U.S. federal income tax liability. Therules governing foreign tax credits are complex and, therefore, U.S. holders should consult their tax advisors regarding the availability of a foreign tax creditin such U.S. holders’ particular circumstances. Taxation of Disposition of Shares Subject to the PFIC rules discussed below, a U.S. holder will recognize taxable gain or loss on any sale, exchange or other taxable disposition of anADS or Class A Ordinary Share equal to the difference between the amount realized for the ADS or Class A Ordinary Share and the U.S. holder’s adjusted taxbasis in the ADS or Class A Ordinary Share. The gain or loss will be capital gain or loss. A non-corporate U.S. holder, including an individual U.S. holder,who has held the ADS or Class A Ordinary Share for more than one year will be eligible for reduced capital gains tax rates. The deductibility of capital lossesis subject to limitations. Any such gain or loss that a U.S. holder recognizes will be treated as U.S. source income for foreign tax credit limitation purposes. As described above under “Taxation—PRC Taxation,” any gain from the disposition of our ADSs or Class A Ordinary Shares may be subject to PRCtax. In such event, a U.S. holder that is eligible for the benefits of the income tax treaty between the U.S. and the PRC may elect to treat the gain as PRCsource income for foreign tax credit purposes. U.S. holders should consult their tax advisors regarding their eligibility for benefits under the income tax treatybetween the U.S. and the PRC and their ability to credit any PRC tax withheld in respect of a sale of our ADSs or Class A Ordinary Shares against theirU.S. federal income tax liability. Passive Foreign Investment Company We expect that we will not be treated as a PFIC for our 2017 taxable year ended November 30, 2017. Our expectation is based on our operations andthe estimated composition of our earnings and assets for the current taxable year, including the valuation of our assets (including goodwill) based on theexpected price of our ADSs in the market. However, because we hold a substantial amount of cash and cash equivalents, and because the value of our otherassets may be based in part on the market price of our ADSs, which may fluctuate (and could fluctuate considerably given that market prices of Internetcompanies historically have been especially volatile), our PFIC status in the current and future taxable years may depend in large part on the market price ofour ADSs. A drop in the market price of our ADSs and associated decrease in the value of our goodwill would cause a reduction in the value of our non-passive assets for purposes of the asset test described below. Accordingly, we could become a PFIC if our market capitalization were to decrease significantlywhile we hold substantial cash and cash equivalents. In addition, the composition of our income and assets will be affected by how, and how quickly, wespend our cash. Furthermore, it is not entirely clear how the contractual arrangements between us and our consolidated VIEs will be treated for purposes of thePFIC rules. If these contractual arrangements were found to not result in our ownership of the VIEs for U.S. federal income tax purposes, we could be a PFIC.See “Risk Factors—Risks Related to Our Corporate Structure—We depend upon contractual arrangements with our VIE Sogou Information and itsshareholders for the success of our business and these arrangements may not be as effective in providing operational control as direct ownership of theentities and may be difficult to enforce.” Also our PFIC status for any taxable year will depend upon the character of our income and assets and the value ofour assets for such year, cannot be determined until after the close of the taxable year. Accordingly, there is no guarantee that we will not be a PFIC for anytaxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either: · at least 75% of its gross income is passive income (such as certain dividends, interest or royalties) (the “income test”), or · at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets thatproduce or are held for the production of passive income (the “asset test”). For the purposes of this determination, we will be treated as owning our proportionate share of the assets and earning our proportionate share of theincome of any other corporation in which we own (or are treated as owing), directly or indirectly, at least 25% (by value) of the shares or equity interests. We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. 103Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents If we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or Class A Ordinary Shares, such U.S. holder will be subject tospecial tax rules with respect to any “excess distribution” that such U.S. holder receives and any gain that such U.S. holder realizes from a sale or otherdisposition (including, in a certain circumstances, a pledge) of the ADSs or Class A Ordinary Shares, unless the holder makes a “mark-to-market” election asdiscussed below. For purpose of these special rules, if we are a PFIC for any year during which a U.S. holder holds ADSs or Class A Ordinary Shares, we willcontinue to be treated as a PFIC with respect to such U.S. holder for all succeeding years during which such U.S. holder holds ADSs or Class A OrdinaryShares, even if we are no longer classified as a PFIC in subsequent years. Under certain attribution rules, if we are a PFIC, a U.S. holder will be deemed to ownsuch U.S. holder’s proportionate share of any subsidiaries or other entities that are PFICs in which we hold (directly or indirectly through other PFICs) anequity interest (“subsidiary PFICs”), and will generally be treated for purposes of the PFIC rules as if such U.S. holder directly held the shares of suchsubsidiary PFICs. Under these special rules, distributions that a U.S. holder receives in a taxable year that are greater than 125% of the average annual distributionsthat such U.S. holder received during the shorter of the three preceding taxable years or such U.S. holder’s holding period for the ADSs or Class A OrdinaryShares 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 Class A Ordinary Shares; · the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treatedas ordinary income; and · the amount allocated to each other taxable year will be subject to the highest tax rate in effect for that taxable year for individuals orcorporations, as applicable, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting taxattributable to each such taxable year. Gains from the disposition of ADSs or Class A Ordinary Shares will be taxed in the same manner. The tax liability for amounts allocated to yearsprior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on thesale of ADSs or Class A Ordinary Shares cannot be treated as capital, even if the U.S. holder holds the ADSs or Class A Ordinary Shares as capital assets. AU.S. holder will be subject to the same U.S. federal income tax rules as described above on indirect or constructive distributions that the U.S. holder is deemedto receive on shares of a subsidiary PFIC and on indirect or constructive dispositions of shares of subsidiary PFICs. Alternatively, 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 electout of the tax treatment discussed in the two preceding paragraphs. A mark-to-market election will not be available, however, with respect to any subsidiaryPFICs. If a U.S. holder makes a mark-to-market election for the ADSs or Class A Ordinary Shares, such U.S. holder will generally include in income each yearan amount equal to the excess, if any, of the fair market value of the ADSs or Class A Ordinary Shares as of the close of such U.S. holder’s taxable year oversuch U.S. holder’s adjusted tax basis in such ADSs or Class A Ordinary Shares. The U.S. holder will be allowed a deduction for the excess, if any, of theadjusted basis of the ADSs or Class A Ordinary Shares over their fair market value as of the close of the taxable year. However, deductions are allowable onlyto the extent of any net mark-to-market gains on the ADSs or Class A Ordinary Shares included in the U.S. holder’s income for prior taxable years. Amountsincluded in a 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 or Class A OrdinaryShares, will generally be taxed at ordinary income rates. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on theADSs or Class A Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the ADSs or Class A Ordinary Shares, to the extent that theamount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or Class A Ordinary Shares. A U.S. holder’s basis in theADSs or Class A Ordinary Shares will be adjusted to reflect any such income or loss amounts. If the U.S. holder makes a mark-to-market election, tax rules thatapply to distributions by corporations which are not PFICs would apply to distributions by us (however, the lower applicable capital gains rate for “qualifieddividend income” discussed above would not apply). The basis adjustment and income or loss inclusion under this alternate mark-to-market regime willapply only during years in which we are a PFIC. The mark-to-market election will only be available for “marketable stock” which is stock that is traded in more than de minimis quantities on at least15 days during each calendar quarter on a qualified exchange or other market, as defined in applicable Treasury regulations, such as the New York StockExchange. A third alternative taxation regime which may be available to some U.S. investors in PFICs, known as “qualified electing fund” (QEF) treatment, willnot be available to U.S. holders of our ADSs or Class A Ordinary Shares. This is because QEF treatment requires the PFIC to supply annually certaininformation to U.S. holders of ADSs or Class A Ordinary Shares, and we do not intend to supply such information. 104Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents A U.S. holder of ADSs or Class A Ordinary Shares in any year in which we are a PFIC will be required to file Internal Revenue Service Form 8621regarding distributions received on the ADSs or Class A Ordinary Shares and any gain realized on the disposition of the ADSs or Class A Ordinary Shares. Inaddition, if we are a PFIC for a taxable year in which we pay a dividend, or for the prior taxable year, the lower rate on “qualified dividend income” discussedabove with respect to dividends paid to certain non-corporate U.S. holders would not apply. U.S. holders and prospective holders of our ADSs are urged to consult their own tax advisors regarding the application of the PFIC rules to aninvestment in ADSs or Class A Ordinary Shares. Information Reporting and Backup Withholding Dividend payments with respect to ADSs or Class A Ordinary Shares and proceeds from the sale, exchange or redemption of ADSs or Class AOrdinary Shares may be subject to information reporting to the Internal Revenue Service and possible U.S. backup withholding at a rate of 24% for taxableyears beginning after December 31, 2017 and before January 1, 2026. Backup withholding will not apply, however, to a U.S. holder who furnishes a correcttaxpayer identification number and makes any other required certifications or who is otherwise exempt from backup withholding and demonstrates suchexemption if required. U.S. holders who are required to establish their exempt status must provide such certification on Internal Revenue Service Form W-9.U.S. holders should consult their tax advisors regarding the application of U.S. information reporting and backup withholding rules. Individual U.S. holders, that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 are generally required to filean information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include anyfinancial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include our Class A Ordinary Shares)that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certainmarried individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirectinterests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject tosubstantial penalties. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in our ADSsand Class A Ordinary Shares, including the application of the rules to their particular circumstances. Prospective purchasers of our ADSs should consult their own tax advisor regarding the application of the U.S. federal income tax laws to their particularsituations as well as any tax consequences resulting from purchasing, holding or disposing of our ADSs and Class A Ordinary Shares, including theapplicability and effect of the tax laws of any state, local or foreign jurisdiction and including estate, gift and inheritance laws. Available Additional Information We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to filereports and other information with the SEC. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public referencefacilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtaininformation regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a Website atwww.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SECusing its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterlyreports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisionscontained in Section 16 of the Exchange Act. As required under Section 203.01 of the New York Stock Exchange Listed Company Manual, we will post our annual reports filed with the SEC on ourWeb site at http://ir.sogou.com. We will not furnish hard copies of such reports to holders of our ADSs unless we are requested to do so in writing by a holder.Upon receipt of such a request, we will provide a hard copy of such reports to such requesting holder free of charge. 105Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Rate Risk While our reporting currency is the U.S. dollar, to date almost all of our revenues and costs, a majority of our assets, and almost all of our liabilitiesare denominated in RMB. As a result, we are exposed to foreign exchange risk, as our revenues and assets may be affected by fluctuations in the exchangerate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues and assets as expressed in our U.S.dollar financial statements will decline. For example, our revenues for the year ended December 31, 2017 were US$908.4 million and our total assets as ofDecember 31, 2017 were US$1.3 billion, representing revenues of RMB5.935 billion and total assets of RMB8.632 billion at the exchange rate ofRMB6.5342 to $1.00 in effect as of December 31, 2017. If the value of the RMB were to depreciate by 10% against the U.S. dollar, the value of the sameamount of revenues and total assets in U.S. dollars would be US$825.8 million and US$1.2 billion, respectively. The RMB is not freely tradeable in “capital account” transactions, which include foreign direct investment. Foreign exchange transactionsclassified as capital account transactions are subject to limitations and require approval from the SAFE. This could affect our China-based subsidiaries’ability to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us. Further, the RMB is atpresent free convertible in “current account” transactions, which include dividends, trade and service-related foreign exchange transactions, and our China-based subsidiaries may purchase and retain foreign exchange for settlement of such transactions, including payment of dividends, without the approval of theSAFE. However, the relevant PRC governmental authorities may limit our ability to purchase or retain foreign currencies in the future. Since a significantamount of our future revenues are likely to be in the form of RMB, these existing restrictions, and any future restrictions, on currency exchange may limit ourability to use revenues generated in RMB to fund our business activities outside of China, or to make expenditures denominated in foreign currencies. To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would reduce theRMB amount we would receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments fordividends on our ordinary shares or for other business purposes, depreciation of the RMB against the U.S. dollar would reduce the U.S. dollar amountsavailable to us. As of December 31, 2017, we had RMB-denominated cash and cash equivalents and short-term investments of RMB2.044 billion and U.S. dollar-denominated cash and cash equivalents of US$720.4 million. Assuming we had converted our US$720.4 million cash and cash equivalents balance intoRMB at the exchange rate of RMB6.5342 to US$1.00 in effect as of December 31, 2017, we would have had a total RMB balance for cash and cashequivalents and short-term investments of RMB6.751 billion as of that date. An appreciation of the RMB of 10% against the U.S. dollar as of December 31,2017 would have caused the total RMB balance for our cash and cash equivalents and short-term investments to be RMB6.281 billion as of that date aftersuch a hypothetical conversion. Conversely, if we had converted our RMB2.044 billion cash and cash equivalents and short-term investments balance intoU.S. dollars at the exchange rate of RMB6.5342 to US$1.00 in effect as of December 31, 2017, we would have had a total U.S. dollar balance for cash andcash equivalents and short-term investments of US$1.033 billion as of that date. A depreciation of the RMB of 10% against the U.S. dollar as of December 31,2017 would have caused us to have a total U.S. dollar balance for our cash and cash equivalents and short-term investments of US$1.005 billion as of thatdate after such a hypothetical conversion. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we maydecide to enter into hedging transactions in the future, the effectiveness of these hedges may be limited and we may not be able to successfully hedge ourexposure. Accordingly, we may incur economic losses in the future due to foreign exchange rate fluctuations, which could have an adverse impact on ourfinancial condition and results of operations. Inflation Rate Risk According to the National Bureau of Statistics of China, the consumer price index grew 1.6% in 2017, compared to an increase of 2.0% in 2016. Whilethe increase for 2017 represented a decline in the rate of inflation compared to 2016, there may be an increase in the rate of inflation in the future, whichcould have an adverse effect on our business. Interest Rate Risk Our investment policy limits our investments of excess cash to investments in bank deposits and high-quality corporate securities and limits theamount of our exposure to any one issuer. We have not been, nor do we expect to be, exposed to material risks due to changes in interest rates on borrowingsbecause we have not incurred, and do not expect to incur, any significant third-party debt. 106Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES The following table summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, pursuant to the DepositAgreement and the types of services and the amount of the fees or charges paid therefore: Persons depositing or withdrawing shares or ADS holders must pay: For:US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)· Issuance of ADSs, including issuances resulting from a distribution ofshares or rights or other property· Cancellation of ADSs for the purpose of withdrawal, including if theDeposit Agreement terminatesUS$0.05 (or less) per ADS· Any cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securities distributed toyou had been shares and the shares had been deposited for issuance ofADSs· Distribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holdersUS$0.05 (or less) per ADS per calendar year· Depositary servicesRegistration 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 withdraw sharesExpenses of the depositary· Cable and facsimile transmissions (when expressly provided in theDeposit Agreement)· converting non-U.S. currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian has topay on any ADSs or shares underlying ADSs, such as stock transfer taxes,stamp duty, or withholding taxes· As necessaryAny charges incurred by the depositary or its agents for servicing thedeposited securities· As necessary Pursuant to an agreement dated November 8, 2017 between us and the Bank of New York Mellon, the depositary for our ADSs, the depositaryreimbursed us in cash for our expenses, including investor relations expenses, legal fees, accounting fees, the New York Stock Exchange listing applicationand listing fees, and related expenses, in the amount of US$8,659,456, which is net of U.S. withholding tax, related to the establishment of our Americandepositary receipt facility. 107Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES Not Applicable. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Use of Proceeds On November 8, 2017, our registration statement on Form F-1 (File No. 333-220928), as amended, was declared effective by the SEC for our initialpublic offering, pursuant to which we offered and sold a total of 50,643,856 ADSs, including 5,643,856 ADSs sold upon the exercise by the underwriters oftheir over-allotment options, at the public offering price of $13.00 per ADS. The offering was completed in November 2017. We received net proceeds of approximately US$622.1 million from the offering, after deducting underwriting discounts and commissions ofapproximately $32.9 million and other expenses of approximately $3.3 million. None of the underwriting discounts and commissions or other expenses werepaid directly or indirectly to any director, officer, or general partner of ours or to their associates, persons owning ten percent or more of any class of ourequity securities, or to any of our affiliates. J.P. Morgan, Credit Suisse, Goldman Sachs, and CICC acted as joint bookrunners for our initial public offeringand as the representatives of the underwriters. As of December 31, 2017, we had not used any of the net proceeds to us from our initial public offering. Proceeds from the offering have been depositedin banks. ITEM 15. CONTROLS AND PROCEDURES Disclosure Controls and Procedures Our principal executive officer and principal financial officer performed an evaluation of the effectiveness of our disclosure controls and procedures, asdefined and required under Rule 13a-15(e)of the Exchange Act, as of the end of the period covered by this annual report. Based upon that evaluation, theyhave concluded that our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports thatwe file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principalfinancial officer, to allow timely decisions regarding required disclosure. Our principal executive officer and principal financial officer also concluded thatthe information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in by the Securities and Exchange Commission’s rules and regulations. Management’s Annual Report on Internal Control over Financial Reporting This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report ofour independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the period covered by this annual report 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 determined that Bin Gao meets the criteria of an “audit committee financial expert” as set forth in the applicable SECrules and has accounting or related financial management expertise as set forth in the New York Stock Exchange Listed Company Manual. Our Board ofDirectors has determined that all three members of our audit committee are “independent” under Rule 10A-3 under the Securities Exchange Act of 1934 andthe New York Stock Exchange Listed Company Manual. ITEM 16B. CODE OF ETHICS Our Board of Directors adopted a code of ethics and conduct that is applicable to all of our directors, officers and employees. A copy of our code ofethics and conduct was filed as an exhibit to our Registration Statement on Form F-1 (File No. 333-220928) originally filed with the SEC on October 13,2017, and is also posted on our Website at http://ir.sogou.com under the heading “Corporate Governance.” 108Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 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 byPricewaterhouseCoopers Zhong Tian LLP, our principal external auditors, for the periods indicated below. For the year endedDecember 31,2016 2017US$ US$(US$in thousands)Audit fees2041,747Tax fees310—Audit related fees—37All other fees—77Total5141,861 (1) “Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors for the audit ofour annual financial statements and our internal controls over financial reporting, and the fees for assurance services rendered in connection with ourinitial public offering in 2017. (2) “Tax fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors for taxcompliance and tax advice. (3) “Audit-related fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors relatedto the audit of our financial statements and our internal controls over financial reporting that are not reported under “Audit Fees” and consultation onaccounting standards or transactions. Audit Committee Pre-approval Policies and Procedures Our audit committee has adopted procedures which set forth the manner in which the committee will review and approve all audit and non-auditservices to be provided by PricewaterhouseCoopers Zhong Tian LLP before that firm is retained for such services. The pre-approval procedures are as follows: · Any audit or non-audit service to be provided to us by the independent accountant must be submitted to the audit committee for review andapproval, with a description of the services to be performed and the fees to be charged. · The audit committee in its sole discretion then approves or disapproves the proposed services and documents such approval, if given, throughwritten resolutions or in the minutes of meetings, as the case may be. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not Applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Not Applicable. ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not Applicable. ITEM 16G. CORPORATE GOVERNANCE Sohu, through its ownership of Class B Ordinary Shares and the Voting Agreement with Tencent, will have the power to appoint a majority of ourboard of directors. As a result, we will be a “controlled company” under the New York Stock Exchange Listed Company Manual. We will rely on certainexemptions that are available to controlled companies from NYSE corporate governance requirements, including the following, which we do not intend tomeet voluntarily: 109(1)(2)(3)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents · that we have a majority of independent directors on our board; · that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’spurpose and responsibilities; and · for an annual performance evaluation of the nominating/corporate governance committee and the compensation committee. We are not required to and will not voluntarily meet these requirements. If we are no longer a “controlled company,” we may in the future invoke“home country” exceptions available to foreign private issuers, such as us, under the New York Stock Exchange Listed Company Manual which are similar tothe exemptions for controlled companies, and also include the possibility of additional exceptions from the New York Stock Exchange Listed CompanyManual, such as the requirement that equity-compensation plans be approved by shareholders. As a result of our use of the “controlled company”exemptions, and any future use by us of the “home country” exceptions, holders of our ADSs will not have the same protection afforded to shareholders ofcompanies that are subject to all of NYSE corporate governance requirements. ITEM 16H. MINE SAFETY DISCLOSURE Not Applicable. 110Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 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 Sogou and its subsidiaries and VIEs are included at the end of this annual report. 111Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ITEM 19. EXHIBITS ExhibitNumber Description of Document 1.1Seventh Amended and Restated Memorandum of Association and Third Amended and Restated Articles of Association of the Registrant 2.1*Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3) 2.2Registrant’s Specimen Certificate for Class A ordinary shares 2.3*Deposit Agreement, dated November 8, 2017, among the Registrant, the depositary and all registered holders and beneficial owners ofthe American Depositary Shares 4.12010 Share Incentive Plan 4.2 *2017 Share Incentive Plan, as amended and restated 4.3English Translation of Form of Employment Agreement with Executive Officers 4.4English Translation of Form of Non-Competition Agreement with Executive Officers 4.5English Translation of Form of Confidentiality Agreement with Executive Officers 4.6Voting Agreement dated September 16, 2013 among Sogou Inc., Sohu.com (Search) Limited, Photon, Xiaochuan Wang, and othermembers of Sogou Management, as amended as of August 11, 2017 4.7Voting Agreement dated as of August 11, 2017 among Sogou Inc, Sohu.com (Search) Limited, and THL A21 Limited 4.8Registration Rights Agreement dated as of August 11, 2017 among Sogou Inc., Sohu.com (Search) Limited, Photon and THLA21 Limited 4.9English Translation of Loan Agreement, dated December 2, 2013, between Sogou Technology and Xiaochuan Wang 4.10English Translation of Exclusive Equity Interest Purchase Rights Agreement, dated December 2, 2013, among Sogou Technology,Sogou Information and the shareholders of Sogou Information 4.11English Translation of Share Pledge Agreement, dated December 2, 2013, among Sogou Technology, Sogou Information and theshareholders of Sogou Information 4.12English Translation of Power of Attorney, dated December 2, 2013, by the shareholders of Sogou Information in favor of SogouTechnology 4.13English Translation of Business Operation Agreement, dated December 2, 2013, among Sogou Technology, Sogou Information and theshareholders of Sogou Information 4.14English Translation of Exclusive Technology Consulting and Service Agreement, dated September 26, 2010, between SogouTechnology and Sogou Information 4.15Form of Indemnification Agreement with the Registrant’s Directors 4.16†English Translation of Second Amended and Restated Mobile Browser Cooperation Agreement, dated September 25, 2017, betweenShenzhen Tencent Computer Systems Co., Ltd. and Sogou Inc., Sogou Technology, Sogou Network, Sogou Information and Shi JiGuang Su. 4.17English Translation of Cooperation Agreement between Weixin Official Platform and Sogou Search, dated September 15, 2017, betweenShenzhen Tencent Computer Systems Co., Ltd. and Sogou Information. 4.18English Translation of Amended and Restated Business Development and Resource Sharing Agreement, dated September 25, 2017,between Shenzhen Tencent Computer Systems Co., Ltd. and Sogou Inc., Sogou Technology, Sogou Network, Sogou Information, Shi JiGuang Su and Sohu.com Limited. 4.19Sohu.com Internet Plaza Office Building Lease, dated December 30, 2016, between Sogou Network and Beijing Sohu New MediaInformation Technology Co., Ltd., as amended and supplemented 4.20*Letter Agreement, dated January 21, 2018, between Sogou Inc. and James Deng 8.1*Subsidiaries of the Registrant 112(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents ExhibitNumber Description of Document11.1Code of Ethics and Conduct for Directors, Officers and Employees 12.1*Certification of Chief Executive Officer Required by Rule 13a-14(a) 12.2*Certification of Chief Financial Officer Required by Rule 13a-14(a) 13.1*Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United StatesCode 13.2*Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United StatesCode 15.1*Consent of PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm 15.2*Consent of Commerce & Finance Law Offices 101.INS*XBRL Instance Document 101.SCH*XBRL Taxonomy Extension Schema Document 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document 101.LAB*XBRL Taxonomy Extension Label Linkbase Document 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document (1) Incorporated by reference to our Registration Statement on Form F-1(file no. 333-220928) filed with the Securities and Exchange Commission onOctober 13, 2017. † Portions of these exhibits have been omitted pursuant to a request for confidential treatment, and the omitted information has been filed separately withthe Securities and Exchange Commission. * Filed or furnished with this Annual Report on Form 20-F. 113(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorizedthe undersigned to sign this annual report on its behalf. SOGOU INC. By/s/ Xiaochuan WangName:Xiaochuan WangTitle:Chief Executive Officer By/s/ Joe ZhouName:Joe ZhouTitle:Chief Financial Officer Date: February 28, 2018 114Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting FirmF-2Consolidated Balance Sheets as of December 31, 2016, and 2017F-3Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2016, and 2017F-4Consolidated Statements of Changes in Shareholders’ (Deficit)/Equity for the Years Ended December 31, 2015, 2016, and 2017F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2016, and 2017F-8Notes to Consolidated Financial StatementsF-9 F-1Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Sogou Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Sogou Inc. and its subsidiaries as of December 31, 2017 and December 31, 2016, and therelated consolidated statements of comprehensive income, of changes in shareholders’ (deficit)/equity and of cash flows for each of the three years in theperiod ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and December 31,2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accountingprinciples generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error orfraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresin the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers Zhong Tian LLP Beijing, the People’s Republic of China February 28, 2018 We have served as the Company’s auditor since 2017. F-2Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) As of December 31,2016 2017ASSETSCurrent assets:Cash and cash equivalents$286,078$694,207Short-term investments—339,006Accounts receivable, net40,53269,967Prepaid and other current assets6,83515,091Due from related parties26,4792,971Total current assets359,9241,121,242Long-term investments22,58530,152Fixed assets, net117,022139,209Goodwill5,5655,908Intangible assets, net2,4781,328Deferred tax assets, net10,31215,006Other assets (including due from related parties of US$1,564 and US$2,337, respectively, as of December 31,2016 and 2017)6,9328,191Total assets$524,818$1,321,036LIABILITIESCurrent liabilities:Accounts payable (including accounts payable of consolidated variable interest entities, or “VIEs”, withoutrecourse to the Company of US$484 and US$18,955, respectively, as of December 31, 2016 and 2017)$47,501$73,018Accrued and other short-term liabilities (including accrued and other short-term liabilities of consolidatedVIEs without recourse to the Company of US$36,464 and US$15,989, respectively, as of December 31,2016 and 2017)131,651164,269Receipts in advance (including receipts in advance of consolidated VIEs without recourse to the Company ofUS$5,663 and US$7,889, respectively, as of December 31, 2016 and 2017)59,57466,199Accrued salary and benefits (including accrued salary and benefits of consolidated VIEs without recourse tothe Company of US$876 and US$1,292, respectively, as of December 31, 2016 and 2017)22,79429,719Taxes payable (including taxes payable of consolidated VIEs without recourse to the Company of US$2,663and US$9,232, respectively, as of December 31, 2016 and 2017)12,33656,481Due to related parties (including due to related parties of consolidated VIEs without recourse to the Companyof US$13,050 and US$20,394, respectively, as of December 31, 2016 and 2017)84,70023,109Total current liabilities358,556412,795Total liabilities$358,556$412,795Commitments and contingencies (Note 21)MEZZANINE EQUITYPre-IPO Series A Preferred Shares (US$0.001 par value; 62,400,000 shares authorized and issued, 32,000,000outstanding as of December 31, 2016; none authorized, issued, or outstanding as of December 31, 2017)20,000—Pre-IPO Series B Preferred Shares (US$0.001 par value; 65,431,579 shares authorized, issued, and outstandingas of December 31, 2016; none authorized, issued, or outstanding as of December 31, 2017)224,404—Total mezzanine equity$244,404$—SHAREHOLDERS’ (DEFICIT)/EQUITYPre-IPO Class A Ordinary Shares (US$0.001 par value, 391,100,000 shares authorized, 173,502,295 sharesissued, 157,226,495 shares outstanding as of December 31, 2016; none authorized, issued, or outstanding asof December 31, 2017); Class A Ordinary Shares (US$0.001 par value, none and 571,242,125 sharesauthorized, none and 123,314,237 shares issued, none and 108,080,937 shares outstanding as ofDecember 31, 2016 and 2017)162112Pre-IPO Class B Ordinary Shares (US$0.001 par value, 79,368,421 shares authorized, issued, and outstandingas of December 31, 2016; none authorized, issued, or outstanding as of December 31, 2017); Class BOrdinary Shares (US$0.001 par value, none and 278,757,875 shares authorized, issued, and outstanding asof December 31, 2016 and 2017)79279Additional paid-in capital22,330913,147Treasury stock (US$0.001 par value, 16,275,800 and 15,233,300 shares as of December 31, 2016 and 2017,respectively)(27,869)(27,869)Accumulated (deficit)/retained earnings(55,022)27,178Accumulated other comprehensive loss(17,822)(4,606)Total shareholders’ (deficit)/equity(78,142)908,241Total liabilities, mezzanine equity and shareholders’ (deficit)/equity$524,818$1,321,036 The accompanying notes are an integral part of these consolidated financial statements. F-3Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except for per share data) For the Year Ended December 31, 2015 20162017Revenues:Search and search-related advertising revenues (including transactions with relatedparties of US$2,558, US$6,273, and US$10,461, respectively, for 2015, 2016 and2017)$539,521$597,213$801,551Other revenues (including transactions with related parties of US$85, US$2,449 andUS$5,486, respectively, for 2015, 2016 and 2017)52,28263,195106,806Total revenues591,803660,408908,357Cost of revenues (including transactions with related parties of US$30,550, US$36,487and US$67,653, respectively, for 2015, 2016 and 2017)248,279302,736457,401Gross profit343,524357,672450,956Operating expenses:Research and development (including transactions with related parties of US$7,825,US$6,619 and US$8,233, respectively, for 2015, 2016 and 2017)131,072138,364172,829Sales and marketing (including transactions with related parties of US$4,409, US$3,788and US$3,010, respectively, for 2015, 2016 and 2017)93,998123,119156,420General and administrative (including transactions with related parties of US$83,US$81 and US$131, respectively, for 2015, 2016 and 2017)16,66624,56727,821Total operating expenses241,736286,050357,070Operating income101,78871,62293,886Interest income5,3325,1989,126Foreign currency exchange gain/(loss)6675,346(7,082)Other income/(expenses), net1,142(26,027)692Income before income tax expenses108,92956,13996,622Income tax expenses9,4302714,422Net income99,49956,11282,200Net income attributable to Sogou Inc.$99,499$56,112$82,200Less: Dividends attributable to Preferred Shareholders28,09228,09224,388Less: Adjustment for repurchase of Preferred Shares80,822——Net (loss)/income attributable to ordinary shareholders$(9,415)$28,020$57,812Net income99,49956,11282,200Other comprehensive (loss)/income, net of nil tax:Foreign currency translation adjustment(5,026)(9,365)13,216Comprehensive income$94,473$46,747$95,416Net (loss)/income per ordinary share—basic$(0.04)$0.12$0.22Net (loss)/income per ordinary share—diluted$(0.04)$0.11$0.20 Share-based compensation expense included in:Cost of revenues$330$171$540Research and development6,8625,61516,470Sales and marketing9431,8164,299General and administrative2,2445,2592,414$10,379$12,861$23,723 The accompanying notes are an integral part of these consolidated financial statements. F-4(1)(1)(1)(1)(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITY For the Year Ended December 31, 2015 (In thousands, except for share data) Ordinary Shares AdditionalPaid-inTreasury AccumulatedAccumulatedOtherComprehensiveTotalShareholders’ SharesAmount CapitalStock DeficitLossDeficitBalance as of January 1, 2015229,612,634$233$11,881$(24,679)$(140,658)$(3,431)$(156,654)Share issuance from exercise of options underSogou 2010 Share Incentive Plan3,825,8004————4Contribution from Sohu (Note 3u)——1,195———1,195Share-based compensation expense for Sogoushare-based awards——8,305———8,305Share-based compensation related to Sososearch-related businesses employeestransferred from Tencent——1,984———1,984Repurchase of Pre-IPO Series A PreferredShares——(10,847)—(69,975)—(80,822)Net income————99,499—99,499Other comprehensive loss, net of nil tax:foreign currency translation adjustment—————(5,026)(5,026)Other——151———151Balance as of December 31, 2015233,438,434$237$12,669$(24,679)$(111,134)$(8,457)$(131,364) The accompanying notes are an integral part of these consolidated financial statements. F-5Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITY For the Year Ended December 31, 2016 (In thousands, except for share data) Ordinary Shares AdditionalPaid-inTreasuryAccumulatedAccumulatedOtherComprehensiveTotalShareholders’ SharesAmount CapitalStockDeficitLossDeficitBalance as of January 1, 2016233,438,434$237$12,669$(24,679)$(111,134)$(8,457)$(131,364)Share issuance from exercise of options underSogou 2010 Share Incentive Plan3,876,4824————4Contribution from Sohu (Note 3u)——837———837Share-based compensation expense for Sogoushare-based awards——8,039———8,039Share-based compensation related to Sososearch-related businesses employeestransferred from Tencent——763———763Repurchase of Pre-IPO Class A OrdinaryShares(720,000)——(3,190)——(3,190)Net income————56,112—56,112Other comprehensive loss, net of nil tax:foreign currency translation adjustment—————(9,365)(9,365)Other——22———22Balance as of December 31, 2016236,594,916$241$22,330$(27,869)$(55,022)$(17,822)$(78,142) The accompanying notes are an integral part of these consolidated financial statements. F-6Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITY For the Year Ended December 31, 2017 (In thousands, except for share data) Ordinary Shares AdditionalPaid-in Treasury (AccumulatedDeficit)/Retained AccumulatedOtherComprehensive TotalShareholders’(Deficit)/ Shares Amount Capital Stock Earnings (Loss)/Income Equity Balance as of January 1, 2017236,594,916$241$22,330$(27,869)$(55,022)$(17,822)$(78,142)Share issuance upon initial publicoffering (“IPO”), net of issuancecosts of US$36,23950,643,85651622,080———622,131Share issuance upon the redesignationof 32,000,000 Pre-IPO Series APreferred Shares into Class AOrdinary Shares32,000,0003219,968———20,000Share issuance upon the redesignationof 65,431,579 Pre-IPO Series BPreferred Shares into Class BOrdinary Shares65,431,57965224,339———224,404Share issuance from exercise of optionsunder Sogou 2010 Share IncentivePlan2,168,4612————2Contribution from Sohu (Note 3u)——711———711Share-based compensation expense forSogou share-based awards——23,037———23,037Share-based compensation related toSoso search-related businessesemployees transferred from Tencent——682———682Net income————82,200—82,200Other comprehensive income, net of niltax: foreign currency translationadjustment—————13,21613,216Balance as of December 31, 2017386,838,812$391$913,147$(27,869)$27,178$(4,606)$908,241 The accompanying notes are an integral part of these consolidated financial statements. F-7Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Year EndedDecember 31, 2015 20162017Cash flows from operating activitiesNet income$99,499$56,112$82,200Adjustments to reconcile net income to net cash provided by operating activities:Depreciation31,36833,88648,205Amortization1,4121,3141,389Gain on disposal of fixed assets(268)(1,400)(988)Allowance for doubtful accounts——378Share-based compensation expense10,37912,86123,723Research and development expenses undertaken by Sohu1,105788707Impairment of long-term investment——230Change in fair value of financial instruments—(823)(927)Deferred tax benefit(7,779)(3,091)(4,117)Changes in assets and liabilities:Accounts receivable(14,145)(13,796)(26,955)Prepaid and other current assets1,881155(8,679)Due from related parties4,76211326,807Other assets(2,759)(2,542)(816)Accounts payable12,62720,75022,284Accrued and other short-term liabilities29,76744,19829,079Receipts in advance9,892(2,850)2,936Accrued salary and benefits4,6366,5565,561Taxes payable20,307(9,185)42,808Due to related parties3,3076,618(61,637)Net cash provided by operating activities205,991149,664182,188Cash flows from investing activitiesCash received from disposal of fixed assets2761,4051,739Purchase of fixed assets(61,266)(86,372)(64,025)Purchase of intangible assets(272)(523)(130)Purchase of long-term investments(14,589)(8,162)(7,008)Cash paid for a business combination, net of cash acquired(30)——Purchase of financial instruments—(52,412)(345,508)Proceeds from financial instruments—51,2607,718Net cash used in investing activities(75,881)(94,804)(407,214)Cash flows from financing activitiesProceeds from exercise of options under Sogou 2010 Share Incentive Plan—41Repurchase of Pre-IPO Series A Preferred Shares(99,822)——Repurchase of Pre-IPO Class A Ordinary Shares——(3,190)Proceeds from issuance of Class A Ordinary Shares in IPO, net of issuance costs ofUS$36,239——622,131Net cash (used in)/provided by financing activities(99,822)4618,942Effect of exchange rate changes on cash and cash equivalents(10,077)(13,270)14,213Net increase in cash and cash equivalents20,21141,594408,129Cash and cash equivalents at beginning of the year224,273244,484286,078Cash and cash equivalents at end of the year$244,484$286,078$694,207Supplemental cash flow disclosure:Income tax paid$—$14,078$6,171Supplemental schedule of non-cash investing activity:Fixed assets in accrued liabilities and accounts payable$199$1,079$658Supplemental schedule of non-cash financing activity:Contribution from Sohu resulting from waived research and development expense paidby Sohu on behalf of the Sogou Group$1,105$788$707Redesignation of 32,000,000 Pre-IPO Series A Preferred Shares into Class A OrdinaryShares$—$—$20,000Redesignation of 65,431,579 Pre-IPO Series B Preferred Shares into Class B OrdinaryShares$—$—$224,404 The accompanying notes are an integral part of these consolidated financial statements. F-8Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SOGOU INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (All amounts in thousands, except for share and per share data, unless otherwise noted) 1. NATURE OF OPERATIONS AND ORGANIZATION Sogou Inc. (“Sogou” or the “Company”) was incorporated in the Cayman Islands on December 23, 2005 as an indirect wholly-owned subsidiary ofSohu.com Inc., the Company’s ultimate parent company. Sohu.com Inc., together with its subsidiaries and consolidated VIEs, but, unless the context requiresotherwise, excluding the businesses and the corresponding subsidiaries and VIEs of Sogou are collectively referred to herein as “Sohu.” Sohu.com Inc. and itssubsidiaries and consolidated VIEs, including the Company and its subsidiaries and VIEs, are collectively referred to herein as the “Sohu Group.” TheCompany, together with its subsidiaries and VIEs, are collectively referred to herein as the “Sogou Group.” Prior to February 2006, the Sogou Group’s business, which includes assets and liabilities related to the operation of the search and search-relatedbusinesses, was operated by various entities owned or controlled by Sohu. In February 2006, Sohu transferred most of the search and search-related businessesto the Sogou Group. Until October 2010, the Company was indirectly wholly owned by Sohu. The Sogou Group is principally engaged in offering search and search-related advertising services which enable advertisers’ promotional links to bedisplayed on the Sogou Group’s search result pages and other properties and third parties’ Internet properties where the links are relevant to the subject andcontent of searches and such properties. The Sogou Group’s advertising services expand distribution of advertisers’ promotional links and advertisements byleveraging traffic on third parties’ Internet properties, including Web content, software, and mobile applications. The search and search-related businessesalso benefits from Sogou’s collaboration with Tencent Holdings Limited (together with its subsidiaries, “Tencent”, whose financial statements are preparedunder International Financial Reporting Standards), which provides Sogou access to traffic and content generated from the products and services providedby Tencent. The Sogou Group also offers Internet value-added services (“IVAS”), primarily with respect to the operation of Web games and mobile gamesdeveloped by third parties and the provision of online reading services, and offers other products and services including smart hardware products, which arecollectively referred to as the “other business.” F-9Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents As of December 31, 2017, the Sogou Group’s subsidiaries and VIEs were as follows: Name of Entity Date ofIncorporation/AcquisitionPlace ofIncorporation/Acquisition EffectiveInterest heldSubsidiaries:Sogou (BVI) Limited (“Sogou BVI”)Incorporated on December 23, 2005British Virgin Islands(“BVI”)100%Beijing Sogou TechnologyDevelopment Co., Ltd. (“Sogou Technology”)Incorporated on February 8, 2006The People’s Republic of China (“PRC”)100%Sogou Hong Kong Limited (“Sogou HK”)Incorporated on December 12, 2007Hong Kong SpecialAdministrative Region (“Hong Kong”)100%Vast Creation Advertising MediaServices Limited (“Vast Creation”)Acquired on November 30, 2011Hong Kong100%Beijing Sogou NetworkTechnology Co., Ltd. (“Sogou Network”)Incorporated on March 29, 2012PRC100%Sogou Technology Hong KongLimited (“Sogou Technology HK”)Incorporated on August 25, 2015Hong Kong100%Tianjin Sogou Network TechnologyCo., Ltd. (“Tianjin Sogou Network”)Incorporated on May 18, 2017PRC100%Sogou (Shantou) Internet MicrocreditCo., Ltd. (“Sogou Shantou”)Incorporated on November 22, 2017PRC100%VIEs: Beijing Sogou Information Service Co., Ltd.(“Sogou Information”)Incorporated on December 28, 2005PRC100%Shenzhen Shi Ji Guang Su InformationTechnology Co., Ltd. (“Shi Ji Guang Su”)Acquired on September 16, 2013PRC100%Beijing Shi Ji Si SuTechnology Co., Ltd. (“Shi Ji Si Su”)Acquired on April 2, 2015PRC100%Chengdu EasypayTechnology Co., Ltd. (“Chengdu Easypay”)Incorporated on January 19, 2015PRC100% The Company’s subsidiaries Sogou Technology, Sogou Network, Tianjin Sogou Network, and Sogou Shantou are wholly foreign-owned enterprises(or “WFOEs”) established in the PRC. The Company’s VIEs, which consist of Sogou Information and its subsidiaries Shi Ji Guang Su, Shi Ji Si Su, andChengdu Easypay, are controlled by Sogou Technology through a series of contractual agreements (see Note 22—VIEs). Liquidity As of December 31, 2017, the Sogou Group had shareholders’ equity of US$908,241, including retained earnings of US$27,178 and accumulatedother comprehensive loss of US$4,606. For the years ended December 31, 2015, 2016, and 2017, the Sogou Group had operating income of US$101,788,US$71,622, and US$93,886, respectively. F-10Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Based upon the Sogou Group’s operating plan, the Sogou Group believes its cash and cash equivalents and short-term investments as ofDecember 31, 2017 in the amount of US$1,033,213 and operating cash flows are sufficient to meet the cash requirements to fund planned operations andother commitments for at least the next twelve months. 2. REORGANIZATION AND SHARE ISSUANCE In October 2010, the Sohu Group undertook a reorganization of the Sogou Group (the “Reorganization”), in connection with the issuance ofSeries A Preferred Shares (the “Pre-IPO Series A Preferred Shares”) of the Company, and transferred assets and employees related to the search and search-related business to the Sogou Group. The Company then issued and sold 24,000,000, 14,400,000, and 38,400,000 Pre-IPO Series A Preferred Shares toAlibaba Group Holding Limited (“Alibaba”), China Web Search (HK) Limited (“China Web”), and Photon Group Limited (“Photon”), the investment vehicleof the Sohu Group’s Chairman and Chief Executive Officer Dr.Charles Zhang.The Reorganization was accounted for in a manner similar to a pooling ofinterest with assets and liabilities at their historical amounts in the Sogou Group’s consolidated financial statements. As such, the Sogou Group’sconsolidated financial statements were prepared as if the current corporate structure had been in existence for all periods presented. In June 2012, Sohu purchased the 24,000,000 Pre-IPO Series A Preferred Shares held by Alibaba. In September 2013, Tencent, through its wholly-owned subsidiary THL A21 Limited, invested a net amount of US$448.0 million in cash in theCompany and transferred Tencent’s Soso search-related businesses and certain other assets to the Company, and Sogou issued 65,431,579 voting Series BPreferred Shares (the “Pre-IPO Series B Preferred Shares”) and 79,368,421 non-voting Class B Ordinary Shares (the “Pre-IPO Class B Ordinary Shares”) toTencent (collectively, the “Sogou-Tencent Transactions”). Also in September 2013, the Company entered into (i) a Repurchase Option Agreement with Sohu exercisable commencing in March 16, 2014,granting the Company the right to repurchase 24,000,000 Pre-IPO Series A Preferred Shares held by Sohu for an aggregate purchase price of US$78.8 million;(ii) a Repurchase Option Agreement with Photon, also exercisable commencing March 16, 2014, granting the Company the right to repurchase6,400,000 Pre-IPO Series A Preferred Shares held by Photon for an aggregate purchase price of US$21.0 million; and (iii) a Repurchase/Put Option Agreementwith China Web, granting the Company the right to repurchase at any time from March 16, 2014 to July 31, 2014, and granting China Web the right to put tothe Company at any time prior to July 31, 2014, 14,400,000 Pre-IPO Series A Preferred Shares held by China Web for an aggregate purchase price ofUS$47.3 million. Also in September 2013, the Company, Sohu, Photon, the Company’s Chief Executive Officer Mr. Xiaochuan Wang, four other members of theCompany’s management, and Tencent entered into a Shareholders Agreement, which terminated in its entirety upon the completion of the Company’s IPO onNovember 13, 2017, and the Company also entered into a voting agreement in which Photon, Xiaochuan Wang, and four other members of the Company’smanagement agreed to vote their Pre-IPO Series A Preferred Shares and Pre-IPO Class A Ordinary Shares to appoint Sohu’s designees to the Company’s Boardof Directors. This voting agreement remained in effect following the completion of the IPO as to the Class A Ordinary Shares that were issued to the partiesupon the redesignation of their Pre-IPO Series A Preferred Shares and Pre-IPO Class A Ordinary Shares but does not cover Class A Ordinary Shares that wereacquired by Xiaochuan Wang in the public market following the completion of the Company’s IPO. Also in September 2013, the Company paid to the three holders of Pre-IPO Series A Preferred Shares a special dividend in the aggregate amount ofUS$300.9 million, of which Sohu received US$161.2 million, Photon received US$43.0 million, and China Web received US$96.7 million. In December 2013, in connection with the Sogou-Tencent Transactions, Tencent acquired a 45% equity interest in Sogou Information for US$1.5million, and Sohu also acquired a 45% equity interest in Sogou Information for US$1.5 million. Through contractual agreements with Tencent, Sohu, SogouInformation, and the Company’s Chief Executive Officer, Sogou Technology controls all shareholder voting rights in Sogou Information, has the power todirect the activities of Sogou Information, and is the primary beneficiary of Sogou Information; and Tencent, Sohu, and the Company’s Chief ExecutiveOfficer act as Sogou Technology’s nominee shareholders. F-11Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In March 2014, the Company repurchased 14,400,000 Pre-IPO Series A Preferred Shares from China Web for an aggregate purchase price ofUS$47.3 million pursuant to the Repurchase/Put Option Agreement entered into with China Web in September 2013. During the year ended December 31, 2014, the Company repurchased 4,185,800 Pre-IPO Class A Ordinary Shares (as defined below) from non-controlling shareholders, a majority of whom were employees of the Sogou Group, for an aggregate purchase price of US$41.9 million. In September 2015, the Company repurchased from Sohu and Photon, pursuant to the Repurchase Option Agreements entered into inSeptember 2013, 24,000,000 and 6,400,000 Pre-IPO Series A Preferred Shares of Sogou, for aggregate purchase prices of US$78.8 million andUS$21.0 million, respectively. As of December 31, 2016, the Company was obligated to repurchase 720,000 of its Pre-IPO Class A Ordinary Shares (as defined below) from theformer president and chief financial officer of the Sohu Group for an aggregate price of US$7.2 million, pursuant to the letter agreements entered betweenSohu and the former president and chief financial officer of the Sohu Group in connection with her resignation. The Company completed the repurchase ofthe 720,000 Class A Ordinary Shares in January 2017. In August 2017, Sohu, Tencent, and the Company entered into a voting agreement that provided for the redesignation of all of the Company’sauthorized and outstanding equity shares outstanding immediately prior to the completion of the IPO into either Class A Ordinary Shares or Class B OrdinaryShares effective upon the completion of the IPO and also provides, among things, that, following the completion of the IPO, subject to certain conditions, forso long as Sohu and Tencent together hold a majority of the combined voting power of the Company’s Class A Ordinary Shares and Class B Ordinary Shares,Sohu will have the right to appoint a majority of the Company’s Board of Directors. Under the amended and restated articles of association of the Companythat took effect upon the completion of the IPO (the “Amended and Restated Articles”), the Class A Ordinary Shares are entitled to one vote per share and theClass B Ordinary Shares, which are held solely by Sohu and Tencent, are entitled to 10 votes per share. In November, 2017, the Company completed the IPO on the New York Stock Exchange. In the offering, 50,643,856 American depositary shares(“ADSs”), representing 50,643,856 Class A Ordinary Shares, were issued and sold to the public at a price of US$13.00 per ADS. The net proceeds to theCompany from the IPO, after deducting commissions and offering expenses, were approximately $622.1 million. Upon the completion of the IPO, inaccordance with the voting agreement entered among Sohu, Tencent, and the Company in August 2017, the Company completed the redesignation on a one-for-one basis of: (i) the 127,200,000 Pre-IPO Class A Ordinary Shares held by Sohu and the 6,757,875 Pre-IPO Class A Ordinary Shares and 79,368,421 Pre-IPO Class B Ordinary Shares held by Tencent into Class B Ordinary Shares; (ii) the 32,000,000 Pre-IPO Series A Preferred Shares held by Photon into Class AOrdinary Shares; (iii) the 65,431,579 Pre-IPO Series B Preferred Shares held by Tencent into Class B Ordinary Shares; (iv) the remaining Pre-IPO Class AOrdinary Share into Class A Ordinary Shares. 3. SIGNIFICANT ACCOUNTING POLICIES a. Basis of Presentation, Principle of Consolidation and Use of Estimates Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ofAmerica (“US GAAP”) and on a going concern basis. Principle of Consolidation The accompanying consolidated financial statements include the financial statements of the Company, its subsidiaries and VIEs for which Sogou isthe ultimate primary beneficiary. All significant intra-company balances and transactions within the Sogou Group have been eliminated upon consolidation.See Note 22—VIEs for discussion of the consolidation of the VIEs. F-12Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Use of Estimates The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management bases the estimates onhistorical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from theseestimates. Identified below are the accounting policies that reflect the Sogou Group’s most significant estimates and judgments, and those that the SogouGroup believes are the most critical for fully understanding and evaluating its consolidated financial statements. b. Functional Currency and Foreign Currency Translation Functional Currency An entity’s functional currency is the currency of the primary economic environment in which it operates; normally that is the currency of theenvironment in which it primarily generates and expends cash. It is essential that management use its judgment to determine the functional currency byassessing various indicators, such as cash flows, product and service prices and markets, expenses, financing and intra-company transactions andarrangements. The functional currency of the Company and the Company’s subsidiaries in the BVI and Hong Kong is the United States dollar(the “U.S. dollar”), while the functional currency of the Company’s subsidiaries and VIEs in the PRC is the Renminbi (the “RMB”). Foreign Currency Translation The Sogou Group uses the U.S. dollar as its reporting currency. In the consolidated financial statements, the financial information of the Company’ssubsidiaries and VIEs in the PRC, which use the RMB as their functional currency, has been translated into U.S. dollars. Assets and liabilities are translatedfrom the functional currency at the exchange rates on the balance sheet date; equity amounts are translated at historical exchange rates; and revenues,expenses, gains, and losses are translated using the average rates in effect during the reporting period. Translation adjustments are reported as foreigncurrency translation adjustments and are shown as a separate component of other comprehensive income or loss in the consolidated statements of changes inshareholders’ (deficit)/equity. Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using theexchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Foreign exchange gains and losses resulting from the settlement of such transactions andfrom re-measurement at period end are recognized in the consolidated statements of comprehensive income. c. Cash and Cash Equivalents Cash and cash equivalents consist of cash, time deposits with original maturities of three months or less, and demand deposits. d. Short-term Investments Short-term investments consist of time deposits with original maturities of more than three months and investments in financial instruments with avariable interest rate indexed to performance of underlying assets. For time deposits with original maturities of more than three months, fair values aredetermined based on the pervasive interest rates in the market. The Sogou Group classifies the valuation techniques that use the pervasive interest rates inputas Level 2 of fair value measurements. For investments in financial instruments with a variable interest rate indexed to performance of underlying assets, inaccordance with ASC 825, the Sogou Group elects the fair value method at the date of initial recognition and carries these investments at fair value. Changesin the fair value are reflected in the consolidated statements of comprehensive income as other income/(expenses), net. To estimate fair value, the SogouGroup refers to the quoted rate of return provided by banks at the end of each period using the discounted cash flow method. The Sogou Group classifies thevaluation techniques that use these inputs as Level 2 of fair value measurements (see Note 3z—Fair Value of Financial Instruments). F-13Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents e. Accounts Receivable, Net The carrying value of accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not becollected. Management makes estimations of the collectability of accounts receivable. In estimating the general allowance, many factors are considered,including reviewing delinquent accounts receivable, performing aging analyses and customer credit analyses, and analyzing historical bad debt records andcurrent economic trends. Additional allowance for specific doubtful accounts might be made if the financial conditions of the customers of the Sogou Groupdeteriorate, resulting in their inability to make payments due to the Sogou Group. f. Short-term Receivables and Payables Prepaid and other current assets are financial assets with carrying values that approximate fair value due to their short term nature. Accounts payable,receipts in advance and accrued liabilities are financial liabilities with carrying values that approximate fair value due to their short term nature. g. Long-term Investments Investments in entities are recorded as equity investments under long-term investments. For entities over which the Sogou Group does not havesignificant influence, the cost method is applied, as there is no readily determinable fair value; for entities over which the Sogou Group can exercisesignificant influence but in which it does not own a majority equity interest or control, the equity method is applied. For cost method investments, the SogouGroup carries the investment at historical cost after the date of investment, net of impairments if any. For equity method investments, the Sogou Groupadjusts the carrying amount of an investment and recognizes investment income or loss for its share of the earnings or loss of the investee after the date ofinvestment. As of December 31, 2016 and 2017, the Sogou Group did not have any equity method investments. h. Fixed Assets Fixed assets comprise computer equipment (including servers), leasehold improvement, office furniture, and vehicles. Fixed assets are recorded atcost less accumulated depreciation with no residual value. Depreciation is calculated on a straight-line basis over the estimated useful lives listed below: Fixed Assets Estimated Useful Lives (Years)Computer equipment (including servers)4 - 5Leasehold improvementsThe lesser of the term of the lease or the estimated useful lives of the assetsOffice furniture5Vehicles4 - 10 Repairs and maintenance costs are expensed as incurred, whereas the cost of renewals and betterments that extend the useful lives of fixed assets arecapitalized as additions to the related assets. Gains or losses on the disposal of fixed assets are the difference between the net sale proceeds and the carrying amounts of the relevant assets and arerecognized in the consolidated statements of comprehensive income. i. Goodwill Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the SogouGroup’s acquisitions of interests in its subsidiaries and consolidated VIEs. F-14Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Goodwill is not depreciated or amortized but is tested for impairment at the reporting unit level on an annual basis, and between annual tests whenan event occurs or circumstances change that could indicate that the asset might be impaired. Under ASC 350-20-35, the Sogou Group has the option tochoose whether it will apply the qualitative assessment first and then the quantitative assessment, if necessary, or to apply the quantitative assessmentdirectly. The Sogou Group chooses to directly apply the quantitative impairment test, which consists of a two-step quantitative impairment test. The first stepis comparing the carrying amount of the reporting unit to the fair value of the reporting unit. If the fair value of the reporting unit exceeds the carrying valueof the reporting unit, goodwill is not impaired and the Sogou Group is not required to perform further testing. If the carrying value of the reporting unitexceeds the fair value of the reporting unit, then the Sogou Group must perform the second step of the two-step quantitative goodwill impairment test tomeasure the amount of impairment loss by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigningassets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment inestimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions.Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. j. Intangible Assets Intangible assets primarily comprise copyright, developed technologies, domain names and trademarks and computer software. Intangible assets arerecorded at cost less accumulated amortization with no residual value. Amortization of intangible assets is computed using the straight-line method over theestimated useful lives of the assets as follows: Intangible AssetsEstimated UsefulLives (Years)Copyright5Developed technologies3 - 10Domain names and trademarks5 - 10Computer software3 k. Impairment of Long-lived Assets The carrying values of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value ofan asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Sogou Group measures any impairment of long-livedassets using the projected discounted cash flow method at the asset group level. The estimation of future cash flows requires significant managementjudgment based on the Sogou Group’s historical results and anticipated results and is subject to many factors. The discount rate that is commensurate withthe risk inherent in the Sogou Group’s business model is determined by the Sogou Group’s management. An impairment charge would be recorded if theSogou Group were to determine that the carrying value of long-lived assets may not be recoverable. The impairment to be recognized would be measured bythe amount by which the carrying values of the assets exceeded the fair value of the assets. l. Receipts in Advance Cash payments received in advance from customers are recorded as receipts in advance. The unused cash balances remaining in customers’ accountsare recorded as a liability of the Sogou Group. Receipts in advance are recognized as revenue when all of the revenue recognition criteria are met. m. Mezzanine Equity Mezzanine equity consisted of Pre-IPO Series A Preferred Shares and Pre-IPO Series B Preferred Shares (collectively, the “Pre-IPO Preferred Shares”)issued by the Company. The Pre-IPO Preferred Shares were redeemable upon certain liquidation events, including a change in control, which was deemed tobe a liquidation event, that were considered to be events outside of the Company’s control. Therefore, the Sogou Group classified the Pre-IPO PreferredShares as mezzanine equity. F-15Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In accordance with ASC 480-10, the mezzanine equity was initially measured based on its fair value at date of issue. Since the Pre-IPO PreferredShares were not redeemable until the occurrence of a liquidation event, no subsequent accretion to the respective redemption values was necessary until itwas probable that a liquidation event would occur. No liquidation or deemed liquidation events had occurred or were probable. Accordingly, there were noaccretive costs to the Pre-IPO Preferred Shares recorded for the periods presented. n. Treasury Stock Treasury stock consist of shares repurchased by the Company or that the Company is obligated to repurchase as of the reporting date. Sharesincluded in treasury stock are no longer outstanding. Treasury stock is accounted for under the cost method. Treasury stock also includes ordinary shares that were issued upon the early exercise of options and transferred to trusts for the benefit of the holders,but remained subject to vesting in accordance with the requirements of the applicable option agreements (See “Option Modification” in Note 16—Share-based Compensation). o. Revenue Recognition The Sogou Group is principally engaged in offering search and search-related advertising services including pay-for-click services and other onlineadvertising services. The Sogou Group also offers IVAS, primarily with respect to the operation of Web games and mobile games developed by third partiesand the provision of online reading services, and offers other products and services including smart hardware products. The Sogou Group recognizes revenuewhen persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable, and collectability is reasonably assured, netof value-added tax (“VAT”) and related surcharges. Search and Search-related Advertising Revenues The Sogou Group procures a majority of its search and search-related advertisers through advertising agencies. Discounts and other cash incentivesprovided to the advertising agencies are accounted for as a reduction of revenues. Pay-for-click Services Pay-for-click services enable advertisers’ promotional links to be displayed on the Sogou Group’s search result pages and other Internet propertiesand third parties’ Internet properties where the links are relevant to the subject and content of searches and such properties. For pay-for-click services, theSogou Group introduces Internet users to its advertisers through the auction-based systems and charge advertisers on a per-click basis when the users click onthe displayed links. Revenue for pay-for-click services is recognized on a per-click basis when the users click on the displayed links. Other Online Advertising Services Other online advertising services mainly consist of displaying advertisers’ promotional links on the Sogou Group’s Internet properties. Revenue fortime-based advertising is normally recognized on a straight-line basis over the contract period, provided the Sogou Group’s obligations under the contracthave been met and all revenue recognition criteria have been met. Revenue for performance-based advertising services is recognized when the Company’sobligations under the contract and all revenue recognition criteria have been met. The Sogou Group’s advertising services expand distribution of advertisers’ promotional links and advertisements by leveraging traffic on thirdparties’ Internet properties, including Web content, software, and mobile applications. The Sogou Group is the primary obligor to its advertisers. Paymentsmade to operators of third-party Internet properties are included in the traffic acquisition costs. F-16Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Other Revenues Other revenues consist of IVAS revenues, which are mainly from the operation of Web games and mobile games developed by third parties and theprovision of online reading services, as well as revenues from other products and services, including smart hardware products, offered by the Sogou Group.Other revenues are recognized when the Sogou Group’s obligations under the applicable agreements and all revenue recognition criteria have been met. Barter Transactions Revenues or expenses from barter transactions are recognized at fair value during the period in which the advertisements are provided by the SogouGroup only if the fair value of the advertising services surrendered in the transaction is determinable based on the entity’s own historical practice of receivingcash and cash equivalents, marketable securities, or other consideration that is readily convertible to a known amount of cash for similar advertising frombuyers unrelated to the counterparty in the barter transaction. For the years ended December 31, 2015, 2016 and 2017, the Sogou Group engaged in certainadvertising barter transactions for which the fair value was not determinable and therefore no revenues or expenses derived from these barter transactions wererecognized. p. Cost of Revenues Cost of revenues consist primarily of traffic acquisition cost, bandwidth costs, server and Internet equipment depreciation associated with theoperation of the Sogou Group’s Internet properties, salary and benefits expenses and share-based compensation for staff employed in network operations.Traffic acquisition costs represent the most significant portion of cost of revenues. The Sogou Group’s traffic acquisition costs consist primarily of payments to third parties that direct search queries of their users to Internetproperties of the Sogou Group or distribute the Sogou Group’s advertisers’ promotional links through such third parties’ Internet properties. The trafficacquisitions costs for such arrangements consist primarily of fees that the Sogou Group pays to the third parties based on an agreed-upon unit price andrevenue-sharing payments that the Sogou Group makes to such third parties based on an agreed-upon percentage of revenues generated from users’ clicks. q. Research and Development Expenses Research and development expenses primarily consist of salary and benefits expenses incurred in the research and development of new products andnew functionality added to existing products. Costs incurred during the application development stage for software programs to be used solely to meet internal needs were not material in theyears presented; therefore, no research and development expenses were capitalized as intangible assets. r. Sales and Marketing Expenses Sales and marketing expenses mainly consist of advertising and promotional expenses, salary and benefits expenses, travel expenses, and facilityexpenses. Advertising and promotional expenses generally represent the expenses incurred for promoting the Sogou Group’s products, services and brand.The Sogou Group recognizes advertising and promotional expenses as incurred. Total advertising and promotional expenses were US$67,488, US$94,775,and US$117,553, respectively, for the years ended December 31, 2015, 2016 and 2017. F-17Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents s. Operating Leases Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Paymentsmade under operating leases, including rent concessions, are charged to the consolidated statements of comprehensive income on a straight-line basis overthe lease term. t. Share-based Compensation Expense Share-based compensation expense arises from share-based awards, including share options for the purchase of Sogou ordinary shares, granted by theSogou Group to its management and other key employees, and granted by Sohu to its management and other key employees who to some extent provideservices to the Sogou Group and to certain management and other key employees of the Sogou Group (“Sogou Share-based Awards”); restricted share unitsand share options for the purchase of Sohu common stock granted by Sohu to employees of the Sogou Group (“Sohu Stock-based Awards”); and restrictedshare units granted by Tencent to certain persons who became the Sogou Group’s employees when Tencent’s Soso search-related businesses were transferredto the Sogou Group in September 2013 (“Tencent Share-based Awards”). Sogou Share-based Awards In determining the fair value of share options granted, a binomial option-pricing model (the “BP Model”) is applied. The determination of the fairvalue is affected by the fair value of the ordinary shares as well as assumptions regarding a number of complex and subjective variables, including risk-freeinterest rates, exercise multiples, expected forfeiture rates, the expected share price volatility rates, and expected dividends. The fair values of the ordinaryshares were assessed using the income approach/discounted cash flow method or based on the mid-point of the estimated IPO price range, in each case with adiscount for lack of marketability, given that the shares underlying the awards were not publicly traded at the time of grant. Share-based compensation expense for share options granted to employees is measured based on their grant-date fair values and is recognized overthe estimated period during which the service period requirement and performance target will be met, which is usually within one year, or, for options vestingsubject to an IPO, is recognized on an accelerated basis over the requisite service period after the completion of Sogou’s IPO on November 13, 2017. Thenumber of share-based awards for which the service is not expected to be rendered over the requisite period is estimated, and the related compensationexpense is not recorded for the number of awards so estimated. Share-based compensation expense for share options granted to non-employees is measured at fair value at the earlier of the performancecommitment date or the date service is completed and recognized over the period during which the service is provided. The Sogou Group applies theguidance in ASC 505-50 to measure share options granted to non-employees based on the then-current fair value at each reporting date until the service hasbeen provided and the performance targets have been met. Share-based awards granted by Sohu are deemed to be share-based compensation made by the Sogou Group in exchange for services rendered to theSogou Group, and the Sogou Group recognizes share-based compensation expense accordingly. Because the Sogou Group is not required to reimburse Sohufor such share-based compensation expense, the related amount is recorded as a capital contribution from Sohu. Sohu Stock-based Awards In determining the fair value of Sohu stock options granted, a BP Model is applied; in determining the fair value of restricted stock units granted, thefair value of the underlying shares on the grant dates is applied. Share-based compensation expense for stock options and restricted stock units granted under Sohu stock-based incentive plans is recognized on anaccelerated basis over the requisite service period. The number of share awards for which the service is not expected to be rendered over the requisite period isestimated, and the related compensation expense is not recorded for that number of awards so estimated. F-18Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Tencent Share-based Awards Certain persons who became employees of the Sogou Group when Tencent’s Soso search-related businesses were transferred to the Sogou Group inSeptember 2013 had been granted restricted share units under Tencent’s share award arrangements prior to the transfer of the businesses. Following thetransfer of the businesses, these Tencent restricted share units continue to vest under the original Tencent share award arrangements provided the transferredemployees continue to be employed by the Sogou Group during the requisite service period. After the transfer of the Soso search-related businesses, theSogou Group applied the guidance in ASC 505-50 to measure the related compensation expense, which is deemed to have been incurred by Tencent as aninvestor on the Sogou Group’s behalf, based on the then-current fair value at each reporting date. To determine the then-current fair value of the Tencentrestricted share units granted to these employees, the public market price of the underlying shares at each reporting date was applied. Because the SogouGroup is not required to reimburse Tencent for such share-based compensation expense, the related amount was recorded as a capital contributionfrom Tencent. For Tencent restricted share units that Tencent had granted to employees who transferred to the Sogou Group with the Soso search-relatedbusinesses, compensation expense is recognized by the Sogou Group on an accelerated basis over the requisite service period, and the fair value of the share-based compensation is re-measured at each reporting date until the service has been provided. The number of share-based awards for which the service is notexpected to be rendered over the requisite period is estimated, and no compensation expense is recorded for the number of awards so estimated. The assumptions used in share-based compensation expense recognition represent management’s best estimates, but these estimates involveinherent uncertainties and the application of management judgment. If factors change or different assumptions were used for any given period, the share-based compensation expense could be materially different for that period. Moreover, the estimates of fair value are not intended to predict actual futureevents or the value that ultimately will be realized by employees who receive share-based awards, and subsequent events are not indicative of thereasonableness of the original estimates of fair value made by the Sogou Group for accounting purposes. u. Cost Allocations The Sogou Group’s consolidated statements of comprehensive income comprise all the related costs of operations of the Sogou Group, whichinclude an allocation of certain research and development expenses paid by Sohu for Sogou to provide technical support to the search and search-relatedbusinesses; and Sohu stock-based awards granted to Sogou employees. These allocations are based on a variety of factors, depending upon the nature of theexpenses being allocated, including the number of employees and the percentage of computer system’s workload that is for services provided to Sogou. Total expenses undertaken by Sohu are allocated and included in the Sogou Group’s consolidated statements of comprehensive income as follows: For the Year EndedDecember 31, 2015 2016 2017 Research and development expenses$1,105$788$707Share-based compensation related to Sogou employees90494Total$1,195$837$711 Management believes the basis and amounts of these allocations are reasonable. While the expenses allocated to the Sogou Group for these items arenot necessarily indicative of the expenses that would have been incurred if the Sogou Group had been a separate, stand-alone entity, the Sogou Group doesnot believe that there is any significant difference between the nature and amounts of these allocated expenses and the expenses that would have beenincurred if the Sogou Group had been a separate, stand-alone entity. F-19Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Under an agreement between the Company and Sohu, the Company does not need to repay Sohu for these expenses for share-based compensationrelated to Sogou employees, and research and development expenses allocated from Sohu. Accordingly, the Sogou Group recognizes the related amounts ascapital contributions from Sohu as those expenses are incurred. v. Contribution Under ASC subtopic 720-25, “Contributions Made,” an unconditional promise to give cash that depends only on the passage of time or a demandby the promisee for performance is to be recognized as a payable and as an expense in the period the promise is made. In the second quarter of 2016, theSogou Group recognized a one-time expense of US$27.8 million arising from a donation by Sogou to Tsinghua University related to setting up a jointresearch institute focusing on artificial intelligence technology. The donation expense was reflected in other income/(expenses), net in the consolidatedstatements of comprehensive income. w. Income Taxes and Uncertain Tax Positions Income Taxes Income taxes are accounted for using an asset and liability approach which requires the recognition of income taxes payable or refundable for thecurrent year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Sogou Group’s financialstatements or tax returns. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilitiesand are measured using tax rates and tax laws in effect as of the measurement date. Deferred tax assets are reduced by a valuation allowance if, based onavailable evidence, it is considered more likely than not that some portion of or all of the deferred tax assets will not be realized. In making suchdetermination, the Sogou Group considers factors including (i) future reversals of existing taxable temporary differences, (ii) future profitability, and (iii) taxplanning strategies. Uncertain Tax Positions In order to assess uncertain tax positions, the Sogou Group applies a more likely than not threshold and a two-step approach for financial statementrecognition and measurement of its tax position. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if theweight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related litigation processesand appeals, if any. The second step is to measure the tax benefit as the largest amount that is more likely than not to be realized upon settlement. Significantjudgment is required in evaluating the Sogou Group’s uncertain tax positions and determining its provision for income taxes. The Sogou Group did not haveany significant interest or penalties associated with tax positions for the years ended December 31, 2015, 2016 and 2017. As of December 31, 2015, 2016 and2017, the Sogou Group did not have any significant unrecognized uncertain tax positions, and did not recognize any liability for unrecognized tax benefitsor any significant interest or penalties associated with such uncertain tax positions. x. Comprehensive Income Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstancesexcluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive loss, as presented in theSogou Group’s consolidated balance sheets, consists of the Sogou Group’s cumulative foreign currency translation adjustment. F-20Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents y. Net (Loss)/Income per Ordinary Share Basic net (loss)/income per ordinary share are computed using the weighted average number of ordinary shares outstanding during the year. Dilutednet (loss)/income per ordinary share are computed using the weighted average number of ordinary shares and, if dilutive, potential ordinary sharesoutstanding during the year. Potential ordinary shares consist of shares issuable upon the exercise of share options, vesting and settlement of restricted shareunits, and, for periods prior to the completion of the IPO, conversion of Pre-IPO Preferred Shares. Potential ordinary shares issuable upon the exercise of shareoptions are accounted for in the computation of diluted net (loss)/income per ordinary share using the treasury stock method. The dilutive effect of share-based awards with performance requirements is not considered before the performance targets are actually met. Potential ordinary shares issuable upon theconversion of Pre-IPO Preferred Shares are accounted for in the computation of diluted net (loss)/income per ordinary share for periods prior to the completionof the IPO, using the if-converted method. Potential ordinary shares are not included in the denominator of the diluted net (loss)/income per share calculationwhen inclusion of such shares would be anti-dilutive. The two-class method was used to calculate the basic net (loss)/income per ordinary share for periods prior to the completion of the IPO, since thePre-IPO Preferred Shares were entitled to participation with ordinary shares in the Company’s undistributed net (loss)/income and therefore were deemed to beparticipating securities. Net (loss)/income per ordinary share are computed on Class A Ordinary Shares and Class B Ordinary Shares together, because bothclasses have the same dividend rights in the Company’s undistributed net income. z. Fair Value of Financial Instruments U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded atfair value, the Sogou Group considers the principal or most advantageous market in which a transaction would be expected to occur and considersassumptions that market participants would use when pricing the asset or liability. U.S. GAAP establishes a three-tier hierarchy to prioritize the inputs used in the valuation methodologies in measuring the fair value of financialinstruments. This hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fairvalue. The three-tier fair value hierarchy is: Level 1—observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—other inputs that are directly or indirectly observable in the marketplace. Level 3—unobservable inputs that are supported by little or no market activity. The Sogou Group’s financial instruments primarily include cash equivalents, short-term investments, accounts receivable, accounts payables,accrued and other short-term liabilities, and amounts due from/to related parties. The carrying value of these balances approximates their fair value due to thecurrent and short term nature of the balances. aa. Segment Reporting Based on the criteria established by ASC 280 “Segment Reporting”, the Sogou Group’s chief operating decision maker has been identified as theChief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing the performance of the SogouGroup. The Sogou Group does not distinguish between markets or segments for the purpose of internal reporting. Hence, the Sogou Group has only oneoperating segment. As the Sogou Group’s long-lived assets and revenue are substantially located in and derived from the PRC, no geographical segmentsare presented. F-21Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents bb. Recently Issued Accounting Pronouncements Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Thisguidance supersedes current guidance on revenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related tothe nature, amount, timing, and uncertainty of revenue recognition. For publicly-traded business entities, Topic 606 is effective for fiscal years, and interimperiods within those fiscal years, beginning after December 15, 2017. The Sogou Group has adopted the standard effective January 1, 2018 using themodified prospective method. The Sogou Group has substantially completed the assessments related to the standard and quantification of the related impacton its consolidated financial statements, and noted that the only major, but not material, impact of the standard relates to the accounting for advertising bartertransactions, as the provision of Topic 605 exempting advertising-for-advertising barter transactions from being reported at fair value has been superseded.Revenues and expenses related to advertising barter transactions will be recognized beginning January 1, 2018 in accordance with the new guidance. Recognition and Measurement of Financial Assets and Financial Liabilities. On January 5, 2016, the FASB issued ASU 2016-01, “Recognition andMeasurement of Financial Assets and Financial Liabilities”, which amends certain aspects of recognition, measurement, presentation and disclosure offinancial instruments. This amendment requires all equity investments to be measured at fair value, with changes in the fair value recognized through netincome (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). This standard will beeffective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The most significant impact on theconsolidated financial statements of Sogou Group relates to the recognition and measurement of equity investments at fair value in its consolidatedstatements of income. The Sogou Group has elected to use the measurement alternative defined as cost, less impairments, adjusted by observable pricechanges. The Sogou Group will apply the new standard beginning January 1, 2018. Leases. On February 25, 2016, the FASB issued ASU 2016-02, “Leases”, which specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet.The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generallystraight-line basis. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. ASU 2016-02 iseffective for publicly-traded companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Earlyadoption is permitted. The Sogou Group is currently evaluating the impact of adopting this standard on its consolidated financial statements. Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows—Classification of Certain Cash Receipts andCash Payments”, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance iseffective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption ispermitted. The Sogou Group does not expect the standard to have a material impact on its consolidated financial statements. Business Combinations. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of aBusiness”, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should beaccounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, includinginterim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The SogouGroup will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions or disposals of assets or businesses. Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued ASU 2017-04 “Simplifying the Test for Goodwill Impairment.”The guidance removes Step 2 of goodwill impairment tests, which requires a hypothetical purchase price allocation. A goodwill impairment will now be theamount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance is to be adopted on aprospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim orannual goodwill impairment tests performed on testing dates after January 1, 2017. The Sogou Group is currently evaluating the impact of adopting thisstandard on its consolidated financial statements. F-22Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Compensation—Stock Compensation. In May 2017, the FASB issue ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope ofModification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity toapply modification accounting in Topic 718. This standard is effective for all entities for annual periods, and interim periods within those annual periods,beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reportingperiods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yetbeen made available for issuance. The Sogou Group does not expect this standard to have a material impact on its consolidated financial statements. 4. CONCENTRATION OF RISK a. Concentration of Credit Risk Financial instruments that potentially expose the Sogou Group to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Cash and Cash Equivalents and Short-term Investments As of December 31, 2016, approximately 62% of the Sogou Group’s cash and cash equivalents and short-term investments were held in eightfinancial institutions in mainland China, and approximately 34% of the Sogou Group’s cash and cash equivalents and short-term investments were held inone financial institution in Macao. The remaining cash and cash equivalents and short-term investments were held in two financial institutions inHong Kong. As of December 31, 2017, approximately 30% of the Sogou Group’s cash and cash equivalents and short-term investments were held in eightfinancial institutions in mainland China, approximately 29% of the Sogou Group’s cash and cash equivalents and short-term investments were held in threefinancial institutions in Hong Kong, and approximately 25% of the Sogou Group’s cash and cash equivalents and short-term investments were held in onefinancial institution in Macau. The remaining cash and cash equivalents and short-term investments were held in one financial institutions in New York. The Sogou Group holds its cash and cash equivalents and short-term investments at financial institutions that are among the largest and mostrespected in the PRC and at international financial institutions with high ratings from internationally-recognized rating agencies. The Sogou Group’smanagement chooses these institutions because of their reputations and track records for stability, and their known large cash reserves, and managementperiodically reviews these institutions’ reputations, track records, and reported reserves. Management expects that any additional institutions that the Sogou Group uses for its cash and cash equivalents and short-term investments will bechosen with similar criteria for soundness. As a further means of managing its credit risk, the Sogou Group holds its cash and bank deposits in a number ofdifferent financial institutions. As of December 31, 2016 and 2017, the Sogou Group held its cash and cash equivalents and short-term investments indifferent financial institutions and held no more than approximately 48% and 29% of its total cash and cash equivalents and short-term investments at anysingle institution. Under PRC law, it is generally required that a commercial bank in the PRC that holds third party cash deposits protect the depositors’ rights over andinterests in their deposited money; PRC banks are subject to a series of risk control regulatory standards; and PRC bank regulatory authorities are empoweredto take over the operation and management of any PRC bank that faces a material credit crisis. Accounts Receivable As of December 31, 2016 and 2017, the Sogou Group’s accounts receivable from its top three customers represented 54%, and 43%, respectively, ofthe Sogou Group’s aggregate accounts receivable balance, and a single customer accounted for 37%, and 23%, respectively, of such balance. F-23Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Management assesses the credit quality of and sets credit limits on the Sogou Group’s customers, taking into account their financial position, theavailability of guarantees from third parties, their credit history, and other factors such as current market conditions. In estimating the Sogou Group’s generalallowance for doubtful accounts, management considers many factors, including among other things the results of reviews of delinquent accounts, aginganalyses and customer credit analyses, and analysis of historical bad debt records and current economic trends. As of December 31, 2016 and 2017, there werenil and US$384 allowance for doubtful accounts provided by the Sogou Group. b. Foreign Currency Exchange Rate Risks While the reporting currency of the Sogou Group is the U.S. dollar, to date almost all of its revenues and costs, almost half of its assets, and almost allof its liabilities are denominated in RMB. As a result, the Sogou Group is exposed to foreign exchange risk, as its revenues and assets may be affected byfluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of the Sogou Group’s RMBrevenues and assets as expressed in its U.S. dollar financial statements will decline. 5. CASH AND CASH EQUIVALENTS As of December 31, 2016 2017 Cash$62,285$131,407Cash equivalents223,793562,800Total$286,078$694,207 6. ACCOUNTS RECEIVABLE, NET As of December 31, 2016 2017 Accounts receivable$40,532$70,351Less: allowance for doubtful accounts—(384)Total$40,532$69,967 The following table presents the movement of the allowance for doubtful accounts: As of December 31,2015 2016 2017Beginning balance$25$—$—Additional provision for bad debt——378Written off(25)——Foreign currency translation adjustment——6Ending balance$—$—$384 F-24Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 7. PREPAID AND OTHER CURRENT ASSETS As of December 31, 2016 2017 Advances to suppliers$1,585$5,060Inventories5212,587Interest receivable5011,961Business collaboration deposits—1,775Housing loans to employees1,0831,293Deductible input VAT1,534748Employee advances620457Prepaid content and licenses47038Others5211,172Total$6,835$15,091 8. LONG-TERM INVESTMENTS As of December 31, 2016 and 2017, the aggregate carrying value of all cost-method investments was US$22,585 and US$30,152, respectively,mainly consisting of the Sogou Group’s investment in the preferred shares of Zhihu Technology Limited (“Zhihu”). Nil, nil and US$230 impairment loss wasrecognized for the years ended December 31, 2015, 2016 and 2017. As of December 31, 2017, the Sogou Group had invested a cumulative total of US$18,857 in Zhihu, a company that engages primarily in thebusiness of operating an online question and answer-based knowledge and information sharing platform. The Sogou Group accounted for the investment inZhihu using the cost method, since the Sogou Group does not have significant influence over Zhihu and the underlying shares are not considered in-substance common stock. 9. FIXED ASSETS, NET As of December 31, 2016 2017 Computer equipment (including servers)$178,334$236,470Leasehold improvements7,4816,358Office furniture1,7791,925Vehicles318337Fixed assets, gross187,912245,090Less: Accumulated depreciation(70,890)(105,881)Fixed assets, net$117,022$139,209 For the years ended December 31, 2015, 2016 and 2017, depreciation expenses were US$31,368, US$33,886, and US$48,205, respectively. Noimpairment loss was recognized for the years ended December 31, 2015, 2016, and 2017. F-25Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 10. GOODWILL As of December 31, 2016 2017 Beginning balance$5,945$5,565Foreign currency translation adjustment(380)343Ending balance$5,565$5,908 No impairment loss was recognized for the years ended December 31, 2015, 2016, and 2017. As of December 31, 2017, no accumulated goodwillimpairment has been provided. 11. INTANGIBLE ASSETS, NET As of December 31, 2016 Items Cost AccumulatedAmortization Net Value Copyright$3,178$(2,093)$1,085Domain names and trademarks2,075(1,586)489Computer software1,091(413)678Developed technologies577(380)197Others173(144)29Total$7,094$(4,616)$2,478 As of December 31, 2017 Items Cost AccumulatedAmortization Net Value Copyright$3,375$(2,897)$478Domain names and trademarks1,434(1,196)238Computer software1,018(493)525Developed technologies612(525)87Total$6,439$(5,111)$1,328 For the years ended December 31, 2015, 2016 and 2017, amortization expenses were US$1,412, US$1,314, and US$1,389, respectively. Noimpairment loss was recognized for the years ended December 31, 2015, 2016 and 2017. As of December 31, 2017, intangible assets amortization expense for future years is expected to be as follows: Intangible AssetsAmortization Expense2018$1,1162019183202072021720227Thereafter8Total expected amortization expense$1,328 F-26Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 12. ACCRUED AND OTHER SHORT-TERM LIABILITIES As of December 31,2016 2017Accrued advertising and promotion expenses$42,024$65,039Contract deposits from customers19,06523,832Accrued professional fees14,09522,529Accrued bandwidth costs10,49910,644Unpaid installment of donation to Tsinghua University17,2997,652Payables to Web game developers3,8176,725Guarantee liability—5,148Early exercise of Sogou share options with trust arrangements (See “Option Modification” in Note 16—Share-based Compensation)4,5044,503Contingent litigation liabilities (See “Litigation” in Note 21—Commitments and Contingencies)2,8903,822Accrued content and license fees2,2892,036Accrual for fixed assets purchases1,079658Payable to repurchase Pre-IPO Class A Ordinary Shares (See Note 15—Treasury stock)7,200—Others6,89011,681Total$131,651$164,269 (1) The guarantee liability is in relation to a trial Internet finance program. 13. FAIR VALUE MEASUREMENT The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2016, and2017: Fair Value Measurements at ReportingDate UsingItemsAs ofDecember 31,2016Quoted Pricesin Active Marketsfor Identical Assets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Cash equivalents$ 223,793$—$223,793$—Total$ 223,793$—$223,793$— Fair Value Measurements at ReportingDate UsingItemsAs ofDecember 31,2017Quoted Pricesin Active Marketsfor Identical Assets(Level 1)SignificantOtherObservableInputs(Level 2)SignificantUnobservableInputs(Level 3)Cash equivalents$ 562,800$—$562,800$—Short-term investments339,006—339,006—Total$ 901,806$—$901,806$— F-27(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Cash Equivalents The Sogou Group’s cash equivalents consist of time deposits with original maturities of three months or less, and demand deposits that are readilyconvertible to known amounts of cash. The fair values of cash equivalents are determined based on the pervasive interest rates in the market. The SogouGroup classifies the valuation techniques that use the pervasive interest rates input as Level 2 of fair value measurements. Short-term Investments The Sogou Group invested in time deposits with original maturities of more than three months and financial instruments issued by commercialbanks in China which had variable interest rates indexed to the performance of underlying assets. Since the investments’ maturity dates are within one year,they are classified as short-term investments. For time deposits with original maturities of more than three months, the fair values are determined based on the pervasive interest rates in themarket. The Sogou Group classifies the valuation techniques that use the pervasive interest rates input as Level 2 of fair value measurements. For investments in financial instruments with a variable interest rate indexed to performance of underlying assets, in accordance with ASC 825, theSogou Group elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflectedin the consolidated statements of comprehensive income as other income/(expenses), net. To estimate fair value, the Sogou Group refers to the quoted rate ofreturn provided by banks at the end of each period using the discounted cash flow method. The Sogou Group classifies the fair value measurements asLevel 2 of fair value measurements. The Sogou Group recorded gains resulting from changes in the fair value of financial instruments of nil, US$823, andUS$927, respectively, in other income for the years ended December 31, 2015, 2016, and 2017. 14. PREFERRED SHARES The following table presents the movement for the Company’s Pre-IPO Preferred Shares: Pre-IPO Series APreferred Shares Pre-IPO Series BPreferred SharesSharesAmount Shares AmountBalance as of December 31, 201532,000,000$20,00065,431,579$224,426Adjustment of issuance cost of Pre-IPO Series B Preferred Shares———(22)Balance as of December 31, 201632,000,00020,00065,431,579224,404Redesignation of 32,000,000 Pre-IPO Series A Preferred Sharesinto Class A Ordinary Shares(32,000,000)(20,000)——Redesignation of 65,431,579 Pre-IPO Series B Preferred Sharesinto Class B Ordinary Shares——(65,431,579)(224,404)Balance as of December 31, 2017—$——$— The Sogou Group has determined that there was no embedded beneficial conversion feature attributable to the Pre-IPO Preferred Shares because theinitial effective conversion price of the Pre-IPO Preferred Shares was higher than the fair value of the Company’s pre-IPO ordinary shares. The Sogou Group classified the Pre-IPO Preferred Shares as mezzanine equity, as the Pre-IPO Preferred Shares were redeemable upon certainliquidation events, including a change in control, which is deemed to be a liquidation event, that are considered to be events outside of the Company’scontrol. F-28Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The following is a summary of some of the key terms of the Pre-IPO Preferred Shares applicable for the periods before the IPO. Dividend Rights The Company could not declare or pay dividends on its Pre-IPO Class A Ordinary Shares or Pre-IPO Class B Ordinary Shares (collectively, “Pre-IPOOrdinary Shares”) unless the holders of the Pre-IPO Preferred Shares then outstanding first received a dividend on each outstanding Pre-IPO Preferred Share inan amount at least equal to the sum of (i) the dividends that would have been payable to the holder of such Pre-IPO Preferred Share if such share had beenconverted into Pre-IPO Ordinary Shares, at the then-applicable conversion rate, immediately prior to the record date for such dividend, and (ii) all accrued andunpaid dividends (“Accrued Dividends”). Dividends were calculated from the date of issuance of the Pre-IPO Series A Preferred Shares at the rate per annumof US$0.0375 per Pre-IPO Series A Preferred Share and from the date of issuance of the Pre-IPO Series B Preferred Shares at the rate per annum of US$0.411per Pre-IPO Series B Preferred Share. Liquidation Rights In the event of any “Liquidation Event,” such as the liquidation, dissolution, or winding up of the Company; a merger or consolidation of theCompany resulting in a change of control; the sale of substantially all of the Company’s assets; or similar events, the holders of Pre-IPO Series B PreferredShares were entitled to receive, prior and in preference to any distribution to ordinary shareholders, an amount per share equal to the greater of (i) US$6.847plus Accrued Dividends or (ii) such amount per share as would have been payable if the Pre-IPO Series B Preferred Shares had been converted into Pre-IPOOrdinary Shares prior to the Liquidation Event, and holders of Pre-IPO Series A Preferred Shares were entitled to receive, after payment to the holders of thePre-IPO Series B Preferred Shares but before any payment to holders of Pre-IPO Ordinary Shares, an amount equal to the greater of (i) 1.3 times their originalinvestment in Pre-IPO Series A Preferred Shares plus Accrued Dividends or (ii) such amount per share as would be payable if the Pre-IPO Series A PreferredShares had been converted into Pre-IPO Ordinary Shares immediately prior to the Liquidation Event. Redemption Rights The Pre-IPO Preferred Shares were not redeemable at the option of the holders. Conversion Rights Each Pre-IPO Preferred Share was convertible at any time at the option of the holder, without the payment of additional consideration by the holder.Each Pre-IPO Preferred Share was convertible into such number of Pre-IPO Class A Ordinary Shares as was determined, in the case of Pre-IPO Series APreferred Shares, by dividing US$0.625 by the then-effective conversion price for Pre-IPO Series A Preferred Shares, which was initially US$0.625 and, in thecase of Pre-IPO Series B Preferred Shares, by dividing US$7.267 by the then-effective conversion price for Pre-IPO Series B Preferred Shares, which wasinitially US$7.267. The conversion prices of the Pre-IPO Preferred Shares were subject to adjustment on a weighted average basis upon the issuance ofadditional equity shares, or securities convertible into equity shares, at a price per share less than US$0.625, in the case of Pre-IPO Series A Preferred Shares,or less than US$7.267, in the case of Pre-IPO Series B Preferred Shares, subject to certain customary exceptions, such as shares issued pursuant to the Sogou2010 Share Incentive Plan. Each Pre-IPO Preferred Share was subject to automatic conversion into Pre-IPO Class A Ordinary Shares upon the closing of aninitial public offering of the Company with certain parameters based on the then-effective conversion ratio of such Pre-IPO Preferred Share, which was one-for-one for both Pre-IPO Series A Preferred Shares and Pre-IPO Series B Preferred Shares. Voting Rights Each holder of Pre-IPO Preferred Shares was entitled to cast the number of votes equal to the number of Pre-IPO Class A Ordinary Shares into whichthe Pre-IPO Preferred Shares held by such holder were then convertible. F-29Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Other Rights The holders of Pre-IPO Preferred Shares had various other rights typical of preferred share investments. 15. TREASURY STOCK Pursuant to letter agreements entered between Sohu and the former president and chief financial officer of the Sohu Group in connection with herresignation, as of December 31, 2016, the Company was obligated to repurchase 720,000 of its Pre-IPO Class A Ordinary Shares from the former president andchief financial officer of the Sohu Group for an aggregate price of US$7,200. The Company included the 720,000 Pre-IPO Class A Ordinary Shares in treasurystock at their repurchase cost of US$3,190, which was the fair value of the Pre-IPO Class A Ordinary Shares as of the repurchase date. The US$4,010 differencebetween the total repurchase price and the fair value of the repurchased shares as of the repurchase date is regarded as compensation paid to the formerpresident and chief financial officer of the Sohu Group for her contribution to the Sogou Group and was recognized as share-based compensation expense in2016. The Company completed the repurchase of the 720,000 Pre-IPO Class A Ordinary Shares in January, 2017. The treasury stock account also includes 11,370,000 and 10,327,500 Class A ordinary shares that were issued upon the early exercise of options(See “Option Modification” in Note 16—Share-based Compensation), but remained subject to original vesting restrictions both before and after exercise, andremained unvested as of December 31, 2016 and 2017, respectively. Although the Class A Ordinary Shares have been determined to be treasury stock foraccounting purposes, they are outstanding for legal purposes given the early exercise of options and the creation of trusts with the original option grantees asbeneficiaries thereafter. 16. SHARE-BASED COMPENSATION Compensation expense recognized for share-based awards granted by the Sogou Group, Sohu, and Tencent, respectively, was as follows: For the Year Ended December 31,20152016 2017Share-based compensation expense related toSogou share-based awards$8,305$12,049$23,037Sohu stock-based awards90494Tencent share-based awards1,984763682Total$10,379$12,861$23,723 There was no capitalized share-based compensation expense for the years ended December 31, 2015, 2016 and 2017. a. Sogou Share-based Awards Sogou 2010 Share Incentive Plan The Company adopted a share incentive plan on October 20, 2010 and adopted an amendment to the plan effective August 22, 2014 that increasedthe aggregate number of Sogou Class A Ordinary Shares issuable under the plan to 41,500,000 (as amended to date, the “Sogou 2010 Share Incentive Plan”).Awards of share rights may be granted under the Sogou 2010 Share Incentive Plan to management and other key employees of the Sogou Group and of anypresent or future parents or subsidiaries or VIEs of the Sogou Group. The maximum term of any share incentive award granted under the Sogou 2010 ShareIncentive Plan is ten years from the grant date. The Sogou 2010 Share Incentive Plan will expire on October 19, 2020. As of December 31, 2017, the SogouGroup had contractually granted options for the purchase of 39,798,377 Class A Ordinary Shares under the 2010 Sogou Share Incentive Plan. F-30Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Of the contractually-granted options for the purchase of 39,798,377 Class A Ordinary Shares, options for the purchase of 32,548,377 Class AOrdinary Shares vest and become exercisable in installments, with each installment vesting upon a service period requirement being met, as well as the SogouGroup’s achievement of performance targets for the corresponding period. Subject to achievement of the applicable performance targets, options for thepurchase of 31,463,750 Class A Ordinary Shares vest and become exercisable in four equal installments and options for the purchase of 1,084,627 ordinaryshares vest and become exercisable in two to four installments over varying periods. For purposes of recognition of share-based compensation expense, eachinstallment is considered to be granted as of the date that the performance targets have been set. As of December 31, 2017, the Sogou Group had grantedoptions for the purchase of 27,666,405 Class A Ordinary Shares under the Sogou 2010 Share Incentive Plan and options for the purchase of26,800,559 Class A Ordinary Shares had become vested and exercisable because both the service period and the performance requirements had been met. Ofsuch vested options, options for the purchase of 25,163,373 Class A Ordinary Shares had been exercised. Of the contractually-granted options for the purchase of 39,798,377 Class A Ordinary Shares, vesting of options for the purchase of 7,250,000Class A Ordinary Shares was subject to completion of an IPO and, of such options, options for the purchase of 7,200,000 Class A Ordinary Shares vest andbecome exercisable in five equal installments, with (i) the first installment vesting upon the expiration of all underwriters’ lockup periods applicable to theCompany’s IPO and (ii) each of the four subsequent installments vesting on the first, second, third, and fourth anniversary dates, respectively, of thecompletion of the IPO. The remaining options for the purchase of 50,000 Class A Ordinary Shares vest and become exercisable on the first anniversary oftheir grant date. As of December 31, 2017, for purposes of recognition of share-based compensation expense, the Sogou Group had granted share options for thepurchase of 34,916,405 Class A Ordinary Shares under the Sogou 2010 Incentive Plan, of which options for the purchase of 9,753,032 Class A OrdinaryShares were outstanding. A summary of share option activity under the Sogou 2010 Share Incentive Plan as of and for the year ended 2017 is presentedbelow: Numberof Shares(In thousands)WeightedAverageExercisePrice WeightedAverageRemainingContractualLife (Years) AggregateIntrinsicValue Outstanding as of January 1, 20179,451$0.4766.31Granted2,4960.001Exercised(2,168)0.001Forfeited/Expired(26)0.001Outstanding as of December 31, 20179,753$0.4625.56$108,340Vested as of December 31, 2017 and expected to vestthereafter9,694$0.4645.54$107,660Exercisable as of December 31, 20171,637$0.0015.68$18,941 (1) The aggregate intrinsic value in the preceding table represents the difference between the closing price of Sogou Class A Ordinary Shares of $11.57on the last trading day in 2017 and the exercise price of the options. For the years ended December 31, 2015, 2016 and 2017, total share-based compensation expense recognized for share options under the Sogou2010 Share Incentive Plan was US$7,343, US$7,595 and US$23,037, respectively. As of December 31, 2017, there was US$8,718 of unrecognizedcompensation expense related to unvested share options granted under the Sogou 2010 Share Incentive Plan, which is expected to be recognized over aweighted average period of 0.84 years. For the years ended December 31, 2015, 2016 and 2017, the total fair values of the share options vested on their respective vesting dates wereUS$14,596, US$9,682, and US$21,710, respectively. For the years ended December 31, 2015, 2016, and 2017, total intrinsic value of options exercised was US$13,805, US$15,174, and US$11,136,respectively. The fair values of the Class A Ordinary Shares were assessed using the income approach/discounted cash flow method or based on the mid-point ofthe estimated IPO price range, in each case with a discount for lack of marketability because the Class A Ordinary Shares underlying the award were notpublicly traded at the time of grant, and was determined with the assistance of a qualified professional appraiser using management’s estimates andassumptions. The assessment required complex and subjective judgments regarding the Sogou Group’s projected financial and operating results, its uniquebusiness risks, the liquidity of its ordinary shares, and its operating history and prospects at the time the grants were made. F-31(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The fair value of the share options granted under the Sogou 2010 Incentive Plan was estimated on the date of grant using the BP Model with thefollowing assumptions used: 201520162017Average risk-free interest rate2.48% ~ 2.77%1.90% ~ 2.77%2.14% ~ 3.00%Exercise multiple2 ~ 32 ~ 32 ~ 3Expected forfeiture rate (post-vesting)1% ~ 12%0% ~ 12%0% ~ 12%Weighted average expected option life877Volatility rate47% ~ 51%43% ~ 50%39% ~ 47%Dividend yield0%0%0%Weighted average fair value of share options3.583.2610.35 The Sogou Group estimated the risk-free rate based on the market yields of U.S. Treasury securities with an estimated country-risk differential as ofthe valuation date. An exercise multiple was estimated as the ratio of the fair value of the Class A Ordinary Shares over the exercise prices as of the time theoptions would be expected to be exercised, based on consideration of research studies regarding exercise patterns based on historical statistical data. In theSogou Group’s valuation analysis, a multiple of three was applied for management and a multiple of two was applied for other key employees. The SogouGroup estimated the forfeiture rate to be 0% or 1% for share options granted to management and 12% for share options granted to other key employees. Asthere was no trading market for the underlying ordinary shares prior to the completion of the Company’s IPO, the expected volatility at the valuation datewas estimated based on the historical volatility of comparable companies for the period before the grant date with length commensurate with the expectedterm of the options. The Company has no history or expectation of paying dividends on its ordinary shares. Accordingly, the dividend yield was estimated tobe 0%. Sogou 2017 Share Incentive Plan In October 2017, the Company adopted a share incentive plan (the “Sogou 2017 Share Incentive Plan”), which provides that the aggregate numberof Sogou Class A Ordinary Shares issuable under the plan is 28,000,000. Share incentive awards may be granted under the Sogou 2017 Share Incentive Planto our management and employees and of any of our present or future parents or subsidiaries. The maximum term of any share incentive award granted underthe Sogou 2017 Share Incentive Plan is ten years from the grant date. As of December 31, 2017, no options were contractually granted under the 2017 SogouShare Incentive Plan. Sohu Management Sogou Share Option Arrangement Under an arrangement (the “Sohu Management Sogou Share Option Arrangement”) that was approved by the board of directors of Sohu and theCompany in March 2011, Sohu has the right to provide to members of Sohu’s Board of Directors, management and other key employees of Sohu, and certainmanagement and other key employees of the Sogou Group the opportunity to purchase from Sohu up to 12,000,000 Class A Ordinary Shares of Sogou at afixed exercise price of US$0.625 or US$0.001 per share. Of these 12,000,000 Class A Ordinary Shares, 8,800,000 are Sogou Class A Ordinary Sharespreviously held by Sohu and 3,200,000 are Sogou Class A Ordinary Shares that were newly-issued on April 14, 2011 by the Company to Sohu at a price ofUS$0.625 per share, or a total of US$2.0 million. As of December 31, 2017, Sohu had contractually granted options for the purchase of 8,305,000 SogouClass A Ordinary Shares under the Sohu Management Sogou Share Option Arrangement. Of the contractually-granted options for the purchase of 8,305,000 Sogou Class A Ordinary shares, options for the purchase of 8,290,000 shares vestand become exercisable in four equal installments, with each installment vesting upon a service period requirement being met, as well as the Sogou Group’sachievement of performance targets for the corresponding period. For purposes of recognition of share-based compensation expense, each installment isconsidered to be granted as of the date that the performance targets have been set. As of December 31, 2017, Sohu had granted options for the purchase of8,290,000 Sogou Class A Ordinary Shares under the Sohu Management Sogou Share Option Arrangement. As of December 31, 2017, options for the purchaseof 8,290,000 shares had become vested and exercisable because both the service period and the performance requirements had been met, and vested optionsfor the purchase of 8,290,000 shares had been exercised. F-32Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Of the contractually-granted options for the purchase of 8,305,000 Sogou Class A Ordinary shares, options for the purchase of 15,000 Sogou Class AOrdinary Shares were granted to members of Sohu’s Board of Directors. All of these share options vested and became exercisable in 2015, as the serviceperiod requirement had been met. As of December 31, 2017, of such vested options, options for the purchase of 6,000 Sogou Class A Ordinary Shares hadbeen exercised. As the requisite service was provided by members of Sohu’s Board of Directors to Sohu and not to the Sogou Group, no share-basedcompensation expense related to these options was recognized in the Sogou Group’s consolidated statements of comprehensive income. As of December 31, 2017, for purposes of recognition of share-based compensation expense, Sohu had granted options for the purchase of8,305,000 Sogou Class A Ordinary Shares under the Sohu Management Sogou Share Option Arrangement, of which options for the purchase of 9,000 SogouClass A Ordinary Shares were outstanding. A summary of share option activity as of and for the year ended December 31, 2017 is presented below: Numberof Shares(In thousands) WeightedAverageExercisePrice WeightedAverageRemainingContractualLife (Years) AggregateIntrinsicValue Outstanding as of January 1, 201770$0.5176.79Granted—Exercised(61)0.594Forfeited/Expired—Outstanding as of December 31, 20179$0.0017.38$104Vested as of December 31, 20179$0.0017.38$104Exercisable as of December 31, 20179$0.0017.38$104 (1) The aggregate intrinsic value in the preceding table represents the difference between the closing price of Sogou Class A Ordinary Shares of $11.57on the last trading day in 2017 and the exercise price of the options. For the years ended December 31, 2015, 2016, and 2017, total share-based compensation expense recognized for share options under the SohuManagement Sogou Share Option Arrangement was US$962, US$444, and nil, respectively. As of December 31, 2017, there was no unrecognizedcompensation expense related to the unvested share options. For the years ended December 31, 2015, 2016 and 2017, the total fair values of the share options vested on their respective vesting dates wereUS$2,645, US$515, and nil, respectively. For the years ended December 31, 2015, 2016, and 2017, total intrinsic value of options exercised was US$1,775, US$4,501, and US$249,respectively. F-33(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The method used to determine the fair value of share options granted under the Sohu Management Sogou Share Option Arrangement was the same asthe method used for the share options granted under the Sogou 2010 Incentive Plan as described above, except for the assumptions used in the BP Model aspresented below. There was no share-based compensation expense recognized under the Sohu Management Sogou Share Option Arrangement for the yearended December 31, 2017. 2015 2016Average risk-free interest rate2.43% ~ 2.67%2.01% ~ 2.15%Exercise multiple2 ~ 32 ~ 3Expected forfeiture rate (post-vesting)0% - 8%0%Weighted average expected option life66Volatility rate46% ~ 50%43% ~ 47%Dividend yield0%0%Weighted average fair value of share options5.543.02 Option Modification In the first and second quarter of 2013, a portion of the share options granted under the Sogou 2010 Share Incentive Plan and the Sohu ManagementSogou Share Option Arrangement were exercised early, and the resulting Sogou ordinary shares were transferred to trusts with the original option grantees asbeneficiaries. The trusts will distribute the ordinary shares to those beneficiaries in instalments based on the vesting requirements under the original optionagreements. Although these trust arrangements caused a modification of the terms of these share options, the modification was not considered substantive.Accordingly, no incremental fair value related to these ordinary shares resulted from the modification, and the remaining share-based compensation expensefor these ordinary shares continued to be recognized over the original remaining vesting period. As of December 31, 2017, 10,327,500 Class A Ordinary Shares issued upon the early exercise of options granted under the Sogou 2010 ShareIncentive Plan had remained unvested in accordance with the vesting requirements under the original option agreements. All of the Class A Ordinary Sharesissued upon such early exercise that have become vested have been included in the disclosures under the headings “Sogou 2010 Share Incentive Plan” and“Sohu Management Sogou Share Option Arrangement” above. Share Repurchase Transaction Pursuant to letter agreements entered between Sohu and the former president and chief financial officer of the Sohu Group in connection with herresignation, as of December 31, 2016, the Company was obligated to repurchase 720,000 of its Pre-IPO Class A Ordinary Shares from the former president andchief financial officer of the Sohu Group for an aggregate price of US$7,200. The Company included the 720,000 Pre-IPO Class A Ordinary Shares in treasurystock at their repurchase cost of US$3,190, which represents the fair value of the Pre-IPO Class A Ordinary Shares as of the repurchase date. The US$4,010difference between the total repurchase price and the fair value of the repurchased shares as of the repurchase date is regarded as compensation paid to theformer president and chief financial officer of the Sohu Group for her contribution to the Sogou Group and was recognized as share-based compensationexpense in 2016. The Company completed the repurchase of the 720,000 Pre-IPO Class A Ordinary Shares in January, 2017. b. Sohu Stock-based Awards Certain of the Sogou Group’s employees were granted awards under the Sohu 2010 Stock Incentive Plan. The share-based compensation expensearising from such grants was allocated to the Sogou Group and recognized as share-based compensation expense in the Sogou Group’s consolidatedstatements of comprehensive income. F-34Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Sohu 2010 Stock Incentive Plan The Sohu 2010 Stock Incentive Plan provides for the issuance of Sohu common stock to employees of the Sohu Group, which for such purposeincludes employees of the Sogou Group, pursuant to share-based awards, including stock options and restricted stock units. As of December 31, 2017, therewere no unvested Sohu restricted stock units held by employees of the Sogou Group. For the years ended December 31, 2015, 2016 and 2017, share-basedcompensation expense of US$90, US$49, and US$4, respectively, related to these restricted stock units was allocated from Sohu and recognized in the SogouGroup’s consolidated statements of comprehensive (loss)/income. As of December 31, 2017, there was no unrecognized compensation expense related tothese unvested restricted stock units. c. Tencent Share-based Awards Certain persons who became the Sogou Group’s employees when Tencent’s Soso search-related businesses were transferred to the Sogou Group inSeptember 2013 had been granted restricted share units under Tencent’s share award arrangements prior to the transfer of the businesses. Following thetransfer of the businesses, these Tencent restricted share units will continue to vest under the original Tencent share award arrangements provided thetransferred employees continue to be employed by the Sogou Group during the requisite service period. After the transfer of the Soso search-relatedbusinesses, the Sogou Group applied the guidance in ASC 505-50 to measure the related compensation expense, which is deemed to have been incurred byTencent as an investor on the Sogou Group’s behalf, based on the then-current fair value at each reporting date. To determine the then-current fair value ofthe Tencent restricted share units granted to these employees, the public market price of the underlying shares at each reporting date was applied. For the years ended December 31, 2015, 2016 and 2017, share-based compensation expense of US$1,984, US$763, and US$682, respectively,related to these Tencent restricted share units was recognized in the Sogou Group’s consolidated statements of comprehensive income. As of December 31,2017, there was US$58 of unrecognized compensation expense related to these unvested restricted share units. This amount is expected to be recognized overa weighted average period of 0.51 years. 17. TAXATION a. PRC Value-added Tax The Company’s subsidiaries and VIEs in China are subject to VAT. The Sogou Group’s revenues are subject to VAT at a rate of 6% or 17% for the years ended December 31, 2015, 2016 and 2017. b. Income Taxes Cayman Islands Under the current laws of Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon any payment of dividendsby the Company to its shareholders, no Cayman Islands withholding tax will be imposed. British Virgin Islands Under the current laws of British Virgin Islands, Sogou BVI is not subject to tax on income or capital gains. F-35Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Hong Kong The Company’s subsidiaries in Hong Kong are subject to income tax at a rate of 16.5% for the years ended December 31, 2015, 2016 and 2017.Hong Kong does not impose a withholding tax on dividends. PRC The PRC Corporate Income Tax Law (the “CIT Law”) generally applies an income tax rate of 25% to all enterprises, but grants preferential taxtreatment to qualified “High and New Technology Enterprises” (“HNTEs”), Software Enterprises, and “Key National Software Enterprises” (“KNSEs”). Entities Qualified as HNTEs HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years. During this three-year period, an HNTE must conduct a qualification self-review each year to ensure it meets the HNTE criteria and is eligible for the 15% preferential tax ratefor that year. If an HNTE fails to meet the criteria for qualification as an HNTE in any year, the enterprise cannot enjoy the 15% preferential tax rate in thatyear, and must instead use the regular 25% CIT rate. Sogou Technology qualified as an HNTE for the three years ended December 31, 2017, 2018, and 2019, and will need to re-apply for HNTEqualification in 2020. Sogou Information qualified as an HNTE for the three years ended December 31, 2015, 2016, and 2017, and will need to re-apply forHNTE qualification in 2018. Sogou Network was qualified as an HNTE for the years ended December 31, 2016 and 2017, is qualified for the year endingDecember 31, 2018, and will need to re-apply for HNTE qualification in 2019. Entities Qualified as Software Enterprises and KNSEs The CIT Law and its implementing regulations provide that a “Software Enterprise” is entitled to an income tax exemption for two years beginningwith its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years. An entity that qualifies as a KNSE is entitled to a furtherreduced preferential income tax rate of 10%. Enterprises wishing to enjoy the status of a Software Enterprise or a KNSE must perform a self-assessment eachyear to ensure they meet the criteria for qualification and file required supporting documents with the tax authorities before using the preferential CIT rates.These enterprises will be subject to the tax authorities’ assessment each year as to whether they are entitled to use the relevant preferential CIT treatments. Ifat any time during the preferential tax treatment years an enterprise uses the preferential CIT rates but the relevant authorities determine that it fails to meetapplicable criteria for qualification, the relevant authorities may revoke the enterprise’s Software Enterprise/KNSE status. Sogou Technology performed a self-assessment and filed required supporting documents in 2016 for KNSE status for 2015. Sogou Technology wasqualified as a KNSE after the relevant government authorities’ assessment in 2016 and was entitled to a preferential income tax rate of 10% for 2015. As aresult, a reversal of income tax of US$3,857 for the preferential income tax rate was recorded in the consolidated statements of comprehensive income for theyear ended December 31, 2016. The same process was followed in 2017 by Sogou Technology for its preferential income tax treatment as a KNSE for 2016and a reversal of income tax of US$1,467 for the preferential income tax rate was recorded in the consolidated statements of comprehensive income for theyear ended December 31, 2017. Sogou Network performed a self-assessment and filed required supporting documents in 2016 for Software Enterprise status for 2015. SogouNetwork was qualified as a Software Enterprise after the relevant government authorities’ assessment in 2016 and was entitled to a preferential income taxrate of 12.5% for 2015. As a result, a reversal of income tax of US$2,569 for the preferential income tax rate was recorded in the consolidated statements ofcomprehensive income for the year ended December 31, 2016. F-36Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents PRC Withholding Tax on Dividends Under the CIT Law and its implementation rules, the profits of a foreign-invested enterprise arising in 2008 and thereafter that are distributed to itsimmediate holding company outside the PRC are subject to withholding tax at a rate of 10%. A lower withholding tax rate will be applied if there is abeneficial tax treaty between the PRC and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be eligible,with approval of the PRC local tax authority, to be subject to a 5% withholding tax rate under the Arrangement Between the PRC and the Hong Kong SpecialAdministrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital if such holdingcompany is considered to be a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign-invested enterprise distributingthe dividends. However, if the Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC taxregulations, such dividend will remain subject to withholding tax at a rate of 10%. The Company does not intend to have any of its subsidiaries located in PRC distribute any undistributed profits of such subsidiaries in theforeseeable future, but rather expects that such profits will be reinvested by such subsidiaries for their PRC operations. Accordingly, no withholding tax wasrecorded as of December 31, 2017. Composition of Income Tax Expense All income tax expense for the years ended December 31, 2015, 2016 and 2017 was PRC corporate income tax for PRC entities. The current anddeferred portions of income tax expense included in the consolidated statements of comprehensive income are as follows: For the Year EndedDecember 31,20152016 2017Income from PRC entities$120,700$64,885$126,104Loss from non-PRC entities(11,771)(8,746)(29,482)Income before income tax expenses108,92956,13996,622Current income tax expense17,2093,11818,382Deferred tax benefit(7,779)(3,091)(3,960)Income tax expense$9,430$27$14,422 Effective Tax Rate Reconciliation of the PRC CIT tax rate of 25% to the Sogou Group’s effective tax rate for the years of 2015, 2016 and 2017 is as follows: For the Year EndedDecember 31, 2015 2016 2017 PRC statutory tax rate25.0%25.0%25.0%Tax differential from statutory rate in other jurisdictions2.7%5.2%6.8%Effect of tax holidays(8.6)%(17.2)%(14.4)%Permanent book-tax differences(9.0)%(15.1)%(7.5)%Changes in deferred tax asset allowance(1.4)%2.1%5.0%Effective income tax rate8.7%—14.9% The income tax reversals resulting from the preferential income tax rates that Sogou Technology was entitled to as a 2015 and 2016 KNSE and thatSogou Network was entitled to as a 2015 Software Enterprise are included in the “Effect of tax holidays” in the table above. The permanent book-tax differences mainly consisted of R&D expenses super deductions. F-37(1)(2)(1)(2)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The combined effects of the income tax expense exemptions and reductions available to the Sogou Group are as follows: For the year endedDecember 31,20152016 2017Tax holiday effect$9,368$9,656$13,914Basic income per share$0.04$0.04$0.05 c. Deferred Tax As of December 31, 2016 and 2017, the significant temporary differences between the tax and financial statement bases of assets and liabilities thatgave rise to deferred tax balances were principally related to the following: As of December 31,2016 2017Deferred tax assets:Net operating loss carry forwards$5,211$9,540Temporary non-deductible advertising cost carried forward378821Accrued expenses14,59722,320Accrued payroll expense3,4262,139Others—118Total deferred tax assets23,61234,938Deferred tax liabilities:Depreciation of fixed assets(1,983)(3,780)Total deferred tax liabilities(1,983)(3,780)Less: Valuation allowance(11,317)(16,152)Deferred tax assets, net$10,312$15,006 As of December 31, 2016 and 2017, the Sogou Group made a valuation allowance against its deferred tax assets to the extent that such deferred taxassets were not expected to be realized by each individual entity within the Sogou Group. The Sogou Group evaluated a variety of factors in determining theamount of the valuation allowance, including each individual entity’s operating history and financial forecast. As of December 31, 2017, the Sogou Group had net operating losses from PRC entities of approximately US$55,064 available to offset againstfuture net profit for income tax purposes. The Sogou Group anticipated that it was more likely than not that these net operating losses would not be utilizedbased on its estimate of the operating performance of these PRC entities. Therefore, US$9,540 in deferred tax assets generated from net operating losses wereoffset by a valuation allowance. These net operating losses are expected to expire during periods between December 31, 2019 and December 31, 2023. The following table sets forth the movement of the valuation allowance for net deferred tax assets for the periods presented: For the Year EndedDecember 31,20152016 2017Beginning balance$17,045$13,387$11,317Additions2,4483,0214,817Reversals(5,123)(4,235)(680)Foreign currency translation adjustment(983)(856)698Ending balance$13,387$11,317$16,152 F-38Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 18. CHINA CONTRIBUTION PLAN The Company’s subsidiaries and VIEs in the PRC participate in a government-mandated multi-employer defined contribution plan, pursuant towhich certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s PRC basedsubsidiaries and VIEs to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly compensation of qualifiedemployees. The Sogou Group has no further legal obligation beyond its monthly contribution. For the years ended December 31, 2015, 2016 and 2017, the Sogou Group contributed a total of approximately US$29,175, US$29,269, andUS$33,290, respectively. 19. NET (LOSS)/INCOME PER ORDINARY SHARE The following table sets forth the basic and diluted net (loss)/income per ordinary share computation and provides a reconciliation of the numeratorand denominator for the periods presented (in thousands except per share data): For the Year EndedDecember 31,20152016 2017Numerator:Net income attributable to Sogou Inc.$99,499$56,112$82,200Less: Dividends attributable to preferred shareholders28,09228,09224,388Less: Adjustment for repurchase of Preferred Shares80,822——Net (loss)/income attributable to ordinary shareholders(9,415)28,02057,812Numerator for net (loss)/income per ordinary share—basic$(9,415)$28,020$57,812Reversal of preferred share dividends—1,2001,042Numerator for net (loss)/income per ordinary share—diluted$(9,415)$29,220$58,854DenominatorWeighted average number of ordinary shares outstanding—basic230,721236,167257,173Incremental shares from if-converted method—32,00027,704Incremental shares from treasury stock method—2,0762,428Weighted average number of ordinary shares outstanding—diluted230,721270,243287,305Net (loss)/income per ordinary share—basic$(0.04)$0.12$0.22Net (loss)/income per ordinary share—diluted$(0.04)$0.11$0.20 A total of 118,968,017 Pre-IPO Preferred Shares and options for the purchase of 3,829,856 Pre-IPO Class A Ordinary shares, 65,431,579 Pre-IPOPreferred Shares, and 56,647,614 Pre-IPO Preferred Shares, respectively, were excluded from the computation of diluted net (loss)/income per ordinary sharefor the years ended December 31, 2015, 2016, and 2017, because of their anti-dilutive effect. The dilutive effects of Pre-IPO Preferred Shares and shareoptions were calculated using the if-converted method and the treasury share method, respectively. 20. RELATED PARTY TRANSACTIONS The table below sets forth the significant related parties of the Sogou Group and their relationship to the Sogou Group: Related Party’s Name Relationship with the Sogou GroupSohuUnder common control of Sohu.com Inc. with the Sogou GroupTencentHolder of Class B Ordinary Shares F-39Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The table below sets forth the significant related party transactions of the Sogou Group: For the Year EndedDecember 31, 2015 2016 2017Transactions with Sohu:Expenses of research and development undertaken by Sohu (See Note 3u—Cost Allocations)$1,105$788$707Share-based compensation expense related to Sogou employees undertaken by Sohu (See Note 3u—Cost Allocations)90494Online marketing activities provided to Sohu8588348Online marketing activities provided by Sohu4,1562,4821,123Rental of Sohu.com Internet Plaza paid to Sohu5,7345,4848,091Others82—41Transactions with Tencent:Share-based compensation expense related to Soso search-related businesses employees undertakenby Tencent (See “Tencent Share-based Awards” in Note 3t—Share-based CompensationExpense)1,984763682Online marketing activities provided to Tencent2,5588,63415,599Online marketing activities provided by Tencent29,20632,77461,565Bandwidth services provided by Tencent5192,9293,299Rental paid to Tencent—414378Others731,2923,137 The Sogou Group provided online marketing services to Sohu and Tencent, and received similar online marketing services from Sohu and Tencent.Related revenues and expenses are measured at the amount of consideration agreed to and paid by the related parties, which approximates amounts chargedto third parties. The table below sets forth the amounts due to related parties: As of December 31,2016 2017Due from/to related parties—currentDue from Sohu$25,230$820Due from Tencent1,2492,151Total$26,479$2,971Due to Sohu$70,415$1,237Due to Tencent14,28521,872Total$84,700$23,109Due from related parties—non currentDue from Sohu$1,449$2,215Due from Tencent115122Total$1,564$2,337 In 2017, Sogou repaid advances that had been provided by Sohu to Sogou for working capital. The balance due from/to Sohu mainly consists ofonline marketing services provided by or to Sohu, and rental and lease deposits prepaid to Sohu. The balance due from/to Tencent mainly consists of online marketing services provided to or by Tencent, etc. F-40Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 21. COMMITMENTS AND CONTINGENCIES Contractual obligations Operating Commitments As of December 31, 2017, the Sogou Group had operating commitments related to operating lease obligations, bandwidth purchase obligations,content and service purchase obligations and etc., as follows: As of December 31,OperatingLeaseObligations BandwidthPurchase Content andOtherPurchase Others Total2018$11,800$50,437$260$4,454$66,951201910,6231,2214511011,99920201051,12077—1,3022021—32732—3592022—————Thereafter—————Total$22,528$53,105$414$4,564$80,611 : For the years ended December 31, 2015, 2016 and 2017, rental expense included in the operating lease was approximately US$9,948, US$10,075 andUS$12,818, respectively. Litigation The Sogou Group is a party to various legal proceedings which it considers routine and incidental to its business, and is currently involved inseveral lawsuits in PRC courts where its competitors instituted proceedings or asserted counterclaims against the Sogou Group or the Sogou Group institutedproceedings or asserted counterclaims against its competitors. For example, there are various legal proceedings currently pending between the Sogou Groupand affiliates of Baidu, Inc. (“Baidu”) in which the Sogou Group alleges that Baidu’s input method infringes certain of its patents relating to Sogou InputMethod and seeks monetary damages, while Baidu has asserted in counterclaims or in legal proceeding that it has initiated against the Sogou Group thatSogou Input Method infringes certain of its patents, and seeks monetary damages. In addition, the Sogou Group is subject to ongoing unfair competitionclaims against it brought by each of Baidu, ShenMa, operated by UCWeb Inc., which is a subsidiary of Alibaba Group Holding Limited, and affiliates ofQihoo 360 Technology Co., Ltd., separately, in which they allege that certain functions of Sogou Input method unfairly divert users to the Sogou Group, andseek monetary damages and cessation of the alleged unfair competitive practices. The Sogou Group records a liability when the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.As of December 31, 2017, the Sogou Group estimated the range of reasonably possible outcomes and has recorded liabilities for the most probable outcomewithin that range. The Sogou Group also evaluates, on a regular basis, developments in litigation matters that could affect the amount of liability that hasbeen previously accrued and makes adjustments as appropriate. Based on the information currently available, management believes that the total liabilitiesto the Sogou Group that may arise as a result of currently pending legal proceedings are not reasonably likely to have a material adverse effect on the SogouGroup’s business, results of operations, financial condition, and cash flows. As of December 31, 2016 and 2017, the Sogou Group had recorded estimated liabilities of US$2,890 and US$3,822, respectively, as a component ofaccrued and other short-term liabilities related to litigation contingencies. F-41(1)(1)Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents 22. VIEs a. Background PRC laws and regulations prohibit or restrict foreign ownership of companies that operate Internet information and content, Internet access, value-added telecommunications, and certain other businesses in which the Sogou Group is engaged or could be deemed to be engaged. Consequently, the SogouGroup conducts certain of its operations and businesses in the PRC through its VIEs. Sogou consolidates in its consolidated financial statements the VIEs, of which Sogou is the primary beneficiary. b. VIEs Consolidated within the Sogou Group The Sogou Group adopted the guidance of accounting for VIEs, which requires VIEs to be consolidated by their primary beneficiary. Managementevaluated the relationships between Sogou and its VIEs and the flow of economic benefits under contractual arrangements with its VIE Sogou Informationand its shareholders. Sogou Information is the parent company of the Sogou Group’s other three VIEs. In connection with such evaluation, management alsotook into account the fact that, as a result of contractual arrangements with Sogou Information and its shareholders, Sogou controls the shareholders’ votinginterests in the VIEs. As a result of such evaluation, management concluded that Sogou is the primary beneficiary of the VIEs consolidated. Under the contractual agreements with Sogou Information and its shareholders, Sogou has power to direct activities of the VIEs, and can have assetstransferred freely out of the VIEs without any restrictions. Therefore Sogou considers that there are no assets of the VIEs that can be used only to settleobligations of the VIEs, except for registered capital and statutory surplus reserves of the VIEs. As the VIEs are incorporated as limited liability companiesunder the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of Sogou. Currently there is no contractual arrangement thatcould require Sogou to provide additional financial support to the VIEs. As the Sogou Group is conducting certain business in the PRC mainly through theVIEs, Sogou may provide such support on a discretionary basis in the future, which could expose Sogou to a loss. The following is a summary of the Sogou Group’s VIEs, Sogou Information, Shi Ji Guang Su, Shi Ji Si Su, and Chengdu Easypay: Basic Information Sogou Information Sogou Information was incorporated in December 2005. As of December 31, 2017, the registered capital of Sogou Information was US$2.5 millionand the Company’s Chief Executive Officer Xiaochuan Wang, Sohu, and Tencent (collectively the “Nominee Shareholders”) held 10%, 45%, and45% interests, respectively, in Sogou Information. Shi Ji Guang Su Shi Ji Guang Su was acquired in September 2013 as part of the Sogou-Tencent Transactions. As of December 31, 2017, the registered capital of Shi JiGuang Su was US$3.3 million and Sogou Information held 100% of the equity interest in this entity. Shi Ji Si Su Shi Ji Si Su was acquired in April 2015 for cash consideration of US$30. As of December 31, 2017, the registered capital of Shi Ji Si Su wasUS$3.3 million and Sogou Information held 100% of the equity interest in this entity. F-42Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Chengdu Easypay Chengdu Easypay was incorporated in January 2015. As of December 31, 2017, the registered capital of Chengdu Easypay was US$16.3 million andSogou Information and Shi Ji Si Su together held 100% of the equity interest in this entity. Financial Information The following table sets forth the assets, liabilities, results of operations, and cash flows of the VIEs, taken as a whole, that were included in theSogou Group’s consolidated balance sheets, statements of comprehensive income, and statements of cash flows: As of December 31,2016 2017ASSETSCash and cash equivalents$14,986$15,945Accounts receivable, net13,41932,651Prepaid and other current assets1,5232,438Intra-Sogou Group receivable due from the Company and the Company’s subsidiaries15,45270,144Due from related parties of the Sogou Group6,752106Total current assets52,132121,284Long-term investments3,0998,723Fixed assets, net33996Goodwill3,4313,643Intangible assets, net1,760772Other assets—312Total assets$60,761$134,830LIABILITIESAccounts payable$484$18,955Accrued and other short-term liabilities36,46415,989Receipts in advance5,6637,889Accrued salary and benefits8761,292Taxes payable2,6639,232Intra-Sogou Group payable due to the Company and the Company’s subsidiaries—28,762Due to related parties of the Sogou Group13,05020,394Total current liabilities59,200102,513Total liabilities$59,200$102,513 For the Year EndedDecember 31,20152016 2017Net revenue$110,313$159,361$257,424Net (loss)/income$(11,480)$41,084$28,944 For the Year EndedDecember 31,Cash flows of the VIEs 2015 2016 2017Net cash provided by operating activities$16,560$3,721$5,198Net cash used in investing activities(344)(3,112)(5,218)Net cash used in by financing activities——— There is no VIE where the Sogou Group has a variable interest but is not the primary beneficiary. F-43Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Summary of VIE Agreements Currently in Effect Agreements between Sogou Technology and Nominee Shareholders of Sogou Information Loan and share pledge agreements between Sogou Technology and the shareholders of Sogou Information. The loan agreement provides for a loanto Xiaochuan Wang, who holds 10% of the equity interest in Sogou Information, to be used by him to make contributions to the registered capital of SogouInformation in exchange for his equity interest in Sogou Information. The loan is interest free and is repayable on demand, but Mr. Wang may repay the loanonly by transferring to Sogou Technology his equity interest in Sogou Information. Under the pledge agreement, all of the shareholders of Sogou Informationpledge their equity interests to Sogou Technology to secure the performance of their obligations under certain VIE agreements. If any shareholder of SogouInformation breaches any of his or its obligations under any VIE agreements, Sogou Technology is entitled to exercise its rights as the beneficiary under theshare pledge agreement. The share pledge agreement terminates only after all of the obligations of the shareholders under the VIE agreements are no longerin effect. Exclusive equity interest purchase rights agreement between Sogou Technology, Sogou Information, and the shareholders of Sogou Information.Pursuant to this agreement, Sogou Technology and any third party designated by it have the right, exercisable at any time when it becomes legal to do sounder PRC law, to purchase from the shareholders of Sogou Information all or any part of their equity interests at the lowest purchase price permissible underPRC law. Business operation agreement among Sogou Technology, Sogou Information, and the shareholders of Sogou Information. The agreement sets forththe right of Sogou Technology to control the actions of the shareholders of Sogou Information in their capacities as such. The agreement has a term of10 years and is renewable at the request of Sogou Technology. Powers of Attorney executed by the shareholders of Sogou Information in favor of Sogou Technology with a term of 10 years that is extendable atthe request of Sogou Technology. These powers of attorney give Sogou Technology the right to appoint nominees to act on behalf of each of the three SogouInformation shareholders in connection with all actions to be taken by Sogou Information. Business Arrangements between Sogou Technology and Sogou Information Exclusive technology consulting and service agreement between Sogou Technology and Sogou Information. Pursuant to this agreement SogouTechnology has the exclusive right to provide technical consultation and other related services to Sogou Information in exchange for a fee. The agreementhas a term of 10 years and is renewable at the request of Sogou Technology. c. Risks in Relation to the VIE Structure It is possible that the Sogou Group’s operation of certain of its operations and businesses through its VIEs could be found by PRC authorities to bein violation of PRC law and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. While theSogou Group’s management considers the possibility of such a finding by PRC regulatory authorities under current law and regulations to be remote, onJanuary 19, 2015, the Ministry of Commerce of the PRC, or (the “MOFCOM”) released on its Website for public comment a proposed PRC law (the “DraftFIE Law”) that appears to include VIE within the scope of entities that could be considered to be foreign invested enterprises (or “FIEs”) that would besubject to restrictions under existing PRC law on foreign investment in certain categories of industry. Specifically, the Draft FIE Law introduces the conceptof “actual control” for determining whether an entity is considered to be an FIE. In addition to control through direct or indirect ownership or equity, theDraft FIE Law includes control through contractual arrangements within the definition of “actual control.” If the Draft FIE Law is passed by the People’sCongress of the PRC and goes into effect in its current form, these provisions regarding control through contractual arrangements could be construed to reachthe Sogou Group’s VIE arrangements, and as a result the Sogou Group’s VIEs could become explicitly subject to the current restrictions on foreigninvestment in certain categories of industry. The Draft FIE Law includes provisions that would exempt from the definition of foreign invested enterprisesentities where the ultimate controlling shareholders are either entities organized under PRC law or individuals who are PRC citizens. The Draft FIE Law issilent as to what type of enforcement action might be taken against existing VIEs that operate in restricted or prohibited industries and are not controlled byentities organized under PRC law or individuals who are PRC citizens. If a finding were made by PRC authorities, under existing law and regulations orunder the Draft FIE Law if it becomes effective, about the Sogou Group’s operation of certain of its operations and businesses through its VIEs, regulatoryauthorities with jurisdiction over the licensing and operation of such operations and businesses would have broad discretion in dealing with such a violation,including levying fines, confiscating the Sogou Group’s income, revoking the business or operating licenses of the affected businesses, requiring the SogouGroup to restructure its ownership structure or operations, or requiring the Sogou Group to discontinue all or any portion of its operations. Any of theseactions could cause significant disruption to the Sogou Group’s business operations, and have a severe adverse impact on the Sogou Group’s cash flows,financial position and operating performance. F-44Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents In addition, it is possible that the contracts among Sogou Technology, Sogou Information, and the nominee shareholders of Sogou Informationwould not be enforceable in China if PRC government authorities or courts were to find that such contracts contravene PRC laws and regulations or areotherwise not enforceable for public policy reasons. In the event that the Sogou Group was unable to enforce these contractual arrangements, the SogouGroup would not be able to exert effective control over the its VIEs. Consequently, the VIEs’ results of operations, assets and liabilities would not beincluded in the Sogou Group’s consolidated financial statements. If such were the case, the Sogou Group’s cash flows, financial position, and operatingperformance would be materially adversely affected. The Sogou Group’s contractual arrangements Sogou Technology, Sogou Information, and the nomineeshareholders of Sogou Information are approved and in place. Management believes that such contracts are enforceable, and considers the possibility remotethat PRC regulatory authorities with jurisdiction over the Sogou Group’s operations and contractual relationships would find the contracts to beunenforceable. The Sogou Group’s operations and businesses rely on the operations and businesses of its VIEs, which hold certain recognized and unrecognizedrevenue-producing assets. The recognized revenue-producing assets include goodwill and intangible assets acquired through business acquisitions. Goodwillprimarily represents the expected synergies from combining an acquired business with the Sogou Group. Intangible assets acquired through businessacquisitions mainly consist of copyrights, domain names and trademarks, and developed technologies. Unrecognized revenue-producing assets held by theVIEs include certain licenses for the provision of content over the Internet and other licenses, patents, trademarks, copyrights, domain names, and tradesecrets. The VIEs also have an assembled workforce, focused primarily on research and development, whose costs are expensed as incurred. The SogouGroup’s operations and businesses may be adversely impacted if the Sogou Group loses the ability to use and enjoy assets held by its VIEs. 23. PROFIT APPROPRIATION The Company’s China-based subsidiaries and VIEs are required to make appropriations to certain non-distributable reserve funds. Under the China Foreign Investment Enterprises laws, those of the Company’s China-based subsidiaries that are considered under PRC law to beWFOEs are required to make appropriations from their after-tax profit as determined under generally accepted accounting principles in the PRC (the “after-tax-profit under PRC GAAP”) to non-distributable reserve funds, including (i) a general reserve fund, (ii) an enterprise expansion fund, and (iii) a staff bonusand welfare fund. Each year, at least 10% of the after-tax-profit under PRC GAAP is required to be set aside as a general reserve fund until such appropriationsfor the fund equal 50% of the registered capital of the applicable entity. The appropriation for the other two reserve funds is at the Company’s discretion asdetermined by the Board of Directors of each entity. Pursuant to the China Company Laws, those of the Company’s China-based subsidiaries that are considered under PRC law to be domesticallyfunded enterprises, as well as the Company’s VIEs, are required to make appropriations from their after-tax-profit under PRC GAAP to non-distributablereserve funds, including a statutory surplus fund and a discretionary surplus fund. Each year, at least 10% of the after-tax-profit under PRC GAAP is requiredto be set aside as statutory surplus fund until such appropriations for the fund equal 50% of the registered capital of the applicable entity. The appropriationfor the discretionary surplus fund is at the Company’s discretion as determined by the Board of Directors of each entity. F-45Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Upon certain regulatory approvals and subject to certain limitations, the general reserve fund and the statutory surplus fund can be used to offsetprior year losses, if any, and can be converted into paid-in capital of the applicable entity. For the years ended December 31, 2015, 2016 and 2017, the total amount of profits contributed to these funds by the Sogou Group was US$9,181,US$4,592, and US$4,619, respectively. As of December 31, 2016 and 2017, the total balance of profits contributed to these funds by the Sogou Group wasUS$16,524 and US$21,143, respectively. As a result of these and other restrictions under PRC laws and regulations, the Company’s China-based subsidiaries and VIEs are restricted in theirability to transfer a portion of their net assets in the form of non-distributable reserve funds to the Company in the form of dividends, loans, or advances. Eventhough the Company currently does not require any such dividends, loans, or advances from its China-based subsidiaries and VIEs for working capital andother funding purposes, the Company may in the future require additional cash resources from its China-based subsidiaries and VIEs due to changes inbusiness conditions, to fund future acquisitions and development, or to declare and pay dividends to or make distributions to its shareholders. 24. RESTRICTED NET ASSETS Relevant PRC law and regulations permit payment of dividends by PRC-based operating entities only out of their retained earnings, if any, asdetermined in accordance with PRC accounting standards and regulations. In addition, a PRC-based operating entity is required to annually appropriate 10%of net after-tax income to the statutory surplus reserve fund prior to payment of any dividends, unless the amount of the reserve fund has reached 50% of theentity’s registered capital. As a result of these and other restrictions under PRC law and regulations, PRC-based operating entities are restricted in their abilityto transfer a portion of their net assets to the Company in the form of dividends, loans or advances. Even though the Company currently does not require anysuch dividends, loans or advances from PRC-based operating entities for working capital and other funding purposes, the Company may in the future requireadditional cash resources from PRC-based operating entities due to changes in business conditions, to fund future acquisitions and development, or todeclare and pay dividends to its shareholders. 25. SUBSEQUENT EVENTS The Company has performed an evaluation of subsequent events through February 28, 2018, which is the date the financial statements were issued,and did not identify any material events or transactions that would require adjustment to or disclosure in the financial statements. 26. ADDITIONAL INFORMATION—CONDENSED FINANCIAL STATEMENTS The condensed financial statements of Sogou Inc. have been prepared in accordance with SEC Regulation S-X Rule 5-04 and Rule 12-04. The Company records its investments in subsidiaries under the equity method of accounting. Such investments to subsidiaries are presented on thebalance sheet as “Interests in subsidiaries and VIEs” and the profit of the subsidiaries is presented as “Share of (loss)/profit of subsidiaries and VIEs” in thestatements of comprehensive income. For the Company’s VIEs, where the Company is the primary beneficiary, the amount of the Company’s investment is included in the balance sheetas “Interests in subsidiaries and variable interest entities” and the profit or loss of the VIEs is included in “Share of profit of subsidiaries and variable interestentities” in the statements of comprehensive income. F-46Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these financial statements shouldbe read in conjunction with the notes to the Consolidated Financial Statements of the Company. Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. As of December 31, 2016 and 2017, there were no material contingencies, significant provisions for long-term obligations, or guarantees of theCompany, except for those, if any, which have been separately disclosed in the consolidated financial statements. F-47Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Condensed Balance Sheets (In thousands, except for share and per share data) As of December 31,2016 2017ASSETSCurrent assets:Cash and cash equivalents$9,164$649Due from subsidiaries and VIEs—603,086Prepaid and other current assets—15Total current assets9,164603,750Interests in subsidiaries and VIEs189,544310,342Total assets$198,708$914,092LIABILITIESCurrent liabilities:Due to subsidiaries and VIEs$20,378$—Other current liabilities12,0685,851Total current liabilities32,4465,851Total liabilities$32,446$5,851MEZZANINE EQUITYPre-IPO Series A Preferred Shares (US$0.001 par value, 62,400,000 shares authorized and issued; 32,000,000outstanding as of December 31, 2016; none authorized, issue, or outstanding as of December 31, 2017))$20,000$—Pre-IPO Series B Preferred Shares (US$0.001 par value; 65,431,579 shares authorized, issued, and outstandingas of December 31, 2016; none authorized, issued, or outstanding as of December 31, 2017)224,404—Total mezzanine equity$244,404$—SHAREHOLDERS’ (DEFICIT)/EQUITYPre-IPO Class A Ordinary Shares (US$0.001 par value, 391,100,000 shares authorized, 173,502,295 sharesissued, 157,226,495 shares outstanding as of December 31, 2016; none authorized, issued, or outstanding asof December 31, 2017); Class A Ordinary Shares (US$0.001 par value, 571,242,125 shares authorized, noneand 123,314,237 shares issued, none and 108,080,937 shares outstanding as of December 31, 2016 and2017)$162$112Pre-IPO Class B Ordinary Shares (US$0.001 par value, 79,368,421 shares authorized, issued, and outstandingas of December 31, 2016; none authorized, issued, or outstanding as of December 31, 2017); Class BOrdinary Shares (US$0.001 par value, 278,757,875 shares authorized, issued, and outstanding as ofDecember 31, 2017)79279Additional paid-in capital22,330913,147Treasury stock (US$0.001 par value, 16,275,800 and 15,233,300 shares as of December 31, 2016 and 2017,respectively)(27,869)(27,869)Accumulated (deficit)/retained earnings(55,022)27,178Accumulated other comprehensive loss(17,822)(4,606)Total shareholders’ (deficit)/equity$(78,142)$908,241Total liabilities, mezzanine equity, and shareholders’ (deficit)/equity$198,708$914,092 F-48Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Condensed Statements of Comprehensive (Loss)/Income (In thousands) For the Year EndedDecember 31,20152016 2017Operating expenses:Research and development$438$110$220Sales and marketing9112031General and administrative1934,272739Total operating expenses1,5424,402990Operating loss(1,542)(4,402)(990)Share of profit of subsidiaries and VIEs101,04160,51083,152Interest income—438Income before income tax expenses99,49956,11282,200Net income$99,499$56,112$82,200Other comprehensive (loss)/income, net of nil tax: foreign currency translationadjustment(5,026)(9,365)13,216Comprehensive income$94,473$46,747$95,416 F-49Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Condensed Statements of Cash Flows (In thousands) For the Year Ended December 31,20152016 2017Net cash flows (used in)/provided by operating activities$97,237$1,275$(627,457)Cash flows from financing activitiesProceeds from exercise of options under Sogou 2010 Share Incentive Plan—41Proceeds from issuance of Class A Ordinary Shares in IPO, net of issuance costs ofUS$36,239——622,131Repurchase of Pre-IPO Class A Ordinary Shares——(3,190)Repurchase of Pre-IPO Series A Preferred Shares(99,822)——Net cash flows (used in)/provided by financing activities(99,822)4618,942Net (decrease)/increase in cash and cash equivalents(2,585)1,279(8,515)Cash and cash equivalents at beginning of the year10,4707,8859,164Cash and cash equivalents at end of the year$7,885$9,164$649 F-50Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 2.3 SOGOU INC. AND THE BANK OF NEW YORK MELLON As Depositary AND OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES Deposit Agreement November 8, 2017 Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. TABLE OF CONTENTS ARTICLE 1.DEFINITIONS1 SECTION 1.1.American Depositary Shares1SECTION 1.2.Commission2SECTION 1.3.Company2SECTION 1.4.Custodian2SECTION 1.5.Delisting Event2SECTION 1.6.Deliver; Surrender2SECTION 1.7.Deposit Agreement3SECTION 1.8.Depositary; Depositary’s Office3SECTION 1.9.Deposited Securities3SECTION 1.10.Disseminate3SECTION 1.11.Dollars4SECTION 1.12.DTC4SECTION 1.13.Foreign Registrar4SECTION 1.14.Holder4SECTION 1.15.Insolvency Event4SECTION 1.16.Owner4SECTION 1.17.Receipts5SECTION 1.18.Registrar5SECTION 1.19.Replacement5SECTION 1.20.Restricted Securities5SECTION 1.21.Securities Act of 19335SECTION 1.22.Shares5SECTION 1.23.SWIFT6SECTION 1.24.Termination Option Event6 ARTICLE 2.FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER OFAMERICAN DEPOSITARY SHARES6 SECTION 2.1.Form of Receipts; Registration and Transferability of American Depositary Shares6SECTION 2.2.Deposit of Shares7SECTION 2.3.Delivery of American Depositary Shares8SECTION 2.4.Registration of Transfer of American Depositary Shares; Combination and Split-up of Receipts;Interchange of Certificated and Uncertificated American Depositary Shares8SECTION 2.5.Surrender of American Depositary Shares and Withdrawal of Deposited Securities9SECTION 2.6.Limitations on Delivery, Transfer and Surrender of American Depositary Shares10 iSource: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 2.7.Lost Receipts, etc.11SECTION 2.8.Cancellation and Destruction of Surrendered Receipts11SECTION 2.9.Pre-Release of American Depositary Shares11SECTION 2.10.DTC Direct Registration System and Profile Modification System12 ARTICLE 3.CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES12 SECTION 3.1.Filing Proofs, Certificates and Other Information12SECTION 3.2.Liability of Owner for Taxes13SECTION 3.3.Warranties on Deposit of Shares13SECTION 3.4.Disclosure of Interests14 ARTICLE 4.THE DEPOSITED SECURITIES14 SECTION 4.1.Cash Distributions14SECTION 4.2.Distributions Other Than Cash, Shares or Rights15SECTION 4.3.Distributions in Shares16SECTION 4.4.Rights16SECTION 4.5.Conversion of Foreign Currency17SECTION 4.6.Fixing of Record Date19SECTION 4.7.Voting of Deposited Shares19SECTION 4.8.Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities20SECTION 4.9.Reports21SECTION 4.10.Lists of Owners22SECTION 4.11.Withholding22 ARTICLE 5.THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY22 SECTION 5.1.Maintenance of Office and Transfer Books by the Depositary22SECTION 5.2.Prevention or Delay of Performance by the Company or the Depositary23SECTION 5.3.Obligations of the Depositary and the Company24SECTION 5.4.Resignation and Removal of the Depositary25SECTION 5.5.The Custodians26SECTION 5.6.Notices and Reports26SECTION 5.7.Distribution of Additional Shares, Rights, etc.27SECTION 5.8.Indemnification27SECTION 5.9.Charges of Depositary28SECTION 5.10.Retention of Depositary Documents29 iiSource: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 5.11.Exclusivity29 ARTICLE 6.AMENDMENT AND TERMINATION29 SECTION 6.1.Amendment29SECTION 6.2.Termination30 ARTICLE 7.MISCELLANEOUS31 SECTION 7.1.Counterparts; Signatures31SECTION 7.2.No Third Party Beneficiaries31SECTION 7.3.Severability31SECTION 7.4.Owners and Holders as Parties; Binding Effect31SECTION 7.5.Notices32SECTION 7.6.Arbitration; Settlement of Disputes32SECTION 7.7.Appointment of Agent for Service of Process; Submission to Jurisdiction; Jury Trial Waiver33SECTION 7.8.Waiver of Immunities34SECTION 7.9.Governing Law34 iiiSource: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. DEPOSIT AGREEMENT DEPOSIT AGREEMENT dated as of November 8, 2017 among SOGOU INC., a company incorporated under the laws of the Cayman Islands(herein called the Company), THE BANK OF NEW YORK MELLON, a New York banking corporation (herein called the Depositary), and all Owners andHolders (each as hereinafter defined) from time to time of American Depositary Shares issued hereunder. W I T N E S S E T H: WHEREAS, the Company desires to provide, as set forth in this Deposit Agreement, for the deposit of Shares (as hereinafter defined) of theCompany from time to time with the Depositary or with the Custodian (as hereinafter defined) under this Deposit Agreement, for the creation of AmericanDepositary Shares representing the Shares so deposited and for the execution and delivery of American Depositary Receipts evidencing the AmericanDepositary Shares; and WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed to this Deposit Agreement, withappropriate insertions, modifications and omissions, as set forth in this Deposit Agreement; NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto as follows: ARTICLE 1. DEFINITIONS The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this DepositAgreement: SECTION 1.1. American Depositary Shares. The term “American Depositary Shares” shall mean the securities created under this Deposit Agreement representing rights with respect tothe Deposited Securities. American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receiptannexed as Exhibit A to this Deposit Agreement shall be the prospectus required under the Securities Act of 1933 for sales of both certificated anduncertificated American Depositary Shares. Except for those provisions of this Deposit Agreement that refer specifically to Receipts, all the provisions of thisDeposit Agreement shall apply to both certificated and uncertificated American Depositary Shares. Each American Depositary Share shall represent the number of Shares specified in Exhibit A to this Deposit Agreement, except that, if thereis a distribution upon Deposited Securities covered by Section 4.3, a change in Deposited Securities covered by Section 4.8 with respect to which additionalAmerican Depositary Shares are not delivered or a sale of Deposited Securities under Section 3.2 or 4.8, each American Depositary Share shall thereafterrepresent the amount of Shares or other Deposited Securities that are then on deposit per American Depositary Share after giving effect to that distribution,change or sale. 1Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 1.2. Commission. The term “Commission” shall mean the Securities and Exchange Commission of the United States or any successor governmental agency inthe United States. SECTION 1.3. Company. The term “Company” shall mean Sogou Inc., a company incorporated under the laws of the Cayman Islands, and its successors. SECTION 1.4. Custodian. The term “Custodian” shall mean The Hongkong and Shanghai Banking Corporation Limited, as custodian for the Depositary in HongKong for the purposes of this Deposit Agreement, and any other firm or corporation the Depositary appoints under Section 5.5 as a substitute or additionalcustodian under this Deposit Agreement, and shall also mean all of them collectively. SECTION 1.5. Delisting Event. A “Delisting Event” occurs if the American Depositary Shares are delisted from a securities exchange on which the American DepositaryShares were listed and the Company has not listed or applied to list the American Depositary Shares on any other securities exchange. SECTION 1.6. Deliver; Surrender. (a) The term “deliver”, or its noun form, when used with respect to Shares or other Deposited Securities, shall mean (i) book-entrytransfer of those Shares or other Deposited Securities to an account maintained by an institution authorized under applicable law to effect transfers of suchsecurities designated by the person entitled to that delivery or (ii) physical transfer of certificates evidencing those Shares or other Deposited Securitiesregistered in the name of, or duly endorsed or accompanied by proper instruments of transfer to, the person entitled to that delivery. (b) The term “deliver”, or its noun form, when used with respect to American Depositary Shares, shall mean (i) registration of thoseAmerican Depositary Shares in the name of DTC or its nominee and book-entry transfer of those American Depositary Shares to an account at DTCdesignated by the person entitled to that delivery, (ii) registration of those American Depositary Shares not evidenced by a Receipt on the books of theDepositary in the name requested by the person entitled to that delivery and mailing to that person of a statement confirming that registration or (iii) ifrequested by the person entitled to that delivery, execution and delivery at the Depositary’s Office to the person entitled to that delivery of one or moreReceipts evidencing those American Depositary Shares registered in the name requested by that person. 2Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) The term “surrender”, when used with respect to American Depositary Shares, shall mean (i) one or more book-entry transfers ofAmerican Depositary Shares to the DTC account of the Depositary, (ii) delivery to the Depositary at its Office of an instruction to surrender AmericanDepositary Shares not evidenced by a Receipt or (iii) surrender to the Depositary at its Office of one or more Receipts evidencing American DepositaryShares. SECTION 1.7. Deposit Agreement. The term “Deposit Agreement” shall mean this Deposit Agreement, as it may be amended from time to time in accordance with theprovisions of this Deposit Agreement. SECTION 1.8. Depositary; Depositary’s Office. The term “Depositary” shall mean The Bank of New York Mellon, a New York banking corporation, and any successor as depositary underthis Deposit Agreement. The term “Office”, when used with respect to the Depositary, shall mean the office at which its depositary receipts business isadministered, which, at the date of this Deposit Agreement, is located at 101 Barclay Street, New York, New York 10286. SECTION 1.9. Deposited Securities. The term “Deposited Securities” as of any time shall mean Shares at such time deposited or deemed to be deposited under this DepositAgreement, including without limitation, Shares that have not been successfully delivered upon surrender of American Depositary Shares, and any and allother securities, property and cash received by the Depositary or the Custodian in respect of Deposited Securities and at that time held under this DepositAgreement. SECTION 1.10. Disseminate. The term “Disseminate,” when referring to a notice or other information to be sent by the Depositary to Owners, shall mean (i) sending thatinformation to Owners in paper form by mail or another means or (ii) with the consent of Owners, another procedure that has the effect of making theinformation available to Owners, which may include (A) sending the information by electronic mail or electronic messaging or (B) sending in paper form orby electronic mail or messaging a statement that the information is available and may be accessed by the Owner on an Internet website and that it will be sentin paper form upon request by the Owner, when that information is so available and is sent in paper form as promptly as practicable upon request. 3Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 1.11. Dollars. The term “Dollars” shall mean United States dollars. SECTION 1.12. DTC. The term “DTC” shall mean The Depository Trust Company or its successor. SECTION 1.13. Foreign Registrar. The term “Foreign Registrar” shall mean the entity that carries out the duties of registrar for the Shares and any other agent of the Companyfor the transfer and registration of Shares, including, without limitation, any securities depository for the Shares. SECTION 1.14. Holder. The term “Holder” shall mean any person holding a Receipt or a security entitlement or other interest in American Depositary Shares,whether for its own account or for the account of another person, but that is not the Owner of that Receipt or those American Depositary Shares. SECTION 1.15. Insolvency Event. An “Insolvency Event” occurs if the Company institutes proceedings to be adjudicated as bankrupt or insolvent, consents to the institutionof bankruptcy or insolvency proceedings against it, files a petition or answer or consent seeking reorganization or relief under any applicable law in respectof bankruptcy or insolvency, consents to the filing of any petition of that kind or to the appointment of a receiver, liquidator, assignee, trustee, custodian orsequestrator (or other similar official) of it or any substantial part of its property or makes an assignment for the benefit of creditors, or if information becomespublicly available indicating that unsecured claims against the Company are not expected to be paid. SECTION 1.16. Owner. The term “Owner” shall mean the person in whose name American Depositary Shares are registered on the books of the Depositarymaintained for that purpose. 4Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 1.17. Receipts. The term “Receipts” shall mean the American Depositary Receipts issued under this Deposit Agreement evidencing certificated AmericanDepositary Shares, as the same may be amended from time to time in accordance with the provisions of this Deposit Agreement. SECTION 1.18. Registrar. The term “Registrar” shall mean any corporation or other entity that is appointed by the Depositary to register American Depositary Sharesand transfers of American Depositary Shares as provided in this Deposit Agreement. SECTION 1.19. Replacement. The term “Replacement” shall have the meaning assigned to it in Section 4.8. SECTION 1.20. Restricted Securities. The term “Restricted Securities” shall mean Shares that (i) are “restricted securities,” as defined in Rule 144 under the Securities Act of1933, except for Shares that could be resold in reliance on Rule 144 without any conditions, (ii) are beneficially owned by an officer, director (or personperforming similar functions) or other affiliate of the Company, (iii) otherwise would require registration under the Securities Act of 1933 in connection withthe public offer and sale thereof in the United States or (iv) are subject to other restrictions on sale or deposit under the laws of the Cayman Islands, ashareholder agreement or the articles of association or similar document of the Company. SECTION 1.21. Securities Act of 1933. The term “Securities Act of 1933” shall mean the United States Securities Act of 1933, as from time to time amended. SECTION 1.22. Shares. The term “Shares” shall mean Class A ordinary shares of the Company that are validly issued and outstanding, fully paid and nonassessableand that were not issued in violation of any pre-emptive or similar rights of the holders of outstanding securities of the Company; provided, however, that, ifthere shall occur any change in nominal or par value, a split-up or consolidation or any other reclassification or, upon the occurrence of an event described inSection 4.8, an exchange or conversion in respect of the Shares of the Company, the term “Shares” shall thereafter also mean the successor securities resultingfrom such change in nominal value, split-up or consolidation or such other reclassification or such exchange or conversion. 5Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 1.23. SWIFT. The term “SWIFT” shall mean the financial messaging network operated by the Society for Worldwide Interbank FinancialTelecommunication, or its successor. SECTION 1.24. Termination Option Event. The term “Termination Option Event” shall mean an event of a kind defined as such in Section 4.1, 4.2 or 4.8. ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER OF AMERICAN DEPOSITARY SHARES SECTION 2.1. Form of Receipts; Registration and Transferability of American Depositary Shares. Definitive Receipts shall be substantially in the form set forth in Exhibit A to this Deposit Agreement, with appropriate insertions,modifications and omissions, as permitted under this Deposit Agreement. No Receipt shall be entitled to any benefits under this Deposit Agreement or bevalid or obligatory for any purpose, unless that Receipt has been (i) executed by the Depositary by the manual signature of a duly authorized officer of theDepositary or (ii) executed by the facsimile signature of a duly authorized officer of the Depositary and countersigned by the manual signature of a dulyauthorized signatory of the Depositary or the Registrar or a co-registrar. The Depositary shall maintain books on which (x) each Receipt so executed anddelivered as provided in this Deposit Agreement and each transfer of that Receipt and (y) all American Depositary Shares delivered as provided in thisDeposit Agreement and all registrations of transfer of American Depositary Shares, shall be registered. A Receipt bearing the facsimile signature of a personthat was at any time a proper officer of the Depositary shall, subject to the other provisions of this paragraph, bind the Depositary, even if that person was nota proper officer of the Depositary on the date of issuance of that Receipt. The Receipts and statements confirming registration of American Depositary Shares may have incorporated in or attached to them suchlegends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required tocomply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American DepositaryShares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receiptsand American Depositary Shares are subject by reason of the date of issuance of the underlying Deposited Securities or otherwise. 6Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. American Depositary Shares evidenced by a Receipt, when the Receipt is properly endorsed or accompanied by proper instruments oftransfer, shall be transferable as certificated registered securities under the laws of the State of New York. American Depositary Shares not evidenced byReceipts shall be transferable as uncertificated registered securities under the laws of the State of New York. The Depositary, notwithstanding any notice tothe contrary, may treat the Owner of American Depositary Shares as the absolute owner thereof for the purpose of determining the person entitled todistribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes, and neither the Depositarynor the Company shall have any obligation or be subject to any liability under this Deposit Agreement to any Holder of American Depositary Shares (butonly to the Owner of those American Depositary Shares). SECTION 2.2. Deposit of Shares. Subject to the terms and conditions of this Deposit Agreement, Shares or evidence of rights to receive Shares may be deposited under thisDeposit Agreement by delivery thereof to any Custodian, accompanied by any appropriate instruments or instructions for transfer, or endorsement, in formsatisfactory to the Custodian. As conditions of accepting Shares for deposit, the Depositary may require (i) any certification required by the Depositary or the Custodianin accordance with the provisions of this Deposit Agreement, (ii) a written order directing the Depositary to deliver to, or upon the written order of, the personor persons stated in that order American Depositary Shares representing those deposited Shares, (iii) evidence satisfactory to the Depositary that those Shareshave been re-registered in the books of the Company or the Foreign Registrar in the name of the Depositary, a Custodian or a nominee of the Depositary or aCustodian, (iv) evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in each applicablejurisdiction and (v) an agreement or assignment, or other instrument satisfactory to the Depositary, that provides for the prompt transfer to the Custodian ofany dividend, or right to subscribe for additional Shares or to receive other property, that any person in whose name those Shares are or have been recordedmay thereafter receive upon or in respect of those Shares, or, in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to theDepositary. At the request and risk and expense of a person proposing to deposit Shares, and for the account of that person, the Depositary may receivecertificates for Shares to be deposited, together with the other instruments specified in this Section, for the purpose of forwarding those Share certificates tothe Custodian for deposit under this Deposit Agreement. The Depositary shall instruct each Custodian that, upon each delivery to a Custodian of a certificate or certificates for Shares to bedeposited under this Deposit Agreement, together with the other documents specified in this Section, that Custodian shall, as soon as transfer and recordationcan be accomplished, present that certificate or those certificates to the Company or the Foreign Registrar, if applicable, for transfer and recordation of theShares being deposited in the name of the Depositary or its nominee or that Custodian or its nominee. 7Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such otherplace or places as the Depositary shall determine. SECTION 2.3. Delivery of American Depositary Shares. The Depositary shall instruct each Custodian that, upon receipt by that Custodian of any deposit pursuant to Section 2.2, together with theother documents or evidence required under that Section, that Custodian shall notify the Depositary of that deposit and the person or persons to whom orupon whose written order American Depositary Shares are deliverable in respect thereof. Upon receiving a notice of a deposit from a Custodian, or upon thereceipt of Shares or evidence of the right to receive Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement,shall deliver, to or upon the order of the person or persons entitled thereto, the number of American Depositary Shares issuable in respect of that deposit, butonly upon payment to the Depositary of the fees and expenses of the Depositary for the delivery of those American Depositary Shares as provided inSection 5.9, and of all taxes and governmental charges and fees payable in connection with that deposit and the transfer of the deposited Shares. However,the Depositary shall deliver only whole numbers of American Depositary Shares. SECTION 2.4. Registration of Transfer of American Depositary Shares; Combination and Split-up of Receipts; Interchange of Certificatedand Uncertificated American Depositary Shares. The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register a transfer of American Depositary Shares on itstransfer books upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those American Depositary Shares, by theOwner or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer or (ii) in the case of uncertificated AmericanDepositary Shares, receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided inSection 2.10), and, in either case, duly stamped as may be required by the laws of the State of New York and of the United States of America. Uponregistration of a transfer, the Depositary shall deliver the transferred American Depositary Shares to or upon the order of the person entitled thereto. The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purposeof effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of AmericanDepositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. 8Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary, upon surrender of certificated American Depositary Shares for the purpose of exchanging for uncertificated AmericanDepositary Shares, shall cancel the Receipt evidencing those certificated American Depositary Shares and send the Owner a statement confirming that theOwner is the owner of the same number of uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for theavoidance of doubt, instructions through DRS and Profile as provided in Section 2.10) from the Owner of uncertificated American Depositary Shares for thepurpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American Depositary Shares and register and deliver tothe Owner a Receipt evidencing the same number of certificated American Depositary Shares. The Depositary may appoint one or more co-transfer agents for the purpose of effecting registration of transfers of American DepositaryShares and combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agentmay require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to American Depositary Sharesand will be entitled to protection and indemnity to the same extent as the Depositary. SECTION 2.5. Surrender of American Depositary Shares and Withdrawal of Deposited Securities. Upon surrender at the Depositary’s Office of American Depositary Shares for the purpose of withdrawal of the Deposited Securitiesrepresented thereby and payment of the fee of the Depositary for the surrender of American Depositary Shares as provided in Section 5.9 and payment of alltaxes and governmental charges payable in connection with that surrender and withdrawal of the Deposited Securities, and subject to the terms andconditions of this Deposit Agreement, the Owner of those American Depositary Shares shall be entitled to delivery (to the extent delivery can then belawfully and practicably made), to or as instructed by that Owner, of the amount of Deposited Securities at the time represented by those American DepositaryShares, but not any money or other property as to which a record date for distribution to Owners has passed (since money or other property of that kind will bedelivered or paid on the scheduled payment date to the Owner as of that record date). That delivery shall be made, as provided in this Section, withoutunreasonable delay. As a condition of accepting a surrender of American Depositary Shares for the purpose of withdrawal of Deposited Securities, the Depositarymay require (i) that each surrendered Receipt be properly endorsed in blank or accompanied by proper instruments of transfer in blank and (ii) that thesurrendering Owner execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to bedelivered to or upon the written order of a person or persons designated in that order. 9Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Thereupon, the Depositary shall direct the Custodian to deliver, subject to Sections 2.6, 3.1 and 3.2, the other terms and conditions of thisDeposit Agreement and local market rules and practices, to the surrendering Owner or to or upon the written order of the person or persons designated in theorder delivered to the Depositary as above provided, the amount of Deposited Securities represented by the surrendered American Depositary Shares, and theDepositary may charge the surrendering Owner a fee and its expenses for giving that direction by cable (including SWIFT) or facsimile transmission. At the request, risk and expense of an Owner surrendering American Depositary Shares for withdrawal of Deposited Securities, and for theaccount of that Owner, the Depositary shall direct the Custodian to forward any cash or other property comprising, and forward a certificate or certificates, ifapplicable, and other proper documents of title, if any, for, the Deposited Securities represented by the surrendered American Depositary Shares to theDepositary for delivery at the Depositary’s Office or to another address specified in the order received from the surrendering Owner. SECTION 2.6. Limitations on Delivery, Transfer and Surrender of American Depositary Shares. As a condition precedent to the delivery, registration of transfer or surrender of any American Depositary Shares or split-up or combinationof any Receipt or withdrawal of any Deposited Securities, the Depositary, Custodian or Registrar may require payment from the depositor of Shares or thepresenter of the Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum sufficient toreimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and feewith respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Deposit Agreement, may require the productionof proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary mayestablish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.6. The delivery of American Depositary Shares against deposit of Shares generally or against deposit of particular Shares may be suspended, orthe registration of transfer of American Depositary Shares in particular instances may be refused, or the registration of transfer of outstanding AmericanDepositary Shares generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemednecessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government orgovernmental body or commission, or under any provision of this Deposit Agreement, or for any other reason. Notwithstanding anything to the contrary inthis Deposit Agreement, the surrender of outstanding American Depositary Shares and withdrawal of Deposited Securities may not be suspended, subject onlyto (i) temporary delays caused by closing of the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable, or the deposit ofShares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and(iii) compliance with any U.S. or foreign laws or governmental regulations relating to the American Depositary Shares or to the withdrawal of the DepositedSecurities. 10Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares that, at the time of deposit, are RestrictedSecurities. SECTION 2.7. Lost Receipts, etc. If a Receipt is mutilated, destroyed, lost or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced bythat Receipt in uncertificated form or, if requested by the Owner, execute and deliver a new Receipt of like tenor in exchange and substitution for suchmutilated Receipt, upon surrender and cancellation of that mutilated Receipt, or in lieu of and in substitution for that destroyed, lost or stolen Receipt. However, before the Depositary will deliver American Depositary Shares in uncertificated form or execute and deliver a new Receipt, in substitution for adestroyed, lost or stolen Receipt, the Owner must (a) file with the Depositary (i) a request for that replacement before the Depositary has notice that theReceipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfy any other reasonable requirements imposed by theDepositary. SECTION 2.8. Cancellation and Destruction of Surrendered Receipts. The Depositary shall cancel all Receipts surrendered to it and is authorized to destroy Receipts so cancelled. SECTION 2.9. Pre-Release of American Depositary Shares. Notwithstanding Section 2.3, the Depositary may deliver American Depositary Shares prior to the receipt of Shares pursuant to Section 2.2(a “Pre-Release”). The Depositary may, pursuant to Section 2.5, deliver Shares upon the surrender of American Depositary Shares that have been Pre-Released, whether or not that surrender is prior to the termination of that Pre-Release or the Depositary knows that those American Depositary Shares havebeen Pre-Released. The Depositary may receive American Depositary Shares in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release must be(a) preceded or accompanied by a written representation from the person to whom American Depositary Shares or Shares are to be delivered, that such person,or its customer, owns the Shares or American Depositary Shares to be remitted, as the case may be, (b) at all times fully collateralized with cash or such othercollateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days’ notice, and (d) subject to allindemnities and credit regulations that the Depositary deems appropriate. The number of American Depositary Shares outstanding at any time as a result ofPre-Release will not normally exceed thirty percent (30%) of all American Depositary Shares outstanding; provided, however, that the Depositary reserves theright to change or disregard that limit from time to time as it deems appropriate. 11Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary may retain for its own account any compensation received by it in connection with Pre-Release. SECTION 2.10. DTC Direct Registration System and Profile Modification System. (a) Notwithstanding the provisions of Section 2.4, the parties acknowledge that DTC’s Direct Registration System (“DRS”) and ProfileModification System (“Profile”) apply to the American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTCthat facilitates interchange between registered holding of uncertificated securities and holding of security entitlements in those securities through DTC and aDTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, todirect the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to theDTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register that transfer. (b) In connection with DRS/Profile, the parties acknowledge that the Depositary will not determine whether the DTC participant thatis claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as described in paragraph (a) above has the actual authorityto act on behalf of that Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions ofSections 5.3 and 5.8 apply to the matters arising from the use of the DRS/Profile. The parties agree that the Depositary’s reliance on and compliance withinstructions received by the Depositary through the DRS/Profile system and otherwise in accordance with this Deposit Agreement shall not constitutenegligence or bad faith on the part of the Depositary. ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES SECTION 3.1. Filing Proofs, Certificates and Other Information. Any person presenting Shares for deposit or any Owner or Holder may be required from time to time to file with the Depositary or theCustodian such proof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of the Company orthe Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary orproper. The Depositary may withhold the delivery or registration of transfer of American Depositary Shares, the distribution of any dividend or otherdistribution or of the proceeds thereof or the delivery of any Deposited Securities until that proof or other information is filed or those certificates areexecuted or those representations and warranties are made. 12Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 3.2. Liability of Owner for Taxes. If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to or in connection with anyAmerican Depositary Shares or any Deposited Securities represented by any American Depositary Shares or in connection with a transaction to whichSection 4.8 applies, that tax or other governmental charge shall be payable by the Owner of those American Depositary Shares to the Depositary. TheDepositary may refuse to register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities represented by those AmericanDepositary Shares until that payment is made, and may withhold any dividends or other distributions or the proceeds thereof, or may sell for the account ofthe Owner any part or all of the Deposited Securities represented by those American Depositary Shares and apply those dividends or other distributions or thenet proceeds of any sale of that kind in payment of that tax or other governmental charge but, even after a sale of that kind, the Owner of those AmericanDepositary Shares shall remain liable for any deficiency. The Depositary shall distribute any net proceeds of a sale made under this Section that are not usedto pay taxes or governmental charges to the Owners entitled to them in accordance with Section 4.1. If the number of Shares represented by each AmericanDepositary Share decreases as a result of a sale of Deposited Securities under this Section, the Depositary may call for surrender of the American DepositaryShares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extentnecessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled tothem. SECTION 3.3. Warranties on Deposit of Shares. Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that those Shares and eachcertificate therefor, if applicable, are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights of theholders of outstanding securities of the Company and that the person making that deposit is duly authorized so to do. Every depositing person shall also bedeemed to represent that the Shares, at the time of deposit, are not Restricted Securities. All representations and warranties deemed made under thisSection shall survive the deposit of Shares and delivery of American Depositary Shares. 13Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 3.4. Disclosure of Interests. When required in order to comply with applicable laws and regulations or the articles of association or similar document of the Company,the Company may from time to time request each Owner and Holder to provide to the Depositary information relating to: (a) the capacity in which itholds American Depositary Shares, (b) the identity of any Holders or other persons or entities then or previously interested in those American DepositaryShares and the nature of those interests and (c) any other matter where disclosure of such matter is required for that compliance. Each Owner and Holderagrees to provide all information known to it in response to a request made pursuant to this Section. Each Holder consents to the disclosure by the Owner orany other Holder through which it holds American Depositary Shares, directly or indirectly, of all information responsive to a request made pursuant to thisSection relating to that Holder that is known to that Owner or other Holder. The Depositary agrees to use reasonable efforts, at the Company’s expense, tocomply with written instructions requesting that the Depositary forward any request authorized under this Section to the Owners and to forward to theCompany any responses it receives in response to that request. ARTICLE 4. THE DEPOSITED SECURITIES SECTION 4.1. Cash Distributions. Whenever the Depositary receives any cash dividend or other cash distribution on Deposited Securities, the Depositary shall, subject to theprovisions of Section 4.5, convert that dividend or other distribution into Dollars and distribute the amount thus received (net of the fees and expenses of theDepositary as provided in Section 5.9) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing thoseDeposited Securities held by them respectively; provided, however, that if the Custodian or the Depositary shall be required to withhold and does withholdfrom that cash dividend or other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owners of theAmerican Depositary Shares representing those Deposited Securities shall be reduced accordingly. However, the Depositary will not pay any Owner afraction of one cent, but will round each Owner’s entitlement to the nearest whole cent. The Company or its agent will remit to the appropriate governmental agency in each applicable jurisdiction all amounts withheld andowing to such agency. The Depositary will forward to the Company or its agent such information from its records as the Company may reasonably request toenable the Company or its agent to file necessary reports with governmental agencies. If a cash distribution would represent a return of all or substantially all the value of the Deposited Securities underlying AmericanDepositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of or deduct the fee for surrender ofAmerican Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that cash distribution. Adistribution of that kind shall be a Termination Option Event. 14Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 4.2. Distributions Other Than Cash, Shares or Rights. Subject to the provisions of Sections 4.11 and 5.9, whenever the Depositary receives any distribution other than a distribution described inSection 4.1, 4.3 or 4.4 on Deposited Securities (but not in exchange for or in conversion or in lieu of Deposited Securities), the Depositary shall cause thesecurities or property received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and expenses of theDepositary and any taxes or other governmental charges, in proportion to the number of American Depositary Shares representing such Deposited Securitiesheld by them respectively, in any manner that the Depositary deems equitable and practicable for accomplishing that distribution (which may be adistribution of depositary shares representing the securities received); provided, however, that if in the opinion of the Depositary such distribution cannot bemade proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or theDepositary withhold an amount on account of taxes or other governmental charges or that securities received must be registered under the Securities Act of1933 in order to be distributed to Owners or Holders) the Depositary deems such distribution not to be lawful and feasible, the Depositary may adopt suchother method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private saleof the securities or property thus received, or any part thereof, and distribution of the net proceeds of any such sale (net of the fees and expenses of theDepositary as provided in Section 5.9) to the Owners entitled thereto, all in the manner and subject to the conditions set forth in Section 4.1. The Depositarymay withhold any distribution of securities under this Section 4.2 if it has not received satisfactory assurances from the Company that the distribution doesnot require registration under the Securities Act of 1933. The Depositary may sell, by public or private sale, an amount of securities or other property itwould otherwise distribute under this Section 4.2 that is sufficient to pay its fees and expenses in respect of that distribution. If a distribution under this Section 4.2 would represent a return of all or substantially all the value of the Deposited Securities underlyingAmerican Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of or deduct the fee forsurrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making thatdistribution. A distribution of that kind shall be a Termination Option Event. 15Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 4.3. Distributions in Shares. Whenever the Depositary receives any distribution on Deposited Securities consisting of a dividend in, or free distribution of, Shares, theDepositary may deliver to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing those Deposited Securitiesheld by them respectively, an aggregate number of American Depositary Shares representing the amount of Shares received as that dividend or freedistribution, subject to the terms and conditions of this Deposit Agreement with respect to the deposit of Shares and issuance of American Depositary Shares,including withholding of any tax or governmental charge as provided in Section 4.11 and payment of the fees and expenses of the Depositary as provided inSection 5.9 (and the Depositary may sell, by public or private sale, an amount of the Shares received (or American Depositary Shares representing thoseShares) sufficient to pay its fees and expenses in respect of that distribution). In lieu of delivering fractional American Depositary Shares, the Depositary maysell the amount of Shares represented by the aggregate of those fractions (or American Depositary Shares representing those Shares) and distribute the netproceeds, all in the manner and subject to the conditions described in Section 4.1. If and to the extent that additional American Depositary Shares are notdelivered and Shares or American Depositary Shares are not sold, each American Depositary Share shall thenceforth also represent the additional Sharesdistributed on the Deposited Securities represented thereby. If the Company declares a distribution in which holders of Deposited Securities have a right to elect whether to receive cash, Shares or othersecurities or a combination of those things, or a right to elect to have a distribution sold on their behalf, the Depositary may, after consultation with theCompany, make that right of election available for exercise by Owners in any manner the Depositary considers to be lawful and practical. As a condition ofmaking a distribution election right available to Owners, the Depositary may require satisfactory assurances from the Company that doing so does not requireregistration of any securities under the Securities Act of 1933. SECTION 4.4. Rights. (a) If rights are granted to the Depositary in respect of deposited Shares to purchase additional Shares or other securities, the Companyand the Depositary shall endeavor to consult as to the actions, if any, the Depositary should take in connection with that grant of rights. The Depositary may,to the extent deemed by it to be lawful and practical (i) if requested in writing by the Company, grant to all or certain Owners rights to instruct the Depositaryto purchase the securities to which the rights relate and deliver those securities or American Depositary Shares representing those securities to Owners, (ii) ifrequested in writing by the Company, deliver the rights to or to the order of certain Owners, or (iii) sell the rights to the extent practicable and distribute thenet proceeds of that sale to Owners entitled to those proceeds. To the extent rights are not exercised, delivered or disposed of under (i), (ii) or (iii) above, theDepositary shall permit the rights to lapse unexercised. (b) If the Depositary will act under (a)(i) above, the Company and the Depositary will enter into a separate agreement setting forth theconditions and procedures applicable to the particular offering. Upon instruction from an applicable Owner in the form the Depositary specified and uponpayment by that Owner to the Depositary of an amount equal to the purchase price of the securities to be received upon the exercise of the rights, theDepositary shall, on behalf of that Owner, exercise the rights and purchase the securities. The purchased securities shall be delivered to, or as instructed by,the Depositary. The Depositary shall (i) deposit the purchased Shares under this Deposit Agreement and deliver American Depositary Shares representingthose Shares to that Owner or (ii) deliver or cause the purchased Shares or other securities to be delivered to or to the order of that Owner. The Depositary willnot act under (a)(i) above unless the offer and sale of the securities to which the rights relate are registered under the Securities Act of 1933 or the Depositaryhas received an opinion of United States counsel that is satisfactory to it to the effect that those securities may be sold and delivered to the applicable Ownerswithout registration under the Securities Act of 1933. 16Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) If the Depositary will act under (a)(ii) above, the Company and the Depositary will enter into a separate agreement setting forth theconditions and procedures applicable to the particular offering. Upon (i) the request of an applicable Owner to deliver the rights allocable to the AmericanDepositary Shares of that Owner to an account specified by that Owner to which the rights can be delivered and (ii) receipt of such documents as theCompany and the Depositary agreed to require to comply with applicable law, the Depositary will deliver those rights as requested by that Owner. (d) If the Depositary will act under (a)(iii) above, the Depositary will use reasonable efforts to sell the rights in proportion to thenumber of American Depositary Shares held by the applicable Owners and pay the net proceeds to the Owners otherwise entitled to the rights that were sold,upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery ofany American Depositary Shares or otherwise. (e) Payment or deduction of the fees of the Depositary as provided in Section 5.9 and payment or deduction of the expenses of theDepositary and any applicable taxes or other governmental charges shall be conditions of any delivery of securities or payment of cash proceeds under thisSection 4.4. (f) The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make rights available to orexercise rights on behalf of Owners in general or any Owner in particular, or to sell rights. SECTION 4.5. Conversion of Foreign Currency. Whenever the Depositary or the Custodian receives foreign currency, by way of dividends or other distributions or the net proceeds fromthe sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary beconverted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be convertedby sale or in any other manner that it may determine that foreign currency into Dollars, and those Dollars shall be distributed to the Owners entitled thereto. A cash distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners based on exchangerestrictions, the date of delivery of any American Depositary Shares or otherwise and shall be net of any expenses of conversion into Dollars incurred by theDepositary as provided in Section 5.9. 17Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If a conversion of foreign currency or the repatriation or distribution of Dollars can be effected only with the approval or license of anygovernment or agency thereof, the Depositary may, but will not be required to, file an application for that approval or license. If the Depositary determines that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on areasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof that is required for suchconversion is not filed or sought by the Depositary or is not obtained within a reasonable period as determined by the Depositary, the Depositary maydistribute the foreign currency received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interestthereon for the respective accounts of, the Owners entitled to receive the same. If any conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, theDepositary may in its discretion make that conversion and distribution in Dollars to the extent practicable and permissible to the Owners entitled thereto andmay distribute the balance of the foreign currency received by the Depositary to, or hold that balance uninvested and without liability for interest thereon forthe account of, the Owners entitled thereto. The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and notas agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain forits own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under thisDeposit Agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account. The Depositarymakes no representation that the exchange rate used or obtained in any currency conversion under this Deposit Agreement will be the most favorable rate thatcould be obtained at the time or that the method by which that rate will be determined will be the most favorable to Owners, subject to the Depositary’sobligations under Section 5.3. The methodology used to determine exchange rates used in currency conversions is available upon request. 18Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 4.6. Fixing of Record Date. Whenever a cash dividend, cash distribution or any other distribution is made on Deposited Securities or rights to purchase Shares or othersecurities are issued with respect to Deposited Securities (which rights will be delivered to or exercised or sold on behalf of Owners in accordance withSection 4.4) or the Depositary receives notice that a distribution or issuance of that kind will be made, or whenever the Depositary receives notice that ameeting of holders of Shares will be held in respect of which the Company has requested the Depositary to send a notice under Section 4.7, or whenever theDepositary will assess a fee or charge against the Owners, or whenever the Depositary causes a change in the number of Shares that are represented by eachAmerican Depositary Share, or whenever the Depositary otherwise finds it necessary or convenient, the Depositary shall fix a record date, which shall be thesame as, or as near as practicable to, any corresponding record date set by the Company with respect to Shares, (a) for the determination of the Owners (i) whoshall be entitled to receive the benefit of that dividend or other distribution or those rights, (ii) who shall be entitled to give instructions for the exercise ofvoting rights at that meeting or (iii) who shall be responsible for that fee or charge or (iv) for any other purpose for which the record date was set, or (b) on orafter which each American Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.1 through 4.5 and to theother terms and conditions of this Deposit Agreement, the Owners on a record date fixed by the Depositary shall be entitled to receive the amountdistributable by the Depositary with respect to that dividend or other distribution or those rights or the net proceeds of sale thereof in proportion to thenumber of American Depositary Shares held by them respectively, to give voting instructions or to act in respect of the other matter for which that record datewas fixed, or be responsible for that fee or charge, as the case may be. SECTION 4.7. Voting of Deposited Shares. (a) Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to vote, if requested inwriting by the Company, the Depositary shall, as soon as practicable thereafter, Disseminate to the Owners a notice, the form of which shall be in the solediscretion of the Depositary, that shall contain (i) the information contained in the notice of meeting received by the Depositary, (ii) a statement that theOwners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Cayman Islands law and of the articles ofassociation or similar documents of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Sharesrepresented by their respective American Depositary Shares (iii) a statement as to the manner in which those instructions may be given and (iv) the last dateon which the Depositary will accept instructions (the “Instruction Cutoff Date”). (b) Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if a record date was specifiedby the Depositary, as of that record date, received on or before any Instruction Cutoff Date established by the Depositary, the Depositary may, and if theDepositary sent a notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the amount of deposited Sharesrepresented by those American Depositary Shares in accordance with the instructions set forth in that request. The Depositary shall not vote or attempt toexercise the right to vote that attaches to the deposited Shares other than in accordance with instructions given by Owners and received by the Depositary. 19Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) There can be no assurance that Owners generally or any Owner in particular will receive the notice described in paragraph(a) above in time to enable Owners to give instructions to the Depositary prior to the Instruction Cutoff Date. (d) In order to give Owners a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Shares, ifthe Company will request the Depositary to Disseminate a notice under paragraph (a) above, the Company shall give the Depositary notice of the meeting,details concerning the matters to be voted upon and copies of materials to be made available to holders of Shares in connection with the meeting not lessthan 45 days prior to the meeting date. SECTION 4.8. Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities. (a) The Depositary shall not tender any Deposited Securities in response to any voluntary cash tender offer, exchange offer or similaroffer made to holders of Deposited Securities (a “Voluntary Offer”), except when instructed in writing to do so by an Owner surrendering AmericanDepositary Shares and subject to any conditions or procedures the Depositary may require. (b) If the Depositary receives a written notice that Deposited Securities have been redeemed for cash or otherwise purchased for cash ina transaction that is mandatory and binding on the Depositary as a holder of those Deposited Securities (a “Redemption”), the Depositary, at the expense ofthe Company, shall (i) if required, surrender Deposited Securities that have been redeemed to the issuer of those securities or its agent on the redemption date,(ii) Disseminate a notice to Owners (A) notifying them of that Redemption, (B) calling for surrender of a corresponding number of American DepositaryShares and (C) notifying them that the called American Depositary Shares have been converted into a right only to receive the money received by theDepositary upon that Redemption and those net proceeds shall be the Deposited Securities to which Owners of those converted American Depositary Sharesshall be entitled upon surrenders of those American Depositary Shares in accordance with Section 2.5 or 6.2 and (iii) distribute the money received upon thatRedemption to the Owners entitled to it upon surrender by them of called American Depositary Shares in accordance with Section 2.5 (and, for the avoidanceof doubt, Owners shall not be entitled to receive that money under Section 4.1). If the Redemption affects less than all the Deposited Securities, theDepositary shall call for surrender a corresponding portion of the outstanding American Depositary Shares and only those American Depositary Shares willautomatically be converted into a right to receive the net proceeds of the Redemption. The Depositary shall allocate the American Depositary Sharesconverted under the preceding sentence among the Owners pro-rata to their respective holdings of American Depositary Shares immediately prior to theRedemption, except that the allocations may be adjusted so that no fraction of a converted American Depositary Share is allocated to any Owner. ARedemption of all or substantially all of the Deposited Securities shall be a Termination Option Event. 20Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) If the Depositary is notified of or there occurs any change in nominal value or any subdivision, combination or any otherreclassification of the Deposited Securities or any recapitalization, reorganization, sale of assets substantially as an entirety, merger or consolidation affectingthe issuer of the Deposited Securities or to which it is a party that is mandatory and binding on the Depositary as a holder of Deposited Securities and, as aresult, securities or other property have been or will be delivered in exchange, conversion, replacement or in lieu of, Deposited Securities (a “Replacement”),the Depositary shall, if required, surrender the old Deposited Securities affected by that Replacement of Shares and hold, as new Deposited Securities underthis Deposit Agreement, the new securities or other property delivered to it in that Replacement. However, the Depositary may elect to sell those newDeposited Securities if in the opinion of the Depositary it is not lawful or not practical for it to hold those new Deposited Securities under this DepositAgreement because those new Deposited Securities may not be distributed to Owners without registration under the Securities Act of 1933 or for any otherreason, at public or private sale, at such places and on such terms as it deems proper and proceed as if those new Deposited Securities had been Redeemedunder paragraph (b) above. A Replacement shall be a Termination Option Event. (d) In the case of a Replacement where the new Deposited Securities will continue to be held under this Deposit Agreement, theDepositary may call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing the new Deposited Securities and thenumber of those new Deposited Securities represented by each American Depositary Share. If the number of Shares represented by each American DepositaryShare decreases as a result of a Replacement, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basisfor a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions ofAmerican Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them. (e) If there are no Deposited Securities with respect to American Depositary Shares, including if the Deposited Securities are cancelled,or the Deposited Securities with respect to American Depositary Shares have become apparently worthless, the Depositary may call for surrender of thoseAmerican Depositary Shares or may cancel those American Depositary Shares, upon notice to Owners, and a Termination Option Event occurs. SECTION 4.9. Reports. The Depositary shall make available for inspection by Owners at its Office any reports and communications, including any proxysolicitation material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) madegenerally available to the holders of those Deposited Securities by the Company. The Company shall furnish reports and communications, including anyproxy soliciting material to which this Section applies, to the Depositary in English, to the extent those materials are required to be translated into Englishpursuant to any regulations of the Commission. 21Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 4.10. Lists of Owners. Upon written request by the Company, the Depositary shall, at the expense of the Company, furnish to it a list, as of a recent date, of thenames, addresses and American Depositary Share holdings of all Owners. SECTION 4.11. Withholding. If the Depositary determines that any distribution received or to be made by the Depositary (including Shares and rights to subscribetherefor) is subject to any tax or other governmental charge that the Depositary is obligated to withhold, the Depositary may sell, by public or private sale, allor a portion of the distributed property (including Shares and rights to subscribe therefor) in the amounts and manner the Depositary deems necessary andpracticable to pay those taxes or charges, and the Depositary shall distribute the net proceeds of that sale, after deduction of those taxes or charges, to theOwners entitled thereto in proportion to the number of American Depositary Shares held by them respectively. Services for Owners and Holders that may permit them to obtain reduced rates of tax withholding at source or reclaim excess tax withheld,and the fees and costs associated with using services of that kind, are not provided under, and are outside the scope of, this Deposit Agreement. Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their respective directors, employees, agentsand affiliates for, and hold each of them harmless against, any claim by any governmental authority with respect to taxes, additions to tax, penalties orinterest arising out of any refund of taxes, reduced withholding at source or other tax benefit received by it. ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY SECTION 5.1. Maintenance of Office and Transfer Books by the Depositary. Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain facilities for the execution anddelivery, registration, registration of transfers and surrender of American Depositary Shares in accordance with the provisions of this Deposit Agreement. The Depositary shall keep books for the registration of American Depositary Shares, which shall be open for inspection by the Owners at theDepositary’s Office during regular business hours, provided that such inspection is not for the purpose of communicating with Owners in the interest of abusiness or object other than the business of the Company or a matter related to this Deposit Agreement or the American Depositary Shares. 22Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it in connection with theperformance of its duties under this Deposit Agreement. If any American Depositary Shares are listed on one or more stock exchanges, the Depositary shall act as Registrar or appoint a Registrar orone or more co-registrars for registry of those American Depositary Shares in accordance with any requirements of that exchange or those exchanges. SECTION 5.2. Prevention or Delay of Performance by the Company or the Depositary. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to anyOwner or Holder: (i) if by reason of (A) any provision of any present or future law or regulation or other act of the government of the United States, any Stateof the United States or any other state or jurisdiction, or of any governmental or regulatory authority or stock exchange; (B) (in the case of the Depositaryonly) any provision, present or future, of the articles of association or similar document of the Company, or by reason of any provision of any securitiesissued or distributed by the Company, or any offering or distribution thereof; or (C) any event or circumstance, whether natural or caused by a person orpersons, that is beyond the ability of the Depositary or the Company, as the case may be, to prevent or counteract by reasonable care or effort (including, butnot limited to earthquakes, floods, severe storms, fires, explosions, war, terrorism, civil unrest, labor disputes or criminal acts; interruptions or malfunctions ofutility services, Internet or other communications lines or systems; unauthorized access to or attacks on computer systems or websites; or other failures ormalfunctions of computer hardware or software or other systems or equipment), the Depositary or the Company is, directly or indirectly, prevented from,forbidden to or delayed in, or could be subject to any civil or criminal penalty on account of doing or performing and therefore does not do or perform, anyact or thing that, by the terms of this Deposit Agreement or the Deposited Securities, it is provided shall be done or performed; (ii) for any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement (including any determination by theDepositary to take, or not take, any action that this Deposit Agreement provides the Depositary may take); (iii) for the inability of any Owner or Holder to benefit from any distribution, offering, right or other benefit that is made available toholders of Deposited Securities but is not, under the terms of this Deposit Agreement, made available to Owners or Holders; or 23Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (iv) for any special, consequential or punitive damages for any breach of the terms of this Deposit Agreement. Where, by the terms of a distribution to which Section 4.1, 4.2 or 4.3 applies, or an offering to which Section 4.4 applies, or for any otherreason, that distribution or offering may not be made available to Owners, and the Depositary may not dispose of that distribution or offering on behalf ofOwners and make the net proceeds available to Owners, then the Depositary shall not make that distribution or offering available to Owners, and shall allowany rights, if applicable, to lapse. SECTION 5.3. Obligations of the Depositary and the Company. The Company assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to any Owner or Holder, exceptthat the Company agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith. The Depositary assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to any Owner or Holder(including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that the Depositary agrees to perform itsobligations specifically set forth in this Deposit Agreement without negligence or bad faith. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or otherproceeding in respect of any Deposited Securities or in respect of the American Depositary Shares on behalf of any Owner or Holder or any other person. Each of the Depositary and the Company may rely, and shall be protected in relying upon, any written notice, request, direction or otherdocument believed by it to be genuine and to have been signed or presented by the proper party or parties. Neither the Depositary nor the Company shall be liable for any action or non-action by it in reliance upon the advice of or information fromlegal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give suchadvice or information. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act oromission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connectionwith the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted asDepositary. 24Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary shall not be liable for the acts or omissions of any securities depository, clearing agency or settlement system in connectionwith or arising out of book-entry settlement of American Depositary Shares or Deposited Securities or otherwise. In the absence of bad faith on its part, the Depositary shall not be responsible for any failure to carry out any instructions to vote any of theDeposited Securities, or for the manner in which any such vote is cast or the effect of any such vote. The Depositary shall have no duty to make any determination or provide any information as to the tax status of the Company or anyliability for any tax consequences that may be incurred by Owners or Holders as a result of owning or holding American Depositary Shares. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of this Deposit Agreement. SECTION 5.4. Resignation and Removal of the Depositary. The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, tobecome effective upon the appointment of a successor depositary and its acceptance of that appointment as provided in this Section. The effect ofresignation if a successor depositary is not appointed is provided for in Section 6.2. The Depositary may at any time be removed by the Company by 120 days’ prior written notice of that removal, to become effective uponthe later of (i) the 120th day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of itsappointment as provided in this Section. If the Depositary resigns or is removed, the Company shall use its best efforts to appoint a successor depositary, which shall be a bank ortrust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to the Companyan instrument in writing accepting its appointment under this Deposit Agreement. If the Depositary receives notice from the Company that a successordepositary has been appointed following its resignation or removal, the Depositary, upon payment of all sums due it from the Company, shall deliver to itssuccessor a register listing all the Owners and their respective holdings of outstanding American Depositary Shares and shall deliver the Deposited Securitiesto or to the order of its successor. When the Depositary has taken the actions specified in the preceding sentence (i) the successor shall become theDepositary and shall have all the rights and shall assume all the duties of the Depositary under this Deposit Agreement and (ii) the predecessor depositaryshall cease to be the Depositary and shall be discharged and released from all obligations under this Deposit Agreement, except for its duties underSection 5.8 with respect to the time before that discharge. A successor Depositary shall notify the Owners of its appointment as soon as practical afterassuming the duties of Depositary. 25Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Any corporation or other entity into or with which the Depositary may be merged or consolidated shall be the successor of the Depositarywithout the execution or filing of any document or any further act. SECTION 5.5. The Custodians. The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it. TheDepositary in its discretion may at any time appoint a substitute or additional custodian or custodians, each of which shall thereafter be one of the Custodiansunder this Deposit Agreement. If the Depositary receives notice that a Custodian is resigning and, upon the effectiveness of that resignation there would beno Custodian acting under this Deposit Agreement, the Depositary shall, as promptly as practicable after receiving that notice, appoint a substitute custodianor custodians, each of which shall thereafter be a Custodian under this Deposit Agreement. The Depositary shall require any Custodian that resigns or isremoved to deliver all Deposited Securities held by it to another Custodian. SECTION 5.6. Notices and Reports. If the Company takes or decides to take any corporate action of a kind that is addressed in Sections 4.1 to 4.4, or 4.6 to 4.8, or that effects orwill effect a change of the name or legal structure of the Company, or that effects or will effect a change to the Shares, the Company shall notify theDepositary and the Custodian of that action or decision as soon as it is lawful and practical to give that notice. The notice shall be in English and shallinclude all details that the Company is required to include in any notice to any governmental or regulatory authority or securities exchange or is required tomake available generally to holders of Shares by publication or otherwise. The Company will arrange for the translation into English, if not already in English, to the extent required pursuant to any regulations ofthe Commission, and the prompt transmittal by the Company to the Depositary and the Custodian of all notices and any other reports and communicationswhich are made generally available by the Company to holders of its Shares. If requested in writing by the Company, the Depositary will Disseminate, at theCompany’s expense, those notices, reports and communications to all Owners or otherwise make them available to Owners in a manner that the Companyspecifies as substantially equivalent to the manner in which those communications are made available to holders of Shares and compliant with therequirements of any securities exchange on which the American Depositary Shares are listed. The Company will timely provide the Depositary with thequantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect thatDissemination. 26Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company represents that as of the date of this Deposit Agreement, the statements in Article 11 of the Receipt with respect to theCompany’s obligation to file periodic reports under the United States Securities Exchange Act of 1934, as amended, are true and correct. The Companyagrees to promptly notify the Depositary upon becoming aware of any change in the truth of any of those statements. SECTION 5.7. Distribution of Additional Shares, Rights, etc. If the Company or any affiliate of the Company determines to make any issuance or distribution of (1) additional Shares, (2) rights tosubscribe for Shares, (3) securities convertible into Shares, or (4) rights to subscribe for such securities (each a “Distribution”), the Company shall notify theDepositary in writing in English as promptly as practicable and in any event before the Distribution starts and, if requested in writing by the Depositary, theCompany shall promptly furnish to the Depositary either (i) evidence satisfactory to the Depositary that the Distribution is registered under the Securities Actof 1933 or (ii) a written opinion from U.S. counsel for the Company that is reasonably satisfactory to the Depositary, stating that the Distribution does notrequire, or, if made in the United States, would not require, registration under the Securities Act of 1933. The Company agrees with the Depositary that neither the Company nor any company controlled by, controlling or under common controlwith the Company will at any time deposit any Shares that, at the time of deposit, are Restricted Securities. SECTION 5.8. Indemnification. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and each Custodian against, and hold eachof them harmless from, any liability or expense (including, but not limited to any fees and expenses incurred in seeking, enforcing or collecting suchindemnity and the fees and expenses of counsel) that may arise out of or in connection with (a) any registration with the Commission of American DepositaryShares or Deposited Securities or the offer or sale thereof in the United States or (b) acts performed or omitted, pursuant to the provisions of or in connectionwith this Deposit Agreement and the American Depositary Shares, as the same may be amended, modified or supplemented from time to time, (i) by either theDepositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence orbad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates. The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliates and hold them harmless from any liabilityor expense (including, but not limited to any fees and expenses incurred in seeking, enforcing or collecting such indemnity and the fees and expenses ofcounsel) that may arise out of acts performed or omitted by the Depositary or any Custodian or their respective directors, employees, agents and affiliates dueto their negligence or bad faith. 27Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 5.9. Charges of Depositary. The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American DepositaryShares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by theCompany or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant toSection 4.3), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for theregistration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the nameof the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable (including SWIFT) andfacsimile transmission fees and expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in theconversion of foreign currency pursuant to Section 4.5, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery ofAmerican Depositary Shares pursuant to Section 2.3, 4.3 or 4.4 and the surrender of American Depositary Shares pursuant to Section 2.5 or 6.2, (6) a fee of$.05 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement, including, but not limitedto Sections 4.1 through 4.4 and Section 4.8, (7) a fee for the distribution of securities pursuant to Section 4.2 or of rights pursuant to Section 4.4 (where theDepositary will not exercise or sell those rights on behalf of Owners), such fee being in an amount equal to the fee for the execution and delivery of AmericanDepositary Shares referred to above which would have been charged as a result of the deposit of such securities under this Deposit Agreement (for purposes ofthis item 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to anyfee charged under item 6 above, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum for depositary services, which will bepayable as provided in item 9 below, and (9) any other charges payable by the Depositary or the Custodian, any of the Depositary’s or Custodian’s agents orthe agents of the Depositary’s or Custodian’s agents, in connection with the servicing of Shares or other Deposited Securities (which charges shall be assessedagainst Owners as of the date or dates set by the Depositary in accordance with Section 4.6 and shall be payable at the sole discretion of the Depositary bybilling those Owners for those charges or by deducting those charges from one or more cash dividends or other cash distributions). The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to bedistributed, to Owners that are obligated to pay those fees. 28Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In performing its duties under this Deposit Agreement, the Depositary may use brokers, dealers, foreign currency dealers or other serviceproviders that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions. The Depositary, subject to Section 2.9, may own and deal in any class of securities of the Company and its affiliates and in AmericanDepositary Shares. SECTION 5.10. Retention of Depositary Documents. The Depositary is authorized to destroy those documents, records, bills and other data compiled during the term of this Deposit Agreementat the times permitted by the laws or regulations governing the Depositary, unless the Company requests that those papers be retained for a longer period orturned over to the Company or to a successor depositary. SECTION 5.11. Exclusivity. Without prejudice to the Company’s rights under Section 5.4, the Company agrees not to appoint any other depositary for issuance ofdepositary shares, depositary receipts or any similar securities or instruments so long as The Bank of New York Mellon is acting as Depositary under thisDeposit Agreement. ARTICLE 6. AMENDMENT AND TERMINATION SECTION 6.1. Amendment. The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreementbetween the Company and the Depositary without the consent of Owners or Holders in any respect that they may deem necessary or desirable. Anyamendment that would impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimiletransmission costs, delivery costs or other such expenses), or that would otherwise prejudice any substantial existing right of Owners, shall, however, notbecome effective as to outstanding American Depositary Shares until the expiration of 30 days after notice of that amendment has been Disseminated to theOwners of outstanding American Depositary Shares. Every Owner and Holder, at the time any amendment so becomes effective, shall be deemed, bycontinuing to hold American Depositary Shares or any interest therein, to consent and agree to that amendment and to be bound by this Deposit Agreementas amended thereby. Upon the effectiveness of an amendment to the form of Receipt, including a change in the number of Shares represented by eachAmerican Depositary Share, the Depositary may call for surrender of Receipts to be replaced with new Receipts in the amended form or call for surrender ofAmerican Depositary Shares to effect that change of ratio. In no event shall any amendment impair the right of the Owner to surrender American DepositaryShares and receive delivery of the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. 29Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 6.2. Termination. (a) The Company may initiate termination of this Deposit Agreement by notice to the Depositary. The Depositary may initiatetermination of this Deposit Agreement if (i) at any time 60 days shall have expired after the Depositary delivered to the Company a written resignation noticeand a successor depositary has not been appointed and accepted its appointment as provided in Section 5.4, (ii) an Insolvency Event or Delisting Eventoccurs with respect to the Company or (iii) a Termination Option Event has occurred or will occur. If termination of this Deposit Agreement is initiated, theDepositary shall Disseminate a notice of termination to the Owners of all American Depositary Shares then outstanding setting a date for termination (the“Termination Date”), which shall be at least 90 days after the date of that notice, and this Deposit Agreement shall terminate on that Termination Date. (b) After the Termination Date, the Company shall be discharged from all obligations under this Deposit Agreement except for itsobligations to the Depositary under Sections 5.8 and 5.9. (c) At any time after the Termination Date, the Depositary may sell the Deposited Securities then held under this Deposit Agreementand may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and withoutliability for interest, for the pro rata benefit of the Owners of American Depositary Shares that remain outstanding, and those Owners will be general creditorsof the Depositary with respect to those net proceeds and that other cash. After making that sale, the Depositary shall be discharged from all obligations underthis Deposit Agreement, except (i) to account for the net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender ofAmerican Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in accordance with the terms and conditions ofthis Deposit Agreement and any applicable taxes or governmental charges) and (ii) for its obligations under Section 5.8 and (iii) to act as provided inparagraph (d) below. (d) After the Termination Date, the Depositary shall continue to receive dividends and other distributions pertaining to DepositedSecurities (that have not been sold), may sell rights and other property as provided in this Deposit Agreement and shall deliver Deposited Securities (or saleproceeds) upon surrender of American Depositary Shares (after payment or upon deduction, in each case, of the fee of the Depositary for the surrender ofAmerican Depositary Shares, any expenses for the account of the Owner of those American Depositary Shares in accordance with the terms and conditions ofthis Deposit Agreement and any applicable taxes or governmental charges). After the Termination Date, the Depositary shall not accept deposits of Shares ordeliver American Depositary Shares. After the Termination Date, (i) the Depositary may refuse to accept surrenders of American Depositary Shares for thepurpose of withdrawal of Deposited Securities (that have not been sold) if in its judgment the requested withdrawal would interfere with its efforts to sell theDeposited Securities, (ii) the Depositary will not be required to deliver cash proceeds of the sale of Deposited Securities until all Deposited Securities havebeen sold and (iii) the Depositary may discontinue the registration of transfers of American Depositary Shares and suspend the distribution of dividends andother distributions on Deposited Securities to the Owners and need not give any further notices or perform any further acts under this Deposit Agreementexcept as provided in this Section. 30Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ARTICLE 7. MISCELLANEOUS SECTION 7.1. Counterparts; Signatures. This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of thosecounterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodians and shallbe open to inspection by any Owner or Holder during regular business hours. Any manual signature on this Deposit Agreement that is faxed, scanned or photocopied, and any electronic signature valid under theElectronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001, et. seq., shall for all purposes have the same validity, legal effect andadmissibility in evidence as an original manual signature, and the parties hereby waive any objection to the contrary. SECTION 7.2. No Third Party Beneficiaries. This Deposit Agreement is for the exclusive benefit of the Company, the Depositary, the Owners and the Holders and their respectivesuccessors and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person. SECTION 7.3. Severability. In case any one or more of the provisions contained in this Deposit Agreement or in a Receipt should be or become invalid, illegal orunenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Deposit Agreement or that Receipt shallin no way be affected, prejudiced or disturbed thereby. SECTION 7.4. Owners and Holders as Parties; Binding Effect. The Owners and Holders from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditionsof this Deposit Agreement and of the Receipts by acceptance of American Depositary Shares or any interest therein. 31Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 7.5. Notices. Any and all notices to be given to the Company shall be in writing and shall be deemed to have been duly given if personally delivered orsent by domestic first class or international air mail or air courier or sent by facsimile transmission or email attaching a pdf or similar bit-mapped image of asigned writing, provided that receipt of the facsimile transmission or email has been confirmed by the recipient, addressed to Sogou Inc., Level 15, Sohu.comInternet Plaza, No.1 Unit Zhongguancun East Road, Haidian District, Beijing, 100084, People’s Republis of China, Attention: Mr. Yi Zhou, Deputy ChiefFinancial Officer, or any other place to which the Company may have transferred its principal office with notice to the Depositary. Any and all notices to be given to the Depositary shall be in writing and shall be deemed to have been duly given if in English andpersonally delivered or sent by first class domestic or international air mail or air courier or sent by facsimile transmission or email attaching a pdf or similarbit-mapped image of a signed writing, addressed to The Bank of New York Mellon, 101 Barclay Street, New York, New York 10286, Attention: DepositaryReceipt Administration, or any other place to which the Depositary may have transferred its Office with notice to the Company. Delivery of a notice to the Company or Depositary by mail or air courier shall be deemed effected when deposited, postage prepaid, in apost-office letter box or received by an air courier service. Delivery of a notice to the Company or Depositary sent by facsimile transmission or email shall bedeemed effected when the recipient acknowledges receipt of that notice. A notice to be given to an Owner shall be deemed to have been duly given when Disseminated to that Owner. Dissemination in paper formwill be effective when personally delivered or sent by first class domestic or international air mail or air courier, addressed to that Owner at the address of thatOwner as it appears on the transfer books for American Depositary Shares of the Depositary, or, if that Owner has filed with the Depositary a written requestthat notices intended for that Owner be mailed to some other address, at the address designated in that request. Dissemination in electronic form will beeffective when sent in the manner consented to by the Owner to the electronic address most recently provided by the Owner for that purpose. SECTION 7.6. Arbitration; Settlement of Disputes. Any controversy, claim or cause of action brought by any party hereto against the Company arising out of or relating to the Shares or otherDeposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement, or the breach hereof or thereof, if so elected by the claimant,shall be settled by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association, and judgment upon the awardrendered by the arbitrators may be entered in any court having jurisdiction thereof. 32Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The place of the arbitration shall be The City of New York, State of New York, United States of America, and the language of the arbitrationshall be English. The number of arbitrators shall be three, each of whom shall be disinterested in the dispute or controversy, shall have no connection withany party thereto, and shall be an attorney experienced in international securities transactions. Each party shall appoint one arbitrator and the two arbitratorsshall select a third arbitrator who shall serve as chairperson of the tribunal. If a dispute, controversy or cause of action shall involve more than two parties, theparties shall attempt to align themselves in two sides (i.e., claimant(s) and respondent(s)), each of which shall appoint one arbitrator as if there were only twoparties to such dispute, controversy or cause of action. If such alignment and appointment shall not have occurred within thirty (30) calendar days after theinitiating party serves the arbitration demand, the American Arbitration Association shall appoint the three arbitrators, each of whom shall have thequalifications described above. The parties and the American Arbitration Association may appoint from among the nationals of any country, whether or not aparty is a national of that country. The arbitral tribunal shall have no authority to award any consequential, special or punitive damages or other damages not measured by theprevailing party’s actual damages and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of thisDeposit Agreement. SECTION 7.7. Appointment of Agent for Service of Process; Submission to Jurisdiction; Jury Trial Waiver. The Company hereby (i) designates and appoints the person named in Exhibit A to this Deposit Agreement, located in the State of NewYork, as the Company’s authorized agent upon which process may be served in any suit or proceeding (including any arbitration proceeding) arising out ofor relating to the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement (a “Proceeding”), (ii) consents andsubmits to the jurisdiction of any state or federal court in the State of New York in which any Proceeding may be instituted and (iii) agrees that service ofprocess upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any Proceeding. The Company agreesto deliver to the Depositary, upon the execution and delivery of this Deposit Agreement, a written acceptance by the agent named in Exhibit A to thisDeposit Agreement of its appointment as process agent. The Company further agrees to take any and all action, including the filing of any and all suchdocuments and instruments, as may be necessary to continue that designation and appointment in full force and effect, or to appoint and maintain theappointment of another process agent located in the United States as required above, and to deliver to the Depositary a written acceptance by that agent ofthat appointment, for so long as any American Depositary Shares or Receipts remain outstanding or this Deposit Agreement remains in force. In the event theCompany fails to maintain the designation and appointment of a process agent in the United States in full force and effect, the Company hereby waivespersonal service of process upon it and consents that a service of process in connection with a Proceeding may be made by certified or registered mail, returnreceipt requested, directed to the Company at its address last specified for notices under this Deposit Agreement, and service so made shall be deemedcompleted five (5) days after the same shall have been so mailed. 33Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACH PARTY TO THIS DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH OWNER AND HOLDER)HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BYJURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR INDIRECTLY ARISING OUTOF OR RELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THISDEPOSIT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF, INCLUDING,WITHOUT LIMITATION, ANY QUESTION REGARDING EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT ORANY OTHER THEORY). SECTION 7.8. Waiver of Immunities. To the extent that the Company or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributedto it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respectthereof, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment inaid of execution or judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of anyjudgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under orarising out of or in connection with the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement, theCompany, to the fullest extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any immunity of that kindand consents to relief and enforcement as provided above. SECTION 7.9. Governing Law. This Deposit Agreement and the Receipts shall be interpreted in accordance with and all rights hereunder and thereunder and provisionshereof and thereof shall be governed by the laws of the State of New York. 34Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IN WITNESS WHEREOF, SOGOU INC. and THE BANK OF NEW YORK MELLON have duly executed this Deposit Agreement as of theday and year first set forth above and all Owners and Holders shall become parties hereto upon acceptance by them of American Depositary Shares or anyinterest therein. SOGOU INC. By:Name:Title: THE BANK OF NEW YORK MELLON,as Depositary By:Name:Title: 35Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT A AMERICAN DEPOSITARY SHARES(Each American Depositary Share represents One deposited Share) THE BANK OF NEW YORK MELLONAMERICAN DEPOSITARY RECEIPTFOR CLASS A ORDINARY SHARES OFSOGOU INC.(INCORPORATED UNDER THE LAWS OF THE CAYMAN ISLANDS) The Bank of New York Mellon, as depositary (hereinafter called the “Depositary”), hereby certifies that , or registered assigns ISTHE OWNER OF AMERICAN DEPOSITARY SHARES representing deposited Class A ordinary shares (herein called “Shares”) of Sogou Inc., incorporated under the laws of the Cayman Islands (herein called the“Company”). At the date hereof, each American Depositary Share represents one Share deposited or subject to deposit under the Deposit Agreement (as suchterm is hereinafter defined) with a custodian for the Depositary (herein called the “Custodian”) that, as of the date of the Deposit Agreement, was TheHongkong and Shanghai Banking Corporation Limited located in Hong Kong. The Depositary’s Office is located at a different address than its principalexecutive office. Its Office is located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at 225 Liberty Street, NewYork, N.Y. 10286. THE DEPOSITARY’S OFFICE ADDRESS IS101 BARCLAY STREET, NEW YORK, N.Y. 10286 A-1Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1. THE DEPOSIT AGREEMENT. This American Depositary Receipt is one of an issue (herein called “Receipts”), all issued and to be issued upon the terms and conditions set forth inthe Deposit Agreement dated as of , 2017 (herein called the “Deposit Agreement”) among the Company, the Depositary, and all Owners and Holdersfrom time to time of American Depositary Shares issued thereunder, each of whom by accepting American Depositary Shares agrees to become a party theretoand become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Holders and the rights and duties ofthe Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of thoseShares and held thereunder (those Shares, securities, property, and cash are herein called “Deposited Securities”). Copies of the Deposit Agreement are on fileat the Depositary’s Office in New York City and at the office of the Custodian. The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by andsubject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Deposit Agreement and notdefined herein shall have the meanings set forth in the Deposit Agreement. 2. SURRENDER OF AMERICAN DEPOSITARY SHARES AND WITHDRAWAL OF SHARES. Upon surrender at the Depositary’s Office of American Depositary Shares for the purpose of withdrawal of the Deposited Securities representedthereby and payment of the fee of the Depositary for the surrender of American Depositary Shares as provided in Section 5.9 of the Deposit Agreement andpayment of all taxes and governmental charges payable in connection with that surrender and withdrawal of the Deposited Securities, and subject to the termsand conditions of the Deposit Agreement, the Owner of those American Depositary Shares shall be entitled to delivery (to the extent delivery can then belawfully and practicably made), to or as instructed by that Owner, of the amount of Deposited Securities at the time represented by those American DepositaryShares, but not any money or other property as to which a record date for distribution to Owners has passed (since money or other property of that kind will bedelivered or paid on the scheduled payment date to the Owner as of that record date). The Depositary shall direct the Custodian with respect to delivery ofDeposited Securities and may charge the surrendering Owner a fee and its expenses for giving that direction by cable (including SWIFT) or facsimiletransmission. That delivery will be made, at the office of the Custodian, except that, at the request, risk and expense of the surrendering Owner, and for theaccount of that Owner, the Depositary shall direct the Custodian to forward any cash or other property comprising, and forward a certificate or certificates, ifapplicable, and other proper documents of title, if any, for, the Deposited Securities represented by the surrendered American Depositary Shares to theDepositary for delivery at the Depositary’s Office or to another address specified in the order received from the surrendering Owner. A-2Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 3. REGISTRATION OF TRANSFER OF AMERICAN DEPOSITARY SHARES; COMBINATION AND SPLIT-UP OF RECEIPTS; INTERCHANGE OFCERTIFICATED AND UNCERTIFICATED AMERICAN DEPOSITARY SHARES. The Depositary, subject to the terms and conditions of the Deposit Agreement, shall register a transfer of American Depositary Shares on its transferbooks upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those American Depositary Shares, by the Owner orby a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer or (ii) in the case of uncertificated American DepositaryShares, receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided inSection 2.10 of that Agreement), and, in either case, duly stamped as may be required by the laws of the State of New York and of the United States ofAmerica. Upon registration of a transfer, the Depositary shall deliver the transferred American Depositary Shares to or upon the order of the person entitledthereto. The Depositary, subject to the terms and conditions of the Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose ofeffecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of AmericanDepositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. The Depositary, upon surrender of certificated American Depositary Shares for the purpose of exchanging for uncertificated American DepositaryShares, shall cancel the Receipt evidencing those certificated American Depositary Shares and send the Owner a statement confirming that the Owner is theowner of the same number of uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for the avoidanceof doubt, instructions through DRS and Profile as provided in Section 2.10 of the Deposit Agreement) from the Owner of uncertificated American DepositaryShares for the purpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American Depositary Shares and registerand deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares. As a condition precedent to the delivery, registration of transfer, or surrender of any American Depositary Shares or split-up or combination of anyReceipt or withdrawal of any Deposited Securities, the Depositary, the Custodian, or Registrar may require payment from the depositor of the Shares or thepresenter of the Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum sufficient toreimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and feewith respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in the Deposit Agreement, may require the productionof proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary mayestablish consistent with the provisions of the Deposit Agreement. A-3Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The delivery of American Depositary Shares against deposit of Shares generally or against deposit of particular Shares may be suspended, or theregistration of transfer of American Depositary Shares in particular instances may be refused, or the registration of transfer of outstanding AmericanDepositary Shares generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemednecessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government orgovernmental body or commission, or under any provision of the Deposit Agreement, or for any other reason. Notwithstanding anything to the contrary inthe Deposit Agreement or this Receipt, the surrender of outstanding American Depositary Shares and withdrawal of Deposited Securities may not besuspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable,or the deposit of Shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges,and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the American Depositary Shares or to the withdrawal of theDeposited Securities. The Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares that, at the time of deposit, areRestricted Securities. 4. LIABILITY OF OWNER FOR TAXES. If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to or in connection with anyAmerican Depositary Shares or any Deposited Securities represented by any American Depositary Shares or in connection with a transaction to whichSection 4.8 of the Deposit Agreement applies, that tax or other governmental charge shall be payable by the Owner of those American Depositary Shares tothe Depositary. The Depositary may refuse to register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities representedby those American Depositary Shares until that payment is made, and may withhold any dividends or other distributions or the proceeds thereof, or may sellfor the account of the Owner any part or all of the Deposited Securities represented by those American Depositary Shares, and may apply those dividends orother distributions or the net proceeds of any sale of that kind in payment of that tax or other governmental charge but, even after a sale of that kind, theOwner shall remain liable for any deficiency. The Depositary shall distribute any net proceeds of a sale made under Section 3.2 of the Deposit Agreementthat are not used to pay taxes or governmental charges to the Owners entitled to them in accordance with Section 4.1 of the Deposit Agreement. If the numberof Shares represented by each American Depositary Share decreases as a result of a sale of Deposited Securities under Section 3.2 of the Deposit Agreement,the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American DepositaryShares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange anddistribute the net proceeds of that sale to the Owners entitled to them. A-4Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5. WARRANTIES ON DEPOSIT OF SHARES. Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that those Shares and each certificatetherefor, if applicable, are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights of the holders ofoutstanding securities of the Company and that the person making that deposit is duly authorized so to do. Every depositing person shall also be deemed torepresent that the Shares, at the time of deposit, are not Restricted Securities. All representations and warranties deemed made under Section 3.3 of theDeposit Agreement shall survive the deposit of Shares and delivery of American Depositary Shares. 6. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION. Any person presenting Shares for deposit or any Owner or Holder may be required from time to time to file with the Depositary or the Custodian suchproof of citizenship or residence, exchange control approval, or such information relating to the registration on the books of the Company or the ForeignRegistrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper. TheDepositary may withhold the delivery or registration of transfer of any American Depositary Shares, the distribution of any dividend or other distribution orof the proceeds thereof or the delivery of any Deposited Securities until that proof or other information is filed or those certificates are executed or thoserepresentations and warranties are made. As conditions of accepting Shares for deposit, the Depositary may require (i) any certification required by theDepositary or the Custodian in accordance with the provisions of the Deposit Agreement, (ii) a written order directing the Depositary to deliver to, or uponthe written order of, the person or persons stated in that order, the number of American Depositary Shares representing those Deposited Shares, (iii) evidencesatisfactory to the Depositary that those Shares have been re-registered in the books of the Company or the Foreign Registrar in the name of the Depositary, aCustodian or a nominee of the Depositary or a Custodian, (iv) evidence satisfactory to the Depositary that any necessary approval has been granted by anygovernmental body in each applicable jurisdiction and (v) an agreement or assignment, or other instrument satisfactory to the Depositary, that provides forthe prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property, that any person in whose namethose Shares are or have been recorded may thereafter receive upon or in respect of those Shares, or, in lieu thereof, such agreement of indemnity or otheragreement as shall be satisfactory to the Depositary. A-5Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 7. CHARGES OF DEPOSITARY. The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares orto whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Companyor an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant toSection 4.3 of the Deposit Agreement), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time totime be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers ofShares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) suchcable (including SWIFT) and facsimile transmission fees and expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurredby the Depositary in the conversion of foreign currency pursuant to Section 4.5 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 AmericanDepositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.3, 4.3 or 4.4 of the Deposit Agreement and thesurrender of American Depositary Shares pursuant to Section 2.5 or 6.2 of the Deposit Agreement, (6) a fee of $.05 or less per American Depositary Share (orportion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited to Sections 4.1 through 4.4 and 4.8 of theDeposit Agreement, (7) a fee for the distribution of securities pursuant to Section 4.2 of the Deposit Agreement or of rights pursuant to Section 4.4 of thatAgreement (where the Depositary will not exercise or sell those rights on behalf of Owners), such fee being in an amount equal to the fee for the executionand delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities under the DepositAgreement (for purposes of this item 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary toOwners, (8) in addition to any fee charged under item 6, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum for depositaryservices, which will be payable as provided in item 9 below, and (9) any other charges payable by the Depositary or the Custodian, any of the Depositary’s orCustodian’s agents or the agents of the Depositary’s or Custodian’s agents, in connection with the servicing of Shares or other Deposited Securities (whichcharges shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.6 of the Deposit Agreement and shall bepayable at the sole discretion of the Depositary by billing those Owners for those charges or by deducting those charges from one or more cash dividends orother cash distributions). The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to bedistributed, to Owners that are obligated to pay those fees. A-6Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary, subject to Article 8 hereof, may own and deal in any class of securities of the Company and its affiliates and in American DepositaryShares. From time to time, the Depositary may make payments to the Company to reimburse the Company for costs and expenses generally arising out ofestablishment and maintenance of the American Depositary Shares program, waive fees and expenses for services provided by the Depositary or share revenuefrom the fees collected from Owners or Holders. In performing its duties under the Deposit Agreement, the Depositary may use brokers, dealers, foreigncurrency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions. 8. PRE-RELEASE OF AMERICAN DEPOSITARY SHARES. Notwithstanding Section 2.3 of the Deposit Agreement, the Depositary may deliver American Depositary Shares prior to the receipt of Sharespursuant to Section 2.2 of the Deposit Agreement (a “Pre-Release”). The Depositary may, pursuant to Section 2.5 of the Deposit Agreement, deliver Sharesupon the surrender of American Depositary Shares that have been Pre-Released, whether or not that surrender is prior to the termination of that Pre-Release orthe Depositary knows that those American Depositary Shares have been Pre-Released. The Depositary may receive American Depositary Shares in lieu ofShares in satisfaction of a Pre-Release. Each Pre-Release must be (a) preceded or accompanied by a written representation from the person to whom AmericanDepositary Shares or Shares are to be delivered, that such person, or its customer, owns the Shares or American Depositary Shares to be remitted, as the casemay be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on notmore than five (5) business days’ notice, and (d) subject to all indemnities and credit regulations that the Depositary deems appropriate. The number ofAmerican Depositary Shares outstanding at any time as a result of Pre-Release will not normally exceed thirty percent (30%) of all American DepositaryShares outstanding; provided, however, that the Depositary reserves the right to change or disregard that limit from time to time as it deems appropriate. The Depositary may retain for its own account any compensation received by it in connection with Pre-Release. 9. TITLE TO AMERICAN DEPOSITARY SHARES. It is a condition of the American Depositary Shares, and every successive Owner and Holder of American Depositary Shares, by accepting or holdingthe same, consents and agrees that American Depositary Shares evidenced by a Receipt, when the Receipt is properly endorsed or accompanied by properinstruments of transfer, shall be transferable as certificated registered securities under the laws of the State of New York, and that American Depositary Sharesnot evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of the State of New York. The Depositary,notwithstanding any notice to the contrary, may treat the Owner of American Depositary Shares as the absolute owner thereof for the purpose of determiningthe person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other purposes, andneither the Depositary nor the Company shall have any obligation or be subject to any liability under the Deposit Agreement to any Holder of AmericanDepositary Shares, but only to the Owner. A-7Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10. VALIDITY OF RECEIPT. This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shallhave been (i) executed by the Depositary by the manual signature of a duly authorized officer of the Depositary or (ii) executed by the facsimile signature of aduly authorized officer of the Depositary and countersigned by the manual signature of a duly authorized signatory of the Depositary or the Registrar or a co-registrar. 11. REPORTS; INSPECTION OF TRANSFER BOOKS. The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports withthe Securities and Exchange Commission. Those reports will be available for inspection and copying through the Commission’s EDGAR system or at publicreference facilities maintained by the Commission in Washington, D.C. The Depositary will make available for inspection by Owners at its Office any reports, notices and other communications, including any proxysoliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generallyavailable to the holders of those Deposited Securities by the Company. The Company shall furnish reports and communications, including any proxysoliciting material to which Section 4.9 of the Deposit Agreement applies, to the Depositary in English, to the extent such materials are required to betranslated into English pursuant to any regulations of the Commission. The Depositary will keep books for the registration of American Depositary Shares and transfers of American Depositary Shares, which shall be openfor inspection by the Owners at the Depositary’s Office during regular business hours, provided that such inspection shall not be for the purpose ofcommunicating with Owners in the interest of a business or object other than the business of the Company or a matter related to the Deposit Agreement or theAmerican Depositary Shares. 12. DIVIDENDS AND DISTRIBUTIONS. Whenever the Depositary receives any cash dividend or other cash distribution on Deposited Securities, the Depositary will, if at the time ofreceipt thereof any amounts received in a foreign currency can in the judgment of the Depositary be converted on a reasonable basis into Dollars transferableto the United States, and subject to the Deposit Agreement, convert that dividend or other cash distribution into Dollars and distribute the amount thusreceived (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement) to the Owners entitledthereto; provided, however, that if the Custodian or the Depositary is required to withhold and does withhold from that cash dividend or other cashdistribution an amount on account of taxes or other governmental charges, the amount distributed to the Owners of the American Depositary Sharesrepresenting those Deposited Securities shall be reduced accordingly. If a cash distribution would represent a return of all or substantially all the value of theDeposited Securities underlying American Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may requirepayment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as acondition of making that cash distribution. A distribution of that kind shall be a Termination Option Event. A-8Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Subject to the provisions of Section 4.11 and 5.9 of the Deposit Agreement, whenever the Depositary receives any distribution other than adistribution described in Section 4.1, 4.3 or 4.4 of the Deposit Agreement on Deposited Securities (but not in exchange for or in conversion or in lieu ofDeposited Securities), the Depositary will cause the securities or property received by it to be distributed to the Owners entitled thereto, after deduction orupon payment of any fees and expenses of the Depositary and any taxes or other governmental charges, in any manner that the Depositary deems equitableand practicable for accomplishing that distribution (which may be a distribution of depositary shares representing the securities received); provided,however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if forany other reason the Depositary deems such distribution not to be lawful and feasible, the Depositary may adopt such other method as it may deem equitableand practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thusreceived, or any part thereof, and distribution of the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Article 7hereof and Section 5.9 of the Deposit Agreement) to the Owners entitled thereto all in the manner and subject to the conditions set forth in Section 4.1 of theDeposit Agreement. The Depositary may withhold any distribution of securities under Section 4.2 of the Deposit Agreement if it has not received satisfactoryassurances from the Company that the distribution does not require registration under the Securities Act of 1933. The Depositary may sell, by public orprivate sale, an amount of securities or other property it would otherwise distribute under this Article that is sufficient to pay its fees and expenses in respectof that distribution. If a distribution under Section 4.2 of the Deposit Agreement would represent a return of all of substantially all the value of the DepositedSecurities underlying American Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of ordeduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition ofmaking that distribution. A distribution of that kind shall be a Termination Option Event. A-9Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Whenever the Depositary receives any distribution consisting of a dividend in, or free distribution of, Shares, the Depositary may deliver to theOwners entitled thereto, an aggregate number of American Depositary Shares representing the amount of Shares received as that dividend or free distribution,subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and issuance of American Depositary Shares, including thewithholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees and expenses of theDepositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement (and the Depositary may sell, by public or private sale, an amount ofShares received (or American Depositary Shares representing those Shares) sufficient to pay its fees and expenses in respect of that distribution). In lieu ofdelivering fractional American Depositary Shares, the Depositary may sell the amount of Shares represented by the aggregate of those fractions (or AmericanDepositary Shares representing those Shares) and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1of theDeposit Agreement. If and to the extent that additional American Depositary Shares are not delivered and Shares or American Depositary Shares are not sold,each American Depositary Share shall thenceforth also represent the additional Shares distributed on the Deposited Securities represented thereby. If the Company declares a distribution in which holders of Deposited Securities have a right to elect whether to receive cash, Shares or othersecurities or a combination of those things, or a right to elect to have a distribution sold on their behalf, the Depositary may, after consultation with theCompany, make that right of election available for exercise by Owners any manner the Depositary considers to be lawful and practical. As a condition ofmaking a distribution election right available to Owners, the Depositary may require satisfactory assurances from the Company that doing so does not requireregistration of any securities under the Securities Act of 1933. If the Depositary determines that any distribution received or to be made by the Depositary (including Shares and rights to subscribe therefor) issubject to any tax or other governmental charge that the Depositary is obligated to withhold, the Depositary may sell, by public or private sale, all or aportion of the distributed property (including Shares and rights to subscribe therefor) in the amounts and manner the Depositary deems necessary andpracticable to pay any those taxes or charges, and the Depositary shall distribute the net proceeds of that sale, after deduction of those taxes or charges, to theOwners entitled thereto in proportion to the number of American Depositary Shares held by them respectively. Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their respective directors, employees, agents andaffiliates for, and hold each of them harmless against, any claim by any governmental authority with respect to taxes, additions to tax, penalties or interestarising out of any refund of taxes, reduced withholding at source or other tax benefit received by it. Services for Owners and Holders that may permit them toobtain reduced rates of tax withholding at source or reclaim excess tax withheld, and the fees and costs associated with using services of that kind, are notprovided under, and are outside the scope of, the Deposit Agreement. A-10Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 13. RIGHTS. (a) If rights are granted to the Depositary in respect of deposited Shares to purchase additional Shares or other securities, the Company and theDepositary shall endeavor to consult as to the actions, if any, the Depositary should take in connection with that grant of rights. The Depositary may, to theextent deemed by it to be lawful and practical (i) if requested in writing by the Company, grant to all or certain Owners rights to instruct the Depositary topurchase the securities to which the rights relate and deliver those securities or American Depositary Shares representing those securities to Owners, (ii) ifrequested in writing by the Company, deliver the rights to or to the order of certain Owners, or (iii) sell the rights to the extent practicable and distribute thenet proceeds of that sale to Owners entitled to those proceeds. To the extent rights are not exercised, delivered or disposed of under (i), (ii) or (iii) above, theDepositary shall permit the rights to lapse unexercised. (b) If the Depositary will act under (a)(i) above, the Company and the Depositary will enter into a separate agreement setting forth theconditions and procedures applicable to the particular offering. Upon instruction from an applicable Owner in the form the Depositary specified and uponpayment by that Owner to the Depositary of an amount equal to the purchase price of the securities to be received upon the exercise of the rights, theDepositary shall, on behalf of that Owner, exercise the rights and purchase the securities. The purchased securities shall be delivered to, or as instructed by,the Depositary. The Depositary shall (i) deposit the purchased Shares under the Deposit Agreement and deliver American Depositary Shares representingthose Shares to that Owner or (ii) deliver or cause the purchased Shares or other securities to be delivered to or to the order of that Owner. The Depositary willnot act under (a)(i) above unless the offer and sale of the securities to which the rights relate are registered under the Securities Act of 1933 or the Depositaryhas received an opinion of United States counsel that is satisfactory to it to the effect that those securities may be sold and delivered to the applicable Ownerswithout registration under the Securities Act of 1933. (c) If the Depositary will act under (a)(ii) above, the Company and the Depositary will enter into a separate agreement setting forth theconditions and procedures applicable to the particular offering. Upon (i) the request of an applicable Owner to deliver the rights allocable to the AmericanDepositary Shares of that Owner to an account specified by that Owner to which the rights can be delivered and (ii) receipt of such documents as theCompany and the Depositary agreed to require to comply with applicable law, the Depositary will deliver those rights as requested by that Owner. (d) If the Depositary will act under (a)(iii) above, the Depositary will use reasonable efforts to sell the rights in proportion to the number ofAmerican Depositary Shares held by the applicable Owners and pay the net proceeds to the Owners otherwise entitled to the rights that were sold, upon anaveraged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of anyAmerican Depositary Shares or otherwise. A-11Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (e) Payment or deduction of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement and payment or deduction of theexpenses of the Depositary and any applicable taxes or other governmental charges shall be conditions of any delivery of securities or payment of cashproceeds under Section 4.4 of that Agreement. (f) The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make rights available to or exerciserights on behalf of Owners in general or any Owner in particular , or to sell rights. 14. CONVERSION OF FOREIGN CURRENCY. Whenever the Depositary or the Custodian receives foreign currency, by way of dividends or other distributions or the net proceeds from the sale ofsecurities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on areasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted by sale or in anyother manner that it may determine that foreign currency into Dollars, and those Dollars shall be distributed to the Owners entitled thereto. A cashdistribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners based on exchange restrictions, thedate of delivery of any American Depositary Shares or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary asprovided in Section 5.9 of the Deposit Agreement. If a conversion of foreign currency or the repatriation or distribution of Dollars can be effected only with the approval or license of any governmentor agency thereof, the Depositary may, but will not be required to, file an application for that approval or license. If the Depositary determines that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonablebasis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof that is required for such conversion isnot filed or sought by the Depositary or is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the foreigncurrency received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for therespective accounts of, the Owners entitled to receive the same. If any conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositarymay in its discretion make that conversion and distribution in Dollars to the extent practicable and permissible to the Owners entitled thereto and maydistribute the balance of the foreign currency received by the Depositary to, or hold that balance uninvested and without liability for interest thereon for theaccount of, the Owners entitled thereto. A-12Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent,advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its ownaccount. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the DepositAgreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account. The Depositary makes norepresentation that the exchange rate used or obtained in any currency conversion under the Deposit Agreement will be the most favorable rate that could beobtained at the time or that the method by which that rate will be determined will be the most favorable to Owners, subject to the Depositary’s obligationsunder Section 5.3 of that Agreement. The methodology used to determine exchange rates used in currency conversions is available upon request. 15. RECORD DATES. Whenever a cash dividend, cash distribution or any other distribution is made on Deposited Securities or rights to purchase Shares or other securitiesare issued with respect to Deposited Securities (which rights will be delivered to or exercised or sold on behalf of Owners in accordance with Section 4.4 ofthe Deposit Agreement) or the Depositary receives notice that a distribution or issuance of that kind will be made, or whenever the Depositary receives noticethat a meeting of holders of Shares will be held in respect of which the Company has requested the Depositary to send a notice under Section 4.7 of theDeposit Agreement, or whenever the Depositary will assess a fee or charge against the Owners, or whenever the Depositary causes a change in the number ofShares that are represented by each American Depositary Share, or whenever the Depositary otherwise finds it necessary or convenient, the Depositary shallfix a record date, which shall be the same as, or as near as practicable to, any corresponding record date set by the Company with respect to Shares, (a) for thedetermination of the Owners (i) who shall be entitled to receive the benefit of that dividend or other distribution or those rights, (ii) who shall be entitled togive instructions for the exercise of voting rights at that meeting, (iii) who shall be responsible for that fee or charge or (iv) for any other purpose for whichthe record date was set, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to the provisions ofSections 4.1 through 4.5 of the Deposit Agreement and to the other terms and conditions of the Deposit Agreement, the Owners on a record date fixed by theDepositary shall be entitled to receive the amount distributable by the Depositary with respect to that dividend or other distribution or those rights or the netproceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively, to give voting instructions or to act in respectof the other matter for which that record date was fixed, or be responsible for that fee or charge, as the case may be. A-13Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 16. VOTING OF DEPOSITED SHARES. (a) Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to vote, if requested in writing by theCompany, the Depositary shall, as soon as practicable thereafter, Disseminate to the Owners a notice, the form of which shall be in the sole discretion of theDepositary, that shall contain (i) the information contained in the notice of meeting received by the Depositary, (ii) a statement that the Owners as of the closeof business on a specified record date will be entitled, subject to any applicable provision of Cayman Islands law and of the articles of association or similardocuments of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by theirrespective American Depositary Shares (iii) a statement as to the manner in which those instructions may be given and (iv) the last date on which theDepositary will accept instructions (the “Instruction Cutoff Date”). (b) Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if a record date was specified by theDepositary, as of that record date, received on or before any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositarysent a notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the amount of deposited Shares representedby those American Depositary Shares in accordance with the instructions set forth in that request. The Depositary shall not vote or attempt to exercise theright to vote that attaches to the deposited Shares other than in accordance with instructions given by Owners and received by the Depositary. (c) There can be no assurance that Owners generally or any Owner in particular will receive the notice described in paragraph (a) above intime to enable Owners to give instructions to the Depositary prior to the Instruction Cutoff Date. (d) In order to give Owners a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Shares, if theCompany will request the Depositary to Disseminate a notice under paragraph (a) above, the Company shall give the Depositary notice of the meeting,details concerning the matters to be voted upon and copies of materials to be made available to holders of Shares in connection with the meeting not lessthan 45 days prior to the meeting date. 17. TENDER AND EXCHANGE OFFERS; REDEMPTION, REPLACEMENT OR CANCELLATION OF DEPOSITED SECURITIES. (a) The Depositary shall not tender any Deposited Securities in response to any voluntary cash tender offer, exchange offer or similar offermade to holders of Deposited Securities (a “Voluntary Offer”), except when instructed in writing to do so by an Owner surrendering American DepositaryShares and subject to any conditions or procedures the Depositary may require. A-14Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) If the Depositary receives a written notice that Deposited Securities have been redeemed for cash or otherwise purchased for cash in atransaction that is mandatory and binding on the Depositary as a holder of those Deposited Securities (a “Redemption”), the Depositary, at the expense of theCompany, shall (i) if required, surrender Deposited Securities that have been redeemed to the issuer of those securities or its agent on the redemption date,(ii) Disseminate a notice to Owners (A) notifying them of that Redemption, (B) calling for surrender of a corresponding number of American DepositaryShares and (C) notifying them that the called American Depositary Shares have been converted into a right only to receive the money received by theDepositary upon that Redemption and those net proceeds shall be the Deposited Securities to which Owners of those converted American Depositary Sharesshall be entitled upon surrenders of those American Depositary Shares in accordance with Section 2.5 or 6.2 of the Deposit Agreement and (iii) distribute themoney received upon that Redemption to the Owners entitled to it upon surrender by them of called American Depositary Shares in accordance withSection 2.5 of that Agreement (and, for the avoidance of doubt, Owners shall not be entitled to receive that money under Section 4.1 of that Agreement). Ifthe Redemption affects less than all the Deposited Securities, the Depositary shall call for surrender a corresponding portion of the outstanding AmericanDepositary Shares and only those American Depositary Shares will automatically be converted into a right to receive the net proceeds of the Redemption. The Depositary shall allocate the American Depositary Shares converted under the preceding sentence among the Owners pro-rata to their respective holdingsof American Depositary Shares immediately prior to the Redemption, except that the allocations may be adjusted so that no fraction of a converted AmericanDepositary Share is allocated to any Owner. A Redemption of all or substantially all of the Deposited Securities shall be a Termination Option Event. (c) If the Depositary is notified of or there occurs any change in nominal value or any subdivision, combination or any other reclassification ofthe Deposited Securities or any recapitalization, reorganization, sale of assets substantially as an entirety, merger or consolidation affecting the issuer of theDeposited Securities or to which it is a party that is mandatory and binding on the Depositary as a holder of Deposited Securities and, as a result, securities orother property have been or will be delivered in exchange, conversion, replacement or in lieu of, Deposited Securities (a “Replacement”), the Depositaryshall, if required, surrender the old Deposited Securities affected by that Replacement of Shares and hold, as new Deposited Securities under the DepositAgreement, the new securities or other property delivered to it in that Replacement. However, the Depositary may elect to sell those new Deposited Securitiesif in the opinion of the Depositary it is not lawful or not practical for it to hold those new Deposited Securities under the Deposit Agreement because thosenew Deposited Securities may not be distributed to Owners without registration under the Securities Act of 1933 or for any other reason, at public or privatesale, at such places and on such terms as it deems proper and proceed as if those new Deposited Securities had been Redeemed under paragraph (b) above. AReplacement shall be a Termination Option Event. A-15Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) In the case of a Replacement where the new Deposited Securities will continue to be held under the Deposit Agreement, the Depositary maycall for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing the new Deposited Securities and the number of thosenew Deposited Securities represented by each American Depositary Share. If the number of Shares represented by each American Depositary Share decreasesas a result of a Replacement, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lessernumber of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of AmericanDepositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them. (e) If there are no Deposited Securities with respect to American Depositary Shares, including if the Deposited Securities are cancelled, or theDeposited Securities with respect to American Depositary Shares become apparently worthless, the Depositary may call for surrender of those AmericanDepositary Shares or may cancel those American Depositary Shares, upon notice to Owners, and a Termination Option Event occurs. 18. LIABILITY OF THE COMPANY AND DEPOSITARY. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner orHolder: (i) if by reason of (A) any provision of any present or future law or regulation or other act of the government of the United States, any State of theUnited States or any other state or jurisdiction, or of any governmental or regulatory authority or stock exchange; (B) (in the case of the Depositary only) anyprovision, present or future, of the articles of association or similar document of the Company, or by reason of any provision of any securities issued ordistributed by the Company, or any offering or distribution thereof; or (C) any event or circumstance, whether natural or caused by a person or persons, that isbeyond the ability of the Depositary or the Company, as the case may be, to prevent or counteract by reasonable care or effort (including, but not limited toearthquakes, floods, severe storms, fires, explosions, war, terrorism, civil unrest, labor disputes or criminal acts; interruptions or malfunctions of utilityservices, Internet or other communications lines or systems; unauthorized access to or attacks on computer systems or websites; or other failures ormalfunctions of computer hardware or software or other systems or equipment), the Depositary or the Company is, directly or indirectly, prevented from,forbidden to or delayed in, or could be subject to any civil or criminal penalty on account of doing or performing and therefore does not do or perform, anyact or thing that, by the terms of the Deposit Agreement or the Deposited Securities, it is provided shall be done or performed; (ii) for any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement (including any determination by the Depositaryto take, or not take, any action that the Deposit Agreement provides the Depositary may take); A-16Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (iii) for the inability of any Owner or Holder to benefit from any distribution, offering, right or other benefit that is made available to holders ofDeposited Securities but is not, under the terms of the Deposit Agreement, made available to Owners or Holders; or (iv) for any special, consequential or punitive damages for any breach of the terms of the Deposit Agreement. Where, by the terms of a distribution to which Section 4.1, 4.2 or 4.3 of the Deposit Agreement applies, or an offering to which Section 4.4 of thatAgreement applies, or for any other reason, that distribution or offering may not be made available to Owners, and the Depositary may not dispose of thatdistribution or offering on behalf of Owners and make the net proceeds available to Owners, then the Depositary shall not make that distribution or offeringavailable to Owners, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary assumes any obligation or shall be subject to any liability under the Deposit Agreement to Owners orHolders, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositaryshall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company shall be underany obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the AmericanDepositary Shares, on behalf of any Owner or Holder or other person. Neither the Depositary nor the Company shall be liable for any action or non-action byit in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or Holder, or any otherperson believed by it in good faith to be competent to give such advice or information. Each of the Depositary and the Company may rely, and shall beprotected in relying upon, any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by theproper party or parties. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous actor omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided that in connectionwith the issue out of which such potential liability arises, the Depositary performed its obligations without negligence or bad faith while it acted asDepositary. The Depositary shall not be liable for the acts or omissions of any securities depository, clearing agency or settlement system in connection withor arising out of book-entry settlement of American Depositary Shares or Deposited Securities or otherwise. In the absence of bad faith on its part, theDepositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities or for the manner in which any suchvote is cast or the effect of any such vote. The Depositary shall have no duty to make any determination or provide any information as to the tax status of theCompany or any liability for any tax consequences that may be incurred by Owners or Holders as a result of owning or holding American Depositary Shares. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement. A-17Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 19. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN. The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its election so to do delivered to theCompany, to become effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the DepositAgreement. The Depositary may at any time be removed by the Company by 120 days’ prior written notice of that removal, to become effective upon thelater of (i) the 120th day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of its appointmentas provided in the Deposit Agreement. The Depositary in its discretion may at any time appoint a substitute or additional custodian or custodians. 20. AMENDMENT. The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between theCompany and the Depositary without the consent of Owners or Holders in any respect which they may deem necessary or desirable. Any amendment thatwould impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs,delivery costs or other such expenses), or that would otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as tooutstanding American Depositary Shares until the expiration of 30 days after notice of that amendment has been Disseminated to the Owners of outstandingAmerican Depositary Shares. Every Owner and Holder, at the time any amendment so becomes effective, shall be deemed, by continuing to hold AmericanDepositary Shares or any interest therein, to consent and agree to that amendment and to be bound by the Deposit Agreement as amended thereby. Upon theeffectiveness of an amendment to the form of Receipt, including a change in the number of Shares represented by each American Depositary Share, theDepositary may call for surrender of Receipts to be replaced with new Receipts in the amended form or call for surrender of American Depositary Shares toeffect that change of ratio. In no event shall any amendment impair the right of the Owner to surrender American Depositary Shares and receive delivery ofthe Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. 21. TERMINATION OF DEPOSIT AGREEMENT. (a) The Company may initiate termination of the Deposit Agreement by notice to the Depositary. The Depositary may initiate termination ofthe Deposit Agreement if (i) at any time 60 days shall have expired after the Depositary delivered to the Company a written resignation notice and a successordepositary has not been appointed and accepted its appointment as provided in Section 5.4 of that Agreement, (ii) an Insolvency Event or Delisting Eventoccurs with respect to the Company or (iii) a Termination Option Event has occurred or will occur. If termination of the Deposit Agreement is initiated, theDepositary shall Disseminate a notice of termination to the Owners of all American Depositary Shares then outstanding setting a date for termination (the“Termination Date”), which shall be at least 90 days after the date of that notice, and the Deposit Agreement shall terminate on that Termination Date. A-18Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) After the Termination Date, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations tothe Depositary under Sections 5.8 and 5.9 of that Agreement. (c) At any time after the Termination Date, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and maythereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability forinterest, for the pro rata benefit of the Owners of American Depositary Shares that remain outstanding, and those Owners will be general creditors of theDepositary with respect to those net proceeds and that other cash. After making that sale, the Depositary shall be discharged from all obligations under theDeposit Agreement, except (i) to account for the net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender ofAmerican Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in accordance with the terms and conditions ofthe Deposit Agreement and any applicable taxes or governmental charges) and (ii) for its obligations under Section 5.8 of that Agreement and (iii) to act asprovided in paragraph (d) below. (d) After the Termination Date, the Depositary shall continue to receive dividends and other distributions pertaining to Deposited Securities(that have not been sold), may sell rights and other property as provided in the Deposit Agreement and shall deliver Deposited Securities (or sale proceeds)upon surrender of American Depositary Shares (after payment or upon deduction, in each case, of the fee of the Depositary for the surrender of AmericanDepositary Shares, any expenses for the account of the Owner of those American Depositary Shares in accordance with the terms and conditions of theDeposit Agreement and any applicable taxes or governmental charges). After the Termination Date, the Depositary shall not accept deposits of Shares ordeliver American Depositary Shares. After the Termination Date, (i) the Depositary may refuse to accept surrenders of American Depositary Shares for thepurpose of withdrawal of Deposited Securities (that have not been sold) if in its judgment the requested withdrawal would interfere with its efforts to sell theDeposited Securities, (ii) the Depositary will not be required to deliver cash proceeds of the sale of Deposited Securities until all Deposited Securities havebeen sold and (iii) the Depositary may discontinue the registration of transfers of American Depositary Shares and suspend the distribution of dividends andother distributions on Deposited Securities to the Owners and need not give any further notices or perform any further acts under the Deposit Agreementexcept as provided in Section 6.2 of that Agreement. A-19Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 22. DTC DIRECT REGISTRATION SYSTEM AND PROFILE MODIFICATION SYSTEM. (a) Notwithstanding the provisions of Section 2.4 of the Deposit Agreement, the parties acknowledge that DTC’s Direct Registration System(“DRS”) and Profile Modification System (“Profile”) apply to the American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the systemadministered by DTC that facilitates interchange between registered holding of uncertificated securities and holding of security entitlements in thosesecurities through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of an Owner ofAmerican Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver thoseAmerican Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to registerthat transfer. (b) In connection with DRS/Profile, the parties acknowledge that the Depositary will not determine whether the DTC participant that isclaiming to be acting on behalf of an Owner in requesting registration of transfer and delivery described in paragraph (a) above has the actual authority to acton behalf of that Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.3and 5.8 of the Deposit Agreement apply to the matters arising from the use of the DRS/Profile. The parties agree that the Depositary’s reliance on andcompliance with instructions received by the Depositary through the DRS/Profile system and otherwise in accordance with the Deposit Agreement, shall notconstitute negligence or bad faith on the part of the Depositary. 23. ARBITRATION; SETTLEMENT OF DISPUTES. Any controversy, claim or cause of action brought by any party hereto against the Company arising out of or relating to the Shares or otherDeposited Securities, the American Depositary Shares, the Receipts or the Deposit Agreement, or the breach hereof or thereof, if so elected by the claimant,shall be settled by arbitration in accordance with the International Arbitration Rules of the American Arbitration Association, and judgment upon the awardrendered by the arbitrators may be entered in any court having jurisdiction thereof. The place of the arbitration shall be The City of New York, State of New York, United States of America, and the language of the arbitration shall beEnglish The number of arbitrators shall be three, each of whom shall be disinterested in the dispute or controversy, shall have no connection with any partythereto, and shall be an attorney experienced in international securities transactions. Each party shall appoint one arbitrator and the two arbitrators shallselect a third arbitrator who shall serve as chairperson of the tribunal. If a dispute, controversy or cause of action shall involve more than two parties, theparties shall attempt to align themselves in two sides (i.e., claimant(s) and respondent(s)), each of which shall appoint one arbitrator as if there were only twoparties to such dispute, controversy or cause of action. If such alignment and appointment shall not have occurred within thirty (30) calendar days after theinitiating party serves the arbitration demand, the American Arbitration Association shall appoint the three arbitrators, each of whom shall have thequalifications described above. The parties and the American Arbitration Association may appoint from among the nationals of any country, whether or not aparty is a national of that country. A-20Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The arbitral tribunal shall have no authority to award any consequential, special or punitive damages or other damages not measured by theprevailing party’s actual damages and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of theDeposit Agreement. 24. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS; SUBMISSION TO JURISDICTION; JURY TRIAL WAIVER; WAIVER OFIMMUNITIES. The Company has (i) appointed CT Corporation System, 111 Eighth Avenue, New York, New York 10011 as the Company’s authorized agent uponwhich process may be served in any suit or proceeding (including any arbitration proceeding) arising out of or relating to the Shares or Deposited Securities,the American Depositary Shares, the Receipts or this Agreement, (ii) consented and submitted to the jurisdiction of any state or federal court in the State ofNew York in which any such suit or proceeding may be instituted, and (iii) agreed that service of process upon said authorized agent shall be deemed in everyrespect effective service of process upon the Company in any such suit or proceeding. EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH OWNER AND HOLDER) THEREBYIRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY INANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR INDIRECTLY ARISING OUT OF ORRELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THE DEPOSITAGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF, INCLUDING WITHOUTLIMITATION ANY QUESTION REGARDING EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY OTHERTHEORY). A-21Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. To the extent that the Company or any of its properties, assets or revenues may have or hereafter become entitled to, or have attributed to it, anyright of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respect thereof,from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid ofexecution or judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in whichproceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with theShares or Deposited Securities, the American Depositary Shares, the Receipts or the Deposit Agreement, the Company, to the fullest extent permitted by law,hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement. 25. DISCLOSURE OF INTERESTS. When required in order to comply with applicable laws and regulations or the articles of association or similar document of the Company, theCompany may from time to time request each Owner and Holder to provide to the Depositary information relating to: (a) the capacity in which itholds American Depositary Shares, (b) the identity of any Holders or other persons or entities then or previously interested in those American DepositaryShares and the nature of those interests and (c) any other matter where disclosure of such matter is required for that compliance. Each Owner and Holderagrees to provide all information known to it in response to a request made pursuant to this Section. Each Holder consents to the disclosure by the Owner orother Holder through which it holds American Depositary Shares, directly or indirectly, of all information responsive to a request made pursuant to thisSection relating to that Holder that is known to that Owner or other Holder. The Depositary agrees to use reasonable efforts, at the Company’s expense, tocomply with written instructions requesting that the Depositary forward any request authorized under this Section to the Owners and to forward to theCompany any responses it receives in response to that request. A-22Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 4.2 SOGOU INC. 2017 SHARE INCENTIVE PLAN (amended and restated as of December 28, 2017) 1. Purposes of this Plan This 2017 Share Incentive Plan (this “Plan”) is intended to provide incentives: (a) to the directors, officers, employees, consultants and advisors ofSogou Inc., a Cayman Islands company (the “Company”), and any present or future parents or subsidiaries of the Company by providing them withopportunities to (i) acquire Ordinary Shares of the Company pursuant to options (“Options”) granted hereunder, (ii) to receive Restricted Share Unit awards(“RSU”), and (iii) to make direct purchases of Ordinary Shares of the Company, subject to vesting (“Restricted Shares”). In addition to Options, RSUs, andRestricted Shares, other Awards involving Ordinary Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based uponor settled in, Ordinary Shares, including (without limitation) unrestricted Shares, performance units, share appreciation rights, dividend equivalents, andconvertible debentures, may be granted or sold under this Plan. 2. Definitions “Applicable Laws” means laws of the Company’s jurisdictions of incorporation and operation and requirements relating to the granting or sale of equityincentives and the administration of equity share incentive plans under the laws of any country or other jurisdiction where Awards are issued or sold underthis Plan, and under the rules of any securities exchange on which the Company’s Ordinary Shares are listed. “Award” means an Option, RSU, Restricted Share, or other share-based award or right granted or sold pursuant to the terms of this Plan. “Award Agreement” means a written or electronic document or agreement setting forth the terms and conditions of a specific Award. “Board” means the Board of Directors of the Company. “Compensation Committee” means the full Board or a Compensation Committee appointed by the Board, which Compensation Committee will beconstituted to comply with Applicable Laws and which will administer this Plan in accordance with Section 4 below. “Company” means Sogou Inc., a company incorporated under the laws of the Cayman Islands. “Consultant” means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity, butis not an employee of the Company or any Parent or Subsidiary. “Director” means a member of the Board. “Disability” means any total and permanent disability which prevents a Service Provider from continuing in such capacity. “Employee” means any person employed by the Company or any Parent or Subsidiary of the Company. A person will not cease to be an Employeesolely by virtue of also being a Director of the Company. A Service Provider will not cease to be an Employee in the case of: (i) any leave of absence approved by the Company; or (ii) transfers between locations of the Company or between the Company, any Parent, or any Subsidiary, or any successor to the Company or any Parentor Subsidiary. Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Exchange” means NASDAQ, the New York Stock Exchange or any other internationally recognized stock exchange of similar prestige and liquidity. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and in effect on any given date. “Fair Market Value” as of any given date means, unless otherwise defined in an Award Agreement, if the Ordinary Shares are listed on an Exchange, theclosing price for the Ordinary Shares on such exchange, or if Shares were not traded on such exchange on such given date, then on the next preceding date onwhich Shares were traded, all as reported in The Wall Street Journal or such other resource as the Compensation Committee deems reliable. If the OrdinaryShares are listed on an Exchange, in the event that an Award is granted on any given date prior to the time that trading has ended on the applicable exchangeon such date, Fair Market Value may be determined as of the date preceding such grant. If the Ordinary Shares are not listed on an Exchange, Fair MarketValue shall be determined by the Compensation Committee in its good faith discretion, using such methods of appraisal and valuation as it deemsappropriate. “Holder” means the holder of an outstanding Award granted or issued under this Plan. “Memorandum and Articles of Association” means the Memorandum and Articles of Association of the Company, as amended and effective from time totime. “Option” means an option granted pursuant to this Plan to purchase Ordinary Shares. “Ordinary Shares” means the Class A Ordinary Shares in the capital of the Company, having the rights, restrictions, privileges and preferences set forth inthe Memorandum and Articles of Association of the Company. “Outside Director” means a member of the Board who is not an Employee or Consultant. “Parent” means any entity which holds directly or indirectly more than fifty percent of the voting equity of the Company. “Plan” means this 2017 Share Incentive Plan, as amended from time to time. “Restricted Share” means an Ordinary Share issued subject to forfeiture or repurchase by the Company until vested. “Restricted Share Unit” or “RSU” means a grant of a hypothetical number of Ordinary Shares, to be settled upon vesting in either Ordinary Shares orcash, as determined by the Compensation Committee. “Service Provider” means an Employee, Director, or Consultant. “Share” means an Ordinary Share. “Subsidiary” means any entity in which the Company holds directly or indirectly more than fifty percent of the voting equity. “Tax Law” means the relevant tax legislation of an applicable jurisdiction, as amended from time to time and in effect on any given date. “Underlying Shares” means the Ordinary Shares subject to Options or issuable upon vesting and settlement of RSUs. “U.S. GAAP” means generally accepted accounting principles in the United States as in effect from time to time. “U.S. Incentive Stock Options” means Options intended to qualify as incentive stock options within the meaning of Section 422 of the U.S. InternalRevenue Code. 2Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “U.S. Internal Revenue Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time and in effect on any given date. “U.S. Non-Qualified Stock Option” means an Option not intended to qualify as a U.S. Incentive Stock Option. Except where otherwise indicated by the context, the masculine gender will include the feminine gender, and the definition of any term herein in thesingular also will include the plural. 3. Shares Subject to this Plan (a) Number of Shares Available Subject to the provisions of Section 3(b) and Section 10 of this Plan, the maximum number of Ordinary Shares that may be subject to Awards grantedand sold under this Plan is 28,000,000, which shall not be increased within four (4) years following the date of the effectiveness of this Plan. At all timesduring the term of this Plan and while any Awards are outstanding, the Company will retain as authorized and unissued Ordinary Shares, or as treasury shares,at least the number of Shares from time to time required under the provisions of this Plan, or otherwise assure itself of its ability to perform its obligationshereunder. (b) Treatment of Expired, Unvested Shares If an Award expires or terminates for any reason or becomes unexercisable without having been exercised or settled in full, the unissued Shares whichwere subject thereto will become available for future grant, issuance or sale under this Plan. Shares that have actually been issued under this Plan will not bereturned to this Plan and will not become available for future distribution under this Plan, except that if Restricted Shares are repurchased by the Company attheir original purchase price and cancelled, such Shares will become available for future grant or issuance under this Plan. 4. Administration of this Plan (a) Compensation Committee This Plan will be administered by the Compensation Committee. If the Company has any class of equity security registered under Section 12 of theExchange Act, and the Company is not a “foreign private issuer” as that term is defined in Rule 3b-4 under the Exchange Act, with the result that theCompany’s executive officers and directors become subject to Section 16 of the Exchange Act, this Plan generally will be administered so as to causetransactions in securities issued or to be issued under this Plan to be afforded the exemptions from Section 16(b) of the Exchange Act provided by Rule 16b-3under the Exchange Act or any similar successor statute or rules. (b) Powers of the Compensation Committee Subject to the provisions of this Plan and, in the case of the Compensation Committee, the specific duties delegated by the Board to the CompensationCommittee, and subject to the approval of any relevant authorities, the Compensation Committee will have the authority in its discretion: (i) to determine the Fair Market Value; (ii) to determine the types of Awards to be granted. (iii) to select the Service Providers to whom Awards may from time to time be made; (iv) to determine the number of Shares or RSUs to be covered by each Award granted; (v) to approve forms of Award Agreement; 3Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (vi) to determine the terms and conditions of any Award. Such terms and conditions include, but are not limited to, the exercise price, the time or timeswhen Options may be exercised, RSUs may be vested or Restricted Shares may no longer be subject to the repurchase right of the Company, or Options, RSUsor Restricted Shares may be forfeited (which in each case may be based on performance criteria), any vesting acceleration or waiver of restrictions, and anyrestriction or limitation regarding any Award or Shares relating thereto, based in each case on such factors as the Compensation Committee may determine;provided, that in no event may any Option or comparable Award granted under this Plan be amended, other than pursuant to Section 10, to decrease theexercise price thereof or otherwise be subject to any action that would be treated, for accounting purposes, as a “repricing” of such Option, unless suchamendment or action is approved by the Company’s shareholders; (vii) to determine whether and under what circumstances an RSU may be settled in cash instead of Ordinary Shares; (viii) to prescribe and amend provisions relating to this Plan, including provisions relating to sub-plans established for the purpose of qualifying forpreferred tax treatment under applicable Tax Law; (ix) to allow holders of Options or other Awards to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to beissued upon exercise of an Option or other Award that number of Shares having a Fair Market Value equal to the amount required to be withheld. The FairMarket Value of the Shares to be withheld will be determined on the date that the amount of tax to be withheld is to be determined. All elections by Holdersto have Shares withheld for this purpose will be made in such form and under such conditions as the Compensation Committee may deem necessary oradvisable; and (x) to construe and interpret the terms of this Plan and Awards granted pursuant to this Plan. (c) Effect of Compensation Committee’s Decisions All decisions, determinations and interpretations of the Compensation Committee under this Plan will be final and binding on all recipients and, ifapplicable, transferees of Awards under this Plan. 5. Eligibility (a) Service Providers Awards may be granted to Service Providers; provided, however, that U.S. Incentive Stock Options may be granted only to Employees of the Company, aParent or a Subsidiary and generally will be granted only to persons who are, or are expected to be, subject to tax on income under the U.S. Internal RevenueCode. (b) No Right to Continued Employment Neither this Plan nor any Award will confer upon any recipient or other holder of an Award any right with respect to continuing such recipient’s orholder’s relationship as a Service Provider with the Company, nor will it interfere in any way with his or her right or the Company’s right to terminate suchrelationship at any time, with or without cause. 6. Term of Options and RSUs The term of each Option, RSU or other Award will be stated in the Award Agreement. Notwithstanding the foregoing, with respect to U.S. IncentiveStock Options the term will be no more than ten (10) years from the date of grant thereof and with respect to U.S. Incentive Stock Options granted to a Holderwho, at the time the Option is granted, owns shares representing more than ten percent of the voting power of all classes of shares of the Company or anyParent or Subsidiary, the term of such U.S. Incentive Stock Option will be five (5) years from the date of grant thereof or such shorter term as may be providedin the Award Agreement. 4Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 7. Option Exercise Price, Restricted Share Purchase Price, and Form of Consideration (a) Exercise Price of Options and Purchase Price of Restricted Shares The exercise price for Shares to be issued upon exercise of an Option and the purchase price of Restricted Shares will be such price as is determined bythe Compensation Committee, provided that with respect to a U.S. Incentive Stock Option, the exercise price for Shares to be issued upon exercise of suchoption will not be less than the Fair Market Value on the date of grant. With respect to a U.S. Incentive Stock Option granted to an person who, at the time theU.S. Incentive Stock Option is granted, owns shares representing more than ten percent of the voting power of all classes of shares of the Company or anyParent or Subsidiary, the per Share exercise price will not be less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant. (b) Form of Consideration The consideration to be paid for Shares to be issued upon exercise of an Option and for Restricted Shares, including the method of payment, will bedetermined by the Compensation Committee. Such consideration may consist of: (i) cash, (ii) check payable to the order of the Company, (iii) promissory note; provided, however, that consideration in the form of a promissory note will not be acceptable if it would constitute a personal loanto an executive officer or director of the Company prohibited by Section 402 of the U.S. Sarbanes-Oxley Act of 2002, (iv) other Shares which (x) have been owned by the grantee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on thedate of surrender equal to the aggregate exercise price of the Shares as to which such Option is exercised or the aggregate purchase price of Restricted Sharesbeing purchased, (v) consideration received by the Company for the exercise of Options under a cashless exercise program implemented or approved by the Company inconnection with this Plan, or (vi) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Compensation Committee will consider if acceptance of such considerationmay be reasonably expected to benefit the Company. 8. Vesting of Awards (a) Vesting Generally Any Options granted hereunder will become vested and exercisable, any RSUs granted hereunder will vest and be settled, and any Restricted Sharesissued hereunder will vest and no longer be subject to forfeiture, according to the terms hereof at such times and under such conditions as determined by theCompensation Committee and set forth in the Award Agreement. Except in the case of an Award granted to Outside Directors and Consultants, unless theCompensation Committee determines otherwise as set forth in the Award Agreement, Options will vest and become exercisable, RSUs will vest and be settled,Restricted Shares will vest and no longer be subject to forfeiture, and other Awards will vest, in four equal annual installments beginning on the firstanniversary of the date of grant or issuance of the Award or of such other vesting commencement date prior to the date of grant or issuance of the Award asspecified by the Compensation Committee in its sole discretion. (b) Settlement of RSUs RSUs that will be settled upon vesting, subject to the terms of the Award Agreement, either by delivery to the holder of the number of Shares that equalsthe number of RSUs that then become vested or by the payment to the holder of cash equal to the then Fair Market Value of that number of Shares. It iscontemplated that in most cases the Award Agreement will specify that settlement will be made in Shares rather than in cash. 5Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Exercise of Options An Option will be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Compensation Committee and permitted by the AwardAgreement and this Plan. Shares issued upon exercise of an Option will be issued in the name of the Holder or, if requested by the Holder, in the name of theHolder and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transferagent of the Company), no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Shares, notwithstanding theexercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for adividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 10 below. Exercise of an Option in any manner will result in a decrease in the number of Shares thereafter available, both for purposes of this Plan and for saleunder the Option, by the number of Shares as to which the Option is exercised. To the extent the aggregate Fair Market Value of Shares subject to U.S. Incentive Stock Options which become exercisable for the first time by a Holderduring any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Sharescovered thereby in excess of the foregoing limitation, will be treated as Non-Qualified Stock Options. For this purpose, U.S. Incentive Stock Options will betaken into account in the order in which they were granted, and the Fair Market Value of the Shares will be determined as of the grant date of the relevantOption. (d) Termination of Relationship as Service Provider of Holder of Options If a Holder of Options ceases to be a Service Provider, such Holder may exercise his or her Options within such period of time as is specified in the AwardAgreement to the extent that the Options are vested on the date of termination (but in no event later than the expiration of the term of the Options as set forthin the Award Agreement). In the absence of a specified time in the Award Agreement, the Options will remain exercisable for three (3) months following theHolder’s termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of theOptions will revert to this Plan. If, after termination, the Holder does not exercise his or her Options within the time specified by the CompensationCommittee, the Options will terminate, and the Shares covered by such Options will revert to this Plan. Notwithstanding the foregoing, if employment or services of a Holder of Options are terminated by the Company or any Parent or Subsidiary of theCompany for Cause (as defined below), the Option (whether vested or not) shall terminate on the date of termination of employment or services. For purposes of the Option, “Cause” means that the Holder: (1) has been negligent in the discharge of his or her duties to the Company or any Parent or Subsidiary of the Company, has refused to perform stated orassigned duties or is incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties; 6Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (2) has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or useof inside information, customer lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violated anyother duty, law, rule, regulation or policy of the Company or any Parent or Subsidiary of the Company; or has been convicted of a felony or misdemeanor(other than minor traffic violations or similar offenses); (3) has materially breached any of the provisions of any agreement with the Company or any Parent or Subsidiary of the Company; or (4) has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Company orany Parent or Subsidiary of the Company; has improperly induced a vendor or customer to break or terminate any contract with the Company or any Parent orSubsidiary of the Company; or has induced a principal for whom the Company or any Parent or Subsidiary of the Company acts as agent to terminate suchagency relationship. (e) Disability of Holder of Options If a Holder of Options ceases to be a Service Provider as a result of the Holder’s Disability, the Holder may exercise his or her Options within such periodof time as is specified in the Award Agreement to the extent the Options are vested on the date of termination (but in no event later than the expiration of theterm of such Options as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Options will remain exercisable fortwelve (12) months following the Holder’s termination. If the Disability is not a “disability” as such term is defined in Section 22(e)(3) of the U.S. Internal Revenue Code, in the case of U.S. Incentive StockOptions, such U.S. Incentive Stock Options will automatically convert to U.S. Non-Qualified Stock Options on the day three (3) months and one dayfollowing the date such Holder ceased to be a Service Provider as a result of the Holder’s Disability. If, on the date of termination, the Holder is not vested asto all of his Options, the Shares covered by the unvested Options will revert to this Plan. If, after termination, the Holder does not exercise his or her Optionswithin the time specified herein, the Options will terminate, and the Shares covered by such Options will revert to this Plan. (f) Death of Holder of Options If a Holder of Options dies while a Service Provider, the Options may be exercised within such period of time as is specified in the Award Agreement tothe extent that the Options are vested on the date of death (but in no event later than the expiration of the term of such Options as set forth in the AwardAgreement) by the Holder’s estate or by a person who acquires the right to exercise the Options by bequest or inheritance. In the absence of a specified timein the Award Agreement, the Options will remain exercisable for twelve (12) months following the Holder’s termination. If, at the time of death, the Holder isnot vested as to all of his or her Options, the Shares covered by the unvested Options will immediately revert to this Plan. If the Options are not so exercisedwithin the time specified herein, the Options will terminate, and the Shares covered by such Options will revert to this Plan. (g) Buyout Provisions The Compensation Committee may at any time offer to buy out an Award previously granted for a payment in cash or Shares, based on such terms andconditions as the Compensation Committee may establish, provided that the Company, without the approval of the Company’s stockholders, may not buyout any outstanding Option where such buy out would be treated as a “repricing” for accounting purposes. 9. Awards (a) Rights to Receive or Purchase Awards may be issued either alone, in addition to, or in tandem with other Awards granted under this Plan and/or cash awards made outside of this Plan.After the Compensation Committee determines that it will offer Awards under this Plan, it will advise the offeree in writing or electronically of the terms,conditions and restrictions related to the offer, including the number of Shares that such person will be entitled to receive or purchase, the price to be paid, ifany, and the time within which such person must accept such offer. 7Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Repurchase Option; Forfeiture of Non-vested Shares Unless the Compensation Committee determines otherwise, the Award Agreement will grant the Company a repurchase option exercisable upon thevoluntary or involuntary termination of the Holder’s service with the Company for any reason (including death or Disability) in the event that the Holderpurchased or otherwise received Shares under the Award Agreement and such Shares are non-vested. The purchase price for Shares repurchased pursuant tothe Award Agreement will be the original price paid by the Holder and may be paid, at the Compensation Committee’s option, by cancellation of anyindebtedness of the Holder to the Company. The repurchase option will lapse at such rate as the Compensation Committee may determine. Except withrespect to Shares purchased by Outside Directors and Consultants, unless set forth expressly in the Award Agreement, the repurchase option will in no caselapse at a rate of less than twenty-five percent per year over four years from the date of receipt or purchase. Unless the Compensation Committee determinesotherwise, the Award Agreement will provide for the forfeiture of the non-vested Shares underlying an Award upon the voluntary or involuntary terminationof the Holder’s service with the Company for any reason (including death or Disability). (c) Other Provisions The Award Agreement will contain such other terms, provisions and conditions not inconsistent with this Plan as may be determined by theCompensation Committee in its sole discretion. (d) Rights as a Shareholder Once an Award is exercised, the Holder will have rights equivalent to those of a shareholder and will be a shareholder when his or her purchase is enteredupon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date isprior to the date the Award is exercised, except as provided in Section 10 below. 10. Adjustments Upon Changes in Capitalization or Asset Sale (a) Changes in Capitalization Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shareswhich have been authorized for issuance under this Plan but as to which Awards have yet been granted or which have been returned to this Plan uponcancellation or expiration of an Award, as well as the price per Share covered by each such outstanding Award, will be proportionately adjusted for anyincrease or decrease in the number of issued Shares resulting from a reclassification of the Shares, or any other increase or decrease in the number of issuedShares effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company will not be deemed to havebeen “effected without receipt of consideration.” Such adjustment will be made by the Compensation Committee, whose determination in that respect will befinal and binding. Except as expressly provided herein, no issuance by the Company of equity shares of any class, or securities convertible into equity sharesof any class, will affect, and no adjustment by reason thereof will be made with respect to, the number or price of Shares subject to an Award. (b) Adjustments for Share Splits and Share Dividends If the Company at any time increases or decreases the number of its outstanding Shares, or changes in any way the rights and privileges of such Shares bymeans of the payment of a share dividend or any other distribution upon such Shares, or through a share split, subdivision, consolidation, combination,reclassification or recapitalization involving the Shares, then in relation to the Shares that are affected by one or more of the above events, the numbers, rightsand privileges of the following will be increased, decreased or changed in like manner as if such Shares had been issued and outstanding, fully paid andnonassessable at the time of such occurrence: (i) the number of Shares as to which Awards may be made under this Plan: and (ii) the Shares included in eachoutstanding Award made hereunder. 8Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Dissolution or Liquidation In the event of the proposed dissolution or liquidation of the Company, the Compensation Committee will notify each Holder as soon as practicableprior to the effective date of such proposed transaction. The Compensation Committee in its discretion may provide for a Holder to have the right to exercisehis or her Options until fifteen (15) days prior to such transaction as to all of the Underlying Shares covered thereby, including Shares as to which the Optionswould not otherwise be exercisable. In addition, the Compensation Committee may provide that any Company repurchase option applicable to any Sharespurchased pursuant to an Award will lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the mannercontemplated. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action. (d) Consolidation or Asset Sale If the Company is to be consolidated with or acquired by another person or entity in a sale of all or substantially all of the Company’s assets or equityshare capital or otherwise (an “Acquisition”), the committee or the board of directors of any entity assuming the obligations of the Company hereunder (the“Successor Board”) may in its sole discretion, take one or more of the following actions with respect to outstanding Options, Shares acquired upon exercise ofany Option, outstanding RSUs, or unvested Restricted Shares: (i) make appropriate provision for the continuation of such Awards by substituting on anequitable basis for the Underlying Shares the consideration payable with respect to the outstanding Shares in connection with the Acquisition; (ii) acceleratethe date of exercise of such Options, vesting and settlement of RSUs, or vesting of Restricted Shares, or of any installment of any such Options, RSUs orRestricted Shares; (iii) upon written notice to the participants, provide that all Options must be exercised, to the extent then exercisable, within a specifiednumber of days of the date of such notice, at the end of which period the Options, including those which are not then exercisable, shall terminate;(iv) terminate all Options or RSUs in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options or RSUs(to the extent then exercisable) over the exercise price thereof (if any); or (v) in the event of a Share sale, require that the participant sell to the purchaser towhom such Shares sale is to be made, all Shares previously issued to such participant upon exercise of any Option, pursuant to any RSU, or as RestrictedShares at a price equal to the portion of the net consideration from such sale which is attributable to such Shares. Nothing contained herein will be deemed torequire the Company to take, or refrain from taking, any one or more of the foregoing actions. (e) No Fractional Shares If any adjustment or substitution provided for in this Section 10 results in the creation of a fractional Share under any Option, the Company will, in lieuof issuing such fractional Share, pay to the Holder a cash sum in the amount equal to the product of such fraction multiplied by the Fair Market Value of aShare on the date the fractional Share otherwise would have been issued. (f) Determination by the Compensation Committee Adjustments under this Section 10 will be made by the Compensation Committee whose determinations with regard thereto will be final and bindingupon all parties. 11. Time of Granting of Award The date of grant of an Award will be the date on which the Compensation Committee makes the determination granting such Award, or such other dateas is determined by the Compensation Committee; provided that such other date will not be prior to the date of the Compensation Committee’sdetermination to grant such Award; provided, further, that the foregoing will not prohibit the Compensation Committee from determining, in its discretion, tospecify a vesting commencement date prior to the date of the grant. Notice of the determination will be given to each Service Provider to whom an Award isso granted within a reasonable time after the date of such grant. 9Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 12. Non-Transferability of Awards Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than as provided in the Award Agreement, thisPlan, by will or by the laws of succession and may be exercised, during the lifetime of the Holder, only by the Holder. 13. Conditions Regarding Issuance of Shares (a) Legal Compliance Shares will not be issued pursuant to the exercise of Options, the settlement of RSUs, or the purchase of Restricted Shares unless the issuance anddelivery of such Shares will comply with Applicable Laws, and the issuance of Shares will be subject to confirmation from legal counsel for the Company asto such compliance. (b) Investment Representations The Compensation Committee may require the person receiving Shares upon exercise of Options, settlement of RSUs, or purchase of Restricted Shares torepresent and warrant, as a condition to such receipt, that the Shares are being purchased only for investment and not with a view to the distribution ofsuch Shares. (c) Inability to Obtain Authority The inability of the Company to obtain authority from any regulatory body having jurisdiction will relieve the Company of any liability in respect ofthe failure to issue or sell such Shares as to which such requisite authority has not been obtained. (d) Withholding The Company’s obligations to deliver Shares upon the exercise of an Award will be subject to the Holder’s satisfaction of all applicable Tax Law,including withholding requirements, of all applicable jurisdictions. 14. Amendment and Termination of this Plan (a) Amendment and Termination The Board may at any time amend, suspend or terminate this Plan. (b) Shareholder Approval The Board will obtain shareholder approval of any Plan amendment to the extent necessary or desirable to comply with Applicable Laws. (c) Effect of Amendment or Termination Except as may be required by Applicable Law, no amendment, suspension or termination of this Plan will impair the rights of any Holder, unless agreedotherwise in writing between the Holder and the Compensation Committee. Termination of this Plan will not affect the Compensation Committee’s ability toexercise the powers granted to it hereunder with respect to Awards granted under this Plan prior to the date of such termination. 15. Effectiveness and Term of Plan This Plan will become effective upon its adoption by the Board and approval by the Company’s shareholders. It will continue in effect, with regard tothe making of Awards, for a term of ten (10) years unless sooner terminated under Section 14 above and with regard to the terms of an Award Agreement, forsuch longer term as may be required to give effect to that Award Agreement for a term of ten (10) years unless sooner terminated under Section 14 above. 10Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 4.20 January 12, 2018 Xiaochuan WangChief Executive OfficerSogou Inc. Dear Xiaochuan, Please accept my formal resignation as Sogou’s CFO as follows: 1. I hereby resign from my position as Chief Financial Officer of Sogou Inc., a Cayman Islands company (“Sogou”), effective as of the close ofbusiness on January 21, 2018 (the “Termination Date”). 2. Commencing on January 22, 2018 and ending July 21, 2018 (the “Consulting Period”), I will serve as a consultant to Sogou, reporting to you,in order to assist with the transition of oversight of Sogou’s finance department. My pretax consulting fee will be RMB480,000, which will be paid to me infull in arrears on the last day of the Consulting Period. During the Consulting Period, I will be free to be employed by, or otherwise provide services to, otherentities, including without limitation Sohu.com Inc. 3. In consideration of my providing such consulting services, options previously granted to me for the purchase of 50,000 Class A OrdinaryShares of Sogou will become fully vested on July 21, 2018 and will remain exercisable by me until July 20, 2027, provided that the options will cease to beexercisable on such earlier date as is 90 days after I am no longer providing services to Sohu.com Inc. or one of its subsidiaries or variable interest entities. 4. Sogou and I hereby agree that, in consideration of payment to me of the consulting fee, during the Consulting Period I will not, on my ownbehalf, or as owner, manager, stockholder (other than as a shareholder of less than 2% of the outstanding equity shares of a company that is publicly-traded orlisted on a stock exchange), consultant, director, officer, or employee of or in any other manner connected with any business entity, participate or be involvedin any Competitor without your prior written authorization. “Competitor” means any business of the type and character of business in which Sogou engagesor proposes to engage and includes, without limitation, an individual, company, enterprise, partnership enterprise, government office, committee, socialorganization, or other organization that produces, distributes, or provides the same or substantially similar kind of product or service as does Sogou. 5. Sogou and I hereby agree that I will cooperate with Sogou regarding the transitioning of all my positions and responsibilities in Sogou and allaffiliated and related entities of Sogou (collectively with Sogou, the “Sogou Group”) in due course. 6. I hereby agree, on my own behalf, and on behalf of my heirs, successors and assigns, that the terms of this letter agreement will be in completeand final settlement of all claims, rights, interests, demands, compensation and damages (“Claims”), whether known or unknown, of every name and nature,both in law and equity, I have or may have, or have ever had from the beginning of the world to this date, against the Sogou Group, or any director, officer,employee, independent contractor, consultant, shareholder, manager, member, partner, trustee, beneficiary, or agent of any of the foregoing through the datehereof, in any way relating to or arising out of my employment with Sogou or any of its affiliates or related entities, and the termination of such employment.This release does not release Sogou from any of its obligations under this letter agreement. Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 7. Sogou agrees that the terms of this letter agreement will be in complete and final settlement of all Claims, whether known or unknown, of everyname and nature, both in law and equity, it has or may have, or has ever had from the beginning of the world to this date, against me through the date it hassigned this letter agreement, in any way related to or arising out of my employment with Sogou or any of its affiliates or related entities and the termination ofsuch employment. This release does not release me from, or waive any of the rights of Sogou or any other member of the Sogou Group with respect to, (i) anyof my obligations under this letter agreement or (ii) any act or omission that constitutes gross negligence, intentional misconduct, fraud, bad faith, or aknowing material violation of law. 8. This letter agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to the doctrine ofconflict of laws. Very truly yours, James (Xiufeng) Deng Accepted and agreed to: By:Xiaochuan WangChief Executive OfficerSogou Inc. 2Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 8.1 Subsidiaries and Consolidated Variable Interest Entities of the Registrant Wholly-Owned Subsidiaries: · Sogou (BVI) Limited, incorporated in the British Virgin Islands · Beijing Sogou Technology Development Co., Ltd., incorporated in the PRC · Sogou Hong Kong Limited, incorporated in Hong Kong · Vast Creation Advertising Media Services Limited, incorporated in Hong Kong · Beijing Sogou Network Technology Co., Ltd., incorporated in the PRC · Sogou Technology Hong Kong Limited, incorporated in Hong Kong · Tianjin Sogou Network Technology Co., Ltd., incorporated in the PRC · Sogou (Shantou) Internet Microcredit Co., Ltd., incorporated in the PRC Consolidated Variable Interest Entities: · Beijing Sogou Information Service Co., Ltd. incorporated in the PRC · Shenzhen Shi Ji Guang Su Information Technology Co., Ltd., incorporated in the PRC · Beijing Shi Ji Si Su Technology Co., Ltd., incorporated in the PRC · Chengdu Easypay Technology Co., Ltd., incorporated in the PRC Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 12.1 I, Xiaochuan Wang, certify that: 1. I have reviewed this annual report on Form 20-F of Sogou Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b) [intentionally omitted]; c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by theannual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the company’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal controlover financial reporting. Date: February 28, 2018 By:/s/ Xiaochuan WangName: Xiaochuan WangTitle: Chief Executive Officer Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 12.2 I, Joe Zhou, certify that: 1. I have reviewed this annual report on Form 20-F of Sogou Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b) [intentionally omitted]; c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by theannual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the company’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal controlover financial reporting. Date: February 28, 2018 By:/s/ Joe ZhouName: Joe ZhouTitle: Chief Financial Officer Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 13.1 Certification Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 In connection with the Annual Report on Form 20-F of Sogou Inc. (the “Company”) for the year ended December 31, 2017 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), I, Xiaochuan Wang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of December 31, 2017and results of operations of the Company for the year ended December 31, 2017. /s/ Xiaochuan WangName:Xiaochuan WangTitle:Chief Executive Officer Date:February 28, 2018 Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 13.2 Certification Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 In connection with the Annual Report on Form 20-F of Sogou Inc. (the “Company”) for the year ended December 31, 2017 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), I, Joe Zhou, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of December 31, 2017and results of operations of the Company for the year ended December 31, 2017. /s/ Joe ZhouName:Joe ZhouTitle:Chief Financial Officer Date:February 28, 2018 Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-222343) of Sogou Inc. of our report datedFebruary 28, 2018 relating to the financial statements, which appears in this Form 20-F. /s/ PricewaterhouseCoopers Zhong Tian LLP Beijing, the People’s Republic of ChinaFebruary 28, 2018 Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 15.2 February 28, 2018 Sogou Inc.Level 15, Sohu.com Internet Plaza,No. 1 Unit Zhongguancun East Road, Haidian District,Beijing 100084People’s Republic of China Re: Consent of Commerce & Finance Law Offices We hereby consent to the use of our firm name and summaries of our firm’s opinions under the headings “Risk Factors,” “Business Overview — PRCRegulation” and “Organizational Structure” in the annual report on Form 20-F of Sogou Inc. (the “Company”) for the Company’s fiscal year endedDecember 31, 2017 to be filed with the U.S. Securities and Exchange Commission (the “SEC”) on or about February 28, 2018 (the “Form 20-F”), and to theincorporation by reference in the Company’s Registration Statement on Form S-8 (File No. 333-222343) filed with the SEC on December 29, 2017 of suchreferences to our firm and summaries of our firm’s opinions included under such headings. We also hereby consent to the filing of this consent letter as an exhibit to the Form 20-F. Yours sincerely, /s/ Commerce & Finance Law Offices Commerce & Finance Law Offices Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: SOGOU INC., 20-F, February 28, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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