TPG Inc. 10-K

Item 8. Financial Statements TPG Partners, LLC Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 162 Balance Sheet as of December 31, 2021 163 Statement of Loss for the period from August 18, 2021 (Inception) to December 31, 2021 164 Statement of Member’s Interest for the period from August 18, 2021 (Inception) to December 31, 2021 165 Statement of Cash Flows for the period from August 18, 2021 (Inception) to December 31, 2021 166 Notes to Financial Statements 167 TPG Group Holdings (SBS), L.P. Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 168 Consolidated Statements of Financial Condition as of December 31, 2 021 and 2020 164 Consolidated Statements of Operations for the Years Ended Dece mber 31, 2021, 2020 and 2019 165 Consolidated Statements of Changes in Partners’ Capital for the Years Ended December 31, 2021, 2020 and 2019 166 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 167 Notes to Consolidated Financial Statements 169 154 Table of contents Report of Independent Registered Public Accounting Firm To the Managing Member of TPG Partners, LLC. Opinion on the Financial Statement We have audited the accompanying balance sheet of TPG Partners, LLC (the "Company") as of December 31, 2021, the related statement of loss, member’s interest, and cash flows, for the period from August 18, 2021 (inception) to December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the period from August 18, 2021 (inception) to December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. 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 the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the 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 disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit of the financial statements provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ DELOITTE & TOUCHE LLP Fort Worth, Texas March 29, 2022 We have served as the Company’s auditor since 2021. 155 Table of contents TPG PARTNERS, LLC BALANCE SHEET December 31, 2021 Assets Cash and cash equivalents $ 1,000 Deferred assets 650 Total assets $ 1,650 Liabilities and Member’s Interest Accrued expenses 27,894 Total liabilities $ 27,894 Common interest, no par value 1,000 Accumulated deficit $ (27,244) Total liabilities and member’s interest $ 1,650 156 Table of contents TPG PARTNERS, LLC STATEMENT OF LOSS August 18, 2021 (inception) to December 31, 2021 Revenues $ — Expenses 27,244 Net Loss $ (27,244) 157 Table of contents TPG PARTNERS, LLC STATEMENT OF MEMBER’S INTEREST Member's interest Accumulated deficit Total member's interest Balance at August 18, 2021 (Inception) $ — $ — $ — Member capital contribution 1,000 — 1,000 Net Loss — (27,244) (27,244) Balance at December 31, 2021 $ 1,000 $ (27,244) $ (26,244) 158 Table of contents TPG PARTNERS, LLC STATEMENT OF CASH FLOWS August 18, 2021 (inception) to December 31, 2021 Operating activities: Net loss $ (27,244) Changes in operating assets and liabilities: Deferred assets (650) Accrued expenses 27,894 Net cash provided by operating activities — Financing activities: Contributions from member 1,000 Net cash provided by financing activities 1,000 Net change in cash and cash equivalents 1,000 Cash and cash equivalents, beginning of period — Cash and cash equivalents, end of period $ 1,000 159 Table of contents TPG PARTNERS, LLC Notes to Financial Statements 1. ORGANIZATION TPG Holdings, LLC (the “Company” or “TPG”) was formed as a Delaware limited liability company on August 4, 2021. On August 18, 2021, the Company filed with the Secretary of State of the State of Delaware to amend the Certificate of Formation to change the name of the Company to TPG Partners, LLC. The Company consists of one class of limited liability company interest, all of which are held by the Company’s sole member, TPG GP A, LLC. The sole member’s liability is limited to its contributed capital. Under the terms of the limited liability company agreement, the Company shall have perpetual existence, unless the member votes for dissolution or dissolution is required by law. The Company was formed for the purpose of completing a public offering and related transactions in order to carry on the business of the TPG Operating Group, which will be comprised of TPG Operating Group I, L.P., TPG Operating Group II, L.P., and TPG Operating Group III, L.P. and their respective consolidated subsidiaries as a publicly traded entity (collectively “the TPG Operating Group”). TPG Holdings, LLC and other partners and principals currently operate their business through TPG Operating Group. Reorganization and Initial Public Offering The owners of the TPG Operating Group completed a series of actions during the year ended December 31, 2021 and on January 12, 2022 as part of a corporate reorganization (the “Reorganization”), in conjunction with the initial public offering (“IPO”) that was completed on January 18, 2022. The TPG Operating Group (and the entities through which its direct and indirect partners held their interests) was restructured and recapitalized. On December 31, 2021, the TPG Operating Group transferred certain assets to Tarrant RemainCo I, L.P., Tarrant RemainCo II, L.P., and Tarrant RemainCo III, L.P. (“RemainCo”) and distributed the interests in RemainCo to the owners of the TPG Operating Group. The steps completed on December 31, 2021 by the TPG Operating Group, included the following activities: • Transferred certain performance allocation economic entitlements to RemainCo. These transfers resulted in an increase of $1,012.1 million of non-controlling interests which is reflected in the Consolidated Statement of Financial Condition. • Transferred $738.9 million of economic entitlements associated with certain other investments, including our investment in our former affiliate and certain TPG Funds, to RemainCo. This transfer reduced controlling and non-controlling interests by $629.0 and $109.9 million, respectively. Following this transfer, the Company no longer holds more than an insignificant economic interest in the TPG Funds that have been historically consolidated and as a result, deconsolidated those respective TPG Funds. As of December 31, 2021, we continue to consolidate Public SPACs as we continue to be the primary beneficiary. • Transferred $75.0 million of cash on hand to RemainCo. This transfer reduced controlling and non-controlling interests by $63.4 million and $11.6 million, respectively. • Certain of the Company’s owners transferred their investment in the Company to an interest in the TPG Operating Group resulting in an increase to non-controlling interests totaling $16.6 million and a related decrease in controlling interests. The results of these steps in the Reorganization did not have an impact on the Company’s Consolidated Financial Statements as of and for the year-ended December 31, 2021. On January 12, 2022, the TPG Operating Group completed the remaining steps of the planned Reorganization. The TPG Operating Group created Common Units and issued them to its controlling and non-controlling interest holders. Immediately following the Reorganization, the TPG Operating Group and its subsidiaries were controlled by the same parties and as such, the Reorganization is a transfer of interests under common control. As part of the Reorganization, the Company changed its name to TPG Inc. and converted to a Delaware corporation. 160 Table of contents In conjunction with the IPO, the Company offered 33,900,000 shares of Class A common stock at a price of $29.50 per share, including 5,589,806 shares sold by a non-controlling interest holder of the TPG Operating Group. Additionally, certain pre-IPO investors exchanged their interests in the TPG Operating Group for interests in TPG Inc. totaling 35,136,254 Class A voting and 8,258,901 Class A non-voting common stock. The IPO closed on January 18, 2022, and TPG Inc. received proceeds, net of underwriting discounts and unpaid offering costs, totaling approximately $771.0 million. Net proceeds of $380.1 million were used to purchase Common Units of the TPG Operating Group from certain existing non-controlling interest holders and the remaining net proceeds were used to acquire newly issued Common Units of the TPG Operating Group. As a result of the Reorganization and IPO, TPG Inc. only holds Common Units of the TPG Operating Group. On February 9, 2022, the Company and the selling stockholder sold an additional 1,775,410 and 1,614,590 Class A common stock respectively at the initial public offering price pursuant to the underwriters’ exercise of their option to purchase additional shares. TPG Inc. received additional net proceeds totaling approximately $49.8 million. The underwriters’ exercise of their option in addition to the IPO related transactions resulted in a total of 70,811,664 and 8,258,901 of Class A voting and Class A non-voting common stock outstanding, respectively. TPG Inc.’s ownership of the TPG Operating Group totaled approximately 26%. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s Balance Sheet at December 31, 2021 and the Statement of Loss and Statement of Cash Flows for the period presented. 3. COMMITMENTS AND CONTINGENCIES In the ordinary course of business, the Company may be subject to various legal, regulatory and/or administrative proceedings. There are currently no such proceedings to which the Company is a party. In the ordinary course of business, the Company may enter into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements cannot be determined as these indemnities relate to future claims that may be made against the Company, but which have not yet occurred. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 4. SUBSEQUENT EVENTS In January 2022, TPG Inc. granted the following stock-based awards in connection with its IPO: • 8.3 million restricted stock units (“RSUs”) with a grant date fair value of $243.4 million which are generally satisfied over four years. • 2.2 million RSUs with a grant date fair value of $50.8 million, awarded to certain of the Company’s executives, which are generally satisfied over five years and achievement of a performance-condition. Other than the Reorganization and IPO described in Note 1 and the event described above, there are no additional subsequent events through the date of issuance of the consolidated financial statements which require adjustment or disclosure. 161 Table of contents Report of Independent Registered Public Accounting Firm To the Partners and the Executive Committee of TPG Group Holdings (SBS), L.P. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of TPG Group Holdings (SBS), L.P. (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in partners’ capital, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the 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 disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Fair Value — Underlying Investments Without Readily Determinable Fair Values Used in the Calculation of Carried Interest — Refer to Notes 2 and 4 of the financial statements Critical Audit Matter Description The Company, as a general partner, is entitled to an allocation of income from certain TPG Funds (“TPG Funds”), assuming certain investment returns are achieved, referred to as “Carried Interest”. Carried Interest is accrued based on cumulative fund performance to date, and after specified investment returns to the TPG Funds’ limited partners are achieved. The fair value of the underlying investments held by the TPG Funds is a significant input into this calculation. As the fair value of underlying investments varies between reporting periods, adjustments are made to amounts recorded as Carried Interest, which is recorded as revenues, to reflect either (a) positive performance resulting in an 162 Table of contents increase in the Carried Interest or (b) negative performance that would cause the amount due to the general partner to be less than the amount previously recognized as revenue, resulting in a negative adjustment to Carried Interest. In each case, Carried Interest is calculated on a cumulative basis and cumulative results are compared to amounts previously recorded, with a current period adjustment. Accrued but unpaid Carried Interest as of the reporting date is reflected in Investments in the consolidated statements of financial condition. We considered the valuation of investments without readily determinable fair values used in the calculation of Carried Interest as a critical audit matter because of the valuation techniques, assumptions, and subjectivity of the unobservable inputs used in the valuation. Auditing the fair value of these investments required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists who possess significant investment valuation expertise. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation techniques, assumptions, and unobservable pricing inputs used by management to estimate the fair values of investments with unobservable inputs (“Level III”) included the following, among others: • We involved more senior, more experienced audit team members to perform audit procedures. • We tested the design and implementation of controls over the determination of the fair value of Level III Investments. • We utilized our fair value specialists to assist in the evaluation of management’s valuation methodologies and valuation assumptions, including the unobservable pricing inputs used to estimate fair value. Our fair value specialist procedures included testing the underlying source information of the assumptions, as well as developing a range of independent estimates and comparing those to the inputs used by management. • We assessed the consistency by which management applied its valuation process. • We evaluated management’s ability to accurately forecast future revenues and/or operating margins by comparing actual results to management’s historical forecasts. • We evaluated management’s ability to accurately estimate the fair value of Level III investments by comparing the previous estimates of fair value to subsequent market transactions. /s/ DELOITTE & TOUCHE LLP Fort Worth, Texas March 29, 2022 We have served as the Company’s auditor since 2015. 163 Table of contents TPG Group Holdings (SBS), L.P. Consolidated Statements of Financial Condition (in thousands) December 31, 2021 2020 Assets Cash and cash equivalents $ 972,729 $ 858,220 Restricted cash (1) 13,135 13,135 Due from affiliates 185,321 108,552 Investments (includes assets pledged of $492,276 and $395,172 as of December 31, 2021 and 2020, respectively (1) ) 6,109,046 4,546,243 Right-of-use assets 157,467 179,600 Other assets 499,850 129,299 Assets of consolidated TPG Funds and Public SPACs (1) : Cash and cash equivalents 5,371 3,705 Assets held in Trust Accounts 1,000,027 800,011 Investments — 243,361 Due from affiliates 74 1,033 Due from counterparty — 110,482 Other assets 18,993 6,910 Total assets $ 8,962,013 $ 7,000,551 Liabilities, Redeemable Equity and Partners' Capital Liabilities Accounts payable and accrued expenses $ 134,351 $ 67,894 Due to affiliates 826,999 463,385 Secured borrowings, net (1) 244,950 244,642 Senior unsecured term loan 199,494 — Senior unsecured revolving credit facility — 50,000 Operating lease liabilities 177,003 195,987 Other liabilities 61,243 67,730 Liabilities of consolidated TPG Funds and Public SPACs (1) : Accounts payable and accrued expenses 8,484 4,057 Securities sold, not yet purchased — 79,798 Due to affiliates — 2,561 Due to counterparty — 12,021 Derivative liabilities of Public SPACs 13,048 263,269 Deferred underwriting 35,000 28,000 Other liabilities — 494 Total liabilities 1,700,572 1,479,838 Commitments and contingencies (Note 17) Redeemable equity from consolidated Public SPACs (1) 1,000,027 800,011 Partners' capital Partners' capital controlling interests 1,606,593 2,460,868 Non-controlling interests in consolidated TPG Funds — 204,548 Other non-controlling interests 4,654,821 2,055,286 Total partners' capital 6,261,414 4,720,702 Total liabilities, redeemable equity and partners' capital $ 8,962,013 $ 7,000,551 ________________ (1) The Company’s consolidated total assets and liabilities as of December 31, 2021 and 2020 include assets and liabilities of variable interest entities (“VIEs”). The assets can be used only to satisfy obligations of the VIEs, and the creditors of the VIEs have recourse only to these assets, and not to TPG Group Holdings (SBS), LP. These amounts include the assets and liabilities of consolidated TPG Funds and Public SPACs, restricted cash, assets pledged of securitization vehicles, secured borrowings of securitization vehicles, and redeemable equity of consolidated Public SPACs. See Note 11 to the Consolidated Financial Statements. See accompanying notes to consolidated financial statements. 164 Table of contents TPG Group Holdings (SBS), L.P. Consolidated Statements of Operations (in thousands) Year Ended December 31, 2021 2020 2019 Revenues Fees and other $ 977,904 $ 883,366 $ 1,031,878 Capital allocation-based income 3,998,483 1,231,472 955,977 Total revenues 4,976,387 2,114,838 1,987,855 Expenses Compensation and benefits 579,698 522,715 585,254 General, administrative and other 278,590 260,748 347,400 Depreciation and amortization 21,223 7,137 8,741 Interest expense (includes affiliates of $188 , $1,998 and $2,352 as of December 31, 2021, 2020 and 2019, respectively) 16,291 18,993 15,532 Expenses of consolidated TPG Funds and Public SPACs: Interest expense 740 722 2,265 Other 20,024 7,241 9,289 Total expenses 916,566 817,556 968,481 Investment income Income from investments: Net gains (losses) from investment activities 353,219 (5,839) 71,694 Gain on deconsolidation — 401,695 — Interest, dividends and other (includes affiliates of $1,153 , $4,785 and $9,469 as of December 31, 2021, 2020 and 2019, respectively) 6,460 8,123 18,992 Investment income of consolidated TPG Funds and Public SPACs: Net gains (losses) from investment activities 23,392 (18,691) 75,211 Unrealized gains (losses) on derivative liabilities of Public SPACs 211,822 (239,269) (15,300) Interest, dividends and other (includes affiliates of $285 , $1,031 and $349 as of December 31, 2021, 2020 and 2019, respectively) 10,321 5,410 16,161 Total investment income 605,214 151,429 166,758 Income before income taxes 4,665,035 1,448,711 1,186,132 Income tax expense 9,038 9,779 5,689 Net income 4,655,997 1,438,932 1,180,443 Less: Net income (loss) attributable to redeemable equity in Public SPACs 155,131 (195,906) (9,684) Net income (loss) attributable to non-controlling interests in consolidated TPG Funds 19,287 (12,380) 58,055 Net income attributable to other non-controlling interests 2,455,825 719,640 651,558 Net income attributable to controlling interests $ 2,025,754 $ 927,578 $ 480,514 See accompanying notes to consolidated financial statements. 165 Table of contents TPG Group Holdings (SBS), L.P. Consolidated Statements of Changes in Partners’ Capital (in thousands) Controlling Interests Non-Controlling Interests Partners' Capital Non˗Controlling Interests in Consolidated TPG Funds Other Non- Controlling Interests Total Partners' Capital Balance at January 1, 2019 $ 1,831,457 $ 196,427 $ 1,850,031 $ 3,877,915 Net income 480,514 58,055 651,558 1,190,127 Capital contributions 120 54,008 1,806 55,934 Capital distributions (320,178) (39,239) (508,459) (867,876) Change in receivable from sale of non-controlling interests in consolidated entities 9,145 — 1,688 10,833 Deconsolidation of previously consolidated entities 22,049 (53,028) 32,126 1,147 Change in redemption value of redeemable non-controlling interest (5,134) — (7,052) (12,186) Balance at December 31, 2019 2,017,973 216,223 2,021,698 4,255,894 Net income (loss) 927,578 (12,380) 719,640 1,634,838 Capital contributions 7,824 13,271 7,884 28,979 Capital distributions (403,849) (12,566) (365,064) (781,479) Change in receivable from sale of non- controlling interests in consolidated entities 9,145 — 1,688 10,833 Deconsolidation of previously consolidated entities — — (163,744) (163,744) Change in redemption value of redeemable non-controlling interest (97,803) — (166,816) (264,619) Balance at December 31, 2020 2,460,868 204,548 2,055,286 4,720,702 Net income 2,025,754 19,287 2,455,825 4,500,866 Capital contributions — 540 29,236 29,776 Capital distributions (1,230,510) (10,816) (1,208,368) (2,449,694) Deconsolidation of previously consolidated entities 36,386 — 61,151 97,537 Acquisition of NewQuest — — 301,189 301,189 Change in redemption value of redeemable non-controlling interest 35,157 — 53,292 88,449 Reorganization (1,721,062) (213,559) 907,210 (1,027,411) Balance at December 31, 2021 $ 1,606,593 $ — $ 4,654,821 $ 6,261,414 See accompanying notes to consolidated financial statements. 166 TPG Group Holdings (SBS), L.P. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2021 2020 2019 Operating activities: Net income $ 4,655,997 $ 1,438,932 $ 1,180,443 Adjustments to reconcile net income to net cash provided by operating activities: (Gain) loss from investment activities (353,219) 5,839 (71,694) Gain on deconsolidation (see Note 4) — (401,695) — Capital allocation-based income (3,998,483) (1,231,472) (955,977) Depreciation and amortization expense 21,835 7,721 9,303 Non-cash lease expense 23,894 23,533 25,283 Adjustments related to consolidated TPG Funds and Public SPACs: Realized gain on investments (19,716) (3,989) (35,975) Change in unrealized (gain) loss on investments (4,024) 7,939 (40,229) Realized loss (gain) on investment-related derivatives 10,444 3,217 (5,407) Change in unrealized (gain) loss on investment-related derivatives (10,096) 11,524 6,400 Change in unrealized (gain) loss on derivative liabilities of Public SPACs (211,822) 239,269 15,300 Changes in operating assets and liabilities: Purchases of investments (173,885) (84,148) (77,948) Proceeds from investments 2,179,064 754,912 530,241 Change in consolidation and other — (10,976) — Due from affiliates (42,826) 12,333 32,883 Other assets (22,586) 187 2,987 Operating lease liabilities (20,766) (21,035) (23,832) Accounts payable and accrued expenses 51,148 42,124 (15,893) Due to affiliates 11,129 3,885 (1,972) Other liabilities (6,165) 75,669 (996) Changes related to consolidated TPG Funds and Public SPACs: Purchases of investments (216,657) (327,005) (287,195) Proceeds from investments 218,695 297,696 393,170 Cash and cash equivalents 5,839 31,584 (78,179) Investments held in Trust Accounts (630,281) (800,011) 263,192 Due from affiliates (903) (128) (29) Due from counterparty 10,424 13,184 (41,742) Other assets (22,104) 137 (1,425) Accounts payable and accrued expenses 10,172 3,110 1,097 Due to affiliates 1,987 (63) 2,833 Due to counterparty (1,160) 3,336 2,714 Deferred underwriting compensation 6,855 — — Other liabilities 2,030 (216) 765 Net cash provided by operating activities 1,474,820 95,393 828,118 Investing activities: Repayments of notes receivable from affiliates 23,282 9,536 130,914 Advances on notes receivable from affiliates (9,053) (2,084) (105,359) Purchases of fixed assets (1,791) (8,327) (8,151) Acquisition of NewQuest 24,817 — — Transfers related to Reorganization Activities (see Note 1) (75,000) — — Deconsolidation of previously consolidated vehicles (see Note 4) — (107,221) — Net cash (used in) provided by investing activities (37,745) (108,096) 17,404 See accompanying notes to consolidated financial statements. 167 Year Ended December 31, 2021 2020 2019 Financing activities: Proceeds from senior unsecured term loan 200,000 — — Borrowings on revolving credit facility to affiliate — 150,000 — Repayments of revolving credit facility to affiliate (50,000) (100,000) — Proceeds from subordinated credit facility — 55,000 3,000 Repayments of subordinated credit facility — (55,000) (3,000) Proceeds from sale of non-controlling interests — 10,833 10,833 Proceeds from notes issuance — — 50,000 Debt issuance costs (520) — (1,122) Contributions from holders of other non-controlling interests 4,636 7,884 1,806 Distributions to holders of other non-controlling interests (1,009,242) (310,159) (384,346) Contributions from partners — 7,824 120 Distributions to partners (1,066,680) (298,584) (248,256) Changes related to consolidated TPG Funds and Public SPACs: Proceeds from SPAC IPOs 935,000 800,000 — Payments of underwriting and offering costs (18,700) (16,702) — Redemption of redeemable equity (304,760) — (269,695) Contributions from holders of non-controlling interests 540 13,271 54,008 Distributions to holders of non-controlling interests (12,840) (14,038) (38,734) Net cash (used in) provided by financing activities (1,322,566) 250,329 (825,386) Net change in cash, cash equivalents and restricted cash 114,509 237,626 20,136 Cash, cash equivalents and restricted cash, beginning of period 871,355 633,729 613,593 Cash, cash equivalents and restricted cash, end of period $ 985,864 $ 871,355 $ 633,729 Supplemental disclosures of other cash flow information (a) : Cash paid for income taxes $ 8,548 $ 6,790 $ 6,451 Cash paid for interest 15,728 14,857 14,988 Supplemental disclosures of non-cash operating activities: Conversion from notes receivable from affiliate to equity method investments — (8,380) — In-kind distributions of investments 36,334 89,834 145,535 Proceeds receivable on sale of investments (31,104) (7,750) (105,959) Investment in equity method investments (3,138) — — Increase in due from affiliates (3,045) — — Supplemental disclosures of non-cash investing and financing activities: Reorganization (952,411) — — NewQuest contingent consideration 8,400 — — Equity interests transferred for NewQuest acquisition 24,600 — — Deferred underwriting (35,441) (28,000) 4,000 Distributions in-kind to partners — (57,281) (63,501) Distributions in-kind to holders of other non-controlling interests (33,197) (32,553) (82,033) Distributions payable to partners 352,722 191,452 143,467 Distributions payable to holders of other non-controlling interests 355,282 186,781 164,429 Distributions payable to holders of non-controlling interests in consolidated funds — 2,028 (3,501) Repayments of notes receivable to affiliates 3,045 — — Reconciliation of cash, cash equivalents and restricted cash, end of period: Cash and cash equivalents $ 972,729 $ 858,220 $ 620,092 Restricted cash 13,135 13,135 13,637 Cash, cash equivalents and restricted cash, end of period $ 985,864 $ 871,355 $ 633,729 ________________ (a) For supplemental disclosures related to deconsolidation of previously consolidated TPG Funds and Public SPACs and activities related to deconsolidation of the Former Affiliate, see Note 4 . See accompanying notes to consolidated financial statements. 168 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements 1. Organization TPG Group Holdings (SBS), L.P. is a limited partnership under the Delaware Revised Uniform Limited Partnership Act, as amended. TPG Group Holdings (SBS), L.P., along with its consolidated subsidiaries (collectively “TPG,” “TPG Group Holdings,” or the “Company”), is a leading global alternative asset manager on behalf of third-party investors under the “TPG” brand name. TPG Group Holdings includes the consolidated accounts of management companies, general partners of pooled investment entities (“TPG Funds”) and certain consolidated funds and Special Purpose Acquisition Companies (“Public SPACs” and/or “SPACs”), which are held in one of three holding companies (TPG Holdings I, L.P., TPG Holdings II, L.P. and TPG Holdings III, L.P.) (the “Holdings Companies”). The Holdings Companies are controlled by TPG Group Holdings. TPG is headquartered in Fort Worth, Texas, with senior executives based in both Fort Worth and in San Francisco, California and other principal offices in New York and across Asia, Australia and Europe. On January 4, 2022, the Company filed with the Secretary of State of the State of Delaware to amend the Certificate of Formation to change the name of TPG Holdings I, L.P., TPG Holdings II, L.P. and TPG Holdings III, L.P. to TPG Operating Group I, L.P.; TPG Operating Group II, L.P.; and TPG Operating Group III, L.P. (collectively the “TPG Operating Group”), respectively. Reorganization and IPO The owners of TPG Group Holdings and the TPG Operating Group completed a series of actions during the year ended December 31, 2021 and on January 12, 2022 as part of a corporate reorganization (the “Reorganization”), in conjunction with an initial public offering (“IPO”) that was completed on January 18, 2022. TPG Partners, LLC was created on August 4, 2021 to effectuate the IPO and acquire Common Units of the TPG Operating Group on behalf of public investors. TPG Partners, LLC was designed as a holding company, and its only business is to act as the owner of the entities serving as the general partner of the TPG Operating Group partnerships. The TPG Operating Group (and the entities through which its direct and indirect partners held their interests) was restructured and recapitalized. On December 31, 2021, the TPG Operating Group transferred certain assets to Tarrant RemainCo I, L.P., Tarrant RemainCo II, L.P., and Tarrant RemainCo III, L.P. (collectively “RemainCo”) and distributed the interests in RemainCo to the owners of the TPG Operating Group. The steps completed on December 31, 2021, and reflected on the Consolidated Statement of Financial Condition, included the following activities: • Transferred certain performance allocation economic entitlements to RemainCo. These transfers resulted in an increase of $1,012.1 million of non-controlling interests which is reflected in the Consolidated Statement of Financial Condition. • Transferred $738.9 million of economic entitlements associated with certain other investments, including our investment in our Former Affiliate, as defined in Note 4, and certain TPG Funds, to RemainCo. This transfer reduced controlling and non-controlling interests by $629.0 and $109.9 million, respectively. Following this transfer, the Company no longer holds more than an insignificant economic interest in the TPG Funds that have been historically consolidated and as a result, deconsolidated those respective TPG Funds. As of December 31, 2021, we continue to consolidate Public SPACs as we continue to be the primary beneficiary. • Transferred $75.0 million of cash on hand to RemainCo. This transfer reduced controlling and non-controlling interests by $63.4 million and $11.6 million, respectively. • Certain owners of the Company’s parent exchanged their interests for an interest in the TPG Operating Group resulting in an increase to non-controlling interests totaling $16.6 million and a related decrease in controlling interests. • The results of the Reorganization did not have an impact on our Consolidated Statement of Operations for the year ended December 31, 2021. 169 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following table summarizes the impact of the deconsolidation of the TPG Funds, which resulted from the transfer of economic entitlements to RemainCo related to the TPG Funds we previously consolidated, on the Consolidated Statement of Financial Condition as of December 31, 2021 (in thousands): Balances prior to Reorganization Impact of Reorganization December 31, 2021 Assets of consolidated TPG Funds: Cash and cash equivalents $ 972 $ (972) $ — Investments 254,453 (254,453) — Due from affiliates 1,862 (1,862) — Due from counterparty 97,768 (97,768) — Other assets 486 (486) — Total assets $ 355,541 $ (355,541) $ — Liabilities and Partners' Capital Liabilities of consolidated TPG Funds: Accounts payable and accrued expenses $ 1,183 $ (1,183) $ — Securities sold, not yet purchased 63,350 (63,350) — Due to affiliates 524 (524) — Due to counterparty 8,920 (8,920) — Other liabilities 2,524 (2,524) — Total liabilities 76,501 (76,501) — Partners’ capital controlling interests 65,481 (65,481) — Non-controlling interests in consolidated TPG Funds 213,559 (213,559) — Other non-controlling interests — — — Total partners’ capital 279,040 (279,040) — Total liabilities and partners' capital $ 355,541 $ (355,541) $ — On January 12, 2022, the following steps were completed: • TPG Group Holdings, the TPG Operating Group, and TPG Partners, LLC completed the remaining steps of the planned Reorganization. The TPG Operating Group created Common Units and issued them to the Company and the other non-controlling interest holders of the TPG Operating Group. Immediately following the Reorganization, the TPG Operating Group and its subsidiaries will be controlled by the same parties and as such, the Reorganization is a transfer of interests under common control. Accordingly, the Company will carry forward the existing value of the members’ interests in the assets and liabilities in these Consolidated Financial Statements prior to the IPO into the financial statements following the IPO. • TPG Partners, LLC changed its name to TPG Inc. and converted to a corporation. • TPG Inc. offered 33,900,000 shares of Class A common stock at a price of $29.50 per share, including 5,589,806 shares sold by a non-controlling interest holder of the TPG Operating Group, in the IPO. Additionally, certain pre-IPO investors exchanged their interests in the TPG Operating Group for interests in TPG Inc. totaling 35,136,254 Class A voting and 8,258,901 Class A non-voting common stock. The IPO closed on January 18, 2022, and TPG Inc. received proceeds, net of underwriting discounts and unpaid offering costs, totaling approximately $771.0 million. Net proceeds of $380.1 million were used to repurchase Common Units of the TPG Operating Group from certain existing non-controlling interest holders, acquire newly issued Common Units of the TPG Operating Group and the remaining net proceeds are available for general corporate purposes. As a result of the Reorganization and IPO, TPG Inc. only holds Common Units of the TPG Operating Group. 170 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements On February 9, 2022, the Company and the selling stockholder sold an additional 1,775,410 and 1,614,590 Class A common stock, respectively, at the initial public offering price pursuant to the underwriters’ exercise of their option to purchase additional shares. TPG Inc. received additional net proceeds totaling approximately $49.8 million. The underwriters’ exercise of their option in addition to the IPO related transactions resulted in a total of 70,811,664 and 8,258,901 of Class A voting and Class A non-voting common stock outstanding, respectively. TPG Inc.’s ownership of the TPG Operating Group totaled approximately 26% on February 9, 2022. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements (the “Consolidated Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All dollar amounts are stated in thousands unless otherwise indicated. All intercompany transactions and balances have been eliminated. The Consolidated Financial Statements include the accounts of TPG Group Holdings (SBS), L.P, TPG Operating Group (formerly known as “the Holdings Companies”) and their consolidated subsidiaries, TPG’s management companies, the general partners of TPG Funds and entities that meet the definition of a variable interest entity (“VIE”) for which the Company is considered the primary beneficiary. Certain TPG Funds and Public SPACs, are consolidated into the general partners pursuant to U.S. GAAP. Consequently, the accompanying Consolidated Financial Statements include the assets, liabilities, revenues, expenses and cash flows of such certain TPG Funds and Public SPACs. The ownership interest in such certain TPG Funds held by entities or persons outside of TPG is reflected as non-controlling interests in consolidated TPG Funds in the accompanying Consolidated Financial Statements. All of the management fees, carried interest and other amounts earned from the consolidated TPG Funds and Public SPACs are eliminated in consolidation. In addition, the equivalent expense amounts recorded by the consolidated TPG Funds and Public SPACs are also eliminated, with such reduction of expenses allocated to controlling interest holders. Accordingly, the consolidation of TPG Funds and Public SPACs has no net effect on net income attributable to controlling interests and net income attributable to other non-controlling interests. TPG Funds’ investments (the “Portfolio Companies”) are considered affiliates due to the nature of the Company’s ownership interests. As part of the Reorganization, the TPG Operating Group transferred a portion of its interest in certain consolidated TPG Funds to RemainCo on December 31, 2021, which resulted in the deconsolidation of the TPG Funds as the TPG Operating Group no longer holds a controlling financial interest. Use of Estimates The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues, expenses, and investment income during the reporting periods. Actual results could differ from those estimates and such differences could be material to the Consolidated Financial Statements. 171 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements COVID-19 and Global Economic and Market Conditions In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic. Numerous countries, including the United States, instituted a variety of restrictive measures to contain the viral spread, including mandatory quarantines and travel restrictions, leading to significant disruptions and uncertainty in the global financial markets. While many of the initial restrictions in the United States have been relaxed or removed, the risk of future outbreaks of COVID-19, or variants thereof, or of other public health crises remain. Further, certain public health restrictions remain in place and lifted restrictions may be reimposed to mitigate risks to public health. In 2021, the global economy began reopening, facilitating robust economic activity. However, the economic recovery is only partially underway and has been gradual, uneven and characterized by meaningful dispersion across sectors and regions with uncertainty regarding its ultimate length and trajectory. Further, the emergence of COVID-19 variants and related surges in cases have resulted in setbacks to the recovery, and subsequent surges could lead to renewed restrictions. Many public health experts believe that COVID-19 could persist or reoccur for years, and even if the lethality of the virus declines, such reoccurrence could trigger increased restrictions on business operations. Despite significant market rebounds across many asset classes, the continued rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on financial market and economic conditions. The estimates and assumptions underlying these Consolidated Financial Statements are based on the information available as of December 31, 2021 for the current period and as of December 31, 2020, as applicable. The estimates and assumptions include judgments about financial market and economic conditions which have changed, and may continue to change, over time. Principles of Consolidation The types of entities TPG assesses for consolidation include subsidiaries, management companies, broker dealers, general partners of investment funds, investment funds, SPACs, and other entities. Each of these entities is assessed for consolidation on a case by case basis depending on the specific facts and circumstances surrounding that entity. TPG first considers whether an entity is considered a VIE and therefore whether to apply the consolidation guidance under the VIE model. Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities (“VOE”) under the voting interest model. An entity is considered to be a VIE if any of the following conditions exist: (i) the equity investment at risk is not sufficient to finance the activities of the entity without additional subordinated financial support, (ii) as a group, the holders of the equity investment at risk lack the power to direct the activities that most significantly impact the entity’s economic performance or the obligation to absorb the expected losses or right to receive the expected residual returns, and (iii) the voting rights of some holders of the equity investment at risk are disproportionate to their obligation to absorb losses or right to receive returns, and substantially all of the activities are conducted on behalf of the holder of equity investment at risk with disproportionately few voting rights. For limited partnerships, partners lack power if neither (1) a simple majority or lower threshold (including a single limited partner) with equity at risk is able to exercise substantive kick-out rights through voting interests over the general partner, nor (2) limited partners with equity at risk are able to exercise substantive participating rights over the general partners. 172 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements TPG consolidates all VIEs in which it is the primary beneficiary. An entity is determined to be the primary beneficiary if it holds a controlling financial interest in a VIE. A controlling financial interest is defined as (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (i) whether an entity in which TPG holds a variable interest is a VIE and (ii) whether TPG’s involvement, through holding interest directly or indirectly in the entity or contractually through other variable interests would give it a controlling financial interest. Performance of that analysis requires judgment. The analysis can generally be performed qualitatively; however, if it is not readily apparent that TPG is not the primary beneficiary, a quantitative analysis may also be performed. TPG factors in all economic interests including interests held through related parties, to determine if it holds a variable interest. Fees earned by TPG that are customary and commensurate with the level of effort required for the services provided, and where TPG does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered variable interests. TPG determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and continuously reconsiders that conclusion when facts and circumstances change. Entities that are determined not to be VIEs are generally considered to be VOEs and are evaluated under the voting interest model. TPG consolidates VOEs that it controls through a majority voting interest or through other means. The TPG Funds do not consolidate wholly-owned, majority-owned or controlled investments in Portfolio Companies, nor do the TPG Funds account for investments in Portfolio Companies over which they exert significant influence under the equity method of accounting. Rather, these investments are carried at fair value as described below in the section entitled Fair Value Measurement. As of December 31, 2021, the Company no longer consolidates such TPG Funds (see Note 1). Special Purpose Acquisition Companies The Company invests in and sponsors SPACs which are formed for the purposes of effecting a merger, asset acquisition, stock purchase, reorganization or other business combination. In the IPO of each of these SPACs, either common shares or units (which include one Class A ordinary share and, in some cases, a fraction of a redeemable public warrant which entitles the holder to purchase one share of Class A ordinary shares at a fixed exercise price) are sold to investors. Each SPAC provides its public shareholders the option to redeem their shares either (i) in connection with a shareholder meeting to approve the business combination or (ii) by means of a tender offer. Assets held in Trust Accounts relate to gross proceeds received from the IPO and can only be used for the initial business combination and any possible investor redemptions. If the SPAC is unable to complete a business combination within a specified time frame, typically within 24 months of the IPO close date, the SPACs will redeem all public shares. The ownership interest in each SPAC which is not owned by the Company is reflected as redeemable equity from consolidated Public SPACs in the accompanying Consolidated Financial Statements (see Note 1 9 ). The ownership interest of the Company in these SPACs may include Class F ordinary shares, Class G ordinary shares, purchased private placement shares, purchased private placement warrants, earnout shares and warrants and forward purchase agreements (“FPAs”). The SPACs issue the Company Class F ordinary shares and/or Class G ordinary shares at the formation of the SPAC, typically for an initial contribution of less than $0.1 million, which are convertible into Class A ordinary shares on the first business day following the completion of the business combination. For SPACs that issue Class G ordinary shares, the Class G ordinary shares will convert into Class A ordinary shares only when the performance condition is probable of occurrence, or more specifically when a business combination is consummated, and only to the extent certain triggering events occur following the closing of the business combination and also upon specified strategic transactions. The additionally purchased private placement warrants or shares are not redeemable, and will not be transferable, assignable or salable until 30 days after the completion of the business combination. The Company consolidates these SPACs during the period before the initial business combination, and therefore the Class F ordinary shares, Class G ordinary shares, private placement shares, private placement warrants and FPAs with consolidated related parties are eliminated in consolidation. 173 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The below table is presented in thousands except units: SPAC Name (Ticker) (a) Date of IPO Units Sold Non-Controlling Interests Subject to Possible Redemption as of Public Warrants and Forward Purchase Agreements as of TPG Investments as of (f) December 31, 2021 AfterNext HealthTech ("AFTR") (b) Aug-21 25,000,000 $ 250,000 $ 5,833 $ 3,292 TPG PACE Beneficial II ("YTPG") (c) Apr-21 40,000,000 400,000 — 25 TPG PACE Beneficial Finance ("TPGY") (d) Oct-20 35,000,000 350,027 7,215 5,048 100,000,000 $ 1,000,027 $ 13,048 $ 8,365 December 31, 2020 TPG PACE Beneficial Finance ("TPGY") (d) Oct-20 35,000,000 $ 350,005 $ 224,299 $ 107,317 TPG PACE Tech Opportunities ("PACE") (e) Oct-20 45,000,000 450,006 38,970 20,592 80,000,000 $ 800,011 $ 263,269 $ 127,909 _______________ (a) Each SPAC is listed on the New York Stock Exchange. (b) AFTR sold 25,000,000 units at a price of $10.00 per unit for a total IPO price of $250.0 million. Each unit consists of one Class A ordinary share of AFTR at $0.0001 par value and one-third of one warrant. (c) YTPG sold 40,000,000 units at a price of $10.00 per unit for a total IPO price of $400.0 million. Each unit consists of one Class A ordinary share of YTPG at $0.0001 par value. Prior to the IPO, YTPG entered into FPAs for an aggregate purchase price of $175.0 million. (d) TPGY sold 35,000,000 units at a price of $10.00 per unit for a total IPO price of $350.0 million. Each unit consists of one Class A ordinary share of TPGY at $0.0001 par value and one-fifth of one warrant. Prior to the IPO, TPGY entered into FPAs for an aggregate purchase price of $100.0 million. In December 2020, a definitive agreement to merge was announced between TPGY and EVBox Group, a leading global provider of smart charging solutions for electric vehicles. The merger agreement and the business combination were approved by the board of directors of TPGY in December 2020. On December 29, 2021, TPGY, Dutch Holdco, New SPAC, Engie Seller and EVBox Group entered into a termination of the business combination agreement pursuant to which the parties mutually agreed to terminate the business combination effective as of such date. As a result of the termination of the business combination, Engie Seller will reimburse TPGY for certain expenses incurred by TPGY in connection with the business combination in an amount of EUR 15.0 million. TPGY intends to continue to pursue the consummation of a business combination with an appropriate target. (e) PACE sold 45,000,000 units at a price of $10.00 per unit for a total IPO price of $450.0 million. Each unit consists of one Class A ordinary share of PACE at $0.0001 par value and one-fifth of one warrant. Prior to the IPO, PACE entered into FPAs for an aggregate purchase price of $150.0 million. In January 2021, a definitive agreement to merge was announced between PACE and Nerdy Inc (“NRDY”), a leading platform for delivering live online learning. The merger agreement and the business combination were approved by the board of directors of PACE in January 2021, and the transaction closed on September 20, 2021. (f) The Company’s investments, which includes the founder shares, private placement shares, private placement warrants and FPAs held by consolidated affiliates, are eliminated in consolidation. 174 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements In April 2021, TPG PACE Solutions Corp. (“TPGS”) consummated its $285.0 million IPO. TPGS sold 28,500,000 units at a price of $10.00 per unit for a total IPO price of $285.0 million. Each unit consisted of one Class A ordinary share of TPGS at $0.0001 par value. Prior to the IPO, TPGS entered into FPAs for an aggregate purchase price of $150.0 million. In July 2021, a definitive agreement to merge was announced between TPGS and Vacasa Holdings, LLC, a leading vacation rental management platform. The merger agreement and the business combination were approved by the board of directors of TPGS in July 2021. The merger was consummated on December 7, 2021. The Company accounts for the Public SPACs outstanding public warrants and FPAs in accordance with the guidance contained in Accounting Standards Codification (“ASC”) 815-40, " Derivatives and Hedging — Contracts on an Entity's Own Equity ,” (“ASC 815”). The Company accounts for warrants and FPAs that are not indexed to its own stock as liabilities at fair value on the Statements of Financial Condition. The Company determined that the public warrants do not meet the criteria for equity treatment thereunder. The FPAs, depending on the underlying securities, can be classified as either equity or liability instruments on the Consolidated Financial Statements. The warrants and FPAs that are determined to be liability instruments under ASC 815 must be recorded as liabilities and are subject to remeasurement at each balance sheet date and any change in fair value is recorded in the Company’s Consolidated Statements of Operations. When a consolidated Public SPAC enters into a business combination, the Company assesses whether the respective SPAC should still be consolidated in accordance with ASC 810 — Consolidation (“ASC 810”). If the Company determines the SPAC should no longer be consolidated, then the associated assets, liabilities, and non-controlling interest are deconsolidated and a gain or loss is recorded in the Consolidated Statements of Operations. Investments Investments consist of investments in private equity funds, real estate funds, fund of hedge funds, credit funds, including our share of any carried interest, equity method and other proprietary investments. Investments denominated in currencies other than the U.S. dollar are valued based on the spot rate of the respective currency at the end of the reporting period with changes related to exchange rate movements reflected in the Consolidated Statements of Operations. Equity Method – Carried Interests and Capital Interests Investments in which the Company is deemed to have significant influence, but not control, are accounted for using the equity method of accounting except in cases where the fair value option has been elected. The Company as general partner has significant influence over the TPG Funds in which it invests but does not consolidate. The Company uses the equity method of accounting for these interests whereby it records both its proportionate and disproportionate allocation of the underlying profits or losses of these entities in revenues in the accompanying Consolidated Financial Statements. The carrying amounts of equity method investments are included in investments in the Consolidated Financial Statements. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value and its estimated fair value is recognized as an impairment when the loss is deemed other than temporary. The TPG Funds are considered investment companies under ASC 946, Financial Services – Investment Companies (“ASC 946”). The Company, along with the TPG Funds, apply the specialized accounting promulgated in ASC 946 and, as such, neither the Company nor the TPG Funds consolidate wholly-owned, majority-owned and/or controlled Portfolio Companies nor do they record minority investments. The TPG Funds record all investments in the Portfolio Companies at fair value. Investments in publicly-traded securities are generally valued at quoted market prices based upon the last sales price on the measurement date. Discounts are applied, where appropriate, to reflect restrictions on the marketability of the investment. When observable prices are not available for investments, the general partners use the market and income approaches to determine fair value. The market approach consists of utilizing observable market data such as current trading or acquisition multiples of comparable companies, and applying it to key financial metrics, such as earnings before interest, depreciation and taxes, of the Portfolio Company. The comparability of the identified set of comparable companies to the Portfolio Company, among other factors, is considered in the application of the market approach. The general partners, depending on the type of investment or stage of the Portfolio Company’s lifecycle, may also utilize a discounted cash flow analysis, an income approach, in combination with the market approach in determining fair 175 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements value of investments. The income approach involves discounting projected cash flows of the Portfolio Company at a rate commensurate with the level of risk associated with those cash flows. In accordance with ASC 820, Fair Value Measurement (“ASC 820”) market participant assumptions are used in the determination of the discount rate. In applying valuation techniques used in the determination of fair value, the general partners assume a reasonable period of time for liquidation of the investment and take into consideration the financial condition and operating results of the underlying Portfolio Company, the nature of the investment, restrictions on marketability, market conditions, foreign currency exposures, and other factors. In determining the fair value of investments, the general partners exercise significant judgment and use the best information available as of the measurement date. Due to the inherent uncertainty of valuations, the fair values reflected in the accompanying Consolidated Financial Statements may differ materially from values that would have been used had a readily available market existed for such investments and may differ materially from the values that may ultimately be realized. The carrying value of investments classified as Equity Method - Carried Interests and Capital Interests approximates fair value, because the underlying investments of the unconsolidated TPG Funds are reported at fair value. Equity Method Investments – Other The Company holds non-controlling, limited partnership interests in certain other partnerships in which it has significant influence over their operations. The Company uses the equity method of accounting for these interests whereby it records its proportionate share of the underlying income or losses of these entities in net gains (losses) from investment activities in the accompanying Consolidated Financial Statements. The carrying amounts of equity method investments are included in investments in the Consolidated Financial Statements. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value and its estimated fair value is recognized as an impairment when the loss is deemed other than temporary and recorded in net gains (losses) from investment activities within the Consolidated Financial Statements. Equity Method – Fair Value Option The Company elects the fair value option for certain investments that would otherwise be accounted for using the equity method of accounting. Such election is irrevocable and is applied on an investment by investment basis at initial recognition. The fair value of such investments is based on quoted prices in an active market. Changes in the fair value of these equity method investments are recognized in net gains (losses) from investment activities in the Consolidated Financial Statements. Equity Investments The Company holds non-controlling, ownership interests in which it does not have significant influence over their operations. The Company records such investments at fair value when there is a readily determinable fair value. For certain nonpublic partnerships without readily determinable fair values, the Company has elected to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Impairment is evaluated when significant changes occur that may impact the investee in an adverse manner. Impairment, if any, is recognized in net gains (losses) from investment activities in the Consolidated Financial Statements. Investments held by Consolidated TPG Funds The consolidated TPG Funds are, for U.S. GAAP purposes, investment companies and reflect their investments at fair value and TPG has retained this specialized accounting for these consolidated funds. Accordingly, the unrealized gains and losses resulting from changes in fair value of the investments and other financial instruments held by the consolidated TPG Funds are reflected as a component of net gains (losses) from investment activities in the Consolidated Financial Statements. 176 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Non-Controlling Interests in TPG Group Holdings Non-Controlling Interests in TPG Group Holdings consist of the following: • Non-Controlling Interests in Consolidated Funds – The ownership interests in consolidated TPG Funds. • Other Non-Controlling Interests – The ownership interests in certain consolidated entities other than the consolidated TPG Funds. Allocation of income to non-controlling interest holders is based on the respective entities’ governing documents. Revenues Revenues consisted of the following (in thousands): Year Ended December 31, 2021 2020 2019 Management fees $ 731,974 $ 699,492 $ 800,567 Fee credits (13,630) (20,012) (40,792) Monitoring fees 14,324 19,837 24,852 Transaction fees 90,606 44,528 47,892 Incentive fees — 9,521 34,418 Expense reimbursements and other 154,630 130,000 164,941 Total fees and other 977,904 883,366 1,031,878 Carried interests 3,792,861 1,203,520 903,615 Capital interests 205,622 27,952 52,362 Total capital allocation-based income 3,998,483 1,231,472 955,977 Total revenues $ 4,976,387 $ 2,114,838 $ 1,987,855 177 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Fees and Other Fees and other are accounted for as contracts with customers under Accounting Standard Codification (Topic 606): Revenue from Contracts with Customers (“ASC 606”). The guidance for contracts with customers provides a five-step framework that requires the Company to (a) identify the contract with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract and (e) recognize revenue when the Company satisfies its performance obligations. In determining the transaction price, the Company includes variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. Revenue Streams Customer Performance Obligations satisfied over time or point in time (a) Variable or Fixed Consideration Revenue Recognition Classification of Uncollected Amounts (b) Management Fees TPG Funds, collateralized loan obligations and other vehicles Asset management services are satisfied over time (daily) because the customer receives and consumes the benefits of the advisory services daily Consideration is variable since over time the management fee varies based on fluctuations in the basis of the calculation of the fee Management fees are recognized each reporting period based on the value provided to the customer for that reporting period Due from affiliates – unconsolidated VIEs Monitoring Fees Portfolio companies In connection with the investment advisory services provided, the Company earns monitoring fees for providing oversight and advisory services to certain portfolio companies over time Consideration is variable when based on fluctuations in the basis of the calculation of the fee Consideration is fixed when based on a fixed agreed-upon amount Monitoring fees are recognized each reporting period based on the value provided to the customer for that reporting period Due from affiliates – portfolio companies Transaction Fees Portfolio companies, third-parties and other vehicles The company provides advisory services, debt and equity arrangements, and underwriting and placement services for a fee at a point in time Consideration is fixed and is based on a point in time Transaction fees are recognized on or shortly after the transaction is completed Due from affiliates – portfolio companies Other assets - other Incentive Fees TPG Funds and other vehicles Investment management services performed over a period of time that result in achievement of minimum investment return levels Consideration is variable since incentive fees are contingent upon the TPG Fund or vehicles achieving more than the stipulated investment threshold return Incentive fees are recognized at the end of the performance measurement period if the investment performance is achieved Due from affiliates – unconsolidated VIEs Expense Reimbursements and other TPG Funds, portfolio companies and third-parties Expense reimbursements incurred at a point in time relate to providing investment, management and monitoring services. Other revenue is performed over time Expense reimbursements and other are fixed consideration Expense reimbursements and other are recognized as the expenses are incurred or services are rendered Due from affiliates – portfolio companies and unconsolidated VIEs Other assets – other _________________ (a) There were no significant judgements made in evaluating when a customer obtains control of the promised service for performance obligations satisfied at a point in time. (b) See Note 1 5 for amounts classified in due from affiliates. Management Fees The Company provides investment management services to the TPG Funds and other vehicles in exchange for a management fee. Management fees are determined quarterly based on an annual rate and are generally based upon a percentage of the capital committed or capital invested during the investment period. Thereafter, management fees are generally based on a percentage of actively invested capital or as otherwise defined in the respective management agreements. Since some of the factors that cause management fees to fluctuate are outside of the Company’s control, management fees are considered constrained and are not included in the transaction price until the uncertainty relating to the constraint is subsequently resolved. After the contract is established, management does not make any significant judgments in determining the transaction price. 178 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Management fees earned from the TPG Funds generally range from 0.50% to 2.00% of committed capital during the commitment period and from 0.25% to 2.00% of actively invested capital after the commitment period or at an annual rate of fund gross assets, as defined in the respective partnership agreements of the TPG Funds. Management fees charged to consolidated TPG Funds and SPACs are eliminated in consolidation. Monitoring Fees The Company provides monitoring services to certain Portfolio Companies in exchange for a fee, which is recognized over time as services are rendered. Under the terms of the management agreements with certain TPG Funds, a portion of the monitoring fees received from Portfolio Companies may produce Fee Credits, as defined below, which reduce TPG Funds’ management fees due to the Company. Additionally, certain monitoring fee arrangements may provide for a termination payment following an IPO or change of control as defined in the contractual terms of the related agreement with a Portfolio Company. These termination payments are recognized at the point in time when the related transaction closes. For the years ended December 31, 2021, 2020 and 2019, these termination payments are not material to the Company’s Consolidated Financial Statements. After the monitoring contract is established, there are no significant judgments made in determining the transaction price. Transaction Fees The Company provides capital structuring and other advice to Portfolio Companies, third parties and other vehicles generally in connection with debt and equity arrangements, and underwriting and placement services for a fee at a point in time when the underlying advisory services rendered are complete. Transaction fees are separately negotiated for each transaction and are generally based on the underlying transaction value. After the contract is established, management makes no significant judgements when determining the transaction price. Fee Credits Under the terms of the management agreements with certain TPG Funds, the Company is required to share with such funds an agreed upon percentage of certain fees, including monitoring and transaction fees earned from Portfolio Companies ("Fee Credits"). Investment funds earn fee credits only with respect to monitoring and transaction fees that are allocable to the fund's investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain costs incurred in connection with reimbursements of specialized operational services associated with providing specialized operations and consulting services to the funds and portfolio companies. Fee Credits are recognized and owed to investment funds concurrently with the recognition of monitoring fees and transaction fees. Since Fee Credits are payable to investment funds, amounts owed are generally applied as a reduction of the management fee that is otherwise billed to the investment fund. Fee Credits are recorded as a reduction of revenues in the Consolidated Statement of Operations. Fee Credits owed to investment funds are recorded in due to affiliates in the Consolidated Financial Statements. See Note 15 . Incentive Fees The Company provides investment management services to certain TPG funds and other vehicles in exchange for a management fee as discussed above and, in some cases an incentive fee when the Company is not entitled to carried interest, as further discussed below. Incentive fees are considered variable consideration as these fees are subject to reversal, and therefore the recognition of such fees is deferred until the end of the measurement period when the performance-based incentive fees become fixed and determinable. After the contract is established, there are no significant judgments made when determining the transaction price. Expense Reimbursements and Other In providing investment management and advisory services to TPG funds and monitoring services to the Portfolio Companies, TPG routinely contracts for services from third parties. In situations where the Company is viewed, for accounting purposes only, as having incurred these third-party costs on behalf of the TPG Funds or Portfolio Companies, the cost of such services are presented net as a reduction of the Company’s revenues. In all other situations, the expenses and related reimbursements associated with these services are presented on a gross basis, which are classified as part of the Company’s expenses and reimbursements of such costs are classified as expense reimbursements within revenues in the 179 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Consolidated Financial Statements. After the contract is established, there are no significant judgments made when determining the transaction price. Capital Allocation-Based Income Capital allocation-based income is earned from the TPG Funds when the Company has a general partner’s capital interest and is entitled to a disproportionate allocation of investment income (referred to hereafter as “carried interest”). The Company records capital allocation-based income under the equity method of accounting assuming the fund was liquidated as of each reporting date pursuant to each TPG Fund's governing agreements. Accordingly, these general partner interests are accounted for outside of the scope of ASC 606. Other arrangements surrounding contractual incentive fees through an advisory contract are separate and distinct and accounted for in accordance with ASC 606. In these incentive fee arrangements, the Company’s economics in the entity do not involve an allocation of capital. See discussion above regarding “Incentive Fees”. Carried interest is allocated to the general partner based on cumulative fund performance as of each reporting date, and after specified investment returns to the funds' limited partners are achieved. At the end of each reporting period, the TPG Funds calculate and allocate the carried interest that would then be due to the general partner for each TPG Fund, pursuant to the TPG Fund governing agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments (and the investment returns to the funds’ limited partners) varies between reporting periods, it is necessary to make adjustments to amounts recorded as carried interest to reflect either (a) positive performance resulting in an increase in the carried interest allocated to the general partner or (b) negative performance that would cause the amount due to the general partner to be less than the amount previously recognized, resulting in a negative adjustment to carried interest allocated to the general partner. In each case, carried interest is calculated on a cumulative basis and cumulative results are compared to amounts previously recorded with a current period adjustment, positive or negative recorded. The Company ceases to record negative carried interest allocations once previously recognized carried interest allocations for a TPG Fund have been fully reversed, including realized carried interest. The general partner is not obligated to make payments for guaranteed returns or hurdles of a fund and, therefore, cannot have negative carried interest over the life of a fund. Accrued but unpaid carried interest as of the reporting date is reflected in investments in the Company’s Consolidated Financial Statements. Carried interest received by the general partners of the respective TPG Funds is subject to clawback to the extent the carried interest received by the general partner exceeds the amount the general partner is ultimately entitled to receive based on cumulative fund results. Generally, the actual clawback liability does not become due until eighteen months after the realized loss is incurred; however, individual fund terms vary. For disclosures at December 31, 2021 related to clawbacks, see Note 1 7 . Revenue related to carried interest for consolidated TPG Funds is eliminated in consolidation. The Company earns management fees, incentive fees and capital allocation-based income (loss) from investment funds and other vehicles whose primary focus is making investments in specified geographical locations and earns transaction and monitoring fees from portfolio companies located in varying geographies. For the years ended December 31, 2021, 2020 and 2019, over 10% of consolidated revenues were generated in the United States. For the year ended December 31, 2021, 66%, 6% and 28% of consolidated revenues were generated in the Americas, Europe/Middle East, and Asia-Pacific, respectively. For the year ended December 31, 2020, 77%, 4% and 19% of consolidated revenues were generated in the Americas, Europe/Middle East, and Asia-Pacific, respectively. For the year ended December 31, 2019, 70%, 7% and 23% of consolidated revenues were generated in the Americas, Europe/Middle East, and Asia-Pacific, respectively. The determination of the geographic region was based on the geographic focus of the associated investment vehicle or where the portfolio company is headquartered. Investment Income Income from equity method investments The carrying value of equity method investments in proprietary investments where the Company exerts significant influence, is generally determined based on the amounts invested, adjusted for the equity in earnings or losses of the investee allocated based on the Company’s ownership percentage, less distributions and any impairment. The Company 180 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements records its proportionate share of investee’s equity in earnings or losses based on the most recently available financial information, which in certain cases may lag the date of TPG’s financial statements by up to three calendar months. Income from equity method investments is recorded in net gains (losses) from investment activities on the Consolidated Statements of Operations. Income from equity method investments for which the fair value option was elected Income from equity method investments for which the fair value option was elected includes realized gains and losses from the sale of investments, and unrealized gains and losses from changes in the fair value during the period as a result of quoted prices in an active market. Discounts are applied, where appropriate, to reflect restrictions on the marketability of the investment. Income from equity method investments for which the fair value option was elected is recorded in net gains (losses) from investment activities on the Consolidated Statements of Operations. Income from equity investments Income from equity investments, which represent investments held through equity securities of an investee that the Company does not hold significant influence over, includes realized gains from the sale of investments and unrealized gains and losses result from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Income from equity investments is recorded in net gains (losses) from investment activities on the Consolidated Statements of Operations. Net gains (losses) from investment activities of consolidated TPG Funds and Public SPACs Net gains (losses) from investment activities includes realized gains and losses from the sale of equity, securities sold and not yet purchased, debt and derivative instruments other than warrants and FPAs, and unrealized gains and losses from changes in the fair value of such instruments. Realized gains and losses are recognized on the date the transaction is completed. These instruments are generally valued at quoted market prices based upon the last sales price on the measurement date. Discounts are applied, where appropriate, to reflect restrictions on the marketability of the investment. Net gains from investment activities of consolidated TPG Funds and Public SPACs are recorded in net gains (losses) from investment activities of consolidated TPG Funds and Public SPACs on the Consolidated Statements of Operations. Unrealized gains (losses) from derivative liabilities of Public SPACs Unrealized gains (losses) from derivative liabilities of Public SPACs includes unrealized gains and losses from changes in fair value of warrants and FPAs. Interest, Dividends and Other Interest income is recognized as earned. Dividend income is recognized by the Company on the ex-dividend date, or in the absence of a formal declaration, on the date it is received. Compensation and Benefits Compensation and benefits expense includes salaries, bonuses and benefits paid and payable. Bonuses are accrued over the service period to which they relate. As a result of operating as a partnership, all carried interest payments in the form of legal form equity made to the Company’s partners are paid pro rata based on ownership percentages in the underlying investment partnership and are accounted for as distributions on the equity held by such partners rather than as compensation and benefits expense. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on deposit with banks and other short-term investments with an initial maturity of 90 days or less. Restricted cash balances relate to cash balances reserved for the payment of interest on the Company’s secured borrowings. 181 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Cash and Cash Equivalents Held by Consolidated TPG Funds and Public SPACs Cash and cash equivalents held by consolidated TPG Funds and Public SPACs represent cash and cash equivalents that are held by consolidated TPG Funds and Public SPACs and not available to fund the general liquidity needs of the Company. Assets Held in Trust Accounts Proceeds from equity issued by certain consolidated TPG Funds and Public SPACs have been deposited into trust accounts (“Trust Accounts”) and may only be utilized for specific purposes. Therefore, such cash and investments are reported separately in assets held in Trust Accounts on the Consolidated Statements of Financial Condition. As of December 31, 2021, AFTR and YTPG assets held in the Trust Accounts were deposited into a non-interest-bearing U.S. based trust account. As of December 31, 2020, no assets held in the Trust Accounts were deposited into a non-interest-bearing U.S. based trust account. As of December 31, 2021 and 2020 TPGY assets held in the Trust Accounts were invested in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. As of December 31, 2020, PACE assets held in the Trust Accounts were invested in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due from and Due to Counterparty and Derivative Liabilities of Public SPACs Certain TPG Funds enter into derivative contracts with another party (“Counterparty”) in the normal course of conducting their investment activities. Net amounts due to or due from the Counterparty, based on the derivatives’ fair values, are periodically settled in cash and such amounts are reflected in due from and due to counterparty in the Consolidated Financial Statements. The payments received or paid on individual derivative transactions and unrealized gains and losses recognized are included in net gains (losses) from investment activities. From time to time collateral may be pledged to or obtained from a Counterparty to ensure that the Company and the Counterparty will be able to fulfill their contractual obligations. Such collateral amounts are included in due from and due to counterparty in the Consolidated Statements of Financial Condition. Financial derivative assets and liabilities related to our consolidated TPG Funds and Public SPACs’ investment activities may consist of the following instruments: • Total return swaps which are used to manage the risk of adverse movements in both credit and market risk • Interest rate swaps and futures which are used to hedge against the risk that interest rates will move in an adverse direction • Options which are used to manage price volatility • Foreign currency forwards which are used to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities • Credit default swaps which are used to manage the counterparty credit risk associated with loans and lending related commitments • Warrant liabilities • Forward purchase agreements 182 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The Company recognizes these derivative instruments as assets or liabilities at fair value in the accompanying Consolidated Financial Statements. Changes in the fair value of derivative contracts entered into by the Company are included in current period earnings. These derivative contracts are not designated as hedging instruments for accounting purposes. These derivatives are agreements in which a consolidated TPG Fund and a Counterparty agree to exchange cash flows based on agreed-upon terms. As a result of the derivative transaction, the Company is exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, the applicable TPG Fund only enters into contracts with major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of the derivative instruments. In the normal course of business, the Company incurs commitments and is exposed to risks resulting from its investment and financing transactions, including derivative instruments. The value of a derivative instrument is based upon an underlying instrument. These instruments are subject to various risks similar to non-derivative instruments including market, credit, liquidity, performance and operational risks. The Company manages these risks on an aggregate basis as part of its risk management policies and as such, does not distinguish derivative income or loss from any other category of instruments for financial statement presentation purposes. The leverage inherent in the Company’s derivative instruments increases the sensitivity of the Company’s earnings to market changes. Notional amounts often are used to express the volume of these transactions, but the amounts potentially subject to risk are much smaller. The Company routinely evaluates its contractual arrangements to determine whether embedded derivatives exist. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, if a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and if the combined instrument is not measured at fair value through profit or loss. For derivative contracts where an enforceable master netting agreement is in place, the Company has elected to offset derivative assets and liabilities, as well as cash that may have been received or pledged, as part of collateral arrangements with the respective counterparty in the Consolidated Financial Statements. The master netting agreements provide the Company and the counterparty the right to liquidate collateral and the right to offset each other’s obligations in the event of default by either party. The Company’s consolidated Public SPACs may issue public warrants and FPAs in conjunction with their IPO. The Company accounts for warrants and FPAs of the consolidated Public SPAC’s ordinary shares that are not indexed to its own stock as liabilities at fair value on the balance sheet. These warrants and FPAs are subject to remeasurement at each balance sheet date and any change in fair value is recognized in the Company’s Consolidated Statements of Operations. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants and FPAs that do not meet all the criteria for equity classification, the warrants and FPAs are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants and FPAs are recognized as a non-cash gain or loss on the Consolidated Statements of Operations. Fair Value Measurement ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure the investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements). Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value. The three levels of the fair value hierarchy under ASC 820 are as follows: Level I – Quoted prices (unadjusted) in active markets for identical investments at the measurement date are used. The types of investment generally included in Level I are publicly-listed equities, debt and securities sold, not yet purchased. 183 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Level II – Pricing inputs are other than quoted prices included within Level I that are observable for the investment, either directly or indirectly. Level II pricing inputs include quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, inputs other than quoted prices that are observable for the investment, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. The types of investments generally included in Level II are restricted securities listed in active markets, corporate bonds and loans. Level III – Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. The inputs used in determination of fair value require significant judgment and estimation. The types of investments generally included in Level III are privately held debt and equity securities. In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment. In certain instances, an investment that is measured and reported at fair value may be transferred into or out of Level I, II, or III of the fair value hierarchy. In certain cases, debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions in comparable investments and various relationships between investments. When a security is valued based on dealer quotes, the Company subjects those quotes to various criteria in making the determination as to whether a particular investment would qualify for treatment as a Level II or Level III investment. Some of the factors considered include the number and quality of quotes, the standard deviations of the observed quotes and the corroboration of the quotes to independent pricing services. Level III investments may include common and preferred equity securities, corporate debt, and other privately issued securities. When observable prices are not available for these securities, one or more valuation techniques (e.g., the market approach and/or the income approach) for which sufficient and reliable data is available are used. Within Level III, the use of the market approach generally consists of using comparable market transactions or other data, while the use of the income approach generally utilizes the net present value of estimated future cash flows, adjusted, as appropriate, for liquidity, credit, market and other risk factors. Due to the inherent uncertainty of these valuations, the fair values reflected in the accompanying Consolidated Financial Statements may differ materially from values that would have been used had a readily available market for the investments existed and may differ materially from the values that may ultimately be realized. The period of time over which the underlying assets of the investments will be liquidated is unknown. Financial Instruments Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Except for secured borrowings, the fair value of the Company’s assets and liabilities, including our Senior Unsecured Term Loan, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the Consolidated Statements of Financial Condition due to their short-term nature and in the case of our Senior Unsecured Term Loan due to its recent issuance in December 2021 and variable rate nature. At December 31, 2021 and 2020, the estimated fair value of the secured borrowings based on current market rates and credit spreads for debt with similar maturities was $271.6 million and $275.1 million, respectively, and the carrying value, excluding unamortized issuance costs, was $250.0 million at both December 31, 2021 and 2020. Due from and Due to Affiliates The Company considers current and former limited partners of funds and employees, including their related entities, entities controlled by the Company’s founders (“Founders”) but not consolidated by the Company, Portfolio Companies of 184 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements TPG Funds, and unconsolidated TPG Funds to be affiliates (“Affiliates”). Receivables from and payables to affiliates are recorded at their expected settlement amount in due from and due to affiliates in the Consolidated Financial Statements. Goodwill Goodwill represents the excess of the purchase price over the fair value of acquired identifiable net tangible and intangible assets. Goodwill is not amortized. At least annually, management assesses whether goodwill is impaired. Management assesses whether an impairment exists by comparing the fair value of each of its reporting units to its carrying value, including goodwill. Intangible assets The Company’s intangible assets consist of the fair value of its interests in future promote of certain funds and the fair value of acquired investor relationships representing the fair value of management fees earned from existing investors in future funds. Finite-lived intangible assets are amortized over their estimated useful lives, which range from five to twelve years, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. Operating Leases At contract inception, the Company determines if an arrangement contains a lease by evaluating whether (i) an identified asset has been deployed in a contract explicitly or implicitly and (ii) the Company obtains substantially all the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. Additionally, at contract inception the Company will evaluate whether the lease is an operating or finance lease. Right-of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. To the extent these payments are fixed or determinable, they are included as part of the lease payments used to measure the lease liability. The Company’s ROU assets are recognized as the initial measurement of the lease liabilities plus any initial direct costs and any prepaid lease payments less lease incentives received, if any. The lease terms may include options to extend or terminate the lease which are accounted for when it is reasonably certain that the Company will exercise that option. As the discount rate implicit to the lease is not readily determinable, incremental borrowing rates of the Company were used. The incremental borrowing rates are based on the information available including, but not limited to, collateral assumptions, the term of the lease, and the economic environment in which the lease is denominated at the commencement date. The Company elected the package of practical expedients provided under the guidance. The practical expedient package applies to leases commenced prior to the adoption of the new standard and permits companies not to reassess whether existing or expired contracts are or contain a lease, the lease classification, and any initial direct costs for any existing leases. The Company has elected to not separate the lease and non-lease components within the contract. Therefore, all fixed payments associated with the lease are included in the ROU asset and the lease liability. These costs often relate to the fixed payments for a proportionate share of real estate taxes, common area maintenance and other operating costs in addition to a base rent. Any variable payments related to the lease are recorded as lease expense when and as incurred. The Company has elected this practical expedient for all lease classes. The Company did not elect the hindsight practical expedient. The Company has elected the short-term lease expedient. A short-term lease is a lease that, as of the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For such leases, the Company will not apply the recognition requirements of ASC 842, Leases (“ASC 842”) and instead will recognize the lease payments as lease cost on a straight-line basis over the lease term. Additionally, the Company elected the practical expedient which allows an entity to not reassess whether any existing land easements are or contain leases. The Company’s leases primarily consist of operating leases for real estate, which have remaining terms of 1 to 11 years. Some of those leases include options to extend for additional terms ranging from 2 to 10 years. The Company’s other leases, including those for office equipment, vehicles, and aircrafts, are not significant. Additionally, the Company’s leases do not contain restrictions or covenants that restrict the Company from incurring other financial obligations. The Company also does not provide any residual value guarantees for the leases or have any significant leases that have yet to 185 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements be commenced. From time to time, the Company enters into certain sublease agreements that have terms similar to the remaining terms of the master lease agreements between TPG and the landlord. Sublease income is recorded as an offset to general, administrative and other in the accompanying Consolidated Statements of Operations. In response to the COVID-19 pandemic, the FASB provided relief under ASC 842. Under this relief, companies can make a policy election on how to treat lease concessions resulting directly from the COVID-19 pandemic, provided that the modified contracts result in total cash flows that are substantially the same or less than the cash flows in the original contract. The Company made the policy election to account for lease concessions that result from the COVID-19 pandemic as if they were made under enforceable rights in the original contract. Additionally, the Company made the policy election to account for these concessions outside of the lease modification framework described under ASC 842. The Company records accruals for deferred rental payments and recognizes rent abatements or concessions as variable lease costs in the periods incurred. Operating lease expense is recognized on a straight-line basis over the lease term and is recorded within general, administrative and other in the accompanying Consolidated Statements of Operations (See Note 1 6 ). Fixed Assets Fixed assets consist primarily of leasehold improvements, furniture, fixtures and equipment, computer hardware and software and other fixed assets which are recorded at cost, less accumulated depreciation. Leasehold improvements are amortized using the straight-line method, over the shorter of the respective estimated useful life or the lease term. Depreciation of furniture, fixtures, equipment and computer hardware and software is recorded over the estimated useful life of the asset, generally three to seven years, using the straight-line method. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. When evidence of loss in value has occurred, management compares the estimated undiscounted cash flows associated with the long-lived asset to its carrying value to determine whether an impairment has occurred. If the undiscounted cash flows are less than the carrying value, an impairment is recorded as the difference between the fair value of the long-lived asset and its carrying value. Fair value is based on estimated discounted cash flows associated with the long-lived asset. Foreign Currency The functional currency of the Company’s international subsidiaries is the U.S. Dollar. Non-U.S. dollar denominated assets and liabilities of foreign operations are remeasured at rates of exchange as of the end of the reporting period. Non-U.S. dollar revenues and expenses of foreign operations are remeasured at average rates of exchange during the period. Gains and losses resulting from remeasurement are included in general, administrative and other in the accompanying Consolidated Statements of Operations. Foreign currency gains and losses resulting from transactions in currencies other than the functional currency are also included in general, administrative and other in the Consolidated Statements of Operations during the period the transaction occurred. Securities Sold, Not Yet Purchased Securities sold, not yet purchased consist of securities that certain TPG Funds have borrowed and sold or sold short. The TPG Funds are required to “cover” the short sale in the future by purchasing the security at prevailing market prices and delivering it to the counterparty from which it borrowed the security. The cost of that security is adjusted by brokerage commissions and any premiums charged by the lender of the security. The TPG Funds are exposed to loss in the event that the price at which a security may have to be purchased to cover a short sale exceeds the price at which the borrowed security was sold short. The security is carried at fair value based upon the closing price as it customarily ascertained by the “principal market,” as defined by ASC 820 in which such investments are traded, or if no “principal market” exists, the “most advantageous market”, as of the last business day of the reporting period. If no sale occurs on the last business day of the reporting period, Management may refer to the price at which the last trade occurred in such instrument or such other inputs or methodologies as Management believes is appropriate in its determination of fair value. The TPG Funds’ investments and amounts due from counterparties may be partially pledged as collateral for securities sold, not yet purchased, and margin requirements. The collateral is released upon entering a closing transaction. Certain of these amounts accrue interest at negotiated rates. Any change in value is included in net gains (losses) from investment activities in the Consolidated Financial Statements. 186 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Redeemable Equity from Consolidated Public SPACs Redeemable equity from consolidated Public SPACs represents the shares issued by the Company’s consolidated Public SPACs that are redeemable for cash by the public shareholders in the event of an election to redeem by individual public shareholders at the time of the business combination. Additionally, these shares become automatically redeemable with the Public SPAC’s failure to complete a business combination, tender offer, or stockholder approval provisions. The Company accounts for redeemable equity in accordance with ASC 480-10-S99, Distinguishing Liabilities from Equity (“ASC 480-10-S99”), which states redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. The redeemable non-controlling interests are initially recorded at their original issuance price and are subsequently allocated their proportionate share of the underlying gains or losses of the Public SPACs. The Company adjusts the redeemable equity to full redemption value on a quarterly basis. Income Taxes The Company and its subsidiaries are primarily comprised of partnerships and other “pass-through entities” not subject to income tax. As a pass-through entity, each partner or member therein is responsible for income taxes related to income or loss based on their respective share of an entity’s income and expenses. Certain consolidated subsidiaries are subject to taxation in the U.S. (federal, state and local) and foreign jurisdictions as a result of their entity classification for tax reporting purposes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period in which the enactment date occurs. Under ASC 740, Income Taxes (“ASC 740”), a valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized. The Company’s policy is to recognize accrued interest and penalties related to uncertain tax positions in income tax expense in the Consolidated Financial Statements. At December 31, 2021 and 2020, the Company did not have a liability recorded for payment of interest and penalties associated with uncertain tax positions as such amounts are not material to the Consolidated Financial Statements. Segment We operate our business in a single operating and reportable segment, consistent with how our chief operating decision maker reviews financial performance and allocates resources. We operate collaboratively across product lines with a single expense pool. Recent Accounting Pronouncements In March 2020, the FASB issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions to U.S. GAAP requirements for modifications to debt agreements, leases, derivatives, and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require contract remeasurement at the modification date nor a reassessment of a previous accounting determination. In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, Reference Rate Reform: Scope . This ASU provides optional guidance for a limited period of time to ease the burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. These optional expedients and exceptions are effective as of March 12, 2020 through December 31, 2022. Adoption is permitted at any time. For the year ended December 31, 2021, the Company has not elected to apply the temporary optional expedients and exceptions and will be reevaluating the application each quarter. 187 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). This ASU provides guidance on how an issuer would measure and recognize the effect of these transactions. Specifically, it provides a principles-based framework to determine whether an issuer should recognize the modification or exchange as an adjustment to equity or an expense. ASU 2021-04 will be effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU will be applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company is currently evaluating the impact this new guidance will have on its Consolidated Financial Statements. Recently Adopted Accounting Guidance In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. The ASU aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 2018-15 is effective for annual reporting periods after December 15, 2020 and interim periods within annual periods after December 15, 2021. The Company adopted this ASU in January 2021 with no material impact to its Consolidated Financial Statements. 3. Acquisition of NewQuest On July 1, 2021 (the “Acquisition Date”), the Company completed the acquisition (the “Acquisition”) of the controlling interests with governance rights of NewQuest Holdings (Cayman) Limited (“NQ Manager”) and NewQuest Partners Master G.P. Ltd. (“NQ GP”), (collectively “NewQuest”). The Company initially acquired a 33.3% interest (the “Tranche 1”) in NewQuest in July 2018, which was presented as an equity method investment within investments on the Consolidated Statements of Financial Condition. On the Acquisition Date, the Company acquired the governance rights of NewQuest and an additional 33.3% of NQ Manager (the “Tranche 2”) for $38.0 million, bringing the Company’s total ownership in NQ Manager to 66.7% and NQ GP to 33.3%. Management believes that the Acquisition provides the Company with an opportunity to benefit from scale and expansion of its footprint in the Asia markets and synergies that can be achieved subsequent to the Acquisition. The operating results of NewQuest have been included in our Consolidated Financial Statements since the Acquisition Date. The Acquisition was accounted for as a business combination under ASC 805, Business Combinations ("ASC 805") that was achieved in stages. As a result of the change of control, the Company was required to remeasure its pre-existing equity investment in NewQuest at fair value prior to consolidation. The Company estimated the fair value of its 33.3% pre-existing investment in NewQuest to be approximately $155.4 million. The remeasurement resulted in the recognition of a pretax gain of $95.0 million, which is presented within net gains (losses) from investment activities on the Consolidated Statements of Operations. The consideration paid to acquire Tranche 2 consisted of $5.0 million in cash, contingent consideration valued at $8.4 million and equity interests of the acquirer valued at $24.6 million. The contingent consideration is based on raising additional fee-paying capital commitments by NewQuest during the fundraising period for NewQuest Fund V, whereby the first $5.0 million is earned if NewQuest surpasses $1.0 billion in fee payment capital commitments, and an additional $5.0 million is earned if it surpasses $1.75 billion. The fair value measurement of the Company's contingent consideration was determined using a discounted cash flow model and Level III inputs and the information provided by the Company’s management of the likelihood of achieving earnout, discounted at a rate of 12.5%. The Company believes that it is probable that it will meet the conditions for contingent consideration. The equity interests of the acquirer issued as consideration include a minority interest of 0.08% in the Holding Companies valued at $5.8 million at the Acquisition Date and minority interests in select businesses ranging from 4.2% to 4.7% valued at $18.8 million in the aggregate at the Acquisition Date. 188 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following table summarizes the fair value of the consideration transferred or to be transferred to acquire NewQuest (in thousands): Cash paid $ 5,000 Contingent consideration 8,400 Equity interests of the acquirer 24,600 Total consideration for acquired ownership interest -Tranche 2 38,000 Fair value of previously held equity method investment - Tranche 1 155,400 Fair value of non-controlling interest in NewQuest 301,189 Total purchase consideration $ 494,589 The total consideration was allocated to the fair value of assets acquired and liabilities assumed as of the Acquisition Date, with the excess purchase price recorded as goodwill. A third-party valuation specialist assisted the Company with the fair value estimates for the total enterprise value, fair value of the Company’s existing investment in NewQuest, the net tangible and identifiable intangible assets, and the fair values of the controlling and non-controlling interest in NewQuest. The determination of fair values require extensive use of accounting estimates and management judgment. Certain of these estimates are material. The fair values are based on estimates and assumptions from data currently available and were determined using a discounted cash flow model and Level III inputs, which includes estimates of future cash flows for carried interests and fee related earnings over a specific earning period, at a discount rate that ranges between 12.5% - 25.0%, and estimated economic lives. Total purchase consideration $ 494,589 Net assets acquired Tangible assets Cash $ 29,817 Other assets 5,805 Carried interests 80,278 Capital interests 28,389 Due to affiliates (23,364) Liabilities and other (7,630) Net book value of tangible assets 113,295 Intangible assets Contractual carried interests 132,600 Management contracts 20,000 Investor relationships 25,000 Total intangible assets 177,600 Goodwill 203,694 Total net assets acquired $ 494,589 Controlling interest in NewQuest $ 193,400 Non-controlling interest in NewQuest 301,189 The Company recorded goodwill on its books, which is included in other assets on the Consolidated Statements of Financial Condition. As of December 31, 2021, approximately $5.0 million of goodwill is deductible for income tax purposes. Goodwill is primarily attributable to the scale, skill sets, operations, and synergies that can be achieved subsequent to the Acquisition. 189 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The fair value and weighted average estimated useful lives of identifiable intangible assets acquired in the Acquisition and recorded in other assets on the Consolidated Statements of Financial Condition consist of the following: Fair Value Average Useful Life ($ in thousands) (in years) Contractual carried interests $ 132,600 6.7 Management contracts 20,000 3.5 Investor relationships 25,000 12 Total Intangible Assets $ 177,600 Finite-lived intangible assets were as follows (in thousands) as of December 31, 2021: Gross Carrying Value Additions Accumulated Amortization Net Carrying Value Contractual carried interests $ — $ 132,600 $ (10,002) $ 122,598 Management contracts — 20,000 (3,126) 16,874 Investor relationships — 25,000 (1,042) 23,958 $ — $ 177,600 $ (14,170) $ 163,430 The following table presents our estimate of remaining amortization expense for intangible assets that existed as of December 31, 2021 (in thousands): 2022 $ 28,339 2023 28,339 2024 26,459 2025 22,088 2026 22,088 Thereafter 36,117 Total $ 163,430 190 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Revenue, expense and net income (loss) of NewQuest included in the accompanying Consolidated Statements of Operations from the Acquisition Date through December 31, 2021 were as follows (in thousands): Revenues Fees and other $ 13,678 Capital allocation-based income 30,659 Total revenues 44,337 Total expenses 25,369 Net income $ 18,968 Net income attributable to controlling interests $ 3,963 Net income attributable to other non-controlling interests 15,005 The following pro forma information presents a summary of the Company’s Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, as if the acquisition was completed as of January 1, 2020 (in thousands): Years ended December 31, 2021 2020 Revenues Fees and other $ 991,689 $ 911,675 Capital allocation-based income 4,021,806 1,278,054 Total revenues 5,013,495 2,189,729 Total expenses 944,453 874,596 Net gains from investment activities 584,621 144,641 Net income $ 4,653,663 $ 1,459,774 Net income (loss) attributable to redeemable equity in Public SPACs $ 155,131 $ (195,906) Net income (loss) attributable to non-controlling interests in consolidated TPG Funds 19,287 (12,380) Net income attributable to other non-controlling interests 2,464,132 740,565 Net income attributable to controlling interests 2,015,113 927,495 In December 2021, the Company signed an agreement to acquire the remaining 33.3% interest in NQ Manager in exchange for equity interests in the Company. The Company closed the transaction in January 2022. Management has not yet completed the analyses needed to estimate the impact to the Consolidated Financial Statements. 4. Investments Investments consist of the following (in thousands): December 31, 2021 2020 Equity method - carried interests $ 5,366,694 $ 3,451,863 Equity method - capital interests (includes assets pledged of $492,276 and $395,172) 590,662 422,314 Equity method - fair value option 46,013 — Equity method - other 7,778 621,831 Equity investments 97,899 50,235 Total investments $ 6,109,046 $ 4,546,243 191 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Net gains (losses) from carried interests and capital interests are disclosed in the Revenue section of Note 2 . The following table summarizes net gains (losses) from investment activities (in thousands): Year Ended December 31, 2021 2020 2019 Net gains (losses) from investment activities Net gains (losses) of equity method investments, fair value option (a) $ 45,435 $ (32,170) $ 11,399 Net gains of equity method investments - other (b) 230,186 31,027 15,385 Net gains (losses) from equity investments (c) (d) 77,598 (4,696) 44,910 Total net gains (losses) from investment activities $ 353,219 $ (5,839) $ 71,694 Gain on deconsolidation (e) $ — $ 401,695 $ — ___________ (a) In September 2021, the Company completed a business combination which resulted in a gain on deconsolidation of TPG PACE Tech Opportunities in an amount of $122.7 million. (b) Includes pretax gain of $95.0 million on remeasurement of the Company’s pre-existing equity investment in NewQuest at fair value prior to consolidation. See Note 3 . (c) In December 2021, the Company completed a business combination which resulted in a gain on deconsolidation of TPG Pace Solutions’ in an amount of $109.9 million. (d) In November 2019, the Company completed a business combination which resulted in a gain on deconsolidation of TPG Pace Holdings in an amount of $46.2 million. (e) On May 1, 2020, the Company deconsolidated the assets, liabilities, and partners’ capital of the Former Affiliate and remeasured the retained investment in the Former Affiliate at fair value and recognized a gain of $401.7 million. The following table presents the supplemental cash flow disclosures from activities related to deconsolidation of previously consolidated TPG Funds and Public SPACs (in thousands): Year Ended December 31, 2021 2020 2019 Cash and cash equivalents $ 491,523 $ — $ 48,038 Investments held in Trust Accounts 430,265 — 193,728 Other assets 3,696 — — Due to affiliates — — (4,000) Derivative liabilities of Public SPACs (50,898) — (30,300) Other liabilities (32,580) — (11,750) Accounts payable and accrued expenses (7,278) — (827) Notes payable to affiliates (2,000) — — Amounts due to shareholders (500,000) — — Redeemable equity (430,265) — (193,728) Controlling interests 36,386 — 21,077 Non-controlling interests in consolidated TPG Funds — — (48,000) Other non-controlling interests 61,151 — 25,762 Equity Method Investments, Fair Value Option On September 20, 2021, TPG PACE Tech Opportunities (“PACE”) completed a business combination with NRDY. At the time of the business combination, a reconsideration event occurred whereby the Company no longer has power over PACE. As a result, the Company deconsolidated PACE and recorded a gain of $122.7 million, which is included in net gains (losses) from investment activities. As of December 31, 2021, the Company held a 9.4% beneficial ownership interest in in NRDY, consisting of 7.7 million shares of Class A Common Stock, 4.0 million earnout shares and 4.9 million earnout warrants, with an aggregate fair value of $46.0 million. The warrants entitle the Company to acquire one share of 192 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Class A Common Stock at a price of $11.50 per share and expire on September 20, 2026. The earnout shares and warrants are contingent upon NRDY achieving certain market share price milestones or in the event of a change of control, within five years after September 20, 2021. In addition to its beneficial ownership in NRDY, the Company has one out of seven board of director seats. The Company concluded that its ownership interest and its board of director seat demonstrates that it has significant influence over the operating and financial policies of NRDY. As a result, the Company’s investment in NRDY is subject to the equity method of accounting. Pursuant to ASC 825 — Financial Instruments (“ASC 825”), the Company elected to apply the fair value option for its investments in NRDY and will remeasure its investments in NRDY at fair value every reporting period. In November 2020, the Company distributed to its partners 8.8 million of Playa Hotels & Resorts N.V. (“PLYA”) shares in-kind at a value at the distribution date of $41.2 million which is recognized in in-kind distributions of investments on the Consolidated Statements of Cash Flows. As of December 31, 2020, the Company held 2.0 million earnout warrants with an aggregate fair value of $9.2 million. The earnout warrants entitle the Company to acquire one ordinary share for each earnout warrant for an exercise price of €0.10 per ordinary share if the price per share underlying the earnout warrants on the NASDAQ is greater than $13.00 for a period of more than 20 days out of 30 consecutive trading days within five years after March 13, 2017. The earnout warrants expire five years after March 13, 2017 or earlier upon redemption or liquidation in accordance with their terms. As a result of the distribution of shares, TPG is no longer entitled to designate a nominee for the Playa board of directors, and therefore, the Company no longer holds significant influence over PLYA. As such, the Company now accounts for its remaining investment in PLYA as an equity investment. Equity Method Investments From 2009 to May 2020, TPG and Sixth Street (the “Former Affiliate”) were in a strategic partnership in which the Former Affiliate served as the dedicated global credit and credit-related investing platform associated with TPG. In May 2020, TPG and the Former Affiliate completed a transaction to become independent, unaffiliated businesses. As part of the agreement and in order to complete regulatory disaffiliation, TPG retained a minority economic interest in the Former Affiliate and no longer holds a controlling financial interest in the Former Affiliate’s management companies or general partners of pooled investment entities. Post-closing, TPG holds an 11% interest across all of the Former Affiliate’s businesses, plus an approximate 30% interest in select vehicles with finite lives. On May 1, 2020, the Company deconsolidated the assets, liabilities, and partners’ capital of the Former Affiliate. As a result of the deconsolidation, the Company remeasured the retained investment in SSP at fair value at the time of the transaction, recognized a gain on deconsolidation of $401.7 million and increased its investment in the Former Affiliate’s underlying net assets by the aforementioned gain. Determining the fair value of the Former Affiliate involved making significant estimates and assumptions. The Company used a combination of the income and market-based approaches to estimate fair value, which are based, respectively, on discounted estimated future cash flows from earnings and market valuation multiples of comparable businesses and transactions. Of this basis difference, $28.6 million relates to specific investment funds of the Former Affiliate and will be amortized on a straight-line basis over the funds’ estimated remaining lives. The amortization is recognized in net gains (losses) from investment activities in the Consolidated Statements of Operations. The remaining amount relates to equity method goodwill recognized upon deconsolidation which is not amortized. The Company accounted for its investment in the Former Affiliate using the equity method of accounting until the Reorganization. In conjunction with the Reorganization described in Note 1, the Company transferred its investment in the Former Affiliate to RemainCo on December 31, 2021 resulting in the derecognition of our investment in the Former Affiliate. 193 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following table presents the supplemental cash flow disclosures from activities related to deconsolidation of the Former Affiliate during the year ended December 31, 2020 (in thousands): Cash and cash equivalents $ 107,221 Due from affiliates 87,302 Investments 202,192 Right-of-use assets 6,064 Lease liabilities (6,946) Other assets 25,846 Accounts payable and accrued expenses (44,828) Due to affiliates (113,879) Other liabilities (99,533) Other non-controlling interests (163,744) The Company evaluates its equity method investments in which it has not elected the fair value option for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. In 2021, the Company did not recognize any impairment losses on an equity method investment without a readily determinable fair value. In 2020, the Company recognized impairment losses of $4.3 million on an equity method investment without a readily determinable fair value based on significant deterioration of earnings performance. In 2019, there were no adjustments to the carrying value of equity method investments without readily determinable fair values. Equity Investments Equity investments represent the Company’s proprietary equity investments. At December 31, 2021 and 2020, the Company held equity investments with readily determinable fair values of $97.9 million and $4.5 million, respectively. In December 2021, TPG PACE Solutions (“TPGS”) completed a business combination with Vacasa Holdings, LLC, a leading vacation rental management platform. The business combination was approved on November 30, 2021 by TPGS stockholders and closed on December 7, 2021. At the time of the business combination, a reconsideration event occurred whereby the Company no longer has power over TPGS. As a result, the Company deconsolidated TPGS and recorded a gain of $109.9 million, which is included in net gains (losses) from investment activities. Beginning December 7, 2021, Vacasa common stock started trading on the Nasdaq Stock Exchange under the ticker symbol “VCSA”. The Company concluded that it does not exercise significant influence over Vacasa’s operating and financial policies. As such, the Company accounts for its investment in VCSA as an equity investment. Summarized Financial Information TPG evaluates each of its equity method investments to determine if any are significant as defined in the regulations promulgated by the U.S. Securities and Exchange Commission (the "SEC"). As of and for the years ended December 31, 2021, 2020, and 2019, no individual equity method investment held by TPG met the significance criteria. As such, TPG is not required to present separate financial statements for any of its equity method investments. The following table shows summarized financial information relating to the Consolidated Statements of Financial Condition for all of TPG’s equity method investments assuming 100% ownership as of December 31, 2021 and 2020 (in thousands): December 31, 2021 2020 Total assets $ 67,268,493 $ 76,963,893 Total liabilities 11,499,817 14,191,759 Total equity 55,768,676 62,772,134 194 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following table shows summarized financial information relating to the Consolidated Statements of Operations for all of TPG’s equity method investments assuming 100% ownership for the years ended December 31, 2021, 2020 and 2019 (in thousands): Year Ended December 31, 2021 2020 2019 Interest, dividends and other $ 2,467,862 $ 1,078,999 $ 1,336,837 Expenses 1,871,086 1,540,721 2,206,747 Net gains from investment activities 23,141,140 9,103,461 6,693,996 Net income $ 23,737,916 $ 8,641,739 $ 5,824,086 5. Investments and Securities Sold, Not Yet Purchased held by consolidated TPG Funds As part of the Reorganization described in Note 1 , all TPG Funds were deconsolidated as of December 31, 2021. As of December 31, 2020, investments of consolidated TPG Funds, by geographic region, consisted of the following (in thousands): December 31, 2020 Fair Value Fair Value % of Total Investments of consolidated TPG Funds: North America equity securities total (Cost: 2020 $124,420) $ 150,684 61.8 % Latin America equity securities total (Cost: 2020 $0) 8 0.1 % Europe equity securities total (Cost: 2020 $27,856) 34,491 14.2 % Asia equity securities total (Cost: 2020 $34,360) 58,178 23.9 % Investments of consolidated TPG Funds (Cost: 2020 $186,636) $ 243,361 100.0 % As of December 31, 2020, securities sold, not yet purchased, of consolidated TPG Funds, by geographic region consisted of the following (in thousands): December 31, 2020 Fair Value Fair Value % of Total Securities sold, not yet purchased, of consolidated TPG Funds: North America equity securities total (Proceeds: 2020 $47,017) $ 57,629 72.2 % Europe equity securities total (Proceeds: 2020 $20,028) 20,370 25.5 % Asia equity securities total (Proceeds: 2020 $1,316) 1,799 2.3 % Securities sold, not yet purchased, of consolidated TPG Funds (Proceeds: 2020 $68,361) $ 79,798 100.0 % At December 31, 2020, no investment in any individual security exceeded 5% of Partners’ Capital. Securities sold, not yet purchased are fully collateralized by cash, securities and derivatives held at the prime brokers of the related consolidated TPG fund. 195 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Realized and net change in unrealized gains (losses) from investment activities are comprised of the following (in thousands): Year Ended December 31, 2021 2020 2019 Investment activities of consolidated TPG Funds and Public SPACs: Realized gains, net on investments $ 35,760 $ 17,450 $ 19,660 Realized (losses) gains on securities sold, not yet purchased (16,044) (13,461) 16,315 Change in unrealized (losses) gains, net on investments (7,998) 9,694 47,463 Change in unrealized gains (losses) on securities sold, not yet purchased 12,022 (17,633) (7,234) Total net gains (losses) from investments and securities sold short of consolidated TPG Funds 23,740 (3,950) 76,204 Realized (losses) gains, net on derivative instruments (10,444) (3,217) 5,407 Change in unrealized gains (losses), net on derivative instruments 10,096 (11,524) (6,400) Total net losses on derivative instruments from investment activities of consolidated TPG Funds and Public SPACs (348) (14,741) (993) Net gains (losses) from investment activities of consolidated TPG Funds and Public SPACs $ 23,392 $ (18,691) $ 75,211 6. Derivative Instruments The consolidated TPG Funds and SPACs enter into derivative contracts in connection with their proprietary trading activities, including total return swaps, interest rate swaps and futures, options, foreign currency forwards, credit default swaps, warrants and FPAs, which meet the definition of a derivative in accordance with ASC 815. As a result of the use of derivative contracts, the consolidated TPG Funds and SPACs are exposed to the risk that counterparties will fail to fulfill their contractual obligations. Subsequent to the Reorganization, we no longer hold cash at the consolidated TPG Funds’ prime brokerage accounts on the Statements of Financial Condition. At December 31, 2020, cash of $109.0 million held at the consolidated TPG Funds’ prime brokerage accounts was included in due from counterparty on the Consolidated Statements of Financial Condition. Certain SPACs issue warrants and enter into FPAs, which meet the definition of a derivative in accordance with ASC 815. These warrants and FPAs are included in derivative liabilities of Public SPACs on the Consolidated Statements of Financial Condition. As a result of the issuance of warrants and FPAs, the consolidated Public SPACs are exposed to the volatility of the underlying instruments. As of December 31, 2021 and 2020, the fair value of the warrants and FPAs were $13.0 million and $263.3 million, respectively. There were no related offsets or cash collateral pledged or received for the warrants and FPAs for the years ended December 31, 2021 or 2020. For the year ended December 31, 2021, the Company recorded unrealized gains on warrants and FPAs totaling $211.8 million. For the years ended December 31, 2020 and 2019, the Company recorded unrealized losses on warrants and FPAs totaling $239.3 million and $15.3 million, respectively. 196 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The consolidated TPG Funds and SPACs’ derivative instruments as well as other assets held at the prime broker were as follows (in thousands): December 31, 2021 Fair Value Other Assets at the Prime Broker Total Amount Presented Notional Value (a) Derivatives not designated as hedging instruments under Subtopic 815-20: Liability derivatives: Public warrants $ 11,662 $ — $ 11,662 $ — Forward purchase agreements 1,386 — 1,386 — Derivative liabilities of Public SPACs $ 13,048 $ — $ 13,048 $ — December 31, 2020 Fair Value Other Assets at the Prime Broker Total Amount Presented Notional Value (a) Derivatives not designated as hedging instruments under Subtopic 815-20: Asset derivatives Total return swaps $ 1,358 $ — $ 1,358 $ 11,968 Foreign currency forwards 155 — 155 22,847 1,513 — 1,513 34,815 Cash — 108,969 108,969 — Due from counterparty $ 1,513 $ 108,969 $ 110,482 $ 34,815 Liability derivatives: Total return swaps $ 11,763 $ — $ 11,763 $ 45,353 Foreign currency forwards 258 — 258 14,661 Due to counterparty $ 12,021 $ — $ 12,021 $ 60,014 Public warrants $ 70,730 $ — $ 70,730 $ — Forward purchase agreements 192,539 — 192,539 — Derivative liabilities of Public SPACs $ 263,269 $ — $ 263,269 $ — _______________ (a) While notional value gives some indication of the volume of derivative trading activity, the notional amount is generally not exchanged, but is only used as the basis on which interest and other payments are exchanged. For certain derivative instruments that are denominated in foreign currencies, the fair value is translated to U.S. dollars at the balance sheet date while the notional value is translated to U.S. dollars at the transaction date. 197 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Net gains (losses) on derivative instruments are included in the Consolidated Statements of Operations as net gains (losses) from investment activities of consolidated TPG Funds and Public SPACs or unrealized gains (losses) on derivative liabilities of Public SPACs. The following are net gains (losses) recognized on derivative instruments of consolidated TPG Funds and Public SPACs (in thousands): Year Ended December 31, 2021 2020 2019 Realized (losses) gains, net on total return swaps $ (10,269) $ (5,139) $ 6,726 Realized (losses) gains, net on foreign currency forwards (175) 1,922 (1,319) Unrealized gains (losses), net on total return swaps 10,068 (10,807) (6,323) Unrealized gains (losses), net on foreign currency forwards 28 (717) (77) Total net losses on derivative instruments from investment activities of consolidated TPG Funds (348) (14,741) (993) Unrealized gains (losses), net on public warrants 52,128 (46,730) (15,300) Unrealized gains (losses), net on forward purchase agreements 159,694 (192,539) — Total net gains (losses) on derivative instruments of Public SPACs 211,822 (239,269) (15,300) Net gains (losses) on derivative instruments $ 211,474 $ (254,010) $ (16,293) 198 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements 7. Fair Value Measurement The following tables summarize the valuation of the Company’s financial assets and liabilities and those non-financial assets and liabilities that fall within the fair value hierarchy (in thousands): December 31, 2021 Level I Level II Level III Total Assets Equity method investments - fair value option $ 46,013 $ — $ — $ 46,013 Equity investments 97,899 — — 97,899 Total assets $ 143,912 $ — $ — $ 143,912 Liabilities Liabilities of consolidated TPG Funds and Public SPACs: Public warrants $ 11,662 $ — $ — $ 11,662 Forward purchase agreements — — 1,386 1,386 Total liabilities $ 11,662 $ — $ 1,386 $ 13,048 December 31, 2020 Level I Level II Level III Total Assets Equity investments $ 13,680 $ — $ — $ 13,680 Assets of consolidated TPG Funds: Equity investments 231,037 — 12,324 243,361 Foreign currency forwards — 155 — 155 Total return swaps — 1,358 — 1,358 Total assets $ 244,717 $ 1,513 $ 12,324 $ 258,554 Liabilities Embedded contingent zero strike price forward contract $ — $ — $ 5,000 $ 5,000 Liabilities of consolidated TPG Funds and Public SPACs: Public warrants 70,730 — — 70,730 Forward purchase agreements — — 192,539 192,539 Securities sold, not yet purchased 79,798 — — 79,798 Foreign currency forwards — 258 — 258 Total return swaps — 11,763 — 11,763 Total liabilities $ 150,528 $ 12,021 $ 197,539 $ 360,088 The valuation methodology used in the determination of the fair value of financial instruments for which Level III inputs were used at December 31, 2021 and 2020 included a combination of the market approach and income approach. 199 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following tables summarize the changes in the fair value of financial instruments for which the Company has used Level III inputs to determine fair value (in thousands): Year Ended December 31, 2021 2020 Equity security assets Balance, beginning of period $ 12,324 $ 17,226 Realized gains, net 4,025 (3,208) Unrealized losses, net (3,778) (293) Purchases 708 631 Proceeds (8,223) (2,418) Deconsolidation (a) (5,056) — Transfers (b) — 386 Balance, end of period $ — $ 12,324 Derivative liabilities Balance, beginning of period $ 197,539 $ 5,600 Unrealized gains, net (164,695) 191,939 Transfers (c) (31,458) — Balance, end of period $ 1,386 $ 197,539 _______________ (a) $5.1 million for the year ended December 31, 2021 represents the impact of the deconsolidation of certain TPG Funds in conjunction with the Reorganization described in Note 1 . (b) Transfers into Level III equity securities of $0.4 million for the year ended December 31, 2020 were due to changes in the observability of inputs used in valuation. (c) Transfers out of Level III derivative liabilities of $31.5 million for the year ended December 31, 2021 were due to the deconsolidation of PACE. Total realized and unrealized gains and losses recorded for Level III investments are reported in net gains (losses) from investment activities of consolidated TPG Funds and Public SPACs and unrealized gains (losses) on derivative liabilities of consolidated TPG Funds and Public SPACs in the Consolidated Statements of Operations. The following tables provide qualitative information about investments categorized in Level III of the fair value hierarchy as of December 31, 2021 and 2020. In addition to the techniques and inputs noted in the table below, in accordance with the valuation policy, other valuation techniques and methodologies are used when determining fair value measurements. The below table is not intended to be all-inclusive, but rather provides information on the significant Level III inputs as they relate to the Company’s fair value measurements (fair value measurements in thousands): Fair Value December 31, 2021 Valuation Technique(s) Unobservable Input(s) (a) Range (Weighted Average) (b) Liabilities Forward purchase agreements $ 1,386 Market comparables Implied volatility 13.0% $ 1,386 _______________ (a) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company-specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments. (b) Inputs weighted based on fair value of investments in range. 200 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Fair Value December 31, 2020 Valuation Technique(s) Unobservable Input(s) (a) Range (Weighted Average) (b) Assets Equity securities $ 12,324 Market comparables LTM EBITDA multiple 3.8x - 14.5x (12.8x) FWD EBITDA multiple 5.75x - 5.75x (5.75x) NOI cap rate 6.5% - 7.1% (7.0%) Discounted cash flows 15% Discount rate Not applicable Indicative pricing Operating and market performance Not applicable Last transaction price Operating and market performance Not applicable $ 12,324 (c) Liabilities Forward purchase agreements $ 192,539 Market comparables Implied volatility 22.0% - 45.0% (38.7%) Embedded contingent zero strike price forward contract 5,000 Other Probability weighted expected return Not applicable $ 197,539 _______________ (a) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company-specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments. LTM represents Last Twelve Months, EBITDA represents Earnings Before Interest, Taxes, Depreciation and Amortization, FWD represents Forward and NOI represents Net Operating Income. (b) Inputs weighted based on fair value of investments in range. (c) Amounts include $0.2 million of investments whose valuation inputs are not directly comparable to other private equity investments, and as such, the unobservable inputs associated with these investments have been excluded from this table. These investments include financial instruments for which fair value is primarily based on expected proceeds ($0.2 million). 201 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements 8. Other Assets Other assets consist of the following (in thousands): December 31, 2021 2020 Fixed assets, net: Leasehold improvements $ 40,798 $ 41,288 Other fixed assets 10,709 12,726 Computer hardware and software 9,526 7,490 Furniture, fixtures and equipment 7,724 7,414 Accumulated depreciation (42,447) (34,941) Total fixed assets, net 26,310 33,977 Goodwill (a) 230,194 26,500 Intangible assets, net (b) 164,551 1,146 Prepaid expenses 23,995 24,690 Other 54,800 42,986 Other assets $ 499,850 $ 129,299 _______________ (a) Includes $203.7 million of goodwill related to the acquisition of NewQuest described in Note 3 . (b) Includes $163.4 million of intangibles related to the acquisition of NewQuest described in Note 3 . 9. Accounts Payable and Accrued Expenses, and Other Liabilities Accounts payable and accrued expenses consist of the following (in thousands): December 31, 2021 2020 Trade accounts payable $ 37,429 $ 38,988 Accrued expenses 96,922 28,906 Accounts payable and accrued expenses $ 134,351 $ 67,894 Other liabilities consist of the following (in thousands): December 31, 2021 2020 Clawback liability (see Note 17) $ 58,317 $ 60,713 Other 2,926 7,017 Other liabilities $ 61,243 $ 67,730 10. Credit and Market Risk The Company holds substantially all of its excess cash in bank deposits at highly rated banking corporations or investments in highly rated money market funds, which are included in cash and cash equivalents, restricted cash, investments held in Trust Accounts and cash and cash equivalents held by consolidated TPG Funds and Public SPACs in the Consolidated Financial Statements. The Company continually monitors the risk associated with these deposits and investments. Management believes the carrying values of these assets are reasonable taking into consideration credit and market risks along with estimated collateral values, payment histories and other information. 202 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements In the normal course of business, TPG encounters market and credit risk concentrations. Market risk reflects changes in the value of investments due to changes in interest rates, credit spreads or other market factors. The TPG Funds are subject to credit risk to the extent any counterparty is unable to deliver cash balances, securities, or the fair value of swaps, or clear security transactions on the TPG Funds’ behalf. The settlement, clearing and depository operations for the TPG Funds’ securities trading activities are performed pursuant to agreements with counterparties, which are primarily global financial institutions. The TPG Funds manage this risk by monitoring daily the financial condition and credit quality of the parties with which the TPG Funds conduct business, but in the event of default by any of the TPG Funds’ counterparties, the loss to the TPG Funds could be material. The Company is subject to potential concentration risk related to the investors’ commitments to TPG Funds. At December 31, 2021, no individual investor accounted for more than 10% of the total committed capital to TPG’s active funds. Furthermore, certain of the TPG Funds’ investments are made in private companies and there are generally no public markets for the underlying securities at the current time. The TPG Funds’ ability to liquidate their publicly-traded investments are often subject to limitations, including discounts that may be required to be taken on quoted prices due to the number of shares being sold. Subordinate investments held by TPG may be less marketable, or in some instances illiquid, because of the absence of registration under federal securities laws, contractual restrictions on transfer, the small size of the market and the small size of the issue (relative to issues of comparable interests). As a result, the TPG Funds may encounter difficulty in selling its investments or may, if required to liquidate investments to satisfy redemption requests of its investors or debt service obligations, be compelled to sell such investments at less than fair value. Other limitations for TPG to dispose of an investment and realize value include currency fluctuations and natural disasters. The TPG Funds make investments outside of the United States. Investments outside the U.S. may be subject to less developed bankruptcy, corporate, partnership and other laws (which may have the effect of disregarding or otherwise circumventing the limited liability structures potentially causing the actions or liabilities of one fund or a portfolio company to adversely impact the TPG Funds or an unrelated fund or portfolio company). Non-U.S. investments are subject to the same risks associated with the TPG Funds’ U.S. investments as well as additional risks, such as fluctuations in foreign currency exchange rates, unexpected changes in regulatory requirements, heightened risk of political and economic instability, difficulties in managing non-U.S. investments, potentially adverse tax consequences and the burden of complying with a wide variety of foreign laws. Furthermore, TPG is exposed to economic risk concentrations related to certain large investments as well as concentrations of investments in certain industries and geographies. TPG is exposed to economic risk concentrations insofar as the Company is dependent on the ability of the TPG Funds that it manages to compensate it for the services it provides to these TPG Funds. Further, the incentive income component of this compensation is based on the ability of such TPG Funds to generate returns above certain specified thresholds. Additionally, TPG is exposed to interest rate risk. TPG has debt obligations that have variable rates. Interest rate changes may therefore affect the amount of interest payments, future earnings and cash flows. TPG’s derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. Some of the markets in which the Company may effect its transactions are “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to credit evaluation and regulatory oversight unlike members of exchange-based markets. This exposes the Company to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the applicable contract (whether or not such dispute is bona fide) or because of a credit or liquidity problem, causing the Company to suffer losses. Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Company has concentrated its transactions with a single or small group of counterparties. TPG attempts to minimize this risk by limiting its counterparties to major financial institutions with strong credit ratings. 203 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements 11. Variable Interest Entities TPG consolidates VIEs in which it is considered the primary beneficiary as described in Note 2 . TPG’s investment strategies differ by TPG Fund; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management fees and carried interests. The Company does not provide performance guarantees and has no other financial obligation to provide funding to consolidated VIEs other than its own capital commitments. The assets of consolidated VIEs may only be used to settle obligations of these consolidated VIEs. In addition, there is no recourse to the Company for the consolidated VIEs’ liabilities. The Company holds variable interests in certain VIEs which are not consolidated as it is determined that the Company is not the primary beneficiary. The Company’s involvement with such entities is in the form of direct equity interests and fee arrangements. The fundamental risks have similar characteristics, including loss of invested capital and loss of management fees and carried interests. Accordingly, disaggregation of TPG’s involvement by type of VIE would not provide more useful information. TPG may have an obligation as general partner to provide commitments to unconsolidated VIEs. For the years ended December 31, 2021 and 2020, TPG did not provide any amounts to unconsolidated VIEs other than its obligated commitments. The maximum exposure to loss represents the loss of assets recognized by TPG relating to non-consolidated entities and any amounts due to non-consolidated entities. The assets and liabilities recognized in the Company’s Consolidated Statements of Financial Condition related to its interest in these non-consolidated VIEs and its maximum exposure to loss relating to non-consolidated VIEs were as follows: December 31, 2021 2020 Investments (includes assets pledged of $492,276 and $395,172) $ 5,957,356 $ 4,370,964 Due from affiliates 93,311 32,172 VIE-related assets 6,050,667 4,403,136 Potential clawback obligation 1,500,875 823,040 Due to affiliates 36,049 15,247 Maximum exposure to loss $ 7,587,591 $ 5,241,423 RemainCo In conjunction with the Reorganization described in Note 1, the TPG Operating Group and RemainCo entered into certain agreements to effectuate the go-forward relationship between the entities. The arrangements discussed below represent the TPG Operating Group’s variable interests in RemainCo, which do not provide the TPG Operating Group with the power to direct the activities that most significantly impact RemainCo’s performance and operations. As a result, RemainCo represents a non-consolidated VIE. RemainCo Performance Earnings Agreement In accordance with the TPG Operating Group’s agreement with RemainCo (the “RemainCo Performance Earnings Agreement”), RemainCo is entitled to distributions in respect of performance allocations from TPG Funds as described below. For certain existing TPG Funds that are advanced in their life cycles, which we refer to as the “Excluded Funds,” RemainCo is generally entitled to receive distributions of performance allocations not previously designated for our people or unaffiliated third parties, and the TPG Operating Group is not entitled to further performance allocations from the Excluded Funds. For TPG Funds of a more recent vintage and for future TPG Funds, which we collectively refer to as the “Included Funds,” RemainCo is entitled to a base performance allocation ranging from 10% to 15% (subject to limited exceptions, including TPG Funds acquired in a business combination or formed with meaningful participation by the counterparty of such business combination) depending upon the Included Fund (the “Base Entitlement”). 204 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements With respect to any TPG Fund that holds a first closing involving non-affiliated investors (a “First Closing”) on or after the fifth anniversary of the IPO, the Base Entitlement will step down ratably for each annual period following the fifth anniversary of the IPO through the fifteenth anniversary. RemainCo will not be entitled to distributions of performance allocations with respect to TPG Funds that have not held a First Closing on or prior to the fifteenth anniversary of the IPO. Once determined, RemainCo’s entitlement to performance allocation percentage with respect to any TPG Fund will remain in effect for the life of the applicable fund. RemainCo is obligated to fund its pro rata share of clawback obligations with respect to any TPG Fund (in proportion to the Base Entitlement with respect to such TPG Fund) either directly or through indemnity or similar obligations to the TPG Operating Group. In the event that the underlying assets of RemainCo are not sufficient to cover the clawback amount, the TPG Operating Group is obligated to cover any shortfall of clawback. This shortfall covered by the TPG Operating Group would be required to be repaid by RemainCo out of future distributions. Further, in the calendar years 2022, 2023 and 2024, if the amount otherwise available under the new discretionary performance allocation program is less than $110 million, $120 million and $130 million, respectively, our Chief Executive Officer can determine to increase the performance allocations available under such performance allocation program by an amount equal to the shortfall plus $10 million (which we refer to as “Performance Allocation Increases”), by allocating amounts to the holders of Promote Units that would have otherwise been distributable to RemainCo. The maximum Performance Allocation Increase in any year is $40 million. RemainCo Administrative Services Agreement The TPG Operating Group has entered into an administrative services agreement with RemainCo whereby we will provide RemainCo with certain administrative services, including maintaining RemainCo’s books and records, tax and financial reporting and similar support beginning in 2022. In exchange for these services, RemainCo will pay the TPG Operating Group an annual administration fee in the amount of 1% per annum of the net asset value of RemainCo’s assets, with such amount payable quarterly in advance. Securitization Vehicles During 2019, certain subsidiaries of the Company issued $200.0 million in privately placed securitization notes. Certain equity interests of these subsidiaries serve as collateral for the notes. The Company used one or more special purpose entities that are considered VIEs to issue notes to third-party investors in the securitization transactions. The notes issued by these VIEs are backed by the cash flows related to the Company’s equity method investments (“Participation Rights”) in certain funds. The Company determined that it is the primary beneficiary of the securitization vehicles because (i) its servicing responsibilities for the Participation Rights gives it the power to direct the activities that most significantly impact the performance of the VIEs, and (ii) its variable interests in the VIEs gives the Company the obligation to absorb losses and the right to receive residual returns that could potentially be significant. In 2020, certain subsidiaries of the Company issued an additional $50.0 million in privately placed securitization notes. The transfer of Participation Rights to the special purpose entities are considered sales for legal purposes. However, the Participation Rights and the related debt remain on the Company’s Consolidated Statements of Financial Condition. The Company recognizes interest expense on the secured borrowings issued by the special purpose entities. The Participation Rights of the VIEs, cash and restricted cash serve as the sole source of repayment for the notes issued by these entities. Investors in the notes issued by the VIEs do not have recourse to the Company or to its other assets. Additionally, the Participation Rights and other assets directly held by the VIEs are not available to satisfy the general obligations of the Company. As the primary beneficiary of these entities, the Company is exposed to credit, interest rate and market risk from the Participation Rights in the VIEs. However, the Company’s exposure to these risks did not change as a result of the transfer of Participation Rights to the VIEs. The Company may also be exposed to interest rate risk arising from the secured notes issued by the VIEs. The secured notes issued by the VIE’s are shown on the Company’s Consolidated Statements of Financial Condition as secured borrowings, net of unamortized issuance costs for the years ended December 31, 2021 and 2020 of $5.1 million and $5.4 million, respectively. 205 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following table depicts the total assets and liabilities related to VIE securitization transactions included in the Company’s Consolidated Statements of Financial Condition: December 31, 2021 2020 Cash and cash equivalents $ 24,719 $ 8,195 Restricted cash 13,135 13,135 Participation rights receivable (a) 492,276 395,172 Due from affiliates 1,146 701 Total assets $ 531,276 $ 417,203 Accrued interest $ 191 $ 191 Due to affiliates and other 22,470 19,766 Secured borrowings, net 244,950 244,642 Total liabilities $ 267,611 $ 264,599 _______________ (a) Participation rights receivable related to VIE securitization transactions are included in investments in the Company’s Consolidated Statements of Financial Condition. 12. Credit Facilities Senior Unsecured Term loan In December 2021, the Company entered into a credit agreement (the “Senior Unsecured Term Loan Agreement”) pursuant to which the lenders thereunder agreed to make term loans in a principal amount of up to $300.0 million during the period commencing on December 2, 2021 and ending on the date that is 30 days thereafter. Unused commitments were terminated at the end of such period. The term loans have an interest rate of LIBOR plus 1.00% and will mature in December 2024. As of December 31, 2021, $200.0 million was outstanding under the Senior Unsecured Term Loan Agreement. During the year ended December 31, 2021, the Company incurred interest expense of $0.2 million on the Senior Unsecured Term Loan. Subordinated Credit Facility In August 2014, a consolidated subsidiary of the Company entered into two $15.0 million subordinated revolving credit facilities (collectively, the “Subordinated Credit Facility”), for a total commitment of $30.0 million. The Subordinated Credit Facility is available for direct borrowings and is guaranteed by certain members of the TPG Operating Group. In July 2021, the subsidiary extended the maturity date of the Subordinated Credit Facility from August 2022 to August 2023. In July 2020, the subsidiary extended the maturity date of the Subordinated Credit Facility from August 2021 to August 2022. In August 2019, the subsidiary extended the maturity date of the Subordinated Credit Facility from August 2020 to August 2021. The interest rate for borrowings under the Subordinated Credit Facility is calculated at the LIBOR rate at the time of borrowing plus 2.25%. During the year ended December 31, 2021, the subsidiary did not borrow or make repayments on the Subordinated Credit Facility, leaving a zero balance at December 31, 2021. During the year ended December 31, 2020, the subsidiary borrowed $55.0 million and made repayments of $55.0 million on the Subordinated Credit Facility, resulting in no amount outstanding as of December 31, 2020. During each of the years ended December 31, 2021 and 2020, the subsidiary incurred interest expense and uncommitted line of credit fees on the Subordinated Credit Facility of $0.2 million. During the year ended December 31, 2019, the subsidiary incurred interest expense and uncommitted line of credit fees on the Subordinated Credit Facility of $0.1 million. 206 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Secured Borrowings The Company’s secured borrowings are issued using on-balance sheet securitization vehicles, as further discussed in N ote 1 1 . The secured borrowings are repayable only from collections on the underlying securitized equity method investments and restricted cash. The secured borrowings are separated into two tranches. Tranche A secured borrowings were issued in May 2018 at a fixed rate of 5.33% with an aggregate principal balance of $200.0 million due June 21, 2038, with interest paid semiannually. Tranche B secured borrowings were issued in October 2019 at a fixed rate of 4.75% with an aggregate principal balance of $50.0 million due June 21, 2038, with interest paid semiannually. The secured borrowings contain an optional redemption feature giving the Company the right to call the notes in full or in part. If the secured borrowings are not redeemed on or prior to June 20, 2028, the Company will pay additional interest equal to 4.00% per annum. Interest expense related to tranche A and tranche B secured borrowings for the years ended December 31, 2021, 2020 and 2019 was approximately $13.3 million, $13.1 million and $11.9 million, respectively. The secured borrowings contain covenants and conditions customary in transactions of this nature, including negative pledge provisions, default provisions and operating covenants, limitations on certain consolidations, mergers and sales of assets. At December 31, 2021, the Company is in compliance with these covenants and conditions. Revolving Credit Facility During the years ended December 31, 2021 and 2020, certain consolidated TPG funds neither borrowed nor made repayments under a separate revolving credit facility, resulting in a zero balance at December 31, 2021 and 2020. The interest rate for borrowings under the revolving credit facility is calculated at the LIBOR rate at the time of borrowing plus 1.50%. In conjunction with the Reorganization described in Note 1 , the Company transferred its co-investment interests in such TPG funds to RemainCo and no longer consolidates the TPG Funds. 13. Income Taxes The Company is treated as a partnership for income tax purposes and is therefore not subject to U.S. federal, state or local income taxes. Certain consolidated subsidiaries are subject to taxation in the U.S. (federal, state or local) and foreign jurisdictions as a result of their entity classification for tax reporting purposes. The Company has provided U.S. federal, foreign and state and local corporate income tax for certain consolidated subsidiaries. The provision for income taxes consists of the following (in thousands): Year Ended December 31, 2021 2020 2019 Current income taxes International $ 5,010 $ 7,936 $ 360 Federal 1,950 1,124 2,195 State and local 1,954 1,582 1,709 8,914 10,642 4,264 Deferred income taxes (income tax benefits) International 452 (337) 1,719 Federal (223) (334) (136) State and local (105) (192) (158) 124 (863) 1,425 Income tax expense $ 9,038 $ 9,779 $ 5,689 207 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Income taxes are provided at the applicable statutory rates. The tax effects of temporary differences resulted in the following deferred tax assets and liabilities (in thousands): December 31, 2021 2020 Deferred tax assets Accruals $ 1,637 $ 1,907 Fixed assets 384 368 Straight line rent 305 467 Net operating loss carryforwards 449 742 Partnership book/tax differences 125 (215) 2,900 3,269 Less valuation allowance (442) (715) Deferred tax assets, net $ 2,458 $ 2,554 Deferred tax liabilities Accruals $ 25 $ 29 Fixed assets 585 808 Straight Line Rent 7 — Other (314) (461) Deferred tax liabilities, net $ 303 $ 376 The Company’s deferred tax assets and deferred tax liabilities are included in the Consolidated Financial Statements within other assets, and accounts payable and accrued expenses, respectively. At December 31, 2021, the Company did not have any foreign or federal net operating loss carryforwards, any state or local net operating losses, or any foreign tax credit carryforwards, net of valuation allowance. The Company also considers projections of taxable income in evaluating its ability to utilize deferred tax assets. In projecting its taxable income, the Company begins with historic results and incorporates assumptions of the amount of future pretax operating income. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that the Company uses to manage its business. The Company’s projections of future taxable income that include the effects of originating and reversing temporary differences, including those for the tax basis intangibles, indicate that it is more likely that not that the benefits from the deferred tax asset will be realized. The following table reconciles the U.S. federal statutory tax rate to the effective income tax rate of the Company’s income tax expense: Year Ended December 31, 2021 2020 2019 U.S. federal taxes at statutory rate 21.00 % 21.00 % 21.00 % Income passed through to partners (20.09) (24.51) (21.10) Permanent adjustments — 0.01 0.03 International tax rate differentials (0.76) 4.08 0.42 State and local tax provisions 0.04 0.10 0.13 Effective income tax rate 0.19 % 0.68 % 0.48 % For the years ended December 31, 2021, 2020, and 2019, international tax rate differentials include unrealized losses on derivatives attributable to consolidated Public SPACs which impacted the rate by (0.95)%, 3.47% and 0.27%, respectively. 208 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The Company does not believe that it has any tax position for which it is reasonably possible that it will be required to record significant amounts of unrecognized tax benefits within the next twelve months. The Company applies the provisions of ASC 740, which clarifies the accounting and disclosure for uncertainty in tax positions. The Company analyzed its tax filing positions for all federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. Based on this review, adjustments for uncertain income tax positions of $4.5 million and $3.8 million, exclusive of penalties and interest, were required for each of the years ended December 31, 2021 and 2020, respectively. In the normal course of business, the Company is subject to examination by U.S. federal and certain state, local and foreign tax regulators. At December 31, 2021, the U.S. federal, state, local and foreign income tax returns for the years 2018 through 2020 are generally open under the normal statute of limitations and therefore subject to examination. 14. Sale of non-controlling interests in consolidated entities In June 2017, the Holdings Companies sold an equity interest in the Former Affiliate of 1.5625% to a strategic investor for an aggregate price of $50.0 million. The Holdings Companies received $17.5 million in proceeds upon closing with the balance to be paid in equal installments over three years. The Company received $10.8 million in each of the years ended December 31, 2020 and 2019. The payments are shown in the Consolidated Statements of Changes in Partners’ Capital. As of December 31, 2020, the receivable for the sale of non-controlling interests in consolidated entities has been settled in full. The sale of the equity interests is subject to a put provision whereby, under limited circumstances, the Holdings Companies would be required to repurchase all the equity interest previously sold in excess of any distributions received. This provision expires in June 2022. 15. Related Party Transactions Due from and Due to Affiliates Due from affiliates and due to affiliates consist of the following (in thousands): December 31, 2021 2020 Portfolio companies $ 42,067 $ 32,193 Partners and employees 2,760 1,856 Other related entities 47,183 42,331 Unconsolidated VIEs 93,311 32,172 Due from affiliates $ 185,321 $ 108,552 Portfolio companies $ 6,567 $ 6,965 Partners and employees 125,429 92,312 Other related entities 658,954 348,861 Unconsolidated VIEs 36,049 15,247 Due to affiliates $ 826,999 $ 463,385 Affiliate receivables and payables historically have been settled in the normal course of business without formal payment terms, generally do not require any form of collateral and do not bear interest. Senior Unsecured Revolving Credit Facility In March 2011, the Company secured a $400.0 million credit facility on behalf of an affiliate. In May 2018, the Company entered into an amended and restated Secured Revolving Credit Facility Agreement under which certain terms were modified, including reduced commitments of $300.0 million, an extension of the maturity to May 2023 and certain components of financial covenants were redefined. In November 2020, the Company entered into an amended and restated Revolving Credit Facility Agreement under which certain terms were modified, including releasing all collateral pledged 209 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements under the prior Secured Revolving Credit Facility and extending the maturity to November 2025. The interest rate for borrowings on the credit facility is calculated at the LIBOR rate at the time of the borrowing plus 1.75%. In November 2021, the Company entered into an amended and restated Revolving Credit Facility Agreement under which certain terms were modified, including that TPG Holdings, L.P. may elect to have (i) TPG Operating Group II, L.P. (f/k/a TPG Holdings II, L.P.) assume its obligations as borrower under the Senior Unsecured Revolving Credit Facility and (ii) correspondingly release TPG Operating Group II, L.P., TPG Holdings I-A, LLC, TPG Holdings II-A, LLC and TPG Holdings III-A, L.P from their guarantees of the Senior Unsecured Revolving Credit Facility. TPG Holdings, L.P. made such election in conjunction with the Reorganization, upon which TPG Operating Group II, L.P. assumed its obligations as borrower under the Senior Unsecured Revolving Credit Facility, and TPG Holdings, L.P. was thereby released from its obligations as borrower thereunder. Correspondingly, TPG Operating Group II, L.P., TPG Holdings I-A, LLC, TPG Holdings II-A, LLC and TPG Holdings III-A, L.P were released from their guarantees of the Senior Unsecured Revolving Credit Facility. During the year ended December 31, 2021, the Company made no borrowings and made repayments of $50.0 million on the Revolving Credit Facility to Affiliate, leaving a balance of zero at December 31, 2021. During the year ended December 31, 2020, the Company borrowed $150.0 million and made repayments of $100.0 million on the credit facility, leaving a balance of $50.0 million at December 31, 2020. At December 31, 2021 and 2020, $300.0 million and $250.0 million was available to be borrowed under the terms of the credit facility, respectively. During the years ended December 31, 2021 and 2020, the Company incurred interest expense on the Revolving Credit Facility of $0.6 million and $2.4 million, respectively. The Company did not incur any interest expense on the Revolving Credit Facility during the year ended December 31, 2019. Fund Investments Certain of the Company’s investment professionals and other individuals have made discretionary investments of their own capital in the TPG Funds. These investments are generally not subject to management fees or carried interest at the discretion of the general partner. Investments made by these individuals during the years ended December 31, 2021 and 2020 totaled $211.3 million and $104.2 million, respectively. Fee Income from Affiliates Substantially all revenues are generated from TPG Funds or Portfolio companies. The Company disclosed revenues in Note 2 . Notes Receivable from Affiliates From time to time, the Company makes loans to its employees and other affiliates. Certain of these loans are collateralized by underlying investment interests of the borrowers. The outstanding balance of these notes was $1.0 million and $18.3 million at December 31, 2021 and 2020, respectively. These notes generally incur interest at floating rates, and such interest, which is included in interest, dividends and other in the Consolidated Financial Statements, totaled $0.5 million for each of the years ended December 31, 2021 and 2020, and $1.2 million for the year ended December 31, 2019 . Aircraft Services The Company leases aircraft owned by entities controlled by the Partners of the Company. Such lease payments, which were paid to entities controlled by the Partners of the Company, totaled $4.9 million for each of the years ended December 31, 2021 and 2020, and $6.8 million for the year ended December 31, 2019. 210 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Other Related Party Transactions The Company has entered into contracts to provide services or facilities for a fee with certain related parties. A portion of these fees are recognized within expense reimbursements and other in the amount of $21.8 million. During the years ended December 31, 2021 , 2020, and 2019, these related parties have made payments associated with these arrangements of $27.9 million, $21.1 million, and $0.1 million, respectively. 16. Operating Leases The following tables summarize the Company’s lease cost, cash flows, and other supplemental information related to its operating leases. The components of lease expense were as follows (in thousands): Year Ended December 31, 2021 2020 2019 Lease cost (a) : Operating lease cost $ 37,330 $ 35,995 $ 31,116 Short-term lease costs 416 184 351 Variable lease cost 5,067 2,478 5,091 Sublease income (5,807) (4,000) (762) Total lease cost $ 37,006 $ 34,657 $ 35,796 Weighted-average remaining lease term 7.4 8.3 9.1 Weighted-average discount rate 4.11 % 4.09 % 4.14 % ___________ (a) Office rent expense for the years ended December 31, 2021, 2020 and 2019 was $32.0 million, $30.9 million and $24.5 million, respectively. Supplemental Consolidated Statements of Cash Flows information related to leases were as follows (in thousands): Year Ended December 31, 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities $ 29,224 $ 29,427 $ 29,655 Non-cash right-of-use assets obtained in exchange for new operating lease liabilities (a) 5,634 6,035 120,130 ___________ (a) The new operating right of use assets and related liabilities for the year ended December 31, 2019 excludes the initial impacts of the adoption of ASU 2016-02. The decrease for the year ended December 31, 2020 from the prior year ended December 31, 2019 is due to the timing of the renegotiation of lease contracts approaching expiration. 211 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The following table shows the undiscounted cash flows on an annual basis for operating lease liabilities as of December 31, 2021 (in thousands): Year Due Lease Amount 2022 $ 26,853 2023 24,267 2024 28,479 2025 27,247 2026 13,090 Thereafter 92,694 Total future undiscounted operating lease payments 212,630 Less: imputed interest (35,627) Present value of operating lease liabilities $ 177,003 17. Commitments and Contingencies Guarantees Certain of the Company’s consolidated entities have guaranteed debt or obligations. At December 31, 2021 and 2020, the maximum obligations guaranteed under these agreements totaled $715.0 million and $511.9 million, respectively. At December 31, 2021, the guarantees had expiration dates as follows (in thousands): Maturity Date Guarantee Amount August 2023 $ 30,000 December 2024 200,000 November 2025 300,000 June 2026 60,000 December 2026 79,681 June 2030 45,220 Thereafter 50 Total $ 714,951 At December 31, 2021 and 2020, the outstanding amount of debt on obligations related to these guarantees was $341.3 million and $127.7 million, respectively. Letters of Credit The Company had $0.7 million in letters of credit outstanding at December 31, 2021 and 2020. Commitments At December 31, 2021, the third party investors of the consolidated Public SPACs had unfunded capital commitments of $175.0 million to the consolidated Public SPACs. At December 31, 2021, the Holdings Companies had unfunded investment commitments of $339.9 million to the TPG Funds, consolidated Public SPACs and other strategic investments. 212 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Contingent Obligations (Clawback) With Affiliates The governing agreements of the TPG Funds that pay carried interest generally include a clawback provision that, if triggered, may give rise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Carried interest received by the general partners of the respective TPG Funds is subject to clawback to the extent the carried interest received by the general partners exceeds the amount the general partners are ultimately entitled to receive based on cumulative fund results. At December 31, 2021, if all investments held by the TPG Funds were liquidated at their current unrealized fair value, there would be clawback of $58.3 million, net of tax, for which a performance fee reserve was recorded within other liabilities in the Consolidated Financial Statements. At December 31, 2021, if all remaining investments were deemed worthless, a possibility management views as remote, the amount of carried interest subject to potential clawback would be $1,500.9 million on a pre-tax basis. During the year ended December 31, 2021, the general partners made no payments on the clawback liability. The Company holds additional equity method investments that generate performance fee-based income in which the potential for additional clawback exists, a possibility that management views as unlikely. The reporting rights of these investments is such that management does not have the ability to estimate potential clawback. Legal Actions and Other Proceedings From time to time, TPG is involved in legal proceedings, litigation and claims incidental to the conduct of our business, including with respect to acquisitions, bankruptcy, insolvency and other types of proceedings. Such lawsuits may involve claims against our portfolio companies that adversely affect the value of certain investments owned by TPG’s funds. TPG’s business is also subject to extensive regulation, which has and may result in TPG becoming subject to examinations, inquiries and investigations by various U.S. and non-U.S. governmental and regulatory agencies, including but not limited to the SEC, Department of Justice, state attorneys general, Financial Industry Regulatory Authority (“FINRA”), and the U.K. Financial Conduct Authority. Such examinations, inquiries and investigations may result in the commencement of civil, criminal or administrative proceedings or fines against TPG or its personnel. TPG accrues a liability for legal proceedings in accordance with Generally Accepted Accounting Principles, in particular, TPG establishes an accrued liability for loss contingencies when a settlement arising from a legal proceeding is both probable and reasonably estimable. If the matter is not probable or reasonably estimable, no such liability is recorded. Examples of this include: (i) the proceedings may be in early stages; (ii) damages sought may be unspecified, unsupportable, unexplained or uncertain; (iii) discovery may not have been started or is incomplete; (iv) there may be uncertainty as to the outcome of pending appeals or motions; (v) there may be significant factual issues to be resolved or (vi) there may be novel legal issues or unsettled legal theories to be presented or a large number of parties. Consequently, management is unable to estimate a range of potential loss, if any, related to such matters. Even when TPG accrues a liability for a loss contingency such cases, there may be an exposure to loss in excess of any amounts accrued. Loss contingencies may be, in part or in whole, subject to insurance or other payments such as contributions and/or indemnity, which may reduce any ultimate loss. In November 2019, it became probable that the Company would settle a dispute with the Internal Revenue Service for approximately $7.5 million. This settlement did not result in a change to the Company’s previously filed Federal income tax returns. In the fourth quarter of 2020, the Company recorded this expected settlement amount in general, administrative, and other in the Consolidated Statements of Operations and the offsetting payable in accounts payable and accrued expenses in the Consolidated Statements of Financial Condition. In December 2020, the Company settled the dispute with the Internal Revenue Service by making a payment of approximately $7.8 million and recorded additional expenses of $0.3 million in general, administrative, and other in the Consolidated Statements of Operations. 213 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Based on information presently known by management, TPG has not recorded a potential liability related to any pending legal proceeding and is not subject to any legal proceedings that we expect to have a material impact on our operations, financial positions, or cash flows. It is not possible, however, to predict the ultimate outcome of all pending legal proceedings, and the claimants in the matter discussed below seek potentially large and indeterminate amounts. As such, although we do not consider such an outcome likely, given the inherent unpredictability of legal proceedings, it is possible that an adverse outcome in the matter described below or certain other matters could have a material effect on TPG’s financial results in any particular period. Since 2011, a number of TPG-related entities and individuals, including David Bonderman and Jim Coulter, have been named as defendants/respondents in a series of lawsuits in the US, UK, and Luxembourg concerning an investment TPG held from 2005-2007 in a Greek telecommunications company, known then as TIM Hellas (“Hellas”). Entities and individuals related to Apax Partners, a London based investment firm also invested in Hellas at the time, are named in the suits as well. The cases all allege generally that a late 2006 refinancing of the Hellas group of companies was improper. To date, most of the lawsuits filed in New York Federal and State courts against TPG and Apax-related defendants have been dismissed, with those dismissals upheld on appeal, or the appeal period has passed. A lawsuit pending in the District Court of Luxembourg against two former TPG partners and two individuals related to Apax involved in the investment has been decided after trial in their favor on all claims and is now on appeal. In February 2018, a High Court case in London against a number of TPG and Apax related parties and individuals was abandoned by the claimants in the early days of a scheduled six-week trial with costs of $9.5 million awarded to the TPG and Apax-related parties, of which $3.4 million was awarded to TPG. In addition to the Luxembourg appeal, two cases in New York state court are active, and two cases in New York federal court are stayed, against TPG and Apax-related parties concerning the Hellas investment. Motions to dismiss by all defendants (or appeals and motions to reconsider related thereto) are pending in the two active actions. TPG believes that the suits related to the Hellas investment are without merit and intends to continue to defend them vigorously. Indemnifications In the normal course of business, TPG enters into contracts that contain a variety of representations and warranties that provide general indemnifications. In addition, certain of TPG’s funds have provided certain indemnities relating to environmental and other matters and has provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each in connection with the financing of certain real estate investments that TPG has made. TPG’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against TPG that have not yet occurred. However, based on experience, TPG expects the risk of material loss to be remote. 18. Compensation and Benefits TPG provides voluntary defined contribution plans for its U.S. and U.K. employees who meet certain eligibility requirements. The current defined contribution plan for U.S. employees is a 401(k) profit-sharing plan that was adopted in May 1996. The current defined contribution plan for U.K. employees is a pension plan that was adopted in January 2010. Employees may elect to make contributions up to legally established limits. Both plans provide for employer contributions at the Company’s discretion. The Company’s contribution expenses were $10.9 million, $11.2 million and $13.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Compensation includes a significant performance-based component in the form of discretionary bonuses. The Company incurred discretionary bonus expense of $340.9 million, $293.9 million and $316.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. Certain employees of the Company receive awards from TPG Real Estate Finance Trust, Inc. (“TRTX”), a publicly traded real estate investment trust, externally managed and advised by TPG RE Finance Trust Management, L.P., a wholly-owned subsidiary of the Company for services provided to TRTX. Generally, these awards vest over four years for employees and at grant date for directors of TRTX. 214 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements The awards granted to certain employees of the Company are recorded in other assets and due to affiliates on grant date in the Consolidated Statements of Financial Condition. The grant date fair value of the asset is amortized through compensation and benefits expense on a straight-line basis over the vesting period in the Consolidated Statements of Operations. Compensation and benefits expense is offset by related management fees earned by the Company from TRTX. During the year ended December 31, 2021, the Company recognized $9.5 million of management fees and compensation and benefits expense. 19. Redeemable Equity (see Note 2 – Special Purpose Acquisition Companies) Redeemable equity from consolidated Public SPACs represents the shares issued by the Company’s consolidated Public SPACs that are redeemable for cash in the event of an election to redeem by individual public shareholders at the time of the business combination. Additionally, these shares become automatically redeemable with the Public SPAC’s failure to complete a business combination, tender offer, or stockholder approval provisions. The ownership interest in each SPAC which is not owned by the Company is reflected as redeemable equity from consolidated Public SPACs in the accompanying Consolidated Financial Statements. Offering costs related to Class A ordinary shares issued by SPACs consisted of legal, accounting, underwriting fees and other costs incurred that are directly related to the IPO of units. Offering costs for the year ended December 31, 2021 totaled approximately $54.1 million, inclusive of $32.7 million in deferred underwriting commissions, and were charged to redeemable equity. Offering costs for the year ended December 31, 2020 totaled approximately $46.0 million, inclusive of $28.0 million in deferred underwriting commissions. Approximately $44.7 million of the offering costs were related to the issuance of Class A ordinary shares and charged to redeemable equity and approximately $1.3 million of the offering costs were related to the warrant liabilities and charged to the Consolidated Statement of Operations. As of December 31, 2021 and 2020, the redeemable equity consisted of 100.0 million and 80.0 million outstanding Class A ordinary shares, respectively. These interests were classified outside of partners’ capital totaling $1,000.0 million and $800.0 million, respectively, which represented the full redemption value and equals the assets held in Trust Accounts. The following table summarizes the adjustments to redeemable equity (in thousands): Year Ended December 31, 2021 2020 2019 Beginning balance $ 800,011 $ — $ 456,920 IPO share proceeds 935,000 800,000 — Current and deferred offering costs (54,141) (44,702) 4,000 Bifurcation of warrant liabilities (12,500) (24,000) — Net income (loss) attributable to redeemable equity 155,131 (195,906) (9,684) Redemptions / withdrawals (304,760) — (269,695) Deconsolidation (430,265) — (193,727) Change in redemption value of redeemable non-controlling interest (88,449) 264,619 12,186 Total redeemable equity $ 1,000,027 $ 800,011 $ — 20. Other Non-Controlling Interests Other non-controlling interests consist of: • Non-controlling interests held by TPG Affiliated Partners – ownership interests in certain consolidated entities held by various TPG affiliated partners • Non-controlling interests held by investors – ownership interests in the Holdings Companies held by investors otherwise unaffiliated with TPG 215 Table of Contents TPG Group Holdings (SBS), L.P. Notes to Consolidated Financial Statements Partners’ capital attributable to other non-controlling interests consisted of the following (in thousands): December 31, 2021 2020 TPG affiliated partners $ 4,338,377 $ 1,601,037 Investors 316,444 454,249 Other non-controlling interests $ 4,654,821 $ 2,055,286 Net income (loss) attributable to other non-controlling interests was as follows (in thousands): Year Ended December 31, 2021 2020 2019 TPG affiliated partners $ 2,081,170 $ 548,504 $ 561,189 Investors 374,655 171,136 90,369 Income attributable to other non-controlling interests $ 2,455,825 $ 719,640 $ 651,558 21. Regulated Entities At December 31, 2021, the Company consolidates a registered broker-dealer subsidiary that is subject to the minimum net capital requirements of the SEC and FINRA which may restrict the Company’s ability to withdraw funds from the broker-dealer. The broker-dealer has continuously operated in excess of its minimum net capital requirements. Certain other U.S. and non-U.S. entities are subject to various investment adviser, commodity pool operator and trader regulations. This includes a number of U.S. entities that are registered as investment advisers with the SEC. 22. Subsequent Events In January 2022, TPG Inc. granted the following stock-based awards in connection with its IPO: • 8.3 million restricted stock units (“RSUs”) with a grant date fair value of $243.4 million which are generally satisfied over four years. • 2.2 million RSUs with a grant date fair value of $50.8 million, awarded to certain of the Company’s executives, which are generally satisfied over five years and achievement of a performance-condition. Other than the Reorganization and IPO described in Note 1 , the acquisition of remaining equity interests in NQ Manager described in Note 3 and the event described above, there are no additional subsequent events through the date of issuance of the consolidated financial statements which require adjustment or disclosure. 216 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None.