TPG Inc. 10-K

Item 8. Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 156 Consolidated Statements of Financial Condition as of December 31, 202 2 and 202 1 158 Consolidated Statements of Operations for the Years Ended December 31, 202 2 , 202 1 and 20 2 0 159 Consolidated Statements of Changes in Equity for the Years Ended December 31, 202 2 , 202 1 and 20 2 0 160 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 2 , 202 1 and 20 2 0 162 Notes to Consolidated Financial Statements 163 155 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of TPG Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of TPG Inc. (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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. 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 Performance Allocations — 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 “Performance Allocations”. Performance Allocations are 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 Performance Allocations, which are recorded as revenues, to reflect either (a) positive performance resulting in an increase in the Performance Allocations or (b) negative performance that would cause the amount due to the general 156 Table of Contents partner to be less than the amount previously recognized as revenue, resulting in a negative adjustment to Performance Allocations. In each case, Performance Allocations are calculated on a cumulative basis and cumulative results are compared to amounts previously recorded, with a current period adjustment. Accrued but unpaid Performance Allocations as of the reporting date are 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 Performance Allocations 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 February 24, 2023 We have served as the Company’s auditor since 2015. 157 Table of Contents TPG Inc. Consolidated Statements of Financial Condition (dollars in thousands, except share data) December 31, 2022 December 31, 2021 Assets Cash and cash equivalents $ 1,107,484 $ 972,729 Restricted cash (1) 13,166 13,135 Due from affiliates 202,639 185,321 Investments (includes assets pledged of $ 475,110 and $ 492,276 as of December 31, 2022 and December 31, 2021, respectively (1) ) 5,329,868 6,109,046 Other assets 629,392 657,317 Assets of consolidated TPG Funds and Public SPACs (1) : Cash and cash equivalents 5,097 5,371 Assets held in Trust Accounts 653,635 1,000,027 Other assets 457 19,067 Total assets $ 7,941,738 $ 8,962,013 Liabilities, Redeemable Equity and Equity Liabilities Accounts payable and accrued expenses $ 98,171 $ 134,351 Due to affiliates 139,863 826,999 Secured borrowings, net (1) 245,259 244,950 Senior unsecured term loan 199,307 199,494 Accrued performance allocation compensation 3,269,889 — Other liabilities 226,090 238,246 Liabilities of consolidated TPG Funds and Public SPACs (1) : Derivative liabilities 667 13,048 Deferred underwriting 22,750 35,000 Other liabilities 236 8,484 Total liabilities 4,202,232 1,700,572 Commitments and contingencies (Note 18) Redeemable equity attributable to consolidated Public SPACs (1) 653,635 1,000,027 Equity Class A common stock $ 0.001 par value, 2,340,000,000 shares authorized ( 79,240,058 and 0 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively) 79 — Class B common stock $ 0.001 par value, 750,000,000 shares authorized ( 229,652,641 and 0 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively) 230 — Preferred stock, $ 0.001 par value, 25,000,000 shares authorized ( 0 issued and outstanding as of December 31, 2022 and December 31, 2021, respectively) — — Additional paid-in-capital 506,639 — Retained earnings 2,724 — Partners’ capital controlling interests — 1,606,593 Other non-controlling interests 2,576,199 4,654,821 Total equity 3,085,871 6,261,414 Total liabilities, redeemable equity and equity $ 7,941,738 $ 8,962,013 ________________ (1) The Company’s consolidated total assets and liabilities as of December 31, 2022 and December 31, 2021 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 Inc. These amounts include the assets and liabilities of consolidated Public SPACs, restricted cash, assets pledged of securitization vehicles, secured borrowings of securitization vehicles, and redeemable equity of consolidated Public SPACs. See Notes 2, 11 and 16 to the Consolidated Financial Statements . See accompanying notes to Consolidated Financial Statements. 158 Table of Contents TPG Inc. Consolidated Statements of Operations (dollars in thousands, except share and per share data) Year Ended December 31, 2022 2021 2020 Revenues Fees and other $ 1,246,635 $ 977,904 $ 883,366 Capital allocation-based income 756,252 3,998,483 1,231,472 Total revenues 2,002,887 4,976,387 2,114,838 Expenses Compensation and benefits: Cash-based compensation and benefits 473,696 579,698 522,715 Equity-based compensation 627,714 — — Performance allocation compensation 416,556 — — Total compensation and benefits 1,517,966 579,698 522,715 General, administrative and other 368,915 278,590 260,748 Depreciation and amortization 32,990 21,223 7,137 Interest expense 21,612 16,291 18,993 Expenses of consolidated TPG Funds and Public SPACs: Interest expense — 740 722 Other 3,316 20,024 7,241 Total expenses 1,944,799 916,566 817,556 Investment income (loss) Income (loss) from investments: Net (losses) gains from investment activities ( 110,131 ) 353,219 ( 5,839 ) Gain on deconsolidation — — 401,695 Interest, dividends and other 9,168 6,460 8,123 Investment income of consolidated TPG Funds and Public SPACs: Net gains (losses) from investment activities — 23,392 ( 18,691 ) Unrealized gains (losses) on derivative liabilities of Public SPACs 12,382 211,822 ( 239,269 ) Interest, dividends and other 6,741 10,321 5,410 Total investment (loss) income ( 81,840 ) 605,214 151,429 (Loss) income before income taxes ( 23,752 ) 4,665,035 1,448,711 Income tax expense 32,483 9,038 9,779 Net (loss) income ( 56,235 ) 4,655,997 1,438,932 Net (loss) income attributable to redeemable equity in Public SPACs prior to Reorganization and IPO ( 517 ) 155,131 ( 195,906 ) Net income attributable to non-controlling interests in consolidated TPG Funds prior to Reorganization and IPO — 19,287 ( 12,380 ) Net income attributable to other non-controlling interests prior to Reorganization and IPO 966 2,455,825 719,640 Net income attributable to TPG Group Holdings prior to Reorganization and IPO 5,256 2,025,754 927,578 Net income attributable to redeemable equity in Public SPACs 15,165 — — Net loss attributable to non-controlling interests in TPG Operating Group ( 180,824 ) — — Net income attributable to other non-controlling interests 11,293 — — Net income attributable to TPG Inc. subsequent to Reorganization and IPO $ 92,426 $ — $ — Net income (loss) per share data: Net income (loss) available to Class A common stock per share Basic $ 1.10 $ — $ — Diluted $ ( 0.19 ) $ — $ — Weighted-average shares of Class A common stock outstanding Basic 79,255,411 — — Diluted 308,908,052 — — See accompanying notes to Consolidated Financial Statements. 159 Table of Contents TPG Inc. Consolidated Statements of Changes in Equity (dollars in thousands, except share data) Shares of TPG Inc. TPG Inc. Partners' Capital Class A Common Stock Class B Common Stock Class A Common Stock, at par value Class B Common Stock, at par value Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total TPG Inc. Equity Other Non-Controlling Interests Total Partners' Capital/ Equity Balance at January 1, 2020 $ 2,017,973 — — $ — $ — $ — $ — $ — $ — $ 2,237,921 $ 4,255,894 Net income (loss) 927,578 — — — — — — — — 707,260 1,634,838 Capital contributions 7,824 — — — — — — — — 21,155 28,979 Capital distributions ( 403,849 ) — — — — — — — — ( 377,630 ) ( 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 — — $ — $ — $ — $ — $ — $ — $ 2,259,834 $ 4,720,702 Shares of TPG Inc. TPG Inc. Partners' Capital Class A Common Stock Class B Common Stock Class A Common Stock, at par value Class B Common Stock, at par value Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total TPG Inc. Equity Other Non-Controlling Interests Total Partners' Capital/ Equity Balance at January 1, 2021 $ 2,460,868 — — $ — $ — $ — $ — $ — $ — $ 2,259,834 $ 4,720,702 Net income 2,025,754 — — — — — — — — 2,475,112 4,500,866 Capital contributions — — — — — — — — — 29,776 29,776 Capital distributions ( 1,230,510 ) — — — — — — — ( 1,219,184 ) ( 2,449,694 ) Deconsolidation of previously consolidated entities 36,386 — — — — — — — — 61,151 97,537 Change in redemption value of redeemable non-controlling interest 35,157 — — — — — — — — 53,292 88,449 Acquisition of NewQuest — — — — — — — — — 301,189 301,189 Reorganization ( 1,721,062 ) — — — — — — — — 693,651 ( 1,027,411 ) Balance at December 31, 2021 $ 1,606,593 — — $ — $ — $ — $ — $ — $ — $ 4,654,821 $ 6,261,414 See accompanying notes to Consolidated Financial Statements. 160 Table of Contents TPG Inc. Consolidated Statements of Changes in Equity (dollars in thousands, except share data) Shares of TPG Inc. TPG Inc. Partners' Capital Class A Common Stock Class B Common Stock Class A Common Stock, at par value Class B Common Stock, at par value Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total TPG Inc. Equity Other Non-Controlling Interests Total Partners' Capital/ Equity Balance at January 1, 2022 $ 1,606,593 — — $ — $ — $ — $ — $ — $ — $ 4,654,821 $ 6,261,414 Net income prior to Reorganization and IPO 5,256 — — — — — — — — 966 6,222 Change in redemption value of redeemable non-controlling interest prior to Reorganization and IPO ( 110 ) — — — — — — — — ( 407 ) ( 517 ) Effect of Reorganization and purchase of units in the Partnership ( 1,611,739 ) 48,984,961 229,652,641 49 230 271,780 ( 27 ) — 272,032 1,341,603 1,896 Issuance of common stock in IPO, net of underwriting discount and issuance costs — 28,310,194 — 28 — 784,611 — — 784,639 ( 25,426 ) 759,213 Purchase of Partnership Interests with IPO proceeds — — — — — — — — — ( 379,597 ) ( 379,597 ) Issuance of common stock from Underwriters' exercise of over-allotment option, net of underwriting discount and issuance costs — 1,775,410 — 2 — 49,754 — — 49,756 — 49,756 Equity reallocation between controlling and non-controlling interests prior to Reorganization and IPO — — — — — ( 654,129 ) — — ( 654,129 ) 654,129 — Acquisition of NewQuest — — — — — 33,584 — — 33,584 ( 33,584 ) — Deferred tax effect resulting from purchase of Class A Units, net of amounts payable under Tax Receivable Agreement — — — — — ( 13,232 ) — — ( 13,232 ) — ( 13,232 ) Liability-based performance allocation compensation — — — — — — — — — ( 3,525,767 ) ( 3,525,767 ) Net income (loss) subsequent to Reorganization and IPO — — — — — — 92,426 — 92,426 ( 169,531 ) ( 77,105 ) Shares issued for equity-based awards — 169,493 — 0 — 1,088 — — 1,088 ( 901 ) 187 Equity-based compensation subsequent to Reorganization and IPO — — — — — 31,841 — — 31,841 602,647 634,488 Capital contributions subsequent to Reorganization and IPO — — — — — — — — — 13,039 13,039 Dividends/Distributions — — — — — — ( 89,675 ) — ( 89,675 ) ( 576,955 ) ( 666,630 ) Change in redemption value of redeemable non-controlling interest subsequent to Reorganization and IPO — — — — — 1,342 — — 1,342 21,162 22,504 Balance at December 31, 2022 $ — 79,240,058 229,652,641 $ 79 $ 230 $ 506,639 $ 2,724 $ — $ 509,672 $ 2,576,199 $ 3,085,871 See accompanying notes to Consolidated Financial Statements. 161 Table of Contents TPG Inc. Consolidated Statements of Cash Flows (dollars in thousands) Year Ended December 31, 2022 2021 2020 Operating activities: Net (loss) income $ ( 56,235 ) $ 4,655,997 $ 1,438,932 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Equity-based compensation 627,714 — — Performance allocation compensation 416,556 — — Loss (gain) from investment activities 110,131 ( 353,219 ) 5,839 Gain on deconsolidation — — ( 401,695 ) Capital allocation-based income ( 756,252 ) ( 3,998,483 ) ( 1,231,472 ) Other non-cash activities 29,939 45,729 31,254 Net (gains) losses from investment activities of consolidated TPG Funds and Public SPACs ( 12,382 ) ( 235,214 ) 257,960 Changes in operating assets and liabilities: Purchases of investments ( 109,093 ) ( 173,885 ) ( 84,148 ) Proceeds from investments 1,567,684 2,179,064 754,912 Change in consolidation and other — — ( 10,976 ) Due from affiliates ( 42,378 ) ( 42,826 ) 12,333 Other assets ( 35,893 ) ( 22,586 ) 187 Accounts payable and accrued expenses ( 14,235 ) 51,148 42,124 Due to affiliates ( 12,528 ) 11,129 3,885 Accrued performance allocation compensation ( 672,375 ) — — Other liabilities ( 22,515 ) ( 26,931 ) 54,634 Changes related to consolidated TPG Funds and Public SPACs: Purchases of investments — ( 216,657 ) ( 327,005 ) Proceeds from investments — 218,695 297,696 Cash and cash equivalents 274 5,839 31,584 Assets held in Trust Accounts 346,392 ( 630,281 ) ( 800,011 ) Other assets 18,611 ( 12,583 ) 13,193 Other liabilities ( 7,537 ) 19,884 6,167 Net cash provided by operating activities 1,375,878 1,474,820 95,393 Investing activities: Repayments of notes receivable from affiliates 14,937 23,282 9,536 Advances on notes receivable from affiliates ( 15,500 ) ( 9,053 ) ( 2,084 ) Purchases of fixed assets ( 2,449 ) ( 1,791 ) ( 8,327 ) 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 investing activities ( 3,012 ) ( 37,745 ) ( 108,096 ) Financing activities: Proceeds from issuance of common stock in IPO, net of underwriting and issuance costs 770,865 — — Proceeds from issuance of common stock from underwriters' exercise of over-allotment option, net of underwriting and issuance costs 49,756 — — Purchase of partnership interests with IPO proceeds ( 379,597 ) — — Reorganization activities 2,124 — — 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 30,000 — 55,000 Repayments of subordinated credit facility ( 30,000 ) — ( 55,000 ) Proceeds from sale of non-controlling interests — — 10,833 See accompanying notes to Consolidated Financial Statements. 162 Table of Contents Year Ended December 31, 2022 2021 2020 Debt issuance costs — ( 520 ) — Contributions from holders of other non-controlling interests 7,822 4,636 7,884 Distributions to holders of other non-controlling interests prior to Reorganization and IPO ( 318,942 ) ( 1,009,242 ) ( 310,159 ) Contributions from partners prior to Reorganization and IPO — — 7,824 Dividends/Distributions ( 662,812 ) — — Distributions to partners prior to Reorganization and IPO ( 355,282 ) ( 1,066,680 ) ( 298,584 ) Changes related to 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 ( 352,014 ) ( 304,760 ) — Contributions from holders of non-controlling interests — 540 13,271 Distributions to holders of non-controlling interests — ( 12,840 ) ( 14,038 ) Net cash (used in) provided by financing activities ( 1,238,080 ) ( 1,322,566 ) 250,329 Net change in cash, cash equivalents and restricted cash $ 134,786 $ 114,509 $ 237,626 Cash, cash equivalents and restricted cash, beginning of period 985,864 871,355 633,729 Cash, cash equivalents and restricted cash, end of period $ 1,120,650 $ 985,864 $ 871,355 Supplemental disclosures of other cash flow information (a): Cash paid for income taxes $ 48,327 $ 8,548 $ 6,790 Cash paid for interest 18,352 15,728 14,857 Supplemental disclosures of non-cash operating activities: Conversion from notes receivable from affiliate to equity method investments — — ( 8,380 ) Investment in equity method investments — ( 3,138 ) — In-kind proceeds from investments — 36,334 89,834 Proceeds receivable on sale of investments ( 6,244 ) ( 31,104 ) ( 7,750 ) 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 related to Public SPACs 12,250 ( 35,441 ) ( 28,000 ) Distributions in-kind to partners — — ( 57,281 ) Distributions in-kind to holders of other non-controlling interests — ( 33,197 ) ( 32,553 ) Distributions payable to partners — 352,722 191,452 Distributions payable to holders of other non-controlling interests 3,964 355,282 186,781 Distributions payable to holders of non-controlling interests in consolidated funds — — 2,028 Repayments of notes receivable to affiliates — 3,045 — Reconciliation of cash, cash equivalents and restricted cash, end of period: Cash and cash equivalents $ 1,107,484 $ 972,729 $ 858,220 Restricted cash 13,166 13,135 13,135 Cash, cash equivalents and restricted cash, end of period $ 1,120,650 $ 985,864 $ 871,355 See accompanying notes to Consolidated Financial Statements. 163 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 1. Organization TPG Inc., along with its consolidated subsidiaries (collectively “TPG,” or the “Company”) is a leading global alternative asset manager on behalf of third-party investors under the “TPG” brand name. TPG Inc. includes the consolidated accounts of management companies, general partners of pooled investment entities and Special Purpose Acquisition Companies (“Public SPACs” and/or “SPACs”), which are held in one of three holding companies (TPG Operating Group I, L.P., TPG Operating Group II, L.P. and TPG Operating Group III, L.P.) (collectively the “TPG Operating Group”). Reorganization and IPO The owners of TPG Group Holdings and the TPG Operating Group completed a series of actions 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 was 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 Remain Co I, L.P., Tarrant Remain Co II, L.P., Tarrant Remain Co III, L.P., and Tarrant Remain Co GP, LLC, a Delaware limited liability company serving as their general partner (collectively “RemainCo”) and distributed the interests in RemainCo to the owners of the TPG Operating Group. Following the transfer of certain assets, the Company deconsolidated certain TPG Funds (“TPG Funds”) as of December 31, 2021 as the Company is no longer their primary beneficiary. 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 ) — Total partners’ capital 279,040 ( 279,040 ) — Total liabilities and partners' capital $ 355,541 $ ( 355,541 ) $ — 164 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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 were 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 totaling $ 770.9 million, net of $ 41.8 million in underwriting discounts and commissions, as well as $ 22.5 million of issuance costs. Proceeds of $ 379.6 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. 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 December 31, 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”) 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 Consolidated Financial Statements. All dollar amounts are stated in thousands unless otherwise indicated. All intercompany transactions and balances have been eliminated. Certain comparative amounts for the prior fiscal period have been reclassified to conform to the financial statement presentation as of and for the period ended December 31, 2022. The Consolidated Financial Statements include the accounts of TPG Inc., 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. The prior period financial statements present the consolidated accounts of TPG Group Holdings, which is considered the predecessor for accounting purposes. Following the completion of our IPO, TPG Inc. is the successor for accounting purposes. Prior to the Reorganization and IPO, the Company’s predecessor consolidated certain TPG Funds and Public SPACs (herein referred to as “consolidated TPG Funds and Public SPACs”) pursuant to U.S. GAAP, as the Company’s predecessor was considered the primary beneficiary. Following the Reorganization and IPO, the Company no longer has a controlling financial interest in certain TPG Funds and continues to have a controlling financial interest in Public SPACs. Public SPACs are consolidated pursuant to U.S. GAAP. Consequently, the accompanying Consolidated Financial 165 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Statements include the assets, liabilities, revenues, expenses and cash flows of such certain consolidated Public SPACs. The ownership interest in certain TPG Funds held by entities or persons outside of TPG are reflected as other non-controlling interests in the accompanying Consolidated Financial Statements for fiscal years beginning prior to January 1, 2022. All of the management fees, performance allocations (as defined herein) 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 these entities has no net effect on net income attributable to TPG Inc., its predecessor, or 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. 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. 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 (i) 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 (ii) limited partners with equity at risk are able to exercise substantive participating rights over the general partners. 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. 166 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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 to the Consolidated Financial Statements). Investments Investments consist of investments in private equity funds, real estate funds, hedge funds and credit funds, including our share of any performance allocations and 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 – Performance Allocations 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 Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”). The Company, along with the TPG Funds, applies 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. 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 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 Topic 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. 167 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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. Non-Controlling Interests Non-controlling interests consists of ownership interests held by third-party investors in certain entities that are consolidated, but not 100% owned. The aggregate of the income or loss and corresponding equity that is not owned by the Company is included in non-controlling interests in the Consolidated Financial Statements. Allocation of income to non-controlling interest holders is based on the respective entities’ governing documents. 168 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Revenues Revenues consisted of the following (in thousands): Year Ended December 31, 2022 2021 2020 Management fees $ 931,291 $ 731,974 $ 699,492 Fee credits ( 11,461 ) ( 13,630 ) ( 20,012 ) Monitoring fees 14,330 14,324 19,837 Transaction fees 97,909 90,606 44,528 Incentive fees 5,183 — 9,521 Expense reimbursements and other 209,383 154,630 130,000 Total fees and other 1,246,635 977,904 883,366 Performance allocations 720,106 3,792,861 1,203,520 Capital interests 36,146 205,622 27,952 Total capital allocation-based income 756,252 3,998,483 1,231,472 Total revenues $ 2,002,887 $ 4,976,387 $ 2,114,838 169 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Fees and Other Fees and other are accounted for as contracts with customers under ASC 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 (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) 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, limited partners 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 judgments 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 to the Consolidated Financial Statements for amounts classified in due from affiliates. Management Fees The Company provides investment management services to the TPG Funds, limited partners 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. 170 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Management fees earned 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. 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, as well as 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 reduce management fees payable by funds by an agreed upon percentage of certain fees, including monitoring and transaction fees earned from Portfolio Companies (“Fee Credits”). Investment funds receive the benefit of 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 by investment funds concurrently with the recognition of monitoring fees and transaction fees. Since Fee Credits are payable to investment funds, amounts of Fee Credits 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 payable to investment funds are recorded in due to affiliates in the Consolidated Financial Statements. See Note 1 5 to the Consolidated Financial Statements. 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 performance allocations, 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 is 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 Consolidated Financial Statements. After the contract is established, there are no significant judgments made when determining the transaction price. 171 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Capital Allocation-Based Income (Loss) Capital allocation-based income (loss) 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 “performance allocations”). The Company records capital allocation-based income (loss) 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”. Performance allocations are allocated to the general partners 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 performance allocations 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 performance allocations to reflect either (i) positive performance resulting in an increase in the performance allocations allocated to the general partner or (ii) 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 performance allocations allocated to the general partner. In each case, performance allocations are 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 performance allocations once previously recognized performance allocations for a TPG Fund have been fully reversed, including realized performance allocations. The general partner is not obligated to make payments for guaranteed returns or hurdles of a fund and, therefore, cannot have negative performance allocations over the life of a fund. Accrued but unpaid performance allocations as of the reporting date are reflected in investments in the Company’s Consolidated Financial Statements. Performance allocations received by the general partners of the respective TPG Funds are subject to clawback to the extent the performance allocations received by the general partner exceed 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, 2022 related to clawback, see Note 1 8 to the Consolidated Financial Statements. Revenue related to performance allocations 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, 2022, 2021 and 2020, over 10 % of consolidated revenues were generated in the United States. For the year ended December 31, 2022, 87 %, 5 % and 8 % of consolidated revenues were generated in the Americas, Europe/Middle East and Asia-Pacific, respectively. 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. 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 records its proportionate share of investee’s equity in earnings or losses based on the most recently available financial 172 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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 forward purchase agreements (“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 Cash-based compensation and benefits includes (i) salaries and wages, (ii) benefits and (iii) discretionary cash bonuses. Bonuses are accrued over the service period to which they relate. Compensation expense related to the issuance of equity-based awards is measured at grant-date fair value. Compensation expense for awards that vest over a future service period is recognized over the relevant service period on a straight-line basis. Compensation expense for awards that do not require future service is recognized immediately. Compensation expense for awards that contain market and service conditions is based on grant-date fair value that factors in the probability that the market conditions will be achieved and is recognized on a tranche by tranche basis using the accelerated attribution method. The requisite service period for those awards is the longer of the explicit service period and 173 Table of Contents TPG Inc. Notes to Consolidated Financial Statements the derived service period. The Company recognizes equity-based award forfeitures in the period they occur as a reversal of previously recognized compensation expense. Prior to the IPO, all performance allocation payments in the form of legal form equity made to the Company’s partners were paid pro rata based on ownership percentages in the underlying investment partnership and accounted for as distributions on the equity held by such partners during such period. For the period in 2022 prior to the IPO, there were no performance allocations earned, allocated or distributed with respect to partnership interests. Performance allocation compensation expense and accrued performance allocation compensation is the portion of performance allocations that TPG allocates to certain of its employees and certain other advisors of the Company. Performance allocations due to our partners and professionals are accounted for as compensation expense in conjunction with the recognition of the related performance allocations and, until paid, are recognized as accrued performance allocation compensation. Accordingly, upon a reversal of performance allocations, the related compensation expense, if any, is also reversed. Net Income (Loss) Per Share of Class A Common Stock Basic income (loss) per share of Class A common stock is calculated by dividing net income (loss) attributable to TPG Inc. by the weighted-average shares of Class A common stock, unvested participating shares of Class A common stock outstanding for the period and vested deferred restricted shares of Class A common stock that have been earned for which issuance of the related shares of Class A common stock is deferred until future periods. Diluted income (loss) per share of Class A Common Stock reflects the impact of all dilutive securities. Unvested participating shares of common stock are excluded from the computation in periods of loss as they are not contractually obligated to share in losses. The Company applies the treasury stock method to determine the dilutive weighted-average common shares represented by the unvested restricted stock units. The Company applies the if-converted method to the TPG Operating Group partnership units to determine the dilutive impact, if any, of the exchange right included in the TPG Operating Group partnership units. 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. Cash and Cash Equivalents Held by Consolidated Public SPACs Cash and cash equivalents held by consolidated Public SPACs represent cash and cash equivalents that are held by consolidated Public SPACs and are not available to fund the general liquidity needs of the Company. Assets Held in Trust Accounts Proceeds from equity issued by certain consolidated 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, 2022 and December 31, 2021, TPG Pace Beneficial II Corp. (“YTPG”) assets held in Trust Accounts were deposited into a non-interest-bearing U.S. based account. As of December 31, 2022, AfterNext HealthTech Acquisition Corp. (“AFTR”) assets held in 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, 2021, these assets were deposited into a non-interest-bearing U.S. based trust account. 174 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Derivative Liabilities of Public SPACs Financial derivative assets and liabilities related to our consolidated Public SPACs’ investment activities consist of warrant liabilities and forward purchase agreements. 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 Public SPAC 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 Public SPAC 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. Certain of the Company’s consolidated Public SPACs issued 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. 175 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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. 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 variable rate nature. See Note 12 to the Consolidated Financial Statements. 176 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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 but not consolidated by the Company, Portfolio Companies of 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. Goodwill is reviewed for impairment at least annually utilizing a qualitative or quantitative approach, and more frequently if circumstances indicate impairment may have occurred. The impairment testing for goodwill under the qualitative approach is based first on a qualitative assessment to determine if it is more likely than not that the fair value of the Company’s reporting unit is less than its respective carrying value. If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying value, the Company performs a quantitative analysis. When the quantitative approach indicates an impairment, an impairment loss is recognized to the extent by which the carrying value exceeds the fair value, not to exceed the total amount of goodwill. As of December 31, 2022, we believe it is more likely than not that the fair value of our reporting unit exceeds its carrying value. 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. Amortization expense is included in depreciation and amortization expense in the Consolidated Statements of Operations. 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 177 Table of Contents TPG Inc. Notes to Consolidated Financial Statements asset that the lessee is reasonably certain to exercise. For such leases, the Company will not apply the recognition requirements of ASC Topic 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 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 Financial Accounting Standards Board (“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 N o te 1 7 to the Consolidated Financial Statements). 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. 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. The Company accounts for redeemable equity in accordance with ASC Topic 480-10-S99, Distinguishing Liabilities from Equity (“ASC 480”), which states redemption provisions not 178 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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. If a Public SPAC is unable to complete a business combination within the time period required by its governing documents, this equity becomes redeemable and is reclassified out of redeemable equity and into Public SPAC current redeemable equity in accordance with ASC 480 as the Public SPAC prepares for dissolution. Income Taxes As a result of the Reorganization, the Company is treated as a corporation for U.S. federal and state income tax purposes. The Company is subject to U.S. federal and state income taxes, in addition to local and foreign income taxes, with respect to our allocable share of taxable income generated by the TPG Operating Group partnerships. Prior to the Reorganization and the IPO, the Company was treated as a partnership for U.S. federal income tax purposes and therefore was not subject to U.S. federal and state income taxes except for certain consolidated subsidiaries that were 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. The provision for income taxes in the historical Consolidated Statements of Operations consists of U.S. (federal, state and local) and foreign income taxes with respect to certain consolidated subsidiaries. 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 Topic 740, Income Taxes , a valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized. The realization of deferred tax assets is dependent on the amount of our future taxable income. When evaluating the realizability of deferred tax assets, all evidence (both positive and negative) is considered. This evidence includes, but is not limited to, expectations regarding future earnings, future reversals of existing temporary tax differences and tax planning strategies. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions including evaluating uncertainties. The Company reviews its tax positions quarterly and adjusts its tax balances as new information becomes available. The Company recognizes interest and penalties relating to unrecognized tax benefits as income tax expense (benefit) within the Consolidated Statement of Operations. Segment The Company operates its business in a single operating and reportable segment, consistent with how its chief operating decision maker reviews financial performance and allocates resources. The Company operates collaboratively across product lines with a single expense pool. Regulated Entities At December 31, 2022, 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. 179 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Recent Accounting Pronouncements In June 2022, the FASB issued Accounting Standard Update (“ASU”) 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which (1) clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and (2) requires specific disclosures related to such an equity security. Under current guidance, stakeholders have observed diversity in practice related to whether contractual sale restrictions should be considered in the measurement of the fair value of equity securities that are subject to such restrictions. The amendments in ASU 2022-03 should be applied to equity securities with a contract containing a sale restriction that is executed or modified on or after the adoption date. For equity securities with a contract containing a sale restriction that was executed before the adoption date, companies should continue to apply the historical accounting policy for measuring such securities until the contractual restriction expires or is modified. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company does not expect the adoption of ASU 2022-03 to have a material impact to its Consolidated Financial Statements. Recently Adopted Accounting Guidance In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for public entities for annual reporting periods beginning after December 15, 2020 and interim periods within those reporting periods, with early adoption permitted. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted ASU 2019-12 on January 1, 2022. Based on the Company’s existing application of ASC 740, the new guidance did not have a material impact on the Company’s consolidated financial statements. In March 2020, the FASB issued 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 the London Interbank Offered Rate (“LIBOR”), and certain other floating rate benchmark indices 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 June 2023. Adoption is permitted at any time. The Company elected to apply the optional expedient for contract modifications this year in conjunction with the amendments to its credit facilities as further described in Note 12 to the Consolidated Financial Statements. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU’s amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company’s adoption of ASU 2020-06 on January 1, 2022 did not have a material impact to its Consolidated Financial Statements. 180 Table of Contents TPG Inc. Notes to Consolidated Financial Statements In May 2021, the FASB issued ASU 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”). The amendments in this ASU affect all entities that issue freestanding written call options that are classified in equity, particularly when a freestanding equity-classified written call option is modified or exchanged and remains equity-classified after the modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU is applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company has no written call options classified in equity and as a result, the adoption of ASU 2021-04 did not have any impact to its Consolidated Financial Statements. 3. Acquisition 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” and, together with NQ Manager, “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 %. The operating results of NewQuest have been included in the Company’s Consolidated Financial Statements since the Acquisition Date. The Acquisition was accounted for as a business combination under ASC Topic 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 pre-tax 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 %. At December 31, 2022, the Company believes that it is probable that it will meet the conditions for the first contingent payment. The Company no longer believes that the conditions for the second payment will be met which resulted in a $ 4.2 million reduction of the contingent liability during the year ended December 31, 2022, recorded in general, administrative and other on the Consolidated Statements of Operations. 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. 181 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The following table summarizes the fair value of the consideration 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 performance fee allocations 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 Performance fee allocations 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 performance fee allocations 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 was 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. 182 Table of Contents TPG Inc. 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 at Acquisition Date consist of the following: Fair Value Average Useful Life ($ in thousands) (in years) Contractual performance fee allocations $ 132,600 6.7 Management contracts 20,000 3.5 Investor relationships 25,000 12 Total Intangible Assets $ 177,600 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 January 2022, the Company completed its acquisition of the remaining 33.3 % interest in NQ Manager in exchange for equity interests in the Company, which consisted of 1,638,866 shares of Class A common stock and 1,072,998 Common Units of the TPG Operating Group. All of the granted equity interests are subject to a three-year service vesting condition and as such, will be recognized on a straight-line basis as post-combination compensation expense. The effect of the acquisition was a reallocation of equity between controlling and non-controlling interest of $ 33.6 million. This transaction was an acquisition under common control in which no gain or loss was recognized. 183 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 4. Investments Investments consist of the following (in thousands): December 31, 2022 2021 Equity method - performance allocations $ 4,677,017 $ 5,366,694 Equity method - capital interests (includes assets pledged of $ 475,110 and $ 492,276 ) 607,964 590,662 Equity method - fair value option 20,907 46,013 Equity investments 12,072 97,899 Equity method - other 11,908 7,778 Total investments $ 5,329,868 $ 6,109,046 Net gains (losses) from performance allocations and capital interests are disclosed in the Revenue section of Note 2 t o the Consolidated Financial Statements. The following table summarizes net (losses) gains from investment activities (in thousands): Year Ended December 31, 2022 2021 2020 Net (losses) gains from investment activities Net (losses) gains of equity method investments, fair value option (a) $ ( 25,106 ) $ 45,435 $ ( 32,170 ) Net gains of equity method investments - other (b) 802 230,186 31,027 Net (losses) gains from equity investments (c) ( 85,827 ) 77,598 ( 4,696 ) Total net (losses) gains from investment activities $ ( 110,131 ) $ 353,219 $ ( 5,839 ) Gain on deconsolidation (d) $ — $ — $ 401,695 ___________ (a) In September 2021, TPG Pace Tech Opportunities Corp. (“PACE”) completed a business combination which resulted in a gain on deconsolidation of PACE in an amount of $ 122.7 million. (b) Includes pre-tax gain of $ 95.0 million for the year ended December 31, 2021 on remeasurement of the Company’s pre-existing equity investment in NewQuest at fair value prior to consolidation. See N ote 3 to the Consolidated Financial Statements. (c) In December 2021, TPG PACE Solutions Corp. (“TPGS”) completed a business combination which resulted in a gain on deconsolidation of TPGS in an amount of $ 109.9 million. (d) 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. 184 Table of Contents TPG Inc. Notes to Consolidated Financial Statements There were no activities related to deconsolidation of previously consolidated TPG Funds and Public SPACs during the year ended December 31, 2022. The following table presents the supplemental cash flow disclosures from activities related to deconsolidation of previously consolidated TPG Funds and Public SPACs during the year ended December 31, 2021 (in thousands): Cash and cash equivalents $ 491,523 Investments held in Trust Accounts 430,265 Other assets 3,696 Derivative liabilities of Public SPACs ( 50,898 ) Other liabilities ( 32,580 ) Accounts payable and accrued expenses ( 7,278 ) Notes payable to affiliates ( 2,000 ) Amounts due to shareholders ( 500,000 ) Redeemable equity ( 430,265 ) Controlling interests 36,386 Other non-controlling interests 61,151 Equity Method Investments, Fair Value Option On September 20, 2021, PACE completed a business combination with Nerdy, Inc. (“NRDY”), a leading platform for delivering live online learning. At the time of the business combination, a reconsideration event occurred whereby the Company no longer has control 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, 2022 and December 31, 2021, the Company held a 9.0 % and 9.4 % beneficial ownership interest in NRDY, respectively, 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 $ 20.9 million and $ 46.0 million, respectively. The warrants entitle the Company to acquire one share of 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. 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 held a controlling financial interest in the Former Affiliate’s management companies or general partners of pooled investment entities. Post-closing, TPG held 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 Former Affiliate at fair value at the time of the transaction, recognized a gain on deconsolidation in accordance with U.S. GAAP 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 were 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 related to specific investment funds of the Former Affiliate and was amortized on a straight-line basis over the funds’ estimated remaining lives. The amortization was recognized in net gains (losses) from investment activities in the Consolidated Statements of Operations. The remaining amount related to equity method goodwill recognized upon deconsolidation which was 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 to the Consolidated Financial Statements, the Company transferred its investment in the Former Affiliate to RemainCo on December 31, 2021 resulting in the derecognition of its investment in the Former Affiliate. 185 Table of Contents TPG Inc. 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. During the years ended December 31, 2022 and 2021, the Company did no t recognize any impairment losses on an equity method investment without a readily determinable fair value. During the year ended December 31, 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. Equity Investments Equity investments represent proprietary investment securities held by the Company. At December 31, 2022 and December 31, 2021, the Company held equity investments with readily determinable fair values of $ 12.1 million and $ 97.9 million, respectively. In December 2021, TPG PACE Solutions Corp. (“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’s 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, 2022, 2021, and 2020, 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. 186 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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, 2022 and 2021 (in thousands): December 31, 2022 2021 Total assets $ 78,079,182 $ 67,268,493 Total liabilities 14,299,814 11,499,817 Total equity 63,779,368 55,768,676 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, 2022, 2021 and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 Interest, dividends and other $ 1,362,962 $ 2,467,862 $ 1,078,999 Expenses 1,855,509 1,871,086 1,540,721 Net gains from investment activities 4,475,193 23,141,140 9,103,461 Net income $ 3,982,646 $ 23,737,916 $ 8,641,739 Investment Activities of Consolidated TPG Funds As part of the Reorganization described in Note 1 to the Consolidated Financial Statements, all TPG Funds were deconsolidated as of December 31, 2021, thus the Company had no gains (losses) from investment activities of consolidated TPG Funds for the year ended December 31, 2022. Net gains from investment activities of consolidated TPG Funds was $ 23.4 million for the year ended December 31, 2021 and net losses from investment activities of consolidated TPG Funds was $ 18.7 million for the year ended December 31, 2020. 5. Derivative Instruments The consolidated Public SPACs enter into derivative contracts in connection with their proprietary trading activities, including warrants and FPAs, which meet the definition of a derivative in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). As a result of the use of derivative contracts, the consolidated Public SPACs are exposed to the risk that counterparties will fail to fulfill their contractual obligations and are exposed to the volatility of the underlying instruments. These warrants and FPAs are included in derivative liabilities of Public SPACs on the Consolidated Statements of Financial Condition. As of December 31, 2022 and December 31, 2021, the fair value of the warrants and FPAs were $ 0.7 million and $ 13.0 million, respectively. There were no related offsets or cash collateral pledged or received for the warrants and FPAs as of December 31, 2022 and December 31, 2021. For the years ended December 31, 2022 and 2021, the Company recorded unrealized gains on warrants and FPAs totaling $ 12.4 million and $ 211.8 million, respectively. For the year ended December 31, 2020, the Company recorded unrealized losses on warrants and FPAs totaling $ 239.3 million. 187 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The consolidated Public SPACs’ derivative instruments were as follows (in thousands): December 31, 2022 December 31, 2021 Derivatives not designated as hedging instruments under Subtopic 815-20: Liability derivatives: Public warrants $ 667 $ 11,662 Forward purchase agreements — 1,386 Derivative liabilities of Public SPACs $ 667 $ 13,048 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, 2022 2021 2020 Realized losses, net on total return swaps $ — $ ( 10,269 ) $ ( 5,139 ) Realized (losses) gains, net on foreign currency forwards — ( 175 ) 1,922 Unrealized gains (losses), net on total return swaps — 10,068 ( 10,807 ) Unrealized gains (losses), net on foreign currency forwards — 28 ( 717 ) Total net losses on derivative instruments from investment activities of consolidated TPG Funds — ( 348 ) ( 14,741 ) Unrealized gains (losses), net on public warrants 10,996 52,128 ( 46,730 ) Unrealized gains (losses), net on forward purchase agreements 1,386 159,694 ( 192,539 ) Total net gains (losses) on derivative instruments of Public SPACs 12,382 211,822 ( 239,269 ) Net gains (losses) on derivative instruments $ 12,382 $ 211,474 $ ( 254,010 ) 6. 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, 2022 Level I Level II Level III Total Assets Equity method investments - fair value option $ 20,907 $ — $ — $ 20,907 Equity investments 12,072 — — 12,072 Total assets $ 32,979 $ — $ — $ 32,979 Liabilities Liabilities of consolidated Public SPACs (a) : Public warrants $ 667 $ — $ — $ 667 Total liabilities $ 667 $ — $ — $ 667 _______________ (a) The FPAs related to TPG PACE Beneficial Finance Corp. ("TPGY") were terminated at zero fair value on October 11, 2022. 188 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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 Public SPACs: Public warrants $ 11,662 $ — $ — $ 11,662 Forward purchase agreements — — 1,386 1,386 Total liabilities $ 11,662 $ — $ 1,386 $ 13,048 The valuation methodology used in the determination of the fair value of financial instruments for which Level III inputs were used at December 31, 2022 and December 31, 2021 included a combination of the market approach and income approach. 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, 2022 2021 Equity security assets Balance, beginning of period $ — $ 12,324 Realized gains, net — 4,025 Unrealized losses, net — ( 3,778 ) Purchases — 708 Proceeds — ( 8,223 ) Deconsolidation (a) — ( 5,056 ) Balance, end of period $ — $ — Derivative liabilities Balance, beginning of period $ 1,386 $ 197,539 Unrealized gains, net ( 1,386 ) ( 164,695 ) Transfers (b) — ( 31,458 ) Balance, end of period $ — $ 1,386 _______________ (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 to the Consolidated Financial Statements. (b) 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. See Note 4 to the Consolidated Financial Statements. 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 Public SPACs in the Consolidated Statements of Operations. As of December 31, 2022, there are no investments categorized as Level III of the fair value hierarchy. The following tables provide qualitative information about investments categorized in Level III of the fair value hierarchy as of December 31, 2021. 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 189 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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. 7. Intangible Assets and Goodwill As discussed in Note 3 to the Consolidated Financial Statements, on July 1, 2021, the Company completed the acquisition of NewQuest, which resulted in the recognition of goodwill of $ 203.7 million and certain identifiable intangible assets, which are presented in other assets on the Consolidated Statements of Financial Condition. The following table summarizes the carrying amounts of goodwill and intangible assets as of December 31, 2022 and 2021 (in thousands): December 31, 2022 2021 Contractual performance fee allocations (a) $ 102,591 $ 122,598 Management contracts (a) 10,625 16,874 Investor relationships (a) 21,875 23,958 Other intangibles 1,096 1,121 Goodwill (b) 230,194 230,194 Total intangible assets and goodwill $ 366,381 $ 394,745 _______________ (a) Intangibles related to the acquisition of NewQuest described in Note 3 to the Consolidated Financial Statements. (b) Includes $ 203.7 million of goodwill related to the acquisition of NewQuest described in Note 3 to the Consolidated Financial Statements. No impairment losses on goodwill or intangible assets were recorded during the years ended December 31, 2022, 2021 and 2020. Intangible asset amortization expense was $ 28.4 million, $ 19.8 million and less than $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. The following table presents estimated remaining amortization expense for intangible assets that existed as of December 31, 2022 (in thousands): 190 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 2023 $ 27,114 2024 25,864 2025 23,989 2026 20,254 2027 18,371 Thereafter 19,602 Total $ 135,194 8. Other Assets Other assets consist of the following (in thousands): December 31, 2022 2021 Fixed assets, net: Leasehold improvements $ 39,946 $ 40,798 Other fixed assets 11,347 10,709 Computer hardware and software 8,874 9,526 Furniture, fixtures and equipment 6,878 7,724 Accumulated depreciation ( 42,992 ) ( 42,447 ) Total fixed assets, net 24,053 26,310 Goodwill 230,194 230,194 Intangible assets, net 136,187 164,551 Right-of-use assets 130,357 157,467 Prepaid expenses 23,809 23,995 Other 84,792 54,800 Other assets $ 629,392 $ 657,317 9. Accounts Payable and Accrued Expenses, and Other Liabilities Accounts payable and accrued expenses consist of the following (in thousands): December 31, 2022 2021 Trade accounts payable $ 44,186 $ 37,429 Accrued expenses 53,985 96,922 Accounts payable and accrued expenses $ 98,171 $ 134,351 Other liabilities consist of the following (in thousands): December 31, 2022 2021 Lease Obligation $ 147,887 $ 177,003 Clawback liability (see Note 18) 58,317 58,317 Other 19,886 2,926 Other liabilities $ 226,090 $ 238,246 191 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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. 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, 2022, 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 United States 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 192 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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. 11. Variable Interest Entities TPG consolidates VIEs in which it is considered the primary beneficiary as described in Note 2 to the Consolidated Financial Statements. 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 performance allocations. 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 performance allocations. 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, 2022 and 2021, 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 (in thousands): December 31, 2022 2021 Investments (includes assets pledged of $ 475,110 and $ 492,276 ) $ 5,284,981 $ 5,957,356 Due from affiliates 88,847 93,311 VIE-related assets 5,373,828 6,050,667 Potential clawback obligation 1,869,395 1,500,875 Due to affiliates 47,572 36,049 Maximum exposure to loss $ 7,290,795 $ 7,587,591 RemainCo In conjunction with the Reorganization described in Note 1 to the Consolidated Financial Statements, 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,” 193 Table of Contents TPG Inc. Notes to Consolidated Financial Statements RemainCo is generally entitled to receive distributions of performance allocations not previously designated for partners and employees 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”). 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 the 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 the 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 $ 110.0 million, $ 120.0 million and $ 130.0 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 $ 10.0 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 $ 40.0 million. RemainCo Administrative Services Agreement The TPG Operating Group has entered into an administrative services agreement with RemainCo whereby the TPG Operating Group provides RemainCo with certain administrative services, including maintaining RemainCo’s books and records, tax and financial reporting and similar support which began on January 1, 2022. In exchange for these services, RemainCo pays 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 2018, 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 give the Company the power to direct the activities that most significantly impact the performance of the VIEs, and (ii) its variable interests in the VIEs give the Company the obligation to absorb losses and the right to receive residual returns that could potentially be significant. In 2019, 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. 194 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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 VIEs are shown on the Company’s Consolidated Statements of Financial Condition as secured borrowings, net of unamortized issuance costs as of December 31, 2022 and December 31, 2021 of $ 4.7 million and $ 5.1 million, respectively. The following table depicts the total assets and liabilities related to VIE securitization transactions included in the Company’s Consolidated Statements of Financial Condition (in thousands): December 31, 2022 2021 Cash and cash equivalents $ 33,612 $ 24,719 Restricted cash 13,166 13,135 Participation rights receivable (a) 475,110 492,276 Due from affiliates 436 1,146 Total assets $ 522,324 $ 531,276 Accrued interest $ 191 $ 191 Due to affiliates and other 280 22,470 Secured borrowings, net 245,259 244,950 Total liabilities $ 245,730 $ 267,611 _______________ (a) Participation rights receivable related to VIE securitization transactions are included in investments in the Company’s Consolidated Statements of Financial Condition . 12. Debt The following table summarizes the Company’s and its subsidiaries’ debt obligations (in thousands): As of December 31, 2022 As of December 31, 2021 Debt Origination Date Maturity Date Borrowing Capacity Carrying Value Interest Rate Carrying Value Interest Rate Senior Unsecured Revolving Credit Facility (a) March 2011 July 2027 $ 700,000 $ — 5.46 % $ — 1.85 % Subordinated Credit Facility (b) August 2014 August 2024 30,000 — 6.71 % — 2.35 % Senior Unsecured Term Loan (c) December 2021 December 2024 200,000 199,307 5.46 % 199,494 1.10 % Secured Borrowings - Tranche A (d) May 2018 June 2038 200,000 196,186 5.33 % 195,938 5.33 % Secured Borrowings - Tranche B (d) October 2019 June 2038 50,000 49,073 4.75 % 49,012 4.75 % Total debt obligations $ 1,180,000 $ 444,566 $ 444,444 _______________ (a) In March 2011, TPG Holdings, L.P. entered into a $ 400.0 million credit facility (the “Senior Unsecured Revolving Credit Facility”). Between 2018 and 2021, TPG Holdings, L.P. entered into the first, second, third and fourth amendments to the Senior Unsecured Revolving Credit Facility to, among other things, release the collateral package under the facility, reduce commitments to $ 300.0 million and to provide for successor borrowers. In July 2022, TPG Operating Group II, L.P., as borrower, entered into a fifth amendment and restatement of the Senior Unsecured Revolving Credit Facility (the “Amended Senior Unsecured Revolving Credit Facility”) to among other things, (i) extend the maturity date of the revolving credit facility from November 2025 to July 2027, (ii) increase the aggregate revolving commitments thereunder from $ 300.0 million to $ 700.0 million and (iii) replace LIBOR as the applicable reference rate with the Secured Overnight Financing Rate (“SOFR”) and otherwise conform the credit facility to accommodate SOFR as the reference rate. Dollar-denominated principal amounts outstanding under the Amended 195 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Senior Unsecured Revolving Credit Facility accrue interest, at the option of the applicable borrower, either (i) at a base rate plus applicable margin not to exceed 0.25 % per annum or (ii) at a term SOFR rate plus a 0.10 % per annum adjustment and an applicable margin not to exceed 1.25 %. The Company is also required to pay a quarterly commitment fee on the unused commitments under the Amended Senior Unsecured Revolving Credit Facility not to exceed 0.15 % per annum, as well as certain customary fees for any issued letters of credit. In August 2022, the Company entered into a first amendment to the Amended Senior Unsecured Revolving Credit Facility, which provides that if the Company is not publicly rated, the applicable margin for borrowings under the facility may be determined using the Company’s leverage ratio. (b) 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 August 2022, the subsidiary extended the maturity date of the Subordinated Credit Facility from August 2023 to August 2024 and replaced LIBOR as the applicable reference rate with SOFR, and otherwise conforms the agreements to accommodate SOFR as the reference rate. (c) 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 had an interest rate of LIBOR plus 1.00 % and will mature in December 2024. In July 2022, the Company entered into an amended and restated term loan agreement (the “Amended Senior Unsecured Term Loan Agreement”). The Amended Senior Unsecured Term Loan Agreement, among other things, replaces LIBOR as the applicable reference rate with SOFR, and otherwise conforms the term loan agreement to accommodate SOFR as the reference rate. Principal amounts outstanding under the Amended Senior Unsecured Term Loan Agreement accrue interest, at the option of the borrower, either (i) at a base rate plus an applicable margin of 0.00 % or (ii) at a term SOFR rate plus a 0.10 % per annum adjustment and an applicable margin of 1.00 %. (d) The Company’s secured borrowings are issued using on-balance sheet securitization vehicles, as further discussed in Note 1 1 to the Consolidated Financial Statements. 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. 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, 2022, the Company is in compliance with these covenants and conditions. During the years ended December 31, 2022, 2021 and 2020, the Company incurred interest expense of $ 19.0 million, $ 14.3 million and $ 15.7 million, respectively, on its debt obligations. At December 31, 2022 and 2021, the estimated fair value of the secured borrowings based on current market rates and credit spreads for debt with similar maturities was $ 231.5 million and $ 271.6 million, respectively, and the carrying value, excluding unamortized issuance costs, was $ 250.0 million at December 31, 2022 and 2021. At December 31, 2022, the fair value of the Company’s Senior Unsecured Term Loan was $ 199.2 million, which approximates its carrying amount represented in the Consolidated Statements of Financial Condition due to its variable rate nature. 13. Income Taxes As a result of the Reorganization, the Company is treated as a corporation for U.S. federal and state income tax purposes. We are subject to U.S. federal and state income taxes, in addition to local and foreign income taxes, with respect to our allocable share of taxable income generated by the TPG Operating Group partnerships. Prior to the Reorganization, the Company was treated as a partnership for U.S. federal income tax purposes and therefore was not subject to U.S. federal and state income taxes except for certain consolidated subsidiaries that were 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. The income (loss) before income taxes includes the following components (in thousands): Year Ended December 31, 2022 2021 2020 Income (loss) before income taxes United States $ 80,872 $ 3,171,385 $ 1,756,113 International ( 104,624 ) 1,493,650 ( 307,402 ) $ ( 23,752 ) $ 4,665,035 $ 1,448,711 196 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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, 2022 2021 2020 Current income taxes (benefit) Federal $ 44,714 $ 1,950 $ 1,124 State and local 9,466 1,954 1,582 International 5,443 5,010 7,936 59,623 8,914 10,642 Deferred income taxes (benefit) Federal ( 21,639 ) ( 223 ) ( 334 ) State and local ( 4,769 ) ( 105 ) ( 192 ) International ( 732 ) 452 ( 337 ) ( 27,140 ) 124 ( 863 ) Income tax expense (benefit) $ 32,483 $ 9,038 $ 9,779 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, 2022 2021 Deferred tax assets Accruals $ 2,063 $ 1,637 Investment basis differences 99,018 — Equity based compensation 10,674 — Lease liabilities 12,638 — Fixed assets 369 384 Straight line rent 6 305 Net operating loss carryforwards — 449 Other 603 125 125,371 2,900 Less: valuation allowance ( 80,340 ) ( 442 ) Deferred tax assets, net $ 45,031 $ 2,458 Deferred tax liabilities Accruals $ 42 $ 25 Right-of-use assets 11,157 — Fixed assets 155 585 Straight-line rent — 7 Other 218 ( 314 ) Deferred tax liabilities, net $ 11,572 $ 303 As of December 31, 2022, the Company has recognized net deferred tax assets before the considerations of valuation allowances in the amount of $ 113.8 million which primarily relate to excess income tax basis versus book basis differences in connection with the Company’s investment in the TPG Operating Group partnerships. The excess of income tax basis in the TPG Operating Group partnerships was primarily due to the Reorganization which resulted in a step-up in the tax basis of certain assets to the Company that will be recovered as those underlying assets are sold or the tax basis is amortized. A portion of the excess income tax basis in the TPG Operating Group partnerships will only reverse upon a sale 197 Table of Contents TPG Inc. Notes to Consolidated Financial Statements of the Company’s interest in the TPG Operating Group partnerships which is not expected to occur in the foreseeable future. As a result, the Company has recognized a valuation allowance in the amount of $ 80.3 million against its net deferred tax assets of $ 113.8 million (resulting in net deferred tax assets after valuation allowance of $ 33.5 million) as of December 31, 2022, as it is more-likely-than not that this portion of our deferred tax assets is not realizable. The Company evaluates the realizability of its deferred tax asset on a quarterly basis and adjusts the valuation allowance when it is more-likely-than-not that all or a portion of the deferred tax asset may not be realized. Additionally, and concurrent with the Reorganization, the Company recorded a payable pursuant to the Tax Receivable Agreement within other liabilities in the Consolidated Statements of Financial Condition of $ 18.3 million. At December 31, 2022, 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 than 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, 2022 2021 2020 U.S. federal taxes at statutory rate 21.0 % 21.0 % 21.0 % Income passed through to partners ( 136.2 ) ( 20.1 ) ( 24.5 ) State and local income taxes ( 25.9 ) — 0.1 Foreign Taxes, net of U.S. foreign tax credits ( 17.3 ) ( 0.8 ) 4.1 Equity based compensation 2.0 — — Change in TPG Operating Group Partnerships tax basis estimate 21.7 — — Return to Provision 3.9 — — Change in valuation allowance ( 4.3 ) — — Other ( 1.7 ) — — Effective income tax rate ( 136.8 %) 0.2 % 0.7 % The Company’s effective tax rate was ( 136.8 )%, 0.2 % and 0.7 % for the years ended December 31, 2022, 2021 and 2020, respectively. The Company’s effective tax rate is dependent on many factors, including the estimated amount of income subject to tax. Consequently, the effective tax rate can vary from period to period. The Company’s overall effective tax rate in each of the periods described above deviates from the statutory rate primarily because (i) the Company was not subject to U.S. federal taxes prior to the Reorganization and (ii) a portion of income and losses are allocated to non-controlling interests, and the tax liability on such income or loss is borne by the holders of such non-controlling interests. In addition, during the year ended December 31, 2022, the Company recognized an income tax benefit in connection with certain changes in estimate of the income tax basis of the Company's investments in the TPG Operating Group partnerships at the time of the Reorganization. 198 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The following is a tabular reconciliation of unrecognized tax benefits, excluding interest and penalties (in thousands): Year Ended December 31, 2022 2021 2020 Unrecognized tax benefits - January 1 $ 1,965 $ 1,760 $ 1,459 Additions related to current year positions 259 359 363 Additions related to prior year positions — — — Reductions for tax positions of prior years — ( 119 ) — Settlements — — — Lapse of statute of limitations — — — Exchange rate fluctuations ( 200 ) ( 35 ) ( 62 ) Unrecognized tax benefits - December 31 $ 2,024 $ 1,965 $ 1,760 The Company recognizes interest accrued on uncertain tax benefits in income tax expense. For the years ended December 31, 2022, 2021, 2020, the Company recognized interest of $ 1.1 million, $ 0.9 million and $ 0.8 million, respectively. The Company recognized penalties of $ 1.3 million for each of the years ended December 31, 2022, 2021, 2020. 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. 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, 2022, U.S. federal tax returns related to predecessor entities for the years 2019 through 2021 are generally open under the normal statute of limitations and therefore subject to examination. State and local tax returns of our predecessor entities are generally open to audit for tax years between 2018 to 2021. In addition, certain foreign subsidiaries’ tax returns from 2016 to 2021 are also open for examination by various regulators. The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s Consolidated Financial Statements. On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted in the United States. The IRA, among other things, includes a 15% minimum tax on adjusted financial statement income of corporations with average annual adjusted financial statement income in excess of $1 billion over a three-year period, a 1% excise tax on stock repurchases and additional clean energy tax incentives. The IRA applies to tax years beginning after December 31, 2022. The Company will continue to evaluate its future impact as regulations are issued by the U.S. Department of the Treasury. 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 the year ended December 31, 2020. The payments are shown in the Consolidated Statements of Changes in Equity. As of December 31, 2020, the receivable for the sale of non-controlling interests in consolidated entities had been settled in full. The sale of the equity interests was 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 expired in June 2022. 199 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 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, 2022 2021 Portfolio companies $ 57,492 $ 42,067 Partners and employees 2,270 2,760 Other related entities 54,030 47,183 Unconsolidated VIEs 88,847 93,311 Due from affiliates $ 202,639 $ 185,321 Portfolio companies $ 10,367 $ 6,567 Partners and employees 60,309 125,429 Other related entities 21,615 658,954 Unconsolidated VIEs 47,572 36,049 Due to affiliates $ 139,863 $ 826,999 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. 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 performance allocations at the discretion of the general partner. Investments made by these individuals during the years ended December 31, 2022 and 2021 totaled $ 154.8 million and $ 211.3 million, respectively. Fee Income from Affiliates Substantially all revenues are generated from TPG Funds, limited partners of TPG Funds, or Portfolio Companies. The Company disclosed revenues in Note 2 to the Consolidated Financial Statements. 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 $ 1.6 million and $ 1.0 million at December 31, 2022 and December 31, 2021, 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 less than $ 0.1 million for the year ended December 31, 2022, and $ 0.5 million for each of the years ended December 31, 2021 and 2020 . Aircraft Services The Company terminated its leases of aircraft owned by entities controlled by certain partners of the Company in January 2022. The termination of the leases resulted in the derecognition of a right-of-use asset and a corresponding lease liability of $ 13.6 million. For the year ended December 31, 2022, the Company made no lease payments to entities controlled by certain partners of the Company. For the year ended December 31, 2021, such lease payments, which were paid to entities controlled by certain partners of the Company, totaled $ 4.9 million. 200 Table of Contents TPG Inc. Notes to Consolidated Financial Statements RemainCo Administrative Services Agreement The TPG Operating Group has entered into an administrative services agreement with RemainCo whereby the TPG Operating Group provides RemainCo with certain administrative services, including maintaining RemainCo’s books and records, tax and financial reporting and similar support which began on January 1, 2022. In exchange for these services, RemainCo pays 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. The fees earned by the Company for the year ended December 31, 2022 were $ 19.8 million and recorded in expense reimbursements and other within revenues in the 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 $ 23.5 million, $ 21.8 million and $ 16.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. During the years ended December 31, 2022, 2021 and 2020, these related parties have made payments associated with these arrangements of $ 26.2 million, $ 27.9 million and $ 21.1 million, respectively. 16. Redeemable equity attributable to consolidated Public SPACs Investment in SPACs 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 attributable to Public SPACs in the accompanying Consolidated Financial Statements. 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. In August 2021, AFTR, a SPAC, completed an initial public offering. AFTR sold 25,000,000 units at a price of $ 10.00 per unit for total IPO proceeds 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. In April 2021, YTPG, a SPAC, completed an initial public offering. YTPG sold 40,000,000 shares at a price of $ 10.00 per share for total IPO proceeds of $ 400.0 million. Each share 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, of which the Company is responsible for $ 24.9 million as of December 31, 2022. In October 2020, TPG PACE Beneficial Finance Corp. ("TPGY”), a SPAC, completed an initial public offering. TPGY sold 35,000,000 units at a price of $ 10.00 per unit for total IPO proceeds of $ 350.0 million. Each unit consisted of one Class A ordinary share of TPGY at $ 0.0001 par value and one-fifth of one warrant. On October 11, 2022, TPGY redeemed all of its Class A Shares at a per-share redemption price of approximately $ 10.06 , because TPGY did not consummate an initial business combination within the time period required by its Amended and Restated Memorandum and Articles of Association. As of October 11, 2022, the Class A Shares were deemed cancelled and represented only the right to receive the Redemption Amount. There will be no redemption rights or 201 Table of Contents TPG Inc. Notes to Consolidated Financial Statements liquidating distributions with respect to the TPGY’s warrants, which expired with no value. FPAs entered into by TPGY at the time of its IPO were terminated on October 11, 2022. After October 11, 2022, TPGY ceased all operations except for those required to wind up its business. 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 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. 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. The Company had no such activity for the year ended December 31, 2022. 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, 2022 and 2021, the redeemable equity consisted of 65.0 million and 100.0 million outstanding Class A ordinary shares, respectively. These interests were classified outside of partners’ capital totaling $ 653.6 million and $ 1,000.0 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, 2022 2021 2020 Beginning balance $ 1,000,027 $ 800,011 $ — IPO share proceeds — 935,000 800,000 Current and deferred offering costs 12,959 ( 54,141 ) ( 44,702 ) Bifurcation of warrant liabilities — ( 12,500 ) ( 24,000 ) Net income (loss) attributable to redeemable equity 14,648 155,131 ( 195,906 ) Redemptions / withdrawals ( 352,014 ) ( 304,760 ) — Deconsolidation — ( 430,265 ) — Change in redemption value of redeemable non-controlling interest ( 21,985 ) ( 88,449 ) 264,619 Total redeemable equity $ 653,635 $ 1,000,027 $ 800,011 202 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 17. 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, 2022 2021 2020 Lease cost (a) : Operating lease cost $ 26,371 $ 37,330 $ 35,995 Short-term lease costs 562 416 184 Variable lease cost 6,381 5,067 2,478 Sublease income ( 3,947 ) ( 5,807 ) ( 4,000 ) Total lease cost $ 29,367 $ 37,006 $ 34,657 Weighted-average remaining lease term 7.1 7.4 8.3 Weighted-average discount rate 4.11 % 4.11 % 4.09 % ___________ (a) Office rent expense for the years ended December 31, 2022, 2021 and 2020 was $ 26.1 million, $ 32.0 million and $ 30.9 million, respectively. Supplemental Consolidated Statements of Cash Flows information related to leases were as follows (in thousands): Year Ended December 31, 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities $ 28,458 $ 29,224 $ 29,427 Non-cash right-of-use assets obtained in exchange for new operating lease liabilities 6,311 5,634 6,035 Non-cash right-of-use assets and lease liability termination ( 13,375 ) — — The following table shows the undiscounted cash flows on an annual basis for operating lease liabilities as of December 31, 2022 (in thousands): Year Due Lease Amount 2023 $ 19,000 2024 25,319 2025 27,862 2026 19,765 2027 18,423 Thereafter 62,614 Total future undiscounted operating lease payments 172,983 Less: imputed interest ( 25,096 ) Present value of operating lease liabilities $ 147,887 203 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 18. Commitments and Contingencies Guarantees Certain of the Company’s consolidated entities have guaranteed debt or obligations. At December 31, 2022 and 2021, the maximum obligations guaranteed under these agreements totaled $ 1,120.8 million and $ 715.0 million, respectively. At December 31, 2022, the guarantees had expiration dates as follows (in thousands): Maturity Date Guarantee Amount August 2024 $ 30,000 December 2024 200,000 June 2026 60,000 December 2026 103,718 July 2027 700,000 June 2030 27,050 Total $ 1,120,768 At December 31, 2022 and 2021, the outstanding amount of debt on obligations related to these guarantees was $ 327.8 million and $ 341.3 million, respectively. Letters of Credit The Company had $ 0.5 million and $ 0.7 million in letters of credit outstanding at December 31, 2022 and 2021, respectively. Commitments At December 31, 2022, the third party investors of the consolidated Public SPACs had unfunded capital commitments of $ 150.1 million to the consolidated Public SPACs. At December 31, 2022, the TPG Operating Group had unfunded investment commitments of $ 365.8 million to the TPG Funds, consolidated Public SPACs and other strategic investments. Contingent Obligations (Clawback) With Affiliates The governing agreements of the TPG funds that pay performance allocations 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. Performance allocations received by the general partners of the respective TPG funds are subject to clawback to the extent the performance allocations received by the general partners exceeds the amount the general partners are ultimately entitled to receive based on cumulative fund results. At December 31, 2022, 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, 2022, if all remaining investments were deemed worthless, a possibility management views as remote, the amount of performance allocations subject to potential clawback would be $ 1,869.4 million on a pre-tax basis. During the year ended December 31, 2022, the general partners made no payments on the clawback liability. 204 Table of Contents TPG Inc. Notes to Consolidated Financial Statements Legal Actions and Other Proceedings From time to time, the Company 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. The Company’s business is also subject to extensive regulation, which has and may result in the Company 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 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 the Company or its personnel. The Company accrues a liability for legal proceedings in accordance with U.S. GAAP, in particular, the Company 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 the Company 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. Based on information presently known by management, the Company 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 the Company’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 United States, United Kingdom, 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. 205 Table of Contents TPG Inc. Notes to Consolidated Financial Statements In addition to the Luxembourg appeal, two cases in New York state court are active against TPG and Apax-related parties concerning the Hellas investment. Motions to dismiss by all defendants were made in both actions with the Court now having granted and denied in part those motions, paring back the parties, claims and amounts at issue. Appeals are pending as to the ruling in one matter (with immediate appeals possible as to the ruling in the other). No trial date has been set in either of the two active actions. The prior noted stayed federal actions have now been dismissed by court order and stipulation. The Company believes that the suits related to the Hellas investment are without merit and intends to continue to defend them vigorously. In October 2022, the Company received a document request from the SEC focusing on the use and retention of business-related electronic communications, which, as has been publicly reported, is part of an industry-wide review. The Company is cooperating with the SEC’s request. Indemnifications In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties that provide general indemnifications. In addition, certain of the Company’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 the Company has made. The Company’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects the risk of material loss to be remote. 19. Net Income (Loss) Per Class A Common Share Basic and diluted net income (loss) per share of Class A common stock is presented from January 13, 2022 through December 31, 2022, the period following the Reorganization and IPO. There were no shares of Class A common stock outstanding prior to January 13, 2022, therefore no income per share information has been presented for any period prior to that date. The Company calculates its basic and diluted income (loss) per share using the two-class method for all periods presented, which defines unvested share-based payment awards that contain nonforfeitable rights to dividends as participating securities. The two-class method is an allocation formula that determines income per share for each share of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all income (distributed and undistributed) is allocated to common shares and participating securities based on their respective rights to receive dividends. In computing the dilutive effect that the exchange of TPG Operating Group partnership units would have on net income available to Class A common stock per share, TPG considered that net income (loss) available to holders of shares of Class A common stock would increase due to the elimination of non-controlling interests in the TPG Operating Group, inclusive of any tax impact. The hypothetical conversion may be dilutive to the extent there is activity at the TPG Inc. level that has not previously been attributed to the non-controlling interests or if there is a change in tax rate as a result of a hypothetical conversion. 206 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted net income (loss) per share of Class A common stock (in thousands, except share and per share data): Year Ended December 31, 2022 Numerator: Net income (loss) $ ( 56,235 ) Less: Net loss attributable to redeemable equity in Public SPACs prior to IPO ( 517 ) Net income attributable to other non-controlling interests prior to Reorganization and IPO 966 Net income attributable to TPG Group Holdings prior to Reorganization and IPO 5,256 Net income (loss) subsequent to IPO ( 61,940 ) Less: Net income attributable to redeemable equity in Public SPACs subsequent to IPO 15,165 Net loss attributable to non-controlling interests in TPG Operating Group subsequent to IPO ( 180,824 ) Net income attributable to other non-controlling interests subsequent to IPO 11,293 Net income attributable to Class A Common Stockholders prior to distributions 92,426 Reallocation of earnings to unvested participating restricted stock units ( 4,994 ) Net income attributable to Class A Common Stockholders - Basic 87,432 Net loss assuming exchange of non-controlling interest ( 147,133 ) Reallocation of income from participating securities assuming exchange of Common Units 132 Net income (loss) attributable to Class A Common Stockholders - Diluted $ ( 59,569 ) Denominator: Weighted-Average Shares of Common Stock Outstanding - Basic 79,255,411 Exchange of Common Units to Class A Common Stock 229,652,641 Weighted-Average Shares of Common Stock Outstanding - Diluted 308,908,052 Net income (loss) available to Class A common stock per share Basic $ 1.10 Diluted $ ( 0.19 ) Dividends declared per share of Class A Common Stock (a) $ 1.09 ___________ (a) Dividends declared reflects the calendar date of the declaration for each distribution. The fourth quarter dividends were declared on February 15, 2023 and are payable on March 10, 2023. 20. Equity-Based Compensation In conjunction with the IPO, TPG employees, certain of the Company’s executives and certain non-employees received grants of equity-based awards in the form of restricted stock units which entitle the holder to one share of Class A common stock upon vesting. These grants were issued as part of the IPO to promote broad ownership of the firm among its employees and further align its interests with those of its shareholders. As a result of the Reorganization and the IPO, the Company’s current partners hold restricted indirect interests in Common Units through TPG Partner Holdings, L.P. (“TPG Partner Holdings”) and indirect economic interests through RemainCo. In conjunction with the Reorganization, TPG Partner Holdings distributed its interest in RemainCo and the underlying assets as part of a common control transaction to its existing owners, which are the Company’s current and former partners. No changes were made to the terms of the unvested units. TPG Partner Holdings and RemainCo are presented as non-controlling interest holders within our Consolidated Financial Statements. The interests in TPG Partner Holdings (“TPH Units”) and indirectly in RemainCo (“RPH Units”) are generally subject to both service-based vesting, primarily over a four to seven-year period from the date of grant or, in certain cases, to performance conditions. Holders of these interests participate in distributions regardless of 207 Table of Contents TPG Inc. Notes to Consolidated Financial Statements the vesting status. Additionally, as a result of the Reorganization, the IPO and the acquisition of the final 33.3 % of NQ Manager discussed in Note 3 to the Consolidated Financial Statements, certain TPG partners and NewQuest principals were granted Common Units directly at TPG Operating Group (“TOG Units”) and Class A common stock (collectively with “TOG Units,” the “Other IPO-Related Awards”) subject to both service and performance conditions, which are deemed probable of achieving. The following table summarizes the granted and outstanding awards for the year ended December 31, 2022 (in millions, including share data): Shares / Units Granted for the year ended December 31, 2022 Shares / Units Outstanding as of December 31, 2022 Compensation Expense for the year ended December 31, 2022 Unrecognized Compensation Expense as of December 31, 2022 Restricted Stock Units IPO Service-Vesting Awards 10.2 9.4 $ 68.9 $ 215.5 IPO Executive Service-Vesting Awards 1.1 1.1 6.3 26.2 IPO Executive Performance Condition Awards 1.1 1.1 5.2 13.0 Ordinary Service-Vesting Awards 0.7 0.7 2.8 16.0 Ordinary Performance-Vesting Awards 0.1 0.1 0.6 3.0 Total Restricted Stock Units 13.2 12.4 $ 83.8 $ 273.7 Other IPO-Related Awards Unvested TOG Common Units 2.4 2.2 $ 24.3 $ 40.9 Unvested Class A Common Stock 1.8 1.7 17.1 35.1 Total Other IPO-Related Awards 4.2 3.9 $ 41.4 $ 76.0 Unvested Units at IPO Unvested Units Outstanding as of December 31, 2022 Compensation Expense for the year ended December 31, 2022 Unrecognized Compensation Expense as of December 31, 2022 TPH and RPH Units TPH units 66.6 50.3 $ 426.9 $ 1,211.6 RPH units 0.6 0.4 81.7 209.7 Total TPH and RPH Units 67.2 50.7 $ 508.6 $ 1,421.3 Restricted Stock Units Under the Company’s 2021 Omnibus Equity Incentive Plan (the “Omnibus Plan”), the Company is permitted to grant equity awards representing ownership interests in TPG Inc.’s Class A common stock. On January 13, 2022, the Omnibus Plan became effective and the Company authorized for issuance 30,694,780 shares of TPG Inc.’s Class A common stock, which, pursuant to the Omnibus Plan’s evergreen provision, such share reserve was increased to 43,492,763 shares of TPG Inc.’s Class A common stock on January 6, 2023. For the year ended December 31, 2022, the Company recorded equity-based compensation expense o f $ 83.8 million. IPO and Ordinary Service-Vesting Awards Under the Omnibus Plan, the Company granted equity awards that are subject to service-based vesting, primarily over a four to six-year period from the date of grant (“Service-Vesting Awards”). Holders of the Service-Vesting Awards participate in dividends whether the awards are unvested or vested. 208 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The Company awarded 10.2 million of restricted stock units to employees and certain non-employees of the Company in conjunction with the IPO. Additionally, for the year ended December 31, 2022, the Company issued 0.7 million of ordinary Service-Vesting Awards. The related expense associated with awards granted to certain non-employees of the Company is recognized in general, administrative and other in our Consolidated Statements of Operations and totaled $ 7.1 million for the year ended December 31, 2022 . This excludes 2.2 million of restricted stock units granted to certain executives (“Executive Awards”) in conjunction with the IPO. The fair value is based on the grant date fair value, which considers the public share price of the Company’s Class A common stock. The following table presents the rollforward of the Company’s unvested Service-Vesting Awards for the year ended December 31, 2022 (awards in millions): Service-Vesting Awards Weighted-Average Grant Date Fair Value Balance at December 31, 2021 — $ — Granted 10.9 29.42 Vested, settled ( 0.2 ) 29.50 Forfeited ( 0.6 ) 29.48 Balance at December 31, 2022 10.1 $ 29.41 As of December 31, 2022, there was approximately $ 231.5 million of total estimated unrecognized compensation expense related to unvested Service-Vesting Awards, which is expected to be recognized over the weighted average remaining requisite service period of 3.5 years. Subsequent to December 31, 2022, we gra nted 3.7 million in O rdinary Service-Vesting Awards. The units will vest in equal tranches over a period of three years . Ordinary Performance-Vesting Awards Under the Omnibus Plan, the Company also granted 0.1 million of ordinary equity awards that are subject to both service and performance conditions (“Performance-Vesting Awards”). The weighted-average grant date fair value per share was $ 26.93 for these awards. For year ended December 31, 2022, the Company recorded equity-based compensation expense of $ 0.6 million. Further, as of December 31, 2022, there was approximately $ 3.0 million of total estimated unrecognized compensation expense related to unvested Performance-Vesting Awards, which is expected to be recognized over the weighted average remaining requisite service period of 3.1 years. IPO Executive Awards Under the Omnibus Plan, the Company also granted 2.2 million of Executive Awards in order to incentivize and retain key members of management and further their alignment with our shareholders in conjunction with the IPO. The Executive Awards includes awards of (i) 1.1 million restricted stock units subject to service-based vesting over a five-year service period beginning with the second anniversary of the grant date (“Executive Service-Vesting Awards”) and (ii) 1.1 million market and service based restricted stock units (“Executive Performance Condition Awards”). Each Executive Performance Condition Award is comprised of two parts: (i) a time-based component requiring a five-year service period (“Type I”) and (ii) a market price component with a target Class A common stock share price at either $ 44.25 within five years or $ 59.00 within eight years (“Type II”). Dividend equivalents are paid on vested and unvested Executive Service-Vesting Awards when the dividend occurs. Dividend equivalents accrue for vested and unvested Executive Performance Condition Awards and are paid only when both the applicable service and performance conditions are satisfied. The fair value of the Executive Service-Vesting Awards, $ 32.5 million, is based on the grant date fair value, which considers the public share price of the Company’s Class A common stock. Compensation expense for those awards is recognized on a straight-line basis. The grant date fair value of the Executive Performance Condition Awards made during the year ended December 31, 2022 was $ 18.2 million and was based on a Monte-Carlo simulation valuation model. Compensation expense for those awards is recognized using the accelerated attribution method on a tranche by tranche basis. 209 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The following table presents the rollforwards of the Company’s unvested Executive Awards for the year ended December 31, 2022 (awards in millions): Executive Service-Vesting Awards Grant Date Fair Value Executive Performance Condition Awards Weighted Average Grant Date Fair Value Balance at December 31, 2021 — $ — — $ — Granted 1.1 29.50 1.1 16.58 Vested — — — — Forfeited — — — — Balance at December 31, 2022 1.1 $ 29.50 1.1 $ 16.58 Below is a summary of the grant date fair value based on the Monte-Carlo simulation valuation model. Vesting Condition Grant Date Fair Value Type I $ 17.58 Type II $ 15.59 Significant Assumptions Type I Type II TPG Class A common stock share price as of valuation date $ 29.50 $ 29.50 Volatility 35.0 % 35.0 % Dividend Yield 4.0 % 4.0 % Risk-free rate 1.46 % 1.65 % Cost of Equity 10.7 % 10.7 % As of December 31, 2022 , there was approximately $ 26.2 million of total estimated unrecognized compensation expense related to unvested Executive Service-Vesting Awards, which is expected to be recognized over the weighted average remaining requisite service period of 4.0 years. There was approximately $ 13.0 million of unrecognized compensation expense related to unvested Executive Performance Condition Awards, which is expected to be recognized over the weighted average remaining requisite service period of 2.8 years. TPH and RPH Awards We account for the TPH Units and RPH Units as compensation expense in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). The unvested TPH and RPH Units are recognized as equity-based compensation subject to primarily service vesting conditions and in certain cases performance conditions, which are currently deemed probable of achieving. The Company recognized compensation expense of $ 508.6 million for the year ended December 31, 2022. The Company had no such compensation expense for the year ended December 31, 2021. There is no additional dilution to our stockholders related to these interests. Contractually these units are only related to non-controlling interest holders of the TPG Operating Group, and there is no impact to the allocation of income and distributions to TPG Inc. Therefore, we have allocated these expense amounts to our non-controlling interest holders. 210 Table of Contents TPG Inc. Notes to Consolidated Financial Statements The following table presents the rollforwards of the Company’s unvested TPH Units and RPH Units for the period commencing on January 13, 2022 and ending on December 31, 2022 (units in millions): TPH Units RPH Units Partnership Units Grant Date Fair Value Partnership Units Grant Date Fair Value Balance at January 13, 2022 34.0 $ 23.60 0.6 $ 457.10 Granted 34.2 25.06 — — Vested ( 17.4 ) 24.41 ( 0.2 ) 457.10 Forfeited ( 0.5 ) 24.78 — — Balance at December 31, 2022 50.3 $ 24.38 0.4 $ 457.10 As of December 31, 2022, there was approximately $ 1,421.3 million of total estimated unrecognized compensation expense related to unvested TPH and RPH Units. Other IPO-Related Awards In accordance with ASC 718 the Other IPO-Related Awards are also recognized as equity-based compensation. The expense for the year ended December 31, 2022 totaled $ 41.4 million. The Company had no such expense for the year ended December 31, 2021. As TPG Operating Group holders would accrete pro-rata or benefit directly upon forfeiture of those awards, this compensation expense was allocated pro-rata to all controlling and non-controlling interest holders of TPG Inc. The weighted average grant date fair value of the TOG Units was $ 27.29 and of Class A common stock was $ 29.50 . Total unrecognized compensation expense related to outstanding unvested awards as of December 31, 2022 was $ 76.0 million, of which our TOG Units and Class A common stock represented $ 40.9 million and $ 35.1 million, respectively. Other compensation matters 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 $ 12.7 million, $ 10.9 million and $ 11.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Compensation includes a significant performance-based component in the form of discretionary bonuses. The Company incurred discretionary bonus expense of $ 205.4 million, $ 340.9 million and $ 293.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. Certain employees of the Company receive awards from TPG RE 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. The awards granted to certain employees of the Company are recorded in other assets and due to affiliates on the 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, 2022, the Company recognized less than $ 0.01 million of management fees and compensation and benefits expense. For the year ended December 31, 2021, the Company recognized $ 9.5 million of such expense. 211 Table of Contents TPG Inc. Notes to Consolidated Financial Statements 21. Equity The Company has two classes of common stock outstanding, Class A common stock and Class B common stock. Class A common stock is traded on the Nasdaq Global Select Market. The Company is authorized to issue 2,240,000,000 shares of Class A common stock with a par value of $ 0.001 per share, 100,000,000 shares of nonvoting Class A common stock, 750,000,000 shares of Class B common stock with a par value of $ 0.001 per share, and 25,000,000 shares of preferred stock, with a par value of $ 0.001 per share. Each share of the Company’s Class A common stock entitles its holder to one vote, and each share of our Class B common stock entitles its holder to ten votes. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the Company’s stockholders for their vote or approval. The nonvoting Class A common stock have the same rights and privileges as, rank equally and share ratably with, and are identical in all respects as to all matters to, the Class A common stock, except that the nonvoting Class A common stock have no voting rights other than such rights as may be required by law. Holders of Class A common stock are entitled to receive dividends when and if declared by the board of directors. Holders of the Class B common stock are not entitled to dividends in respect of their shares of Class B common stock. As of December 31, 2022, 79,240,058 shares of Class A common stock were outstanding, 229,652,641 shares of Class B common stock were outstanding, and there were no shares of preferred stock outstanding. Dividends and distributions are reflected in the Consolidated Statements of Stockholders’ Equity when declared by the board of directors. Dividends are made to Class A common stockholders and distributions are made to holders of non-controlling interests in subsidiaries. The following is a summary of cash dividends declared per share on the Company’s Class A common stock during the year ended December 31, 2022: Date Declared Record Date Payment date Dividend per Class A Common Share May 10, 2022 May 20, 2022 June 3, 2022 $ 0.44 August 9, 2022 August 19, 2022 September 2, 2022 $ 0.39 November 9, 2022 November 21, 2022 December 2, 2022 $ 0.26 On February 15, 2023, the Company’s board of directors declared and approved a cash dividend for the fourth quarter of 2022 of $ 0.50 per share of Class A common stock of record at the close of business on February 27, 2023, payable on March 10, 2023. 22. Subsequent Events Other than the events noted in Note 20 and Note 21 to the Consolidated Financial Statements, there have been no additional events since December 31, 2022 that require recognition or disclosure in the Consolidated Financial Statements. 212 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None.