UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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| (Zip Code) | |||||||||||
(817 ) 871-4000
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Not Applicable
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On November 9, 2022 , TPG Inc. issued a summary press release and a detailed earnings presentation announcing financial results for its third quarter ended September 30, 2022. The summary press release and the earnings presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this report.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and Exhibits 99.1 and 99.2 incorporated in this Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information or Exhibits 99.1 and 99.2 be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |||||||
Summary press release of TPG Inc., dated | ||||||||
Earnings presentation of TPG Inc., dated | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.
| TPG INC. | ||||||||
| By: | /s/ Jack Weingart | |||||||
| Name: | Jack Weingart | |||||||
| Title: | Chief Financial Officer | |||||||
Date: November 9, 2022
TPG Reports Third Quarter 2022 Financial Results
Total assets under management of $135 billion as of September 30, 2022, an increase of 24% compared to $109 billion as of September 30, 2021
GAAP net income attributable to TPG Inc. of $37 million and $69 million for the three and nine months ended September 30, 2022, respectively
Fee-Related Earnings of $121 million and $315 million for the three and nine months ended September 30, 2022, resulting in Fee-Related Earnings margins of 43% and 40% over the same periods, respectively
After-tax Distributable Earnings of $113 million (or $0.30 per share of Class A common stock) for the quarter ended September 30, 2022
Announced dividend of $0.26 per share of Class A common stock for the quarter ended
September 30, 2022
San Francisco and Fort Worth, TX – November 9, 2022 – TPG Inc. (NASDAQ: TPG), a leading global alternative asset management firm, reported its unaudited third quarter 2022 results. TPG issued a full detailed presentation of its quarter ended September 30, 2022 results, which can be viewed through the Investor Relations section of TPG’s website at shareholders.tpg.com.
“Our financial results for the third quarter demonstrate the strength and resilience of our business amid the volatile market backdrop. We generated significant quarter-over-quarter growth in management fees, operating margins, and fee-related earnings,” said Jon Winkelried, Chief Executive Officer. “Our total AUM reached $135 billion at quarter end, an increase of 24% year-over-year, which was driven by strong fundraising activity across our business. Given the success of our ongoing fundraising campaigns, we had a record $46 billion of capital available for investment at the end of the third quarter and believe we are well-positioned to continue executing on high quality opportunities in our core thematic areas.”
Dividend
TPG has announced a quarterly dividend of $0.26 per share of Class A common stock to holders of record at the close of business on November 21, 2022, payable on December 2, 2022.
Conference Call
TPG will host a conference call and live webcast at 11:00 a.m. ET. It may be accessed by dialing (800) 343-4849 (US toll-free) or (203) 518-9856 (international), using the conference ID TPGQ322. The number should be dialed at least ten minutes prior to the start of the call. A simultaneous webcast will also be available and can be accessed through the Investor Relations section of TPG’s website at shareholders.tpg.com. A webcast replay will be made available on the Events page in the Investor Relations section of TPG’s website.
About TPG
TPG is a leading global alternative asset management firm, founded in San Francisco in 1992, with $135 billion of assets under management and investment and operational teams in 12 offices globally. TPG invests across five multi-product platforms: Capital, Growth, Impact, Real Estate, and Market Solutions and our unique strategy is driven by collaboration, innovation, and inclusion. Our teams combine deep product and sector experience with broad capabilities and expertise to develop differentiated insights and add value for our fund investors, portfolio companies, management teams, and communities.
| Shareholder contact: | Media contact: | ||||
| Gary Stein | Luke Barrett | ||||
| 212-601-4750 | 415-743-1550 | ||||
| shareholders@tpg.com | media@tpg.com | ||||
Forward Looking Statements
This press release contains “forward-looking” statements based on the Company’s beliefs and assumptions and on information currently available to the Company. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, business strategy and plans and objectives of management for future operations, including, among other things, statements regarding expected growth, future capital expenditures, fund performance, dividends and dividend policy and debt service obligations.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by any forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, among various other risks.
For the reasons described above, we caution you against relying on any forward-looking statements, which should be read in conjunction with the other cautionary statements and risk factors discussed from time to time in the Company’s filings with the SEC, which can be found at the SEC’s website at http://www.sec.gov. Any forward-looking statement in this press release speaks only as of the date of this press release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise any forward-looking statement after the date of this press release, whether as a result of new information, future developments or otherwise, except as may be required by law. No recipient should, therefore, rely on these forward-looking statements as representing the views of the Company or its management as of any date subsequent to the date of the press release.
This press release does not constitute an offer of any TPG Fund.
TPG Reports Third Quarter 2022 Financial Results Quarter Ended September 30, 2022
TPG | 2 ▪ Total assets under management of $135 billion as of September 30, 2022, an increase of 24% compared to $109 billion as of September 30, 2021 ▪ GAAP net income attributable to TPG Inc. of $37 million and $69 million for the three and nine months ended September 30, 2022, respectively ▪ Fee-Related Earnings of $121 million and $315 million for the three and nine months ended September 30, 2022, resulting in Fee- Related Earnings margins of 43% and 40% over the same periods, respectively ▪ After-tax Distributable Earnings of $113 million (or $0.30 per share of Class A common stock) for the quarter ended September 30, 2022 ▪ Announced dividend of $0.26 per share of Class A common stock for the quarter ended September 30, 2022 San Francisco and Fort Worth, TX – November 9, 2022 – TPG Inc. (NASDAQ: TPG), a leading global alternative asset management firm, reported its unaudited third quarter 2022 results. TPG issued a full detailed presentation of its quarter ended September 30, 2022 results, which can be viewed through the Investor Relations section of TPG’s website at shareholders.tpg.com. “Our financial results for the third quarter demonstrate the strength and resilience of our business amid the volatile market backdrop. We generated significant quarter-over-quarter growth in management fees, operating margins, and fee-related earnings,” said Jon Winkelried, Chief Executive Officer. “Our total AUM reached $135 billion at quarter end, an increase of 24% year-over-year, which was driven by strong fundraising activity across our business. Given the success of our ongoing fundraising campaigns, we had a record $46 billion of capital available for investment at the end of the third quarter and believe we are well-positioned to continue executing on high quality opportunities in our core thematic areas.” Dividend TPG has declared a quarterly dividend of $0.26 per share of Class A common stock to holders of record at the close of business on November 21, 2022, payable on December 2, 2022. Conference Call TPG will host a conference call and live webcast at 11:00 am ET. It may be accessed by dialing (800) 343-4849 (US toll-free) or (203) 518-9856 (international), using the conference ID TPGQ322. The number should be dialed at least ten minutes prior to the start of the call. A simultaneous webcast will also be available and can be accessed through the Investor Relations section of TPG's website at shareholders.tpg.com. A webcast replay will be made available on the Events page in the Investor Relations section of TPG's website. Shareholder contact: Media contact: Gary Stein Luke Barrett 212-601-4750 415-743-1550 shareholders@tpg.com media@tpg.com TPG Reports Third Quarter 2022 Financial Results
TPG | 3 TPG Reports Third Quarter 2022 Financial Results About TPG TPG is a leading global alternative asset management firm, founded in San Francisco in 1992, with $135 billion of assets under management and investment and operational teams in 12 offices globally. TPG invests across five multi-product platforms: Capital, Growth, Impact, Real Estate, and Market Solutions and our unique strategy is driven by collaboration, innovation, and inclusion. Our teams combine deep product and sector experience with broad capabilities and expertise to develop differentiated insights and add value for our fund investors, portfolio companies, management teams, and communities. Forward Looking Statements This presentation contains “forward-looking” statements based on the Company’s beliefs and assumptions and on information currently available to the Company. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, business strategy and plans and objectives of management for future operations, including, among other things, statements regarding expected growth, future capital expenditures, fund performance, dividends and dividend policy, and debt service obligations. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by any forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, among various other risks. For the reasons described above, we caution you against relying on any forward-looking statements, which should be read in conjunction with the other cautionary statements included elsewhere in this presentation and risk factors discussed from time to time in the Company’s filings with the SEC, which can be found at the SEC’s website at http://www.sec.gov. Any forward-looking statement in this presentation speaks only as of the date of this presentation. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise any forward-looking statement after the date of this presentation, whether as a result of new information, future developments or otherwise, except as may be required by law. No recipient should, therefore, rely on these forward-looking statements as representing the views of the Company or its management as of any date subsequent to the date of the presentation. This presentation does not constitute an offer of any TPG Fund. Throughout this presentation, all current period amounts are preliminary and unaudited; totals may not sum due to rounding.
TPG | 4 Prior to and in connection with our initial public offering (“IPO”), we completed certain transactions as part of a corporate reorganization (the “Reorganization”), which concluded with NASDAQ listing our Class A common stock on January 13, 2022. The Reorganization included certain transfers of economic entitlements and investments that were effectuated December 31, 2021, including the transfer of certain limited partner interests in entities that (i) serve as the general partner of certain TPG funds and (ii) are, or historically were, consolidated by TPG Group Holdings (SBS), L.P. (“TPG general partner entities”) to Tarrant RemainCo I, L.P., Tarrant RemainCo II, L.P. and Tarrant RemainCo III, L.P. (“RemainCo”). The transfer of certain limited partner interests in TPG general partner entities to RemainCo resulted in the deconsolidation of TPG Funds, as the TPG general partner entities are no longer considered the primary beneficiary as of December 31, 2021. While the Reorganization did not affect, on a GAAP or non-GAAP basis, our income statement activity for the fiscal year ended December 31, 2021 or our financial statements for prior periods, this presentation includes pro forma financial data giving effect to the IPO and the Reorganization as though they had occurred on January 1, 2020. As such, the pro forma information reflects certain Reorganization adjustments, including, but not limited to, the exclusion of assets that were transferred to RemainCo, increasing the amount of performance allocations our people will receive, the inclusion of an administrative services fee paid by RemainCo to the Company, additional interest on debt incurred as part of the Reorganization, and the step-up of taxes on a public-company basis. Therefore, comparability of the pro forma information included in this presentation to prior financial data or future periods may be limited. See the Supplemental Details and Reconciliations and Disclosures Sections of this presentation for a full comparison of actual to pro forma financial data, reconciliations of Non-GAAP to the most comparable GAAP measures, and adjustment descriptions. Comparability Statement and Pro Forma Financial Information
Third Quarter 2022 Financial Results
TPG | 6 ▪ Net income of $53 million for 3Q'22, compared to 2Q'22 net loss of $262 million, and pro forma 3Q'21 net income of $205 million ▪ Net income attributable to TPG Inc. of $37 million for 3Q'22, compared to a net loss of $10 million in 2Q'22, and net income of $58 million in 3Q'21 on a pro forma basis GAAP Statements of Operations (Unaudited) Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO occurred on January 1, 2020; see the Supplemental Details section of this presentation for a full reconciliation and description of adjustments. See the Additional Information and Definitions pages in the Reconciliation and Disclosures section of this presentation for definitions of terms used throughout. Actual Actual Pro Forma Actual Pro Forma Actual ($ in thousands) 3Q'21 3Q'21 YTD 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Revenues Fees and other $ 279,908 $ 685,115 $ 285,415 $ 333,496 $ 701,972 $ 896,456 Capital allocation-based income 231,356 3,211,945 236,294 227,628 3,210,739 667,096 Total revenues 511,264 3,897,060 521,709 561,124 3,912,711 1,563,552 Expenses Compensation and benefits Cash-based compensation and benefits 136,139 392,666 102,995 116,753 295,308 348,751 Equity-based compensation — — 125,004 143,149 376,288 474,200 Performance allocation compensation — — 190,279 149,495 2,036,197 374,607 Total compensation and benefits 136,139 392,666 418,278 409,397 2,707,793 1,197,558 General, administrative and other 68,634 182,930 68,634 95,533 182,930 275,468 Depreciation and amortization 2,251 5,137 2,251 7,372 5,137 24,629 Interest expense 4,371 12,318 5,368 5,737 15,311 15,106 Expenses of consolidated TPG Funds and Public SPACs: Interest expense 226 573 — — — — Other 12,556 23,919 11,658 567 22,724 2,547 Total expenses 224,177 617,543 506,189 518,606 2,933,895 1,515,308 Investment income Income from investments: Net gains from investment activities 224,141 338,346 200,425 1,907 228,067 (90,845) Interest, dividends and other 472 6,959 472 2,407 6,959 3,393 Investment income of consolidated TPG Funds and Public SPACs: Net gains from investment activities 1,949 9,008 — — — — Unrealized gains on derivative liabilities 7,205 191,528 7,205 3,235 191,528 11,715 Interest, dividends and other 910 2,971 10 3,571 35 4,540 Total investment income 234,677 548,812 208,112 11,120 426,589 (71,197) Income before income taxes 521,764 3,828,329 223,632 53,638 1,405,405 (22,953) Income tax expense 1,281 6,090 18,532 432 62,733 23,534 Net income 520,483 3,822,239 205,100 53,206 1,342,672 (46,487) Less: Net income attributable to redeemable equity in Public SPACs prior to IPO (4,250) 133,209 — — — (517) Net income attributable to non-controlling interests in consolidated TPG Funds prior to IPO 1,293 8,191 — — — — Net income attributable to other non-controlling interests prior to IPO 228,646 1,980,946 — — — 966 Net income attributable to TPG Group Holdings prior to IPO 294,794 1,699,893 — — — 5,256 Net income attributable to redeemable equity in Public SPACs — — (4,250) 7,322 133,209 13,203 Net income attributable to non-controlling interests in TPG Operating Group — — — (6,898) — (140,679) Net income attributable to other non-controlling interests — — 151,128 15,422 1,019,362 6,499 Net income attributable to TPG Inc. subsequent to IPO $ — $ — $ 58,222 $ 37,360 $ 190,101 $ 68,785
TPG | 7 Operating Metrics ($B) Pro Forma Non-GAAP Financial Measures ($M) Actual Non-GAAP Financial Measures ($M) Third Quarter and Year to Date Highlights 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Fee-Related Revenues ("FRR") $260 $282 $628 $779 Fee-Related Earnings (“FRE”) 87 121 130 315 Realized Performance Allocations, Net 506 5 748 187 After-Tax Distributable Earnings 635 113 933 474 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Fee-Related Revenues $263 $282 $636 $779 Fee-Related Earnings 123 121 235 315 Realized Performance Allocations, Net 141 5 151 187 After-Tax Distributable Earnings 283 113 401 474 3Q'21 4Q'21 2Q'22 3Q'22 Assets Under Management (“AUM”) $109.1 $113.6 $126.7 $135.1 Fee Earning Assets Under Management (“FAUM”) 59.3 60.1 67.1 81.2 Net Accrued Performance Allocations(1) 0.7 0.8 0.7 0.7 Available Capital 29.8 28.4 39.4 46.4 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Value Creation 2% 2% 32% 7% Capital Raised $10.5 $8.2 $17.7 $26.4 Capital Invested 5.5 2.5 13.9 10.8 Realizations 12.1 2.2 18.4 11.4 ▪ 3Q'22 FRR of $282 million increased 9% versus 3Q'21, with 3Q'22 FRE of $121 million and 3Q'22 After-tax DE of $113 million ▪ 3Q'22 After-tax DE of $113 million, down from pro forma 3Q'21 primarily due to a decline in realized performance allocations, net ▪ Total AUM of $135 billion, up 24% in the last twelve months; Fee Earning AUM of $81 billion, up 37% during the same period Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO occurred on January 1, 2020; see the Supplemental Details section of this presentation for a full reconciliation and description of adjustments. See the Reconciliations and Disclosures section of this presentation for a full reconciliation between GAAP and Non-GAAP Financial Measures. 1. 3Q’21 and 4Q’21 Net Accrued Performance Allocations are pro forma for the Reorganization and IPO.
TPG | 8 Non-GAAP Financial Measures ▪ Fee-Related Earnings of $121 million in 3Q'22, an increase of 19% from $102 million in 2Q'22; Fee-Related Earnings margin increased from 40% in 2Q'22 to 43% in 3Q'22 ▪ Fee-Related Earnings decreased 2% from $123 million in pro forma 3Q'21 to $121 million in 3Q'22; Fee- Related Earnings margin decreased from 47% in pro forma 3Q'21 to 43% in 3Q'22 ▪ After-tax Distributable Earnings of $113 million in 3Q'22 decreased from $162 million in 2Q'22 and $283 million in pro forma 3Q'21, driven by a decline in realized performance allocations, net Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO occurred on January 1, 2020; see the Supplemental Details section of this presentation for a full reconciliation and description of adjustments. See the Reconciliations and Disclosures section of this presentation for a full reconciliation between GAAP and Non-GAAP Financial Measures. Actual Actual Pro Forma Actual Pro Forma Actual Pro Forma ($ in thousands) 3Q'21 3Q'21 YTD 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD 3Q'22 LTM Fee-Related Revenues Management Fees $ 206,995 $ 516,488 $ 206,995 $ 254,510 $ 516,488 $ 679,927 $ 881,804 Transaction, monitoring and other fees, net 42,208 77,375 42,208 14,909 77,375 62,833 87,500 Other Income 10,304 34,091 13,699 12,874 42,133 35,937 47,760 Fee-Related Revenues 259,507 627,954 262,902 282,293 635,996 778,697 1,017,064 Fee-Related Expenses Compensation and benefits, net 125,530 366,939 92,386 96,758 269,581 290,492 402,046 Operating expenses, net 47,090 131,287 47,090 64,324 131,287 173,208 209,035 Fee-Related Expenses 172,620 498,226 139,476 161,082 400,868 463,700 611,081 Fee-Related Earnings 86,887 129,728 123,426 121,211 235,128 314,997 405,983 Realized performance allocations, net 505,626 748,445 141,199 4,977 150,999 187,344 241,009 Realized investment income and other, net 48,312 76,748 42,763 (336) 58,553 22,400 30,564 Depreciation expense (1,736) (4,617) (1,736) (280) (4,617) (3,319) (5,476) Interest expense, net (3,806) (11,245) (4,803) (4,077) (14,238) (12,763) (17,444) Distributable Earnings 635,283 939,059 300,849 121,495 425,825 508,659 654,636 Income taxes (3) (6,399) (17,722) (8,678) (25,084) (34,942) (43,541) After-Tax Distributable Earnings $ 635,280 $ 932,660 $ 283,127 $ 112,817 $ 400,741 $ 473,717 $ 611,095
TPG | 9 $207 $255 $84 $113 $54 $36 $31 $47$17 $41 $20 $17 3Q'21 3Q'22 ▪ 3Q'22 Fee-Related Revenues increased 10% over 2Q'22 and 7% over pro forma 3Q'21, driven by an increase in Fee Earning AUM of 21% and 37% over the same periods, respectively, primarily in the Capital platform ▪ Fee-Related Expenses increased in 3Q'22 compared to pro forma 3Q'21 due to increased public company operating costs and costs associated with returning to office ▪ Fee-Related Earnings margin of 43% in 3Q'22, an increase from 40% in 2Q'22, and decrease from 47% in pro forma 3Q'21; pro forma 3Q'22 LTM Fee-Related Earnings margin was 40% Fee-Related Earnings Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO occurred on January 1, 2020; see the Supplemental Details section of this presentation for a full reconciliation and description of adjustments. 1. There are no pro forma adjustments to management fees, and therefore the by-platform breakdown does not change between actual and pro forma figures. Fee-Related Earnings Management Fees by Platform(1) ($M) ($M) +23% $87 $123 3Q'21 $315 3Q'22 YTD $121 3Q'22 $130 $235 3Q'21 YTD Actual Pro Forma $516 $680 $248 $275 $108 $105 $64 $132$52 $114 $45 $54 3Q'21 YTD 3Q'22 YTD Capital Growth Impact Real Estate Market Solutions +32%
TPG | 10 100% 59% 41% $635 $283 3Q'21 $474 3Q'22 YTD Distributable Earnings ▪ After-tax DE saw a 30% decrease from $162 million in 2Q'22 to $113 million in 3Q'22, due to decreased realized performance allocations, net, offset by a 19% increase in Fee-Related Earnings ▪ After-tax DE declined from $283 million in pro forma 3Q'21 to $113 million for 3Q'22, primarily due to a decrease in realized performance allocations, net, while Fee-Related Earnings declined 2% over the same period After-Tax DE Distributable Earnings Mix 2Q'22 3Q'22 ($M) Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO occurred on January 1, 2020; see the Supplemental Details section of this presentation for a full reconciliation and description of adjustments. $113 3Q'22 Actual Pro Forma $933 $401 3Q'21 YTD FRE All Other Sources of Pre-tax DE
TPG | 11 Capital $3 Impact $2 Capital $161 Growth $9 Impact $16 Real Estate $1 Market Solutions $0 ▪ Realized performance allocations, net were $5 million in 3Q'22, driven by TPG VIII in the Capital platform, and Rise I under the Impact platform ▪ Realized performance allocations, net for 3Q'22 YTD were $187 million stemming from TPG VII, TPG VIII, Asia VII, and THP I in the Capital platform as well as Rise I in the Impact platform and TTAD I in the Growth platform Realized Performance Allocations, Net 3Q'22 Realized Performance Allocations, Net YTD 3Q'22 Realized Performance Allocations, Net ($M) ($M) Total $187 Total $5 Capital Growth Impact Real Estate Market Solutions <$1
TPG | 12 60%22% 9% 5% 5% Capital Growth Impact Real Estate Market Solutions Net Accrued Performance Allocations Value Creation 3Q'22 3Q'22 YTD Capital 2.3% 10.3% Growth 3.8% 2.2% Impact 2.9% 2.9% Real Estate (0.4%) 3.2% Market Solutions (2.2%) (2.7%) Total 2.4% 6.6% Net Accrued Performance Allocations by Fund Vintage ($M) 2Q'22 3Q'22 2016 & Prior $186 $175 2017 233 227 2018 58 59 2019 140 171 2020 44 63 2021 16 30 Total $677 $725 3Q'22 Net Accrued Performance Allocations Net Accrued Performance Allocations Walk ($M) Total $725 ($M) 677 +53 (5) 725 2Q'22 Value Creation & Other Realized Gains 3Q'22
TPG | 13 GAAP Balance Sheet (Unaudited) ▪ Our investments decreased $383 million, or 6%, from 4Q'21 to 3Q'22, mainly driven by realizations offset by a 7% increase in the value of our portfolio companies for 3Q'22 YTD ▪ In 4Q'21 we effectuated certain aspects of the Reorganization with respect to assets transferred to RemainCo, including cash and economic entitlements associated with certain other investments, which is reflected in our GAAP actuals; the pro forma column includes the impact of the IPO and additional Reorganization activities Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO occurred on January 1, 2020; see the Reconciliations and Disclosures section of this presentation for a full reconciliation and description of adjustments. GAAP Pro Forma GAAP ($ in thousands) 4Q'21 4Q'21 3Q'22 Assets Cash and cash equivalents $ 972,729 $ 1,376,746 $ 1,052,612 Investments 6,109,046 6,109,046 5,725,828 Other assets 855,773 831,785 807,825 Assets of consolidated TPG Funds and Public SPACs 1,024,465 1,024,465 1,010,458 Total assets 8,962,013 9,342,042 8,596,723 Liabilities, redeemable equity and equity Liabilities Debt obligations 444,444 444,444 444,398 Due to affiliates 826,999 634,324 178,305 Accrued performance allocation compensation — 3,848,126 3,369,182 Other liabilities 372,597 348,426 460,081 Liabilities of consolidated TPG Funds and Public SPACs 56,532 56,532 376,721 Total liabilities 1,700,572 5,331,852 4,828,687 Redeemable equity attributable to consolidated Public SPACs 1,000,027 1,000,027 651,434 Equity Class A and B common stock — 498,560 499,480 Partners' capital controlling interests 1,606,593 — — Other non-controlling interests 4,654,821 2,511,603 2,617,122 Total equity 6,261,414 3,010,163 3,116,602 Total liabilities, redeemable equity and equity $ 8,962,013 $ 9,342,042 $ 8,596,723
TPG | 14 Non-GAAP Balance Sheet ▪ Cash and cash equivalents of $572 million at the end of 3Q'22 ▪ Our borrowings include securitized notes with a principal amount of $250 million, which are backed by $482 million in pledged assets at the end of 3Q'22, and a senior unsecured term loan with a principal amount of $200 million that was issued as part of the Reorganization ▪ At the end of 3Q'22, our net cash(1) was $122 million, and we had an undrawn $700 million credit facility, which was expanded from $300 million in July 2022 ▪ In 4Q’21 we effectuated certain aspects of the Reorganization with respect to assets transferred to RemainCo, including cash and economic entitlements associated with certain other investments, which is reflected in our Non-GAAP actuals; the pro forma column includes the impact of the IPO and additional Reorganization activities Note: Pro forma financial measures are on an adjusted basis, assuming the Reorganization and IPO on January 1, 2020; see the Reconciliations and Disclosures section of this presentation for a full reconciliation and description of adjustments. 1. Net cash comprised of $572 million of cash and cash equivalents less $450 million in debt principal. Non-GAAP Pro Forma Non-GAAP ($ in thousands) 4Q'21 4Q'21 3Q'22 Book Assets Cash and cash equivalents $ 242,370 $ 646,387 $ 571,792 Restricted cash 13,135 13,135 13,172 Accrued performance allocations 1,344,348 769,283 725,318 Investments in funds 559,810 559,810 581,793 Other assets, net 733,085 504,644 570,110 Total Book Assets 2,892,748 2,493,259 2,462,185 Book Liabilities Accounts payable, accrued expenses and other 525,267 308,421 44,789 Securitized borrowing, net 244,950 244,950 245,182 Senior unsecured term loan 199,494 199,494 199,216 Total Book Liabilities 969,711 752,865 489,187 Net Book Value $ 1,923,037 $ 1,740,394 $ 1,972,998
Operating Metrics
TPG | 16 $59 $81 $27 $39 $10 $11$10 $13 $6 $13 $6 $5 3Q'21 3Q'22 $109 $135 $53 $68 $22 $22$13 $16 $11 $20 $10 $10 3Q'21 3Q'22 Assets Under Management and Fee Earning AUM ▪ 3Q'22 AUM rose 24% over 3Q'21 to $135.1 billion, driven by value creation of 13% for the last twelve months and fundraising of $29.1 billion over the same period, which included $8.7 billion in TPG IX and $3.4 billion in Asia VIII within the Capital platform, and $6.8 billion in TREP IV within the Real Estate platform; this was partially offset by realizations totaling $18.3 billion in the last twelve months ▪ FAUM increased 37% in 3Q'22 over 3Q'21 driven primarily by TPG IX, THP II, and Asia VIII in the Capital platform, and TREP IV in the Real Estate platform Assets Under Management Fee Earning AUM ($B) ($B) +24% +37% Capital Growth Impact Real Estate Market Solutions
TPG | 17 11% 49% 33% 2% 5% —% 5% 88% 2% 5% 1% 6% 85% 4% 4% FAUM by Remaining Duration Assets Under Management and Fee Earning AUM Duration AUM by Duration at Inception Note: For the grouping of years on duration, 0-4 Years represents a term equal to 4 years or less; 5-9 Years represents a term greater than 4 and less than or equal to 9; 10+ Years represents a term greater than 9. 1. Defined as the number of years between fund activation and contractual fund winddown, prior to any extensions, as of September 30, 2022. 2. Defined as the number of years between September 30, 2022 and contractual fund winddown, prior to any extensions. ▪ At 3Q'22, approximately 89% of our AUM and 90% of our FAUM is in perpetual or long-dated funds with a duration(1) of 10 or more years (prior to any extensions) ▪ At 3Q'22, approximately 84% of our FAUM has a remaining lifespan(2) of 5 or more years, with 35% in vehicles that have 10 or more years remaining (including those considered perpetual) Total $135B Total $81B FAUM by Duration at Inception Total $81B ~90% ~84%~89% 0-4 Years 5-9 Years 10+ Years Perpetual Capital Subject to Periodic Redemption <1
TPG | 18 Capital $3,719 Real Estate $789 Capital $861 Growth $2,309 Impact $520 Real Estate $1,264 Market Solutions $1,666 ▪ AUM Subject to Fee Earning Growth totaled $11.1 billion at 3Q'22, and represents capital commitments that generate new management fees (AUM Not Yet Earning Fees) or generate a higher rate of management fees (FAUM Subject to Step-Up) when deployed ▪ At 3Q'22, our AUM Subject to Fee Earnings Growth represents 14% of FAUM, and the potential fee-related revenue opportunity associated with both AUM Not Yet Earning Fees and FAUM Subject to Step-Up is estimated at approximately $60 million annually(1) AUM Not Yet Earning Fees FAUM Subject to Step-Up ($M) ($M) Total $6,620 Total $4,508 AUM Subject to Fee Earning Growth 1. Represents the sum of the gross revenue opportunity for each non-legacy fund with unallocated capital, the deployment of which would result in incremental management fees being earned. Revenue opportunity for each fund is calculated as (a) the incremental amount of unallocated capital that would be invested to achieve a range of 90%-100% total deployment of the original commitments of the fund, multiplied by (b) the incremental fee rate that we anticipate would be earned on invested capital and (c) the proportion of the fund's commitments that are expected to pay fees based on the amount of invested capital.
TPG | 19 AUM Rollforward Note: For Market Solutions, capital raised in our SPAC vehicles represents funds raised in the SPAC IPO, including forward purchase agreements and private investment in public equity (PIPE) commitments, and realizations are considered to occur at business combination with a target, in the amount of capital raised; for our hedge funds, capital raised represents new fund subscriptions. 1. Changes in investment value consists of changes in fair value, capital invested and available capital and other investment activities, including the change in net asset value of our hedge funds. ▪ AUM increased $8.3 billion in 3Q'22 and $26.0 billion in the last twelve months – an increase of 7% and 24%, respectively ▪ AUM growth was driven by capital raised of $8.2 billion for 3Q'22 and $29.1 billion for 3Q'22 LTM, including $15.1 billion in the Capital platform and $7.9 billion in the Real Estate platform in the last twelve months ▪ Changes in Investment Value increased for 3Q'22 due to value creation of 2% in 3Q'22 and increased on a LTM basis largely due to value creation of 13% for the last twelve months Three Months Ended September 30, 2022 ($ in millions) Capital Growth Impact Real Estate Market Solutions Total AUM Balance as of Beginning of Period $ 61,713 $ 21,113 $ 15,065 $ 19,555 $ 9,258 $ 126,704 Capital Raised 6,163 1 716 340 1,017 8,237 Realizations (735) (629) (201) (552) (49) (2,166) Changes in Investment Value(1) 776 1,305 231 428 (465) 2,275 AUM as of end of period $ 67,917 $ 21,790 $ 15,811 $ 19,771 $ 9,761 $ 135,050 Last Twelve Months Ended September 30, 2022 ($ in millions) Capital Growth Impact Real Estate Market Solutions Total AUM Balance as of Beginning of Period $ 52,609 $ 22,147 $ 12,622 $ 11,463 $ 10,257 $ 109,098 Capital Raised 15,149 951 3,713 7,941 1,394 29,147 Realizations (10,617) (3,247) (948) (2,732) (805) (18,349) Changes in Investment Value(1) 10,776 1,939 424 3,099 (1,085) 15,154 AUM as of end of period $ 67,917 $ 21,790 $ 15,811 $ 19,771 $ 9,761 $ 135,050
TPG | 20 FAUM Rollforward 1. Fee earning capital raised represents capital raised by our funds for which management fees calculated based on commitments were activated during the period. 2. Net change in actively invested capital includes capital invested during the period, net of return of capital distributions and changes in net asset value of hedge funds. It also includes adjustments related to funds with a fee structure based on the lower of cost or fair value. 3. Reduction in fee base represents decreases in the fee basis for funds where the investment or commitment fee period has expired, and the fee base has reduced from commitment base to actively invested capital. It also includes reductions for funds that are no longer fee paying. ▪ FAUM increased $14.1 billion in 3Q'22 and $21.8 billion in the last twelve months, an increase of 21% and 37%, respectively ▪ Increases in 3Q'22 were driven by fee earning capital raised in TPG IX and THP II, which closed in 2Q’22 but were not activated until July 2022, and Asia VIII - all within the Capital platform ▪ In the last twelve months, increases were driven by fee earning capital raised in TPG IX and Asia VIII in the Capital platform and TREP IV in the Real Estate platform Three Months Ended September 30, 2022 ($ in millions) Capital Growth Impact Real Estate Market Solutions Total FAUM Balance as of Beginning of Period $ 25,518 $ 10,969 $ 11,922 $ 13,133 $ 5,587 $ 67,128 Fee Earning Capital Raised(1) 13,571 — 600 116 301 14,587 Net Change in Actively Invested Capital(2) (106) (49) (8) 46 (412) (527) Reduction in Fee Base of Certain Funds(3) — — — — — — FAUM as of end of period $ 38,983 $ 10,920 $ 12,514 $ 13,295 $ 5,476 $ 81,188 Last Twelve Months Ended September 30, 2022 ($ in millions) Capital Growth Impact Real Estate Market Solutions Total FAUM Balance as of Beginning of Period $ 26,563 $ 10,465 $ 10,254 $ 5,790 $ 6,275 $ 59,347 Fee Earning Capital Raised(1) 13,571 — 2,890 6,690 444 23,594 Net Change in Actively Invested Capital(2) (1,150) 455 (147) 815 (1,243) (1,272) Reduction in Fee Base of Certain Funds(3) — — (482) — — (482) FAUM as of end of period $ 38,983 $ 10,920 $ 12,514 $ 13,295 $ 5,476 $ 81,188
TPG | 21 Other Operating Metrics Capital Raised 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Capital $ 1,532 $ 6,163 $ 3,622 $ 14,598 Growth 2,074 1 4,580 638 Impact 6,209 716 6,253 2,794 Real Estate 14 340 1,220 7,190 Market Solutions(1) 640 1,017 2,026 1,173 Total $ 10,469 $ 8,237 $ 17,701 $ 26,393 ▪ Significant fundraising activity in the last nine months particularly in the Capital and Real Estate platforms, totaling $14.6 billion and $7.2 billion, respectively; as of 3Q'22, we had $46.4 billion of available capital 1. Within Market Solutions, capital raised at our hedge fund represents new fund subscriptions. 2. Within Market Solutions, capital invested and realizations in our SPAC vehicles represent funds raised in the SPAC IPO, including forward purchase agreements and private investment in public equity (PIPE) commitments, which are considered to occur at business combination with a target. Available Capital 3Q'21 3Q'22 Capital $ 11,479 $ 23,413 Growth 5,367 3,933 Impact 7,421 7,294 Real Estate 2,185 8,457 Market Solutions 3,344 3,278 Total $ 29,796 $ 46,375 Capital Invested 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Capital $ 2,632 $ 57 $ 6,341 $ 2,422 Growth 527 449 2,545 2,134 Impact 546 711 1,317 3,301 Real Estate 933 1,195 2,817 2,539 Market Solutions(2) 828 105 887 410 Total $ 5,466 $ 2,517 $ 13,907 $ 10,806 Realizations 3Q'21 3Q'22 3Q'21 YTD 3Q'22 YTD Capital $ 9,605 $ 735 $ 11,823 $ 6,667 Growth 913 629 3,108 1,932 Impact 414 201 651 468 Real Estate 602 552 2,217 1,927 Market Solutions(2) 596 49 596 361 Total $ 12,130 $ 2,166 $ 18,395 $ 11,355 (All tables in $M)
Supplemental Details
TPG | 23 GAAP and Non-GAAP Performance Allocations 1. The TPG Operating Group Excluded entities’ performance allocations is not a component of net income attributable to TPG following the Reorganization; however, the TPG general partner entities continue to be consolidated by us. We transferred the rights to the performance allocations the TPG Operating Group historically would have received to RemainCo on December 31, 2021. As such, net income available to controlling interest holders will be zero for each of the TPG Operating Group Excluded entities beginning January 1, 2022. 2. Non-GAAP adjustments represent the exclusion of performance allocations that are not attributable to the TPG Operating Group Common Unit holders. Nine Months Ended September 30, 2022 GAAP Less: GAAP GAAP Less: Non-GAAP Non-GAAP ($ in thousands) Total Unrealized Realized Adjustments(2) Realized Capital TPG VII $ 320,026 $ (192,566) $ 512,592 $ 404,533 $ 108,059 TPG VIII 297,999 199,314 98,687 77,911 20,776 Asia VII (36,112) (128,298) 92,186 72,784 19,403 THP I 20,098 (33,366) 53,464 42,193 11,271 Other 22,598 2,923 19,674 17,734 1,940 Excluded Assets(1) (57,370) (82,131) 24,760 24,760 — Total Capital 567,239 (234,124) 801,363 639,914 161,449 Growth TTAD I 1,253 (39,645) 40,898 32,238 8,660 Growth V 65,353 65,353 — — — TDM 20,626 20,626 — — — Growth III (42,611) (58,149) 15,538 15,538 — Other (5,640) (5,640) — — — Excluded Assets(1) (3,122) (3,725) 603 603 — Total Growth 35,859 (21,180) 57,039 48,379 8,660 Impact Rise I (14,712) (88,330) 73,618 57,661 15,957 Rise II 24,283 24,282 1 1 — Excluded Assets(1) (13,600) (15,330) 1,730 1,730 — Total Impact (4,029) (79,378) 75,349 59,392 15,957 Real Estate TREP III 36,359 30,933 5,426 4,316 1,110 Excluded Assets(1) (19,319) (32,673) 13,354 13,354 — Total Real Estate 17,040 (1,740) 18,780 17,670 1,110 Market Solutions TPEP 9,716 8,878 838 671 168 Other 9,960 9,960 — — — Total Market Solutions 19,676 18,838 838 671 168 Total $ 635,784 $ (317,584) $ 953,369 $ 766,026 $ 187,344
TPG | 24 Net Income Per Share of Class A Common Stock ▪ Basic net income per share of Class A common stock of $0.44 for 3Q'22 ▪ Diluted net income per share of Class A common stock of $0.09 for 3Q'22 ($ in thousands, except share and per share amounts) 3Q'22 3Q'22 YTD Net Income Per Share Numerator: Net income (loss) $ 53,206 $ (46,487) 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 53,206 (52,192) Less: Net income attributable to redeemable equity in Public SPACs subsequent to IPO 7,322 13,203 Net loss attributable to non-controlling interests in TPG Operating Group subsequent to IPO (6,898) (140,679) Net income attributable to other non-controlling interests subsequent to IPO 15,422 6,499 Net income attributable to Class A Common Stockholders prior to distributions 37,360 68,785 Reallocation of earnings to unvested participating restricted stock units (2,143) (3,575) Net income attributable to Class A Common Stockholders - Basic 35,217 65,210 Net loss assuming exchange of non-controlling interest (8,237) (114,476) Reallocation of income from participating securities assuming exchange of Common Units 604 — Net income (loss) attributable to Class A Common Stockholders - Diluted 27,584 (49,266) Denominator: Weighted-Average Shares of Common Stock Outstanding - Basic 79,266,822 79,249,528 Exchange of Common Units to Class A Common Stock 229,652,641 229,652,641 Weighted-Average Shares of Common Stock Outstanding - Diluted 308,919,463 308,902,169 Net income (loss) available to Class A common stock per share Basic $ 0.44 $ 0.82 Diluted $ 0.09 $ (0.16) Dividends declared per share of Class A Common Stock(1) $ 0.39 $ 0.83 1. Dividends declared reflects the calendar date of the declaration for each distribution.
TPG | 25 After-Tax DE and Dividends Per Class A Common Stock ▪ After-tax DE attributable to TPG Inc. of $0.30 per share for 3Q'22, and $1.28 per share for 3Q'22 YTD ▪ Declared dividend of $0.26 per share for 3Q'22 on November 9, 2022, with a record date of November 21, 2022 and payable date of December 2, 2022; dividends total $1.09 per share on a year-to-date basis ($ in thousands, except share and per share amounts) 2Q'22 3Q'22 Share Reconciliation Class A common stock from IPO 79,070,565 79,070,565 Vested restricted stock units 169,493 169,493 Class A common stock outstanding 79,240,058 79,240,058 ($ in thousands, except share and per share amounts) 2Q'22 3Q'22 After-Tax Distributable Earnings attributable to TPG Inc. Class A common stockholders Pre-Tax Distributable Earnings $ 171,698 $ 121,495 Less: subsidiary-level income taxes(1) (3,193) (2,109) Distributable Earnings before corporate income taxes 168,505 119,386 Percent to TPG Inc. 26 % 26 % TPG Inc. Distributable Earnings before corporate income taxes 43,227 30,626 Less: corporate income taxes attributable to TPG Inc.(1) (6,638) (6,569) TPG Inc. After-tax Distributable Earnings 36,589 24,057 Class A common stock outstanding 79,240,058 79,240,058 TPG Inc. After-tax Distributable Earnings per Class A common stock 0.46 0.30 Target dividend policy 85 % 85 % Dividend per Class A common stock $ 0.39 $ 0.26 Note: TPG Inc. effective DE corporate income tax rate(2) 15 % 21 % 1. Total income taxes consist of subsidiary-level income taxes at the TPG Operating Group level and corporate income taxes borne by TPG Inc. ($ in thousands) 2Q'22 3Q'22 Subsidiary-level income taxes $ 3,193 $ 2,109 Corporate income taxes 6,638 6,569 Total income taxes $ 9,831 $ 8,678 2. TPG Inc.’s non-GAAP effective tax rate was approximately 21% for the three month period ending September 30, 2022. This rate differed from TPG Inc.’s marginal tax rate of 23% primarily due to the tax treatment of certain IPO costs, and also items that will continue to impact our rate in the future such as tax benefits from our tax receivable program and settlement of restricted stock units (“RSUs”), among other activities arising in our normal course of business.
TPG | 26 Distributable Earnings Participating Shares Outstanding (shares) 2Q'22 3Q'22 TPG Inc. Diluted Shares Outstanding Class A common stock outstanding 79,240,058 79,240,058 Exchange of Common Units to Class A common stock 229,652,641 229,652,641 Diluted Class A common stock outstanding 308,892,699 308,892,699 Restricted Stock Units ("RSUs") IPO-related Service-based(1) 9,658,707 9,518,837 Executive Service-Vesting 1,101,695 1,101,695 Ordinary service-based RSUs 199,366 657,064 Total Distributable Earnings participating shares outstanding(2) 319,852,467 320,170,295 1. Includes 31,978 RSUs that have vested but have not yet been settled. 2. Excludes Executive and Ordinary Performance Condition Vesting RSUs, which are not considered participating as they either accrue dividends to be paid only upon vesting or do not participate in dividends.
TPG | 27 Equity-Based Compensation Summary $ in millions, except for share and per share amounts, as of September 30, 2022 Category Units Outstanding Compensation Expense QTD Compensation Expense YTD Unrecognized Compensation Expense Remaining Recognition Period(1) Legacy Equity and Other IPO-Related Awards(2) N/A $ 122.6 $ 418.3 $ 1,613.0 3.0 - 6.0 years TPG Inc. IPO-Related RSUs(3) 10,620,534 18.4 56.8 262.0 3.8 years Subtotal 10,620,534 141.0 475.1 1,875.0 Add: TPG Inc. Ordinary service-based RSUs 657,064 1.1 1.4 17.6 3.4 years Total 11,277,598 142.1 476.5 1,892.6 Less: Non-employee portion of RSUs(4) 226,400 (0.6) (6.5) Add: PRSU Compensation Expense 1,237,286 1.6 4.2 Total Statement of Operations Equity-based compensation $ 143.1 $ 474.2 1. For RSUs, this metric represents the weighted average remaining recognition period across outstanding grants. 2. Represents units granted in TPG Partner Holdings, RemainCo Partner Holdings, and TPG RE Finance Trust, Inc. and other awards granted in conjunction with the IPO. 3. Excludes Executive Performance Condition Vesting RSUs (“PRSUs”), which are not considered participating; these RSUs either do not participate in dividends or accrue dividends only to be paid upon vesting. Includes 31,978 RSUs that have vested but have not yet been settled. 4. Considered a General, Administrative and Other expense for GAAP purposes. ▪ Equity-based compensation related to TPG Inc. ordinary service-based RSUs totaled $1.1 million in 3Q'22; the total unrecognized compensation expense related to these RSUs amounted to $17.6 million at the end of 3Q'22, and is expected to be recognized over the next 3.4 years
TPG | 28 Fund Performance Metrics Note: Past performance is not indicative of future results. See notes on the following pages. ($ in millions, as of 9/30/22) Vintage Capital Capital Realized Unrealized Total Gross Gross Net Investor Fund Year(1) Committed(2) Invested(3) Value(4) Value(5) Value(6) IRR(7) MoM(7) IRR(8) Net MoM(9) Platform: Capital Capital Funds Air Partners 1993 $ 64 $ 64 $ 697 $ — $ 697 81 % 10.9x 73 % 8.9x TPG I 1994 721 696 3,095 — 3,095 47 % 4.4x 36 % 3.5x TPG II 1997 2,500 2,554 5,010 — 5,010 13 % 2.0x 10 % 1.7x TPG III 1999 4,497 3,718 12,360 — 12,360 34 % 3.3x 26 % 2.6x TPG IV 2003 5,800 6,157 13,733 — 13,733 20 % 2.2x 15 % 1.9x TPG V 2006 15,372 15,564 22,071 1 22,072 6 % 1.4x 5 % 1.4x TPG VI 2008 18,873 19,220 32,651 1,036 33,687 14 % 1.7x 10 % 1.5x TPG VII 2015 10,495 10,046 16,641 7,772 24,413 28 % 2.4x 22 % 2.0x TPG VIII 2019 11,505 9,037 2,569 11,758 14,327 59 % 1.6x 37 % 1.4x TPG IX(19) 2022 8,719 — — — — NM NM NM NM Capital Funds 78,546 67,056 108,827 20,567 129,394 23 % 1.9x 15 % 1.7x Asia Funds Asia I 1994 96 78 71 — 71 (3) % 0.9x (10) % 0.7x Asia II 1998 392 764 1,669 — 1,669 17 % 2.2x 14 % 1.9x Asia III 2000 724 623 3,316 — 3,316 46 % 5.3x 31 % 3.8x Asia IV 2005 1,561 1,603 4,089 — 4,089 23 % 2.6x 17 % 2.1x Asia V 2007 3,841 3,257 5,151 433 5,584 10 % 1.7x 6 % 1.4x Asia VI 2012 3,270 3,207 2,649 4,246 6,895 17 % 2.2x 13 % 1.8x Asia VII 2017 4,630 4,227 1,791 5,578 7,369 28 % 1.8x 18 % 1.5x Asia VIII(19) 2022 3,389 — — — — NM NM NM NM Asia Funds 17,903 13,759 18,736 10,257 28,993 21 % 2.1x 15 % 1.7x Healthcare Funds THP I 2019 2,704 1,845 805 2,154 2,959 57 % 1.6x 32 % 1.3x THP II(19) 2022 1,913 — — — — NM NM NM NM Healthcare Funds 4,617 1,845 805 2,154 2,959 57 % 1.6x 32 % 1.3x Continuation Vehicles TPG AAF 2021 1,317 1,314 75 2,095 2,170 57 % 1.7x 47 % 1.5x TPG AION 2021 207 207 — 207 207 — % 1.0x (1) % 1.0x Continuation Vehicles 1,524 1,521 75 2,302 2,377 49 % 1.6x 41 % 1.5x Platform: Capital (excl- Legacy(15)) 102,590 84,181 128,443 35,280 163,723 23 % 2.0x 15 % 1.7x Legacy Funds TES I 2016 303 206 210 165 375 29 % 1.8x 19 % 1.5x Platform: Capital $ 102,893 $ 84,387 $ 128,653 $ 35,445 $ 164,098 23 % 2.0x 15 % 1.7x
TPG | 29 Fund Performance Metrics (Cont’d) Note: Past performance is not indicative of future results. See notes on the following pages. ($ in millions, as of 9/30/22) Vintage Capital Capital Realized Unrealized Total Gross Gross Net Investor Fund Year(1) Committed(2) Invested(3) Value(4) Value(5) Value(6) IRR(7) MoM(7) IRR(8) Net MoM(9) Platform: Growth Growth Funds STAR 2007 $ 1,264 $ 1,259 $ 1,859 $ 68 $ 1,927 13 % 1.5x 6 % 1.3x Growth II 2011 2,041 2,184 4,695 623 5,318 22 % 2.5x 16 % 2.0x Growth III 2015 3,128 3,315 4,530 2,411 6,941 29 % 2.1x 20 % 1.7x Growth IV 2017 3,739 3,481 1,628 4,542 6,170 26 % 1.8x 17 % 1.5x Gator 2019 726 685 627 619 1,246 40 % 1.8x 30 % 1.6x Growth V 2020 3,558 2,363 313 3,029 3,342 48 % 1.5x 31 % 1.3x Growth Funds 14,456 13,287 13,652 11,292 24,944 21 % 1.9x 15 % 1.6x TDM 2017 510 442 — 961 961 27 % 2.2x 22 % 1.9x Tech Adjacencies Funds TTAD I 2018 1,574 1,497 782 1,932 2,714 40 % 1.8x 32 % 1.6x TTAD II 2021 2,612 1,063 — 1,076 1,076 (3) % 1.0x (21) % 0.9x Tech Adjacencies Funds 4,186 2,560 782 3,008 3,790 38 % 1.6x 30 % 1.4x Platform: Growth (Excl- Legacy(15)) 19,152 16,289 14,434 15,261 29,695 22 % 1.9x 15 % 1.6x Legacy Funds Biotech III 2008 510 468 949 443 1,392 17 % 3.0x 12 % 2.3x Biotech IV 2012 106 99 121 4 125 8 % 1.3x 3 % 1.1x Biotech V 2016 88 79 26 63 89 4 % 1.1x — % 1.0x ART 2013 258 242 27 266 293 3 % 1.2x — % 1.0x Platform: Growth 20,114 17,177 15,557 16,037 31,594 21 % 1.9x 15 % 1.6x Platform: Impact The Rise Funds Rise I 2017 2,106 1,872 1,242 2,451 3,693 26 % 2.0x 18 % 1.6x Rise II 2020 2,176 1,747 63 2,314 2,377 48 % 1.4x 28 % 1.3x Rise III 2022 1,881 297 — 297 297 NM NM NM NM The Rise Funds 6,163 3,916 1,305 5,062 6,367 29 % 1.8x 19 % 1.5x TSI 2018 333 133 368 — 368 35 % 2.8x 25 % 2.1x Evercare 2019 621 415 16 505 521 8 % 1.3x 2 % 1.1x Rise Climate 2021 7,268 2,176 8 2,274 2,282 55 % 1.1x (41) % 0.9x Platform: Impact $ 14,385 $ 6,640 $ 1,697 $ 7,841 $ 9,538 27 % 1.6x 16 % 1.3x
TPG | 30 Fund Performance Metrics (Cont’d) Note: Past performance is not indicative of future results. See notes on the following pages. ($ in millions, as of 9/30/22) Vintage Capital Capital Realized Unrealized Total Gross Gross Net Investor Fund Year(1) Committed(2) Invested(3) Value(4) Value(5) Value(6) IRR(7) MoM(7) IRR(8) Net MoM(9) Platform: Real Estate TPG Real Estate Partners DASA RE 2012 $ 1,078 $ 576 $ 1,068 $ 13 $ 1,081 21 % 1.9x 15 % 1.6x TREP II 2014 2,065 2,211 3,174 415 3,589 29 % 1.7x 19 % 1.5x TREP III 2018 3,722 3,868 1,575 3,529 5,104 28 % 1.5x 20 % 1.3x TREP IV 2022 6,820 413 — 413 413 NM NM NM NM TPG Real Estate Partners 13,685 7,068 5,817 4,370 10,187 25 % 1.6x 18 % 1.4x TRTX 2014 1,916 (14) NM NM NM NM NM NM NM NM TAC+ 2021 1,797 822 69 797 866 7 % 1.1x 5 % 1.0x Platform: Real Estate 17,398 7,890 5,886 5,167 11,053 25 % 1.5x 18 % 1.4x Platform: Market Solutions TPEP Long/Short NM NM NM NM 2,370 NM NM (13) NM NM (13) NM TPEP Long Only NM NM NM NM 1,605 NM NM (13) NM NM (13) NM TSCF 2021 1,108 158 12 132 144 (10) % 0.9x (11) % 0.9x GP Solutions 2022 312 88 — 88 88 NM NM NM NM TPG TIGER 2022 300 8 — 8 8 NM NM NM NM NewQuest I(18) 2011 390 291 767 — 767 48 % 3.2x 37 % 2.3x NewQuest II(18) 2013 310 337 567 171 738 25 % 2.2x 20 % 1.8x NewQuest III(18) 2016 541 499 320 560 880 18 % 1.8x 12 % 1.4x NewQuest IV(18) 2020 1,000 788 103 1,020 1,123 62 % 1.5x 35 % 1.3x NewQuest V(18) 2022 378 — — — — NM NM NM NM Platform: Market Solutions(12) 4,339 2,169 1,769 5,954 3,748 38 % 1.8x 26 % 1.5x Discontinued Funds(16) 5,870 4,103 5,303 — 5,303 7 % 1.3x 3 % 1.1x Total (excl-Legacy(15) and Discontinued Funds(16)) 157,864 117,169 152,229 69,503 217,757 23 % 1.9x 15 % 1.6x Total $ 164,999 $ 122,366 $ 158,865 $ 70,444 $ 225,334 22 % 1.9x 14 % 1.6x
TPG | 31 Fund Performance Metrics Notes 1) Vintage Year, with respect to an investment or group of investments, as applicable, represents the year such investment, or the first investment in such a group, was initially consummated by the fund. For follow-on investments, Vintage Year represents the year that the fund’s first investment in the relevant company was initially consummated. Vintage Year, with respect to a fund, represents the year in which the fund consummated its first investment (or, if earlier, received its first capital contributions from investors). We adopted this standard for fund Vintage Year to better align with current market and investor benchmarking practices. For consistency with prior reporting, however, the Vintage Year classification of any fund that held its initial closing before 2018 remains unchanged and represents the year of such fund’s initial closing. 2) Capital Committed represents the amount of inception to date commitments a particular fund has received. 3) Capital Invested, with respect to an investment or group of investments, as applicable, represents cash outlays by the fund for such investment or investments (whether funded through investor capital contributions or borrowing under the fund’s credit facility), including capitalized expenses and unrealized bridge loans allocated to such investment or investments. Capital Invested may be reduced after the date of initial investment as a result of sell-downs. This does not include proceeds eligible for recycling under fund limited partnership agreements. Capital Invested does not include interest expense on borrowing under the fund’s credit facility. 4) Realized Value, with respect to an investment or group of investments, as applicable, represents total cash received or earned by the fund in respect of such investment or investments through the quarter end, including all interest, dividends and other proceeds. Receipts are recognized when cash proceeds are received or earned. Proceeds from an investment that is subject to pending disposition are not included in Realized Value and remain in Unrealized Value until the disposition has been completed and cash has been received. Similarly, any proceeds from an investment that is pending liquidation, or a similar event are not included in Realized Value until the liquidation or similar event has been completed. In addition, monitoring, transaction and other fees are not included in Realized Value but are applied to offset management fees to the extent provided in the fund’s partnership agreement. 5) Unrealized Value, with respect to an investment in a publicly traded security, is based on the closing market price of the security as of the quarter end on the principal exchange on which the security trades, as adjusted by the general partner for any restrictions on disposition. Unrealized Value, with respect to an investment that is not a publicly traded security, represents the general partner’s estimate of the unrealized fair value of the fund’s investment, assuming a reasonable period of time for liquidation of the investment, and taking into consideration the financial condition and operating results of the portfolio company, the nature of the investment, applicable restrictions on marketability, market conditions, foreign currency exposures and other factors the general partner may deem appropriate. Where applicable, such estimate has been adjusted from cost to reflect (i) company performance relative to internal performance markers and the performance of comparable companies; (ii) market performance of comparable companies; and (iii) recent, pending or proposed transactions involving us, such as recapitalizations, initial public offerings or mergers and acquisitions. Given the nature of private investments, valuations necessarily entail a degree of uncertainty and/or subjectivity. There can be no assurance that expected transactions will actually occur or that performance markers will be achieved, and therefore actual value may differ from such estimated value and these differences may be material and adverse. Except as otherwise noted, valuations are as of the quarter end. 6) Total Value, with respect to an investment or group of investments, as applicable, is the sum of Realized Value and Unrealized Value of such investment or investments. 7) Gross IRR and Gross MoM are calculated by adjusting Investor Net IRR and Investor Net MoM to generally approximate investor performance metrics excluding management fees, fund expenses (other than interest expense and other fees arising from amounts borrowed under the fund’s credit facility to fund investments) and performance allocations. With respect to interest expense and other fees arising from amounts borrowed under the fund’s credit facility to fund investments, we have assumed that investor capital contributions were made in respect thereof as of the midpoint of each relevant quarter in which such amounts were incurred. We have further assumed that distributions to investors occurred in the middle of the month in which the related proceeds were received by the fund. Like the Net IRR, Gross IRR and Gross MoM (i) do not reflect the effect of taxes borne, or to be borne, by investors and (ii) excludes amounts attributable to the fund’s general partner, its affiliated entities and “friends of the firm” entities that generally pay no or reduced management fees and performance allocations. Such Gross IRR and Gross MoM represent an average of returns for all included investors and does not necessarily reflect the actual return of any particular investor. Gross IRR and Gross MoM are an approximation calculated by adjusting historical data using estimates and assumptions that we believe are appropriate for the relevant fund, but that inherently involve significant judgment. For funds that engaged in de minimis or no fund-level borrowing, Gross IRR is the discount rate at which (i) the present value of all Capital Invested in an investment or investments is equal to (ii) the present value of all realized and unrealized returns from such investment or investments. In this scenario, Gross IRR, with respect to an investment or investments, has been calculated based on the time that capital was invested by the fund in such investment or investments and that distributions were received by the fund in respect of such investment or investments, regardless of when capital was contributed to or distributed from the fund. Gross IRR does not reflect the effect of management fees, fund expenses, performance allocations or taxes borne, or to be borne, borne, by investors in the fund and would be lower if it did. For funds that engaged in de minimis or no fund-level borrowing, Gross MoM represents the multiple-of-money on capital invested by the fund for an investment or investments and is calculated as Total Value divided by Capital Invested (i.e., cash outlays by the fund for such investment or investments, whether funded through investor capital contributions or borrowing under the fund’s credit facility). Gross MoM is calculated on a gross basis and does not reflect the effect of management fees, fund expenses, performance allocations or taxes borne, or to be borne, by investors in the fund, and would be lower if it did.
TPG | 32 Fund Performance Metrics Notes (Cont’d) 8) Net IRR represents the compound annualized return rate (i.e., the implied discount rate) of a fund, which is calculated using investor cash flows in the fund, including cash received from capital called from investors, cash distributed to investors and the investors’ ending capital balances as of the quarter end. Net IRR is the discount rate at which (i) the present value of all capital contributed by investors to the fund (which excludes, for the avoidance of doubt, any amounts borrowed by the fund in lieu of calling capital) is equal to (ii) the present value of all cash distributed to investors and the investors’ ending capital balances. Net IRR reflects the impact of management fees, fund expenses (including interest expense arising from amounts borrowed under the fund’s credit facility) and performance allocations, but does not reflect the effect of taxes borne, or to be borne, by investors. The Net IRR calculation assumes that investor contributions and distributions occurred in the middle of the month in which they were made. The Net IRR calculation excludes amounts attributable to the general partner, its affiliated entities and “friends of the firm” entities that generally pay no or reduced management fees and performance allocations. Net IRR represents an average return for all included investors, including those that pay reduced management fees and/or carried interest, and does not necessarily reflect the actual return of any particular investor. An actual investor that paid management fees and/or carried interest at rates higher than the average would have a lower individual Net IRR. In addition, management fees, fund expenses and carried interest differ from fund to fund, and therefore the impact of such amounts in a particular fund should not be assumed to reflect the impact such amounts would have on any other fund, including in respect of any fund in which a prospective investor is considering an investment. Net IRR for a platform does not include the cash flows for funds that are not currently presenting a Net IRR to their investors. 9) Investor Net MoM, with respect to a fund, represents the multiple-of-money on contributions to the fund by investors. Investor Net MoM is calculated as the sum of cash distributed to investors and the investors’ ending capital balances as of the quarter end, divided by the amount of capital contributed to the fund by investors (which amount excludes, for the avoidance of doubt, any amounts borrowed by the fund in lieu of calling capital). Investor Net MoM reflects the impact of management fees, fund expenses (including interest expense arising from amounts borrowed under the fund’s credit facility) and performance allocations, but does not reflect the effect of taxes borne, or to be borne, by investors. The Investor Net MoM calculation excludes amounts attributable to the fund’s general partner, its affiliated entities and “friends of the firm” entities that generally pay no or reduced management fees and performance allocations. Investor Net MoM represents an average multiple-of-money for all included investors and does not necessarily reflect the actual return of any particular investor. An actual investor that paid management fees and/or carried interest at rates higher than the average would have a lower individual net M-o-M. In addition, management fees, fund expenses and carried interest differ from fund to fund, and therefore the impact of such amounts in a particular fund should not be assumed to reflect the impact such amounts would have on any other fund, including in respect of any fund in which a prospective investor is considering an investment. 10) “NM” signifies that the relevant data would not be meaningful. Performance metrics are generally deemed “NM” for an investment or group of investments when, among other reasons, a fund is in its initial period of operation, or the holding period of the investment or investments is in its initial period of holding, which in each case we typically determine to mean up to twelve months, or the investment or investments do not have a significant cost basis. IRR metrics are generally deemed “NM” prior to the fund calling capital for the applicable investment(s). 11) Amounts shown are in US dollars. When an investment is made in another currency, (i) Capital Invested is calculated using the exchange rate at the time of the investment, (ii) Unrealized Value is calculated using the exchange rate at the quarter end and (iii) Realized Value reflects actual US dollar proceeds to the fund. A fund may enter into foreign currency hedges in connection with an investment made in a currency other than US dollars. Capital Invested with respect to such investment includes the cost of establishing foreign currency hedges. For hedges entered into to facilitate payment of the purchase price for an investment, gains or losses on such hedges are applied, respectively, to reduce or increase Capital Invested with respect to such investment. Thereafter during the life of such investment, (i) Capital Invested includes any inception-to-date net realized losses on such hedges, (ii) Unrealized Value includes the unrealized fair value of such hedges as estimated by the general partner and (iii) Realized Value includes any inception-to-date net realized gain on such hedges. For hedges entered into in anticipation of receipt of exit proceeds, (i) losses on such hedges are first applied to offset exit proceeds, with any remaining losses applied to increase Capital Invested and (ii) gains on such hedges are first applied to reverse any inception-to-date net realized losses that were previously included in Capital Invested, with any remaining gains applied to increase Realized Value. Where a foreign currency hedge is implemented as part of the investment structure below the fund, such hedge is similarly reflected in Capital Invested and Realized Value to the extent that there are corresponding cash outflows from and inflows to the fund in respect of such hedge, and otherwise is included in Unrealized Value. 12) Our special purpose acquisition companies (“SPACs”) which include Pace Holdings Corp., TPG Pace Holdings Corp., TPG Pace Tech Opportunities Corp., TPG Pace Beneficial Finance Corp., TPG Pace Energy Holdings Corp., TPG Pace Solutions Corp., TPG Pace Beneficial II Corp. and AfterNext HealthTech Acquisition Corp. within the Market Solutions platform are not reflected. Gross IRR, Gross MoM and Net IRR are not meaningful for SPAC products as they are designed to identify an investment and merge to become a public company.
TPG | 33 Fund Performance Metrics Notes (Cont’d) 13) As of September 30, 2022, TPEP Long/Short had estimated inception-to-date gross returns of 135% and net returns of 98%. These performance estimates represent the composite performance of TPG Public Equity Partners, LP and TPG Public Equity Partners Master Fund, L.P., adjusted as described below. The performance estimates are based on an investment in TPG Public Equity Partners, LP made on September 1, 2013, the date of TPEP’s inception, with the performance estimates for the period from January 1, 2016 to present being based on an investment in TPG Public Equity Partners Master Fund, L.P. made through TPG Public Equity Partners-A, L.P., the “onshore feeder.” Gross performance figures (i) are presented after any investment-related expenses, net interest, other expenses and the reinvestment of dividends; (ii) include any gains or losses from “new issue” securities; and (iii) are adjusted for illustration purposes to reflect the reduction of a hypothetical 1.5% annual management fee. Net performance assumes a 20% performance allocation. Performance results for a particular investor may vary from the performance stated as a result of, among other things, the timing of its investment(s) in TPEP, different performance allocation terms, different management fees, the feeder through which the investor invests and the investor’s eligibility to participate in gains and losses from “new issue” securities. Unrealized Value represents net asset value before redemptions. As of September 30, 2022, TPEP Long Only had estimated inception-to-date gross returns of 7% and net returns of 6%. These performance estimates represent performance for TPEP Long Only and are based on an investment in TPEP Long Only made on May 1, 2019, the date of TPEP Long Only’s inception, through TPG Public Equity Partners Long Opportunities-A, L.P., the “onshore feeder.” Gross performance figures are presented after any investment-related expenses, a 1% annual management fee, net interest, other expenses and the reinvestment of dividends, and include any gains or losses from “new issue” securities. Net performance assumes a 20% performance allocation, with the performance allocation only received upon outperforming the relevant benchmark. Performance results for a particular investor may vary from the performance stated as a result of, among other things, the timing of its investment(s) in TPEP Long Only, different performance allocation terms, different management fees, the feeder through which the investor invests and the investor’s eligibility to participate in gains and losses from “new issue” securities. Unrealized Value represents net asset value before redemptions. 14) Capital Committed for TRTX includes $1,201 million of private capital raised prior to TRTX’s initial public offering and $716 million issued during and subsequent to TRTX’s initial public offering. 15) Legacy funds represent funds whose strategies are not expected to have successor funds but that have not yet been substantially wound down. 16) Discontinued funds represent legacy funds that have substantially been wound down or are fully liquidated. The following TPG funds are considered discontinued: Latin America, Aqua I, Aqua II, Ventures, Biotech I, Biotech II, TPG TFP, TAC 2007 and DASA PE. 17) Total TPG track record amounts do not include results from RMB - Shanghai and RMB - Chongqing or China Ventures, a joint venture partnership. 18) Unless otherwise specified, the fund performance information presented above for NewQuest I, NewQuest II, NewQuest III, NewQuest IV, and NewQuest V is, due to the nature of NewQuest’s strategy, as of and for the quarter ended June 30, 2022. Accordingly, the fund performance information presented above for the NewQuest funds does not reflect any fund activity for the quarter ended September 30, 2022 and therefore does not cover the same period presented for other funds. Any activity occurring during the quarter ended September 30, 2022 will be reflected in the performance information presented in future reporting. 19) Certain funds recorded capital commitments prior to September 30, 2022 but were not activated or had not yet made their first investment. Therefore the only activity reflected in the track record with respect to these funds was the capital commitments.
TPG | 34 GAAP Statements of Operations Expanded (Unaudited) Note: Due to the Reorganization in 1Q’22, comparability of prior periods may be limited. ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Revenues Fees and other $ 279,908 $ 292,789 $ 273,005 $ 289,955 $ 333,496 $ 896,456 $ 1,189,245 Capital allocation-based income 231,356 786,538 837,705 (398,237) 227,628 667,096 1,453,634 Total revenues 511,264 1,079,327 1,110,710 (108,282) 561,124 1,563,552 2,642,879 Expenses Compensation and benefits Cash-based compensation and benefits 136,139 187,032 116,359 115,639 116,753 348,751 535,783 Equity-based compensation — — 185,911 145,140 143,149 474,200 474,200 Performance allocation compensation — — 523,138 (298,026) 149,495 374,607 374,607 Total compensation and benefits 136,139 187,032 825,408 (37,247) 409,397 1,197,558 1,384,590 General, administrative and other 68,634 95,660 102,264 77,671 95,533 275,468 371,128 Depreciation and amortization 2,251 16,086 8,699 8,558 7,372 24,629 40,715 Interest expense 4,371 3,973 4,638 4,731 5,737 15,106 19,079 Expenses of consolidated TPG Funds and Public SPACs: Interest expense 226 167 — — — — 167 Other 12,556 (3,895) 1,523 457 567 2,547 (1,348) Total expenses 224,177 299,023 942,532 54,170 518,606 1,515,308 1,814,331 Investment income Income from investments: Net gains from investment activities 224,141 14,873 6,643 (99,395) 1,907 (90,845) (75,972) Interest, dividends and other 472 (499) 204 782 2,407 3,393 2,894 Investment income of consolidated TPG Funds and Public SPACs: Net gains from investment activities 1,949 14,384 — — — — 14,384 Unrealized gains on derivative liabilities 7,205 20,294 2,657 5,823 3,235 11,715 32,009 Interest, dividends and other 910 7,350 126 843 3,571 4,540 11,890 Total investment income 234,677 56,402 9,630 (91,947) 11,120 (71,197) (14,795) Income before income taxes 521,764 836,706 177,808 (254,399) 53,638 (22,953) 813,753 Income tax expense 1,281 2,948 15,004 8,098 432 23,534 26,482 Net income 520,483 833,758 162,804 (262,497) 53,206 (46,487) 787,271 Less: Net income attributable to redeemable equity in Public SPACs prior to IPO (4,250) 21,922 (517) — — (517) 21,405 Net income attributable to non-controlling interests in consolidated TPG Funds prior to IPO 1,293 11,096 — — — — 11,096 Net income attributable to other non-controlling interests prior to IPO 228,646 474,879 966 — — 966 475,845 Net income attributable to TPG Group Holdings prior to IPO 294,794 325,861 5,256 — — 5,256 331,117 Net income attributable to redeemable equity in Public SPACs — — 1,823 4,058 7,322 13,203 13,203 Net income attributable to non-controlling interests in TPG Operating Group — — (4,912) (128,869) (6,898) (140,679) (140,679) Net income attributable to other non-controlling interests — — 118,904 (127,827) 15,422 6,499 6,499 Net income attributable to TPG Inc. subsequent to IPO $ — $ — $ 41,284 $ (9,859) $ 37,360 $ 68,785 $ 68,785
TPG | 35 GAAP Statements of Operations Pro Forma Adjustments See notes on the following pages. ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Revenues Fees and other $ 5,507 $ 3,950 $ — $ — $ — $ — $ 3,950 (3) Capital allocation-based income 4,938 (7,447) — — — — (7,447) (1) Total revenues 10,445 (3,497) — — — — (3,497) Expenses Compensation and benefits Cash-based compensation and benefits (33,144) (42,920) — — — — (42,920) (5) Equity-based compensation 125,004 124,319 — — — — 124,319 (6, 7) Performance allocation compensation 190,279 502,308 — — — — 502,308 (5) Total compensation and benefits 282,139 583,707 — — — — 583,707 General, administrative and other — — — — — — — Depreciation and amortization — — — — — — — Interest expense 997 998 — — — — 998 (4) Expenses of consolidated TPG Funds and Public SPACs: Interest expense (226) (167) — — — — (167) (1) Other (898) (434) — — — — (434) (1) Total expenses 282,012 584,104 — — — — 584,104 Investment income Income from investments: Net gains from investment activities (23,716) 17,419 — — — — 17,419 (1) Interest, dividends and other — — — — — — — Investment income of consolidated TPG Funds and Public SPACs: Net gains from investment activities (1,949) (14,384) — — — — (14,384) (1) Unrealized gains on derivative liabilities — — — — — — — Interest, dividends and other (899) (1,093) — — — — (1,093) (1) Total investment income (26,564) 1,942 — — — — 1,942 Income before income taxes (298,131) (585,659) — — — — (585,659) Income tax expense 17,251 12,298 — — — — 12,298 (8) Net income (315,382) (597,957) — — — — (597,957) Less: Net income attributable to redeemable equity in Public SPACs prior to IPO 4,250 (21,922) — — — — (21,922) Net income attributable to non-controlling interests in consolidated TPG Funds prior to IPO (1,293) (11,096) — — — — (11,096) (1) Net income attributable to other non-controlling interests prior to IPO (228,646) (474,879) — — — — (474,879) (1-5), (9) Net income attributable to TPG Group Holdings prior to IPO (294,794) (325,861) — — — — (325,861) Net income attributable to redeemable equity in Public SPACs (4,250) 21,922 — — — — 21,922 Net income attributable to non-controlling interests in TPG Operating Group — — — — — — — Net income attributable to other non-controlling interests 151,128 172,632 — — — — 172,632 Net income attributable to TPG Inc. subsequent to IPO $ 58,223 $ 41,247 $ — $ — $ — $ — $ 41,247
TPG | 36 Pro Forma GAAP Statements of Operations Expanded See notes on the following pages. ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Pro Forma Revenues Fees and other $ 285,415 $ 296,739 $ 273,005 $ 289,955 $ 333,496 $ 896,456 $ 1,193,195 Capital allocation-based income 236,294 779,091 837,705 (398,237) 227,628 667,096 1,446,187 Total revenues 521,709 1,075,830 1,110,710 (108,282) 561,124 1,563,552 2,639,382 Pro Forma Expenses Compensation and benefits Cash-based compensation and benefits 102,995 144,112 116,359 115,639 116,753 348,751 492,863 Equity-based compensation 125,004 124,319 185,911 145,140 143,149 474,200 598,519 Performance allocation compensation 190,279 502,308 523,138 (298,026) 149,495 374,607 876,915 Total compensation and benefits 418,278 770,739 825,408 (37,247) 409,397 1,197,558 1,968,297 General, administrative and other 68,634 95,660 102,264 77,671 95,533 275,468 371,128 Depreciation and amortization 2,251 16,086 8,699 8,558 7,372 24,629 40,715 Interest expense 5,368 4,971 4,638 4,731 5,737 15,106 20,077 Expenses of consolidated TPG Funds and Public SPACs: Interest expense — — — — — — — Other 11,658 (4,329) 1,523 457 567 2,547 (1,782) Total expenses 506,189 883,127 942,532 54,170 518,606 1,515,308 2,398,435 Pro Forma Investment income Income from investments: Net gains from investment activities 200,425 32,292 6,643 (99,395) 1,907 (90,845) (58,553) Interest, dividends and other 472 (499) 204 782 2,407 3,393 2,894 Investment income of consolidated TPG Funds and Public SPACs: Net gains from investment activities — — — — — — — Unrealized gains on derivative liabilities 7,205 20,294 2,657 5,823 3,235 11,715 32,009 Interest, dividends and other 11 6,257 126 843 3,571 4,540 10,797 Total investment income 208,113 58,344 9,630 (91,947) 11,120 (71,197) (12,853) Income before income taxes 223,633 251,047 177,808 (254,399) 53,638 (22,953) 228,094 Income tax expense 18,532 15,246 15,004 8,098 432 23,534 38,780 Net income 205,101 235,801 162,804 (262,497) 53,206 (46,487) 189,314 Less: Net income attributable to redeemable equity in Public SPACs prior to IPO — — (517) — — (517) (517) Net income attributable to non-controlling interests in consolidated TPG Funds prior to IPO — — — — — — — Net income attributable to other non-controlling interests prior to IPO — — 966 — — 966 966 Net income attributable to TPG Group Holdings prior to IPO — — 5,256 — — 5,256 5,256 Net income attributable to redeemable equity in Public SPACs (4,250) 21,922 1,823 4,058 7,322 13,203 35,125 Net income attributable to non-controlling interests in TPG Operating Group — — (4,912) (128,869) (6,898) (140,679) (140,679) Net income attributable to other non-controlling interests 151,128 172,632 118,904 (127,827) 15,422 6,499 179,131 Net income attributable to TPG Inc. subsequent to IPO $ 58,223 $ 41,247 $ 41,284 $ (9,859) $ 37,360 $ 68,785 $ 110,032
TPG | 37 Pro Forma GAAP Statements of Operations Notes 1) This adjustment relates to Excluded Assets and is made up of the following components: Impact of changes in economics of certain TPG general partner interests in TPG Funds: The TPG Operating Group transferred to RemainCo certain performance allocation economic entitlements from certain of the TPG general partner entities that are defined as Excluded Assets, as well as certain cash and amounts due to affiliates of the TPG Operating Group that relate to these TPG general partner entities’ economic entitlements. We continue to consolidate these TPG general partner entities because we maintain control and have an implicit variable interest. Transfer of other investments: The TPG Operating Group also transferred the economic entitlements associated with certain other investments, including our investment in our former affiliate. This does not include certain of our strategic equity method investments, including Harlem Capital Partners, VamosVentures and LandSpire Group, as the economics of these investments continue to be part of the TPG Operating Group after the Reorganization. Deconsolidation of consolidated TPG Funds: We transferred the TPG Operating Group’s co-investment interests in certain TPG Funds to RemainCo. These TPG Funds were historically consolidated and as a result of the transfer to RemainCo, are deconsolidated because we no longer hold a more than insignificant economic interest. 2) This adjustment relates to the changes in economic entitlements that the holders of TPG Operating Group Common Units retain, and the associated reallocation of interests after the Reorganization. Specified Company Assets include certain TPG general partner entities to which the TPG Operating Group retained an economic entitlement and that are consolidated both before and after the Reorganization. As part of the Reorganization, the sharing percentage of the associated performance allocation income was reallocated between controlling and non-controlling interests. Subject to certain exceptions, RemainCo is entitled to between 10% and 15% of these Specified Company Assets’ related performance allocations, which we treat as non-controlling interests, and to allocate generally between 65% and 70% indirectly to our partners and professionals through performance allocation vehicles and Promote Units, with the remaining 20% available for distribution to the TPG Operating Group Common Unit holders. RemainCo’s entitlement to performance allocations associated with future funds will step down over time. In conjunction with allocating between 65% and 70% of performance allocations associated with the Specified Company Assets to our partners and professionals, we have reduced the amount of cash-based bonuses historically paid to these individuals as further described in Note 5 below. The primary impact of this is a reallocation from income attributable to controlling interests to income attributable to non-controlling interests. 3) This amount reflects an administrative services fee that we receive for managing the Excluded Assets transferred to RemainCo that are not part of the TPG Operating Group. The fee is based on 1% of the net asset value of RemainCo. 4) This adjustment reflects incremental interest expense related to additional financing the TPG Operating Group used to declare a distribution of $200 million to our controlling and non- controlling interest holders prior to the Reorganization and the IPO. The distribution was made with $200 million of proceeds from the senior unsecured term loan issuance. The Senior Unsecured Term Loan carries an interest rate of LIBOR plus 1.00% and matures in December 2024. 5) Reflects the reclassification of performance allocation amounts owed to senior professionals from other non-controlling interests to performance allocation compensation. Following the IPO, we account for partnership distributions to our partners and professionals as performance allocation compensation expense. As described in Note 2 above, we have adjusted our performance allocation sharing percentage and in conjunction with allocating between 65% and 70% of performance allocations associated with the Specified Company Assets to certain of our people, we are reducing the amounts of cash-based bonuses and increasing the performance allocation compensation expense.
TPG | 38 Pro Forma GAAP Statements of Operations Notes (Cont’d) 6) Our current partners hold restricted indirect interests in Common Units through TPG Partner Holdings and indirect economic interests in RemainCo as a result of the Reorganization and the IPO. The number of TPG Partner Holdings units outstanding at the time of the IPO total 245,397,431, of which 73,849,986 are unvested. The number of units outstanding related to our existing partners’ indirect economic interests in RemainCo at the time of the IPO total 198,040,459, of which 26,922,374 are unvested. 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 our current and former partners. No changes were made to the terms of the unvested units. TPG Partner Holdings and RemainCo are both presented as non-controlling interest holders within our consolidated financial statements. We account for the TPG Partner Holdings units and indirect economic interests in RemainCo as compensation expense in accordance with Accounting Standards Codification Topic 718 Compensation – Stock Compensation. The unvested TPG Partner Holdings units and unvested indirect economic interests in RemainCo will be charged to compensation and benefits as they vest over the remaining requisite service period on a straight-line basis. The vesting periods range from immediate vesting up to six years. Expense amounts for TPG Partner Holdings units have been derived utilizing a per unit value of $29.50 (the IPO price) and adjusting for factors unique to those units, multiplied by the number of unvested units, and will be expensed over the remaining requisite service period. Expense amounts for the unvested indirect interests in RemainCo have been derived based on the fair value of RemainCo, utilizing a discounted cash flow valuation approach, multiplied by the number of unvested interests, and will be expensed over the remaining requisite service period. There is no additional dilution to our stockholders, contractually these units are only related to our non-controlling interest holders, and there is no impact to the allocation of income and distributions to our stockholders. Therefore, we have allocated these expense amounts to our non-controlling interest holders. 7) At IPO, we granted to certain of our people RSUs with respect to approximately 9,280,000 shares of Class A common stock (although we are authorized to grant up to 4% of our shares of Class A common stock, measured on a fully-diluted, as converted basis, which would be 12,277,912 shares of Class A common stock). Of these RSUs, we granted 8,229,960 shares of Class A common stock immediately following the completion of the IPO. These RSUs generally vest over four years in three equal installments on the second through fourth anniversaries of the grant date (with some grants vesting on shorter alternate vesting schedules), subject to the recipient’s continued provision of services to the Company or its affiliates through the vesting date. In addition, under the TPG Inc. Omnibus Equity Incentive Plan, which was approved by our board of directors on December 7, 2021 and our shareholders on December 20, 2021 (the “Omnibus Plan”), we granted immediately following the IPO long-term performance incentive awards to certain of our key executives in the form of RSUs (certain of which have performance-vesting criteria) with respect to a total of 2,203,390 shares of Class A common stock. Furthermore, we have currently named two of our three independent directors, and granted RSUs to the two named independent directors with respect to 20,340 shares of Class A common stock, immediately following the IPO. This adjustment reflects compensation expense associated with the grants described above had they occurred at the beginning of the period presented. These expenses are non-cash in nature and allocated to the Common Unit holders. Not included in the above adjustment are RSUs (which are part of the RSUs with respect to approximately 9,280,000 shares of Class A common stock referred to above) with respect to 1,050,040 shares that were granted in 2022 after the IPO, including those to people hired for new roles created in connection with the IPO. In addition, we plan to grant RSUs of 10,170 shares to our third independent director when named. These additional grants will have similar vesting terms and conditions as the RSUs mentioned above. 8) The TPG Operating Group partnerships continue to be treated as partnerships for U.S. federal and state income tax purposes. Following the IPO, we are subject to U.S. federal income taxes, in addition to state, local and foreign income taxes with respect to our allocable share of any taxable income generated by the TPG Operating Group that flows through to its interest holders, including us. As a result, the unaudited pro forma condensed consolidated statement of operations reflects adjustments to our income tax expense to reflect a blended statutory tax rate of 23.0% at TPG, which was calculated assuming the U.S. federal rates currently in effect and the statutory rates applicable to each state, local and foreign jurisdiction where we estimate our income will be apportioned. 9) Prior to the IPO, TPG held Common Units representing 78.1% of the Common Units and 100% of the interests in certain intermediate holding companies. In our capacity as the sole indirect owner of the entities serving as the general partner of the TPG Operating Group partnerships, we indirectly control all of the TPG Operating Group’s business and affairs. As a result, we consolidate the financial results of the TPG Operating Group and its consolidated subsidiaries and report non-controlling interests related to the interests held by the other partners of the TPG Operating Group and its consolidated subsidiaries in our consolidated statements of operations. Following the IPO, TPG owns 25.6% of the Common Units, and the other partners of the TPG Operating Group own the remaining 74.4%, excluding the equity-based compensation expense related to our partners’ unvested TPG Partner Holdings units and indirect economic interests in RemainCo, which has been allocated only to non-controlling interest holders. Net income attributable to non-controlling interests represent 74.4% of the consolidated income before taxes of the TPG Operating Group. Promote Units are not included in this calculation of ownership interest.
TPG | 39 Non-GAAP Financial Measures Expanded Note: Due to the Reorganization in 1Q’22, comparability of prior periods may be limited. See the Reconciliations and Disclosures section of this presentation for a full reconciliation between GAAP and Non-GAAP Financial Measures. ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Fee-Related Revenues Management Fees $ 206,995 $ 201,877 $ 202,731 $ 222,686 $ 254,510 $ 679,927 $ 881,804 Transaction, monitoring and other fees, net 42,208 24,667 26,756 21,168 14,909 62,833 87,500 Other Income 10,304 12,582 11,045 12,018 12,874 35,937 48,519 Fee-Related Revenues 259,507 239,125 240,532 255,872 282,293 778,697 1,017,822 Fee-Related Expenses Compensation and benefits, net 125,530 154,474 98,187 95,547 96,758 290,492 444,966 Operating expenses, net 47,090 35,827 50,362 58,522 64,324 173,208 209,035 Fee-Related Expenses 172,620 190,301 148,549 154,069 161,082 463,700 654,001 Fee-Related Earnings 86,887 48,824 91,983 101,803 121,211 314,997 363,821 Realized performance allocations, net 505,626 251,158 122,192 60,175 4,977 187,344 438,502 Realized investment income and other, net 48,312 15,972 7,293 15,443 (336) 22,400 38,372 Depreciation expense (1,736) (2,157) (1,571) (1,468) (280) (3,319) (5,476) Interest expense, net (3,806) (3,683) (4,431) (4,255) (4,077) (12,763) (16,446) Distributable Earnings 635,283 310,113 215,466 171,698 121,495 508,659 818,772 Income taxes (3) (2,909) (16,433) (9,831) (8,678) (34,942) (37,851) After-Tax Distributable Earnings $ 635,280 $ 307,204 $ 199,033 $ 161,867 $ 112,817 $ 473,717 $ 780,921
TPG | 40 Non-GAAP Financial Measures Adjustments See notes on the following pages. ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Fee-Related Revenues Management Fees $ — $ — $ — $ — $ — $ — $ — Transaction, monitoring and other fees, net — — — — — — — Other Income 3,395 (758) — — — — (758) (1) Fee-Related Revenues 3,395 (758) — — — — (758) Fee-Related Expenses Compensation and benefits, net (33,144) (42,920) — — — — (42,920) (2) Operating expenses, net — — — — — — — Fee-Related Expenses (33,144) (42,920) — — — — (42,920) Fee-Related Earnings 36,539 42,162 — — — — 42,162 Realized performance allocations, net (364,427) (197,493) — — — — (197,493) (2, 3) Realized investment income and other, net (5,548) (7,808) — — — — (7,808) (4) Depreciation expense — — — — — — — Interest expense, net (998) (998) — — — — (998) (5) Distributable Earnings (334,434) (164,137) — — — — (164,137) Income taxes (17,719) (5,690) — — — — (5,690) (6) After-Tax Distributable Earnings $ (352,153) $ (169,827) $ — $ — $ — $ — $ (169,827)
TPG | 41 Pro Forma Non-GAAP Financial Measures Expanded See notes on the following pages. ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Pro Forma Fee-Related Revenues Management Fees $ 206,995 $ 201,877 $ 202,731 $ 222,686 $ 254,510 $ 679,927 $ 881,804 Transaction, monitoring and other fees, net 42,208 24,667 26,756 21,168 14,909 62,833 87,500 Other Income 13,699 11,823 11,045 12,018 12,874 35,937 47,760 Pro Forma Fee-Related Revenues 262,902 238,367 240,532 255,872 282,293 778,697 1,017,064 Pro Forma Fee-Related Expenses Compensation and benefits, net 92,386 111,554 98,187 95,547 96,758 290,492 402,046 Operating expenses, net 47,090 35,827 50,362 58,522 64,324 173,208 209,035 Pro Forma Fee-Related Expenses 139,476 147,381 148,549 154,069 161,082 463,700 611,081 Pro Forma Fee-Related Earnings 123,426 90,986 91,983 101,803 121,211 314,997 405,983 Realized performance allocations, net 141,199 53,665 122,192 60,175 4,977 187,344 241,009 Realized investment income and other, net 42,763 8,164 7,293 15,443 (336) 22,400 30,564 Depreciation expense (1,736) (2,157) (1,571) (1,468) (280) (3,319) (5,476) Interest expense, net (4,803) (4,681) (4,431) (4,255) (4,077) (12,763) (17,444) Pro Forma Distributable Earnings 300,849 145,977 215,466 171,698 121,495 508,659 654,636 Income taxes (17,722) (8,599) (16,433) (9,831) (8,678) (34,942) (43,541) Pro Forma After-Tax Distributable Earnings $ 283,127 $ 137,378 $ 199,033 $ 161,867 $ 112,817 $ 473,717 $ 611,095
TPG | 42 Pro Forma Non-GAAP Financial Measures Notes 1) The difference in other income between non-GAAP and pro forma non-GAAP financial measures is attributable to: (i) removing the other income associated with the other investments that were transferred to RemainCo and (ii) an administrative services fee that we receive for managing the Excluded Assets transferred to RemainCo that are not part of the TPG Operating Group. The fee is based on 1% of the net asset value of RemainCo. 2) This adjustment reflects the reduction of our cash-based bonuses we historically paid to our partners and professionals within compensation and benefits, net. Through the Reorganization, we have increased certain of our people’s share of performance allocations associated with the Specified Company Assets from approximately 50% to between 65% and 70%. 3) Realized performance allocations, net only include the amounts the TPG Operating Group is entitled to after gross realized performance allocations has been reduced by realized performance allocation compensation and non-controlling interests. Following the Reorganization, the TPG Operating Group receives approximately 20% of the future performance allocations associated with the general partner entities that we retained an economic interest in. This adjustment to our sharing percentage was made to allow us to reduce cash-based bonuses paid to our partners. 4) The difference in realized investment income and other, net is related to the transfer to RemainCo of certain other investments that make up the Excluded Assets. The TPG Operating Group retained its interests in our strategic investments in NewQuest, Harlem Capital Partners, VamosVentures and LandSpire Group. 5) This difference relates to additional interest expense from new financing the TPG Operating Group used to declare a distribution of $200 million to our controlling and non-controlling interest holders prior to the Reorganization and the IPO. The distribution was made with $200 million proceeds from the senior unsecured term loan issuance. The Senior Unsecured Term Loan carries an interest rate of LIBOR plus 1.00% and matures in December 2024. 6) The difference in income tax expense is attributable to the corporate conversion. The income tax expense adjustment reflects TPG Inc.’s share of pro forma pre-tax distributable earnings, which equals 25.6%, multiplied by TPG Inc.’s effective tax rate of 23.0%.
Reconciliations and Disclosures
TPG | 44 GAAP to Non-GAAP Financial Measures Reconciliation ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM GAAP Revenue $ 511,264 $ 1,079,327 $ 1,110,710 $ (108,282) $ 561,124 $ 1,563,552 $ 2,642,879 Capital-allocation Income (231,356) (786,538) (837,704) 398,237 (227,628) (667,096) (1,453,633) Expense Reimbursements (21,961) (50,109) (32,677) (36,022) (54,219) (122,918) (173,027) Investment income and other 1,560 (3,556) 204 1,939 3,016 5,159 1,603 Fee-Related Revenue $ 259,507 $ 239,125 $ 240,532 $ 255,872 $ 282,293 $ 778,697 $ 1,017,822 GAAP Expense $ 224,177 $ 299,023 $ 942,532 $ 54,170 $ 518,606 $ 1,515,308 $ 1,814,331 Depreciation and amortization expense (2,251) (16,086) (8,699) (8,558) (7,372) (24,629) (40,715) Interest expense (4,371) (3,973) (4,638) (4,731) (5,737) (15,106) (19,079) Expense related to consolidated TPG Funds and Public SPACs (12,782) 3,728 (1,523) (457) (567) (2,547) 1,181 Expense Reimbursements (21,961) (50,109) (32,677) (36,022) (54,219) (122,918) (173,027) Performance allocation compensation — — (523,138) 298,026 (149,495) (374,607) (374,607) Equity based compensation — — (185,911) (145,140) (143,149) (474,200) (474,200) Non-core expenses and other (10,192) (42,282) (37,397) (3,219) 3,015 (37,601) (79,883) Fee-Related Expenses $ 172,620 $ 190,301 $ 148,549 $ 154,069 $ 161,082 $ 463,700 $ 654,001 ($ in thousands) 3Q'21 4Q'21 1Q'22 2Q'22 3Q'22 3Q'22 YTD 3Q'22 LTM Net Income $ 520,483 $ 833,758 $ 162,804 $ (262,497) $ 53,206 $ (46,487) $ 787,271 Net (income) attributable to redeemable interests in Public SPACs 4,250 (21,922) (1,306) (4,058) (7,322) (12,686) (34,608) Net (income) attributable to non-controlling interests in consolidated TPG Funds (1,293) (11,096) — — — — (11,096) Net (income) attributable to other non-controlling interests (179,199) (414,406) (118,904) 127,827 (15,422) (6,499) (420,905) Amortization expense — 14,195 3,272 3,083 2,949 9,304 23,499 Equity-based compensation — — 190,462 146,023 144,159 480,644 480,644 Unrealized performance allocations, net 389,482 (96,417) (35,949) 119,222 (48,067) 35,205 (61,211) Unrealized investment income (84,536) 9,218 (2,591) 31,201 (2,116) 26,494 35,712 Unrealized (gain) on derivatives (13,907) (3,907) (685) (37) (338) (1,060) (4,967) Income tax — — (1,301) (1,848) (7,543) (10,692) (10,692) Non-recurring and other — (2,220) 3,231 2,951 (6,689) (506) (2,727) After-tax Distributable Earnings 635,280 307,204 199,033 161,867 112,817 473,717 780,921 Income taxes 3 2,909 16,433 9,831 8,678 34,942 37,851 Distributable Earnings 635,283 310,113 215,466 171,698 121,495 508,659 818,772 Realized performance allocations, net (505,626) (251,158) (122,192) (60,175) (4,977) (187,344) (438,502) Realized investment income and other, net (48,312) (15,972) (7,293) (15,443) 336 (22,400) (38,372) Depreciation expense 1,736 2,157 1,571 1,468 280 3,319 5,476 Interest expense, net 3,806 3,683 4,431 4,255 4,077 12,763 16,446 Fee-Related Earnings $ 86,887 $ 48,823 $ 91,983 $ 101,803 $ 121,211 $ 314,997 $ 363,821
TPG | 45 GAAP to Non-GAAP Balance Sheet Reconciliation ($ in thousands) 4Q'21 3Q'22 Total GAAP Assets $ 8,962,013 $ 8,596,723 Impact of consolidated TPG Funds and Public SPACs Cash and cash equivalents (5,371) (6,282) Assets held in Trust Accounts (1,000,027) (1,003,449) Due from affiliates (74) (45) Other assets (18,993) (682) Subtotal for impact of consolidated TPG Funds and Public SPACs (1,024,465) (1,010,458) Impact of other consolidated entities Cash and cash equivalents (730,359) (480,820) Due from affiliates 81,557 (131,291) Investments (4,204,888) (4,418,717) Other assets (282,272) (143,390) Subtotal for impact of other consolidated entities (5,135,962) (5,174,218) Reclassification adjustments Due from affiliates (13,930) (47,626) Investments (1,904,158) (1,307,111) Accrued performance allocations 1,344,348 725,318 Investments in funds 559,810 581,793 Other assets 105,092 97,764 Subtotal for reclassification adjustments 91,162 50,138 Total Book Assets $ 2,892,748 $ 2,462,185 ($ in thousands) 4Q'21 3Q'22 Total GAAP Liabilities $ 1,700,572 $ 4,828,687 Impact of consolidated TPG Funds and Public SPACs Accounts payable and accrued expenses (8,484) (623) Current redeemable equity — (352,015) Derivative liabilities of Public SPACs (13,048) (1,333) Deferred underwriting (35,000) (22,750) Subtotal for impact of consolidated TPG Funds and Public SPACs (56,532) (376,721) Impact of other consolidated entities Accounts payable and accrued expenses (131,737) (222,556) Due to affiliates (820,998) (169,090) Accrued performance allocation compensation — (3,369,182) Other liabilities (238,055) (212,697) Subtotal for impact of other consolidated entities (1,190,790) (3,973,525) Reclassification adjustments Accounts payable and accrued expenses 522,653 42,082 Due to affiliates (6,001) (9,215) Other liabilities (191) (22,121) Subtotal for reclassification adjustments 516,461 10,746 Total Book Liabilities $ 969,711 $ 489,187
TPG | 46 4Q’21 Pro Forma GAAP Balance Sheet Reorganization and TPG Group Holdings Other Transaction Offering Transaction TPG Inc. Pro Forma ($ in thousands) Historical 4Q'21 Adjustments Adjustments 4Q'21 Assets Cash and cash equivalents $ 972,729 $ (27,200) $ 431,217 $ 1,376,746 (1), (3), (8) Restricted cash 13,135 — — 13,135 Due from affiliates 185,321 — — 185,321 Investments 6,109,046 — — 6,109,046 Right-of-use assets 157,467 — — 157,467 Other assets 499,850 — (23,988) 475,862 (8) Assets of consolidated TPG Funds and Public SPACs: Cash and cash equivalents 5,371 — — 5,371 Investments held in Trust Accounts 1,000,027 — — 1,000,027 Due from affiliates 74 — — 74 Other assets 18,993 — — 18,993 Total assets 8,962,013 (27,200) 407,229 9,342,042 Liabilities, redeemable equity and partners’ capital Accounts payable and accrued expenses 134,351 — — 134,351 Due to affiliates 826,999 (203,286) 10,611 634,324 (1), (6) Secured borrowings, net 244,950 — — 244,950 Revolving credit facility to affiliate 199,494 — — 199,494 Accrued performance allocation compensation — 3,848,126 — 3,848,126 (2) Operating lease liabilities 177,003 — — 177,003 Other liabilities 61,243 — (24,171) 37,072 (8) Liabilities of consolidated TPG Funds and Public SPACs: Accounts payable and accrued expenses 8,484 — — 8,484 Derivative liabilities of Public SPACs 13,048 — — 13,048 Deferred underwriting 35,000 — — 35,000 Total liabilities 1,700,572 3,644,840 (13,560) 5,331,852 Commitments and contingencies Redeemable equity from consolidated Public SPACs 1,000,027 — — 1,000,027 Equity Class A common stock — — 79 79 (4) Class B common stock — — 230 230 (5) Additional paid-in-capital — — 498,251 498,251 (7) Partners' capital controlling interests 1,606,593 (439,196) (1,167,397) — (1), (9) Retained earnings — — — — Total partners' / stockholders' equity attributable to TPG Inc. 1,606,593 (439,196) (668,837) 498,560 Non-Controlling interests in consolidated TPG Funds — — — — Other non-controlling interests 4,654,821 (3,232,844) 1,089,626 2,511,603 (1), (2), (9) Total equity 6,261,414 (3,672,040) 420,789 3,010,163 Total liabilities, redeemable equity and equity $ 8,962,013 $ (27,200) $ 407,229 $ 9,342,042 See notes on the following pages.
TPG | 47 4Q’21 Pro Forma GAAP Balance Sheet Notes 1) The TPG Operating Group transferred to RemainCo certain performance allocation economic entitlements from certain of the TPG general partner entities that are defined as Excluded Assets, as well as certain cash and due to affiliate amounts at the TPG Operating Group that relate to these TPG general partner entities’ economic entitlements. We continue to consolidate these TPG general partner entities because we maintain control and have an implicit variable interest. These transfers resulted in the reduction of cash of $27.2 million and due to affiliate amounts of $203.3 million, which increased partners’ capital by $148.5 million and non-controlling interests of $27.6 million. In addition, the transfer of performance allocation economic entitlements resulted in a transfer of $587.7 million from partners' capital to non-controlling interests. 2) This adjustment relates to accrued performance allocation amounts owed to our partners and professionals. Prior to the Reorganization and the IPO, the entities that comprise the consolidated financial statements of TPG Group Holdings have been partnerships or limited liability companies, and our senior professionals were part of the ownership group of those entities. As such, their share of accrued performance allocations was reflected within “other non-controlling interests” on the TPG Group Holdings consolidated statement of financial condition, as these interests existed through the individuals’ ownership interests, and the income attributable to these performance allocation rights were included in “net income attributable to other non-controlling interests” on the TPG Group Holdings consolidated statement of operations. Additionally, we have adjusted the sharing percentages associated with certain performance allocations between our controlling and non-controlling interest holders, which resulted in an increase to amounts attributable to our historic non-controlling interest holders and a further increase to accrued performance allocation compensation. As of December 31, 2021, the carrying value of these performance allocations totaled approximately $3,848.1 million. An adjustment has been recorded to reclassify this balance from other non-controlling interests to a liability on the unaudited pro forma condensed consolidated statement of financial condition. Subsequent to the Reorganization, the amounts owed to our senior professionals are treated as compensatory profit-sharing arrangements and reflected as a liability on our unaudited pro forma condensed consolidated statement of financial condition. 3) The adjustment reflects i) proceeds, net of estimated underwriting discounts, of $820.7 million from the IPO based on the issuance of 30,085,604 shares of Class A common stock at the IPO price of $29.50 per share, with a corresponding increase to additional paid-in capital and (ii) of the proceeds noted above, we used approximately $380.1 million to purchase Common Units from certain existing owners of the TPG Operating Group (none of whom is an active TPG partner or Founder), at the IPO price of $29.50 per share paid by the underwriters for shares of our Class A common stock in the IPO. 4) Reflects 70,811,664 shares of Class A common stock and 8,258,901 shares of nonvoting Class A common stock with a par value of $0.001 outstanding immediately after the IPO. This includes 30,085,604 shares of our Class A common stock issued in the IPO to new investors and 40,726,060 shares of Class A common stock and 8,258,901 shares of nonvoting Class A common stock received in exchange for Common Units by the holders of Common Units (other than TPG Inc.). 5) In connection with the IPO, we issued 229,652,641 shares of Class B common stock with a par value of $0.001 to the TPG Operating Group owners, other than us or our wholly-owned subsidiaries, on a one-to-one basis with the number of Common Units they own across each of the three TPG Operating Group entities. Each share of our Class B common stock entitles its holder to ten votes. As part of the IPO and pursuant to the Exchange Agreement, each Common Unit that is not held by us or our wholly-owned subsidiaries is exchangeable for either (i) cash equal to the value of one share of Class A common stock from a substantially concurrent public offering or private sale based on the closing price per share of the Class A common stock on the day before the pricing of such public offering or private sale (taking into account customary brokerage commissions or underwriting discounts actually incurred); or (ii) at our election, for one share of our Class A common stock (or, in certain cases, for shares of nonvoting Class A common stock). We are reflecting the TPG Operating Group Common Units held by our affiliates as non-controlling interests on the unaudited pro forma GAAP balance sheet since they relate to equity in the TPG Operating Group that is not attributable to us.
TPG | 48 4Q’21 Pro Forma GAAP Balance Sheet Notes (Cont'd) 6) In connection with the IPO, we entered into the Tax Receivable Agreement with certain of our pre-IPO owners that provides for the payment by us (or our subsidiary) to such pre-IPO owners of 85% of cash tax savings, if any, that we actually realize, or we are deemed to realize (calculated using certain assumptions) as a result of the Covered Tax Items. We retain the benefit of the remaining 15% of these net cash tax savings under the Tax Receivable Agreement. Pursuant to the corporate conversion and the IPO, $10.6 million was recognized in due to affiliates for the Tax Receivable Agreement, which assumes: (i) only exchanges associated with the IPO, (ii) a share price equal to $29.50 per share less any underwriting discounts and commissions, (iii) a constant U.S. federal and state income tax rate of 23.0% (iv) no material changes in tax law, (v) the ability to utilize tax attributes, (vi) no adjustment for potential remedial allocations and (vii) future Tax Receivable Agreement payments. The impact of the Tax Receivable Agreement liability is reflected within additional paid-in capital. 7) Reflects adjustments to additional paid-in capital as a result of: (i) proceeds from offering, net of underwriting discounts and unpaid offering costs, (ii) exchange of common units, (iii) reclassifying partners’ capital to additional paid-in capital, (iv) tax receivable agreement, (v) payment of offering costs, (vi) par value of common stock, and (vii) transfer to non-controlling interest holders. 8) We are deferring certain costs associated with this offering, including certain legal, accounting and other related expenses, which have been recorded in other assets, net in our unaudited pro forma condensed consolidated statement of financial condition. Upon completion of the IPO, we incurred approximately $31.8 million of offering costs that will be reflected as a reduction to additional paid-in capital, of which $24.2 million was recorded to other assets, net as of December 31, 2021. The remaining $9.4 million of offering costs are presented as an offset to proceeds from the IPO. 9) Following the IPO, we hold approximately 25.6% of the Common Units and 100% of the interests in certain intermediate holding companies. In our capacity as the sole indirect owner of the entities serving as the general partner of the TPG Operating Group partnerships, we indirectly control all of the TPG Operating Group’s business and affairs. As a result, we continue to consolidate the financial results of the TPG Operating Group and report non-controlling interests related to the interests held by the other partners of the TPG Operating Group, which represents a majority of the economic interest in the TPG Operating Group on our consolidated statement of financial condition.
TPG | 49 4Q’21 Pro Forma Non-GAAP Balance Sheet and Notes Reorganization and Pro Forma Non-GAAP Other Transaction Offering Transaction Non-GAAP ($ in thousands) 4Q'21 Adjustments Adjustments 4Q'21 Book Assets Cash and cash equivalents $ 242,370 $ (27,200) $ 431,217 $ 646,387 (1), (2) Restricted cash 13,135 — — 13,135 Accrued performance allocations 1,344,348 (575,065) — 769,283 (3) Investments in funds 559,810 — — 559,810 Other assets, net 733,085 (204,453) (23,988) 504,644 (1), (2) Total Book Assets 2,892,748 (806,718) 407,229 2,493,259 Book Liabilities Accounts payable, accrued expenses and other 525,267 (203,286) (13,560) 308,421 (1), (2), (4) Securitized borrowing, net 244,950 — — 244,950 Senior unsecured term loan 199,494 — — 199,494 Total Book Liabilities 969,711 (203,286) (13,560) 752,865 Net Book Value $ 1,923,037 $ (603,432) $ 420,789 $ 1,740,394 (5) 1) The difference between non-GAAP and pro forma non-GAAP balance sheet measures relates to the transfer of Excluded Assets, which consist of rights to future performance allocations related to certain general partner entities. Additionally, certain of our other investments and investments into TPG Funds have been excluded, because such interests are not part of the TPG Operating Group. We would have transferred (i) $27.2 million of cash; (ii) $204.5 million of other assets; and (iii) $203.3 million of other liabilities to RemainCo. 2) Includes $431.2 million of proceeds, net of estimated underwriting discounts and unpaid offering costs of $31.8 million, of which $24.0 million was previously capitalized and accrued in Other Assets, net and accounts payable, accrued expenses and other, respectively. 3) Following the Reorganization, the TPG Operating Group and Common Unit holders receive approximately 20% of the future performance allocations associated with the general partner entities that we retain an economic interest in as described in Note 2 above. This adjustment reduces our share of accrued performance allocations by $575.1 million. 4) Reflects a Tax Receivable Agreement liability of $10.4 million related to the Reorganization of TPG into a corporation and associated offering transactions. 5) Represents the impact to the net book value of the TPG Operating Group after the IPO transaction adjustments.
TPG | 50 Additional Information Dividend Policy Our current intention is to pay holders of our Class A common stock and nonvoting Class A common stock a quarterly dividend representing at least 85% of TPG Inc.’s share of distributable earnings attributable to the TPG Operating Group, subject to adjustment as determined by the Executive Committee of our board of directors to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our business and funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future cash requirements such as tax-related payments and clawback obligations. Although we expect to pay at least 85% of our DE as a dividend, the percentage of our DE paid out as a dividend could fall below that target minimum. All of the foregoing is subject to the further qualification that the declaration and payment of any dividends are at the sole discretion of the Executive Committee prior to the Sunset and the Executive Committee may change our dividend policy at any time, including, without limitation, to reduce such dividends or even to eliminate such dividends entirely. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of the Executive Committee after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs, plans for expansion and any legal or contractual limitations on our ability to pay dividends. Certain of our existing credit facilities include, and any financing arrangement that we enter into in the future may include restrictive covenants that limit our ability to pay dividends. In addition, the TPG Operating Group is generally prohibited under Delaware law from making a distribution to a limited partner to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of the TPG Operating Group (with certain exceptions) exceed the fair value of its assets. Subsidiaries of the TPG Operating Group are generally subject to similar legal limitations on their ability to make distributions to the TPG Operating Group. Non-GAAP Financial Measures In this presentation, we disclose non-GAAP financial measures, including Distributable Earnings (“DE”), After-tax DE, Fee-Related Earnings (“FRE”), Fee-Related Revenues (“FRR”), and Fee- Related Expenses. These measures are not financial measures under GAAP and should not be considered as substitutes for net income, revenues or total expenses, and they may not be comparable to similarly titled measures reported by other companies. These measures should be considered in addition to GAAP measures. We use these measures to assess the core operating performance of our business, and further definitions can be found on the following pages.
TPG | 51 Definitions After-tax Distributable Earnings (“After-tax DE”) is a non-GAAP performance measure of our distributable earnings after reflecting the impact of income taxes. We use it to assess how income tax expense affects amounts available to be distributed to our Class A common stock holders and Common Unit holders. After-tax DE differs from GAAP net income computed in accordance with GAAP in that it does not include the items described in the definition of DE herein; however, unlike DE it does reflect the impact of income taxes. Income taxes, for purposes of determining After-tax DE, represent the total GAAP income tax expense adjusted to include only the current tax expense (benefit) calculated on GAAP net income before income tax and includes the current payable under our Tax Receivable Agreement, which is recorded within other liabilities in our consolidated statement of financial condition. Further, the current tax expense (benefit) utilized when determining After-tax DE reflects the benefit of deductions available to the Company on certain expense items that are excluded from the underlying calculation of DE, such as equity-based compensation charges. We believe that including the amount currently payable under the Tax Receivable Agreement and utilizing the current income tax expense (benefit), as described above, when determining After-tax DE is meaningful as it increases comparability between periods and more accurately reflects earnings that are available for distribution to shareholders. Assets Under Management (“AUM”) represents the sum of (i) fair value of the investments and financial instruments held by our TPG funds managed by us, plus the capital that we are entitled to call from investors in those funds and co-investors, pursuant to the terms of their respective capital commitments, net of outstanding leverage, including capital commitments to funds that have yet to commence their investment periods; (ii) the net asset value of our hedge funds and funds of hedge funds; (iii) the gross amount of assets (including leverage) for our mortgage REITs and collateralized fundraising vehicle; and (iv) IPO proceeds held in trust, excluding interest, as well as forward purchase agreements and proceeds associated with the private investment in public equity related to our SPACs upon the consummation of a business combination. Our definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds that we manage or calculated pursuant to any regulatory definitions. AUM Not Yet Earning Fees represents the amount of capital commitments to TPG investment funds and co-investment vehicles that has not yet been invested or considered active, and as this capital is invested or activated, the fee-paying portion will be included in FAUM. AUM Subject to Fee Earning Growth represents capital commitments that can grow fees when deployed through earning new management fees (AUM Not Yet Earning Fees) or when invested from a higher rate of management fees (FAUM Subject to Step-Up). Available capital is the aggregate amount of unfunded capital commitments that partners have committed to our funds and co-invest vehicles to fund future investments, as well as IPO and forward purchase agreement proceeds associated with our Public SPACs, and private investment in public equity commitments by investors upon the consummation of a business combination associated with our Public SPACs. Available capital is reduced for investments completed using fund-level financing arrangements; however, it is not reduced for investments that we have committed to make yet remain unfunded at the reporting date. We believe this measure is useful to investors as it provides additional insight into the amount of capital that is available to our investment funds and co-investment vehicles to make future investments. Capital invested is the aggregate amount of capital invested during a given period by TPG’s investment funds, co-investment vehicles and SPACs in conjunction with the completion of a business combination. It excludes hedge fund activity. We believe this measure is useful to investors as it measures capital deployment across TPG. Capital invested includes investments made using investment financing arrangements like credit facilities, as applicable. Capital raised is the aggregate amount of capital commitments raised by TPG’s investment funds and co-investment vehicles during a given period, as well as IPO and forward purchase agreements associated with our Public SPACs and private investment in public equity upon the consummation of a business combination associated with one of our Public SPACs. We believe this measure is useful to investors as it measures access to capital across TPG and our ability to grow our management fee base. Distributable Earnings (“DE”) is used to assess performance and amounts potentially available for distributions to partners. DE is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of net income. DE differs from GAAP net income computed in accordance with GAAP in that it does not include (i) unrealized performance allocations and related compensation and benefit expense, (ii) unrealized investment income, (iii) equity-based compensation expense, (iv) net income (loss) attributable to non-controlling interests in consolidated entities, or (v) certain non-cash items, such as contingent reserves. Distributable Earnings participating shares refers to the sum of (i) shares (Class A voting, Class A non-voting, and TPG Operating Group Common Units) and (ii) share-based payment awards with non-forfeitable rights to dividends that benefit from the distribution of profits from TPG Operating Group at the end of any given period. This does not include shares or restricted stock units (i) whose dividends accrue to be paid on vesting or (ii) which do not participate in dividends. Excluded Assets refers to the assets and economic entitlements transferred to RemainCo listed in Schedule A to the master contribution agreement entered into in connection with the Reorganization (as defined herein), which primarily include (i) minority interests in certain sponsors unaffiliated with TPG, (ii) the right to certain performance allocations in TPG funds, (iii) certain co-invest interests and (iv) cash. FAUM Subject to Step-Up represents capital raised within certain funds where the management fee rate increases once capital is invested. Subject to certain limitations, limited partners in these funds pay a lower fee on committed and undrawn capital. As capital is drawn down for investments, the fees paid on that capital increases. FAUM Subject to Step-Up is included within FAUM.
TPG | 52 Definitions (Cont’d) Fee-Related Earnings (“FRE”) is a supplemental performance measure and is used to evaluate our business and make resource deployment and other operational decisions. FRE differs from net income computed in accordance with GAAP in that it adjusts for the items included in the calculation of DE and also adjusts to exclude (i) realized performance allocations and related compensation expense, (ii) realized investment income from investments and financial instruments, (iii) net interest (interest expense less interest income), (iv) depreciation, (v) amortization and (vi) certain non-recurring income and expenses. We use FRE to measure the ability of our business to cover compensation and operating expenses from fee revenues other than capital allocation-based income. The use of FRE without consideration of the related GAAP measures is not adequate due to the adjustments described herein. Fee-Related Expenses differs from expenses computed in accordance with GAAP in that it is net of certain reimbursement arrangements. Fee-related expenses is used in management’s review of the business. Fee-Related Revenues (“FRR”) is comprised of (i) management fees, (ii) transaction, monitoring and other fees, net, and (iii) other income. Fee-related revenue differs from revenue computed in accordance with GAAP in that it excludes certain reimbursement expense arrangements. Fee earning AUM (“FAUM”) represents only the AUM from which we are entitled to receive management fees. FAUM is the sum of all the individual fee bases that are used to calculate our management fees and differs from AUM in the following respects: (i) assets and commitments from which we are not entitled to receive a management fee are excluded (e.g., assets and commitments with respect to which we are entitled to receive only performance allocations or are otherwise not currently entitled to receive a management fee) and (ii) certain assets, primarily in our private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are generally not impacted by changes in the fair value of underlying investments. We believe this measure is useful to investors as it provides additional insight into the capital base upon which we earn management fees. Our definition of FAUM is not based on any definition of AUM or FAUM that is set forth in the agreements governing the investment funds and products that we manage. Net accrued performance allocations represents both unrealized and undistributed performance allocations resulting from our general partner interests in our TPG funds. We believe this measure is useful to investors as it provides additional insight into the accrued performance allocations to which the TPG Operating Group Common Unit holders are expected to receive. Non-GAAP Financial Measures represent financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America. These non-GAAP financial measures should be considered in addition to and not as a substitute for, or superior to, financial measures presented in accordance with U.S. GAAP. We use these measures to assess the core operating performance of our business. Realizations represent the aggregate investment proceeds generated by our TPG investment funds and co-investment vehicles and Public SPACs in conjunction with the completion of a business combination. We believe this measure is useful to investors as it drives investment gains and performance allocations. RemainCo refers to, collectively, Tarrant RemainCo I, L.P., a Delaware limited partnership, Tarrant RemainCo II, L.P., a Delaware limited partnership, and Tarrant RemainCo III, L.P., a Delaware limited partnership, which owns the Excluded Assets, and Tarrant RemainCo GP LLC, a Delaware limited liability company serving as their general partner. TPG Operating Group refers (i) for periods prior to giving effect to the Reorganization, to the TPG Operating Group partnerships and their respective consolidated subsidiaries and (ii) for periods beginning after giving effect to the Reorganization, (A) to the TPG Operating Group partnerships and their respective consolidated subsidiaries and (B) not to RemainCo. TPG Operating Group partnerships refers to TPG Operating Group I, L.P., a Delaware limited partnership formerly named TPG Holdings I, L.P., TPG Operating Group II, L.P., a Delaware limited partnership formerly named TPG Holdings II, L.P., and TPG Operating Group III, L.P., a Delaware limited partnership formerly named TPG Holdings III, L.P. TPG Partner Holdings refers to TPG Partner Holdings, L.P., a Delaware limited partnership, which is a TPG Partner Vehicle that indirectly owns substantially all of the economic interests of TPG Group Holdings, a TPG Partner Vehicle. Value creation, with respect to an investment or group of investments, represents the appreciation or depreciation of value during a given measurement period, with the numerator being the total change in value reduced by capital invested during the measurement period, and the denominator being the sum of (i) the unrealized value at the beginning of the measurement period plus (ii) capital invested in follow-on investments made during the measurement period plus (iii) capital invested in new investments made during the measurement period if the new investment had a change in value.