TPG Inc. (TPG) FY 2023 MD&A

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the information presented in our historical financial statements and the related notes included elsewhere in this report. In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding our expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and elsewhere in this report, particularly in “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A.—Risk Factors” and “—Unaudited Pro Forma Condensed Consolidated Financial Information and Other Data.” We assume no obligation to update any of these forward-looking statements.

On January 12, 2022, we completed a corporate reorganization (the “Reorganization”), which included a corporate conversion of TPG Partners, LLC to a Delaware corporation named TPG Inc., in conjunction with an initial public offering (the “IPO”) of our Class A common stock. The IPO closed on January 18, 2022. Unless the context suggests otherwise, references in this report to “TPG”, “the Company”, “we”, “us” and “our” refer (i) prior to the completion of the Reorganization and IPO to TPG Group Holdings SBS, L.P. and its consolidated subsidiaries and (ii) from and after the completion of the Reorganization and IPO to TPG Inc. and its consolidated subsidiaries.

We completed the Acquisition on November 1, 2023. Accordingly, the results of TPG Angelo Gordon included in our consolidated results of operations are from November 1, 2023 through December 31, 2023.

Business Overview

We are a leading global alternative asset manager with approximately $221.6 billion in assets under management (“AUM”) as of December 31, 2023. We primarily invest in complex asset classes such as private equity, credit, real estate and public market strategies. We have built our firm through more than 30 years of successful innovation and growth, and believe that we have delivered attractive risk-adjusted returns to our clients and established a premier investment business focused on the fastest-growing segments of both the alternative asset management industry and the global economy. We believe that we have a distinctive business approach as compared to other alternative asset managers and a diversified, innovative array of multi-strategy investment platforms that position us well to continue generating sustainable growth across our business.

Trends Affecting our Business

Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions. Changes in global economic conditions and regulatory or other governmental policies or actions can materially affect the values of funds managed by TPG, as well as our ability to source attractive investments and deploy the capital that we have raised. However, we believe our disciplined investment philosophy across our diversified investment platforms and our shared investment themes focusing on attractive and resilient sectors of the global economy has historically contributed to the stability of our performance throughout market cycles.

The market environment improved in 2023 as inflation slowed, the Federal Reserve tapered and ultimately paused its rate hiking cycle, and the domestic economy remained strong, all despite ongoing geopolitical instability and stress within the regional banking sector during the early part of the year.

The U.S. Consumer Price Index (“CPI”) reading for the last month of 2023 showed a 3.1% year-over-year increase in prices, a much slower rate of increase relative to the December 2022 reading of 6.5%. Core CPI, which excludes food and energy, also declined from 5.7% in December 2022 to 3.9% in the December 2023 reading. As inflation tapered, the Federal Reserve began to slow its pace of rate hikes. After increasing the target federal funds rate by 4.25% over the course of 2022, the Federal Reserve increased rates only by another 1.00% in 2023 via 0.25% increases at four of its first five meetings of 2023. The Central Bank has held rates steady since, at 5.25% - 5.50%. The timing of the Federal Reserve’s first rate cut and the pace of the rate cutting cycle remains a significant question impacting markets. Economic data has remained strong despite the extended period of elevated rates. The U.S. added 2.8 million payrolls over the course of 2023, and the unemployment rate ended the year at 3.7%, a modest increase from 2022’s final reading of 3.4%.

U.S. Treasuries experienced a degree of volatility over the twelve months ending December 31, 2023, though finished the year relatively flat to yields seen at the end of 2022. Treasury yields fell sharply early in the year, particularly

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at the shorter end of the curve, as stress within the U.S. regional banking sector drove a flight to safety. Yields steadily widened over the following months, with the 10-Year Treasury touching above 5% in October. However, Treasury bonds rallied significantly heading into the end of the year. The 10 Year Treasury yield ended the year at 3.879%, little changed from its yield at the end of 2022. 2 Year Yields touched as high as 5.212% during 2023 but closed the year at 4.250%.

In corporate credit markets, both U.S. and European high yield markets performed positively during 2023. According to J.P. Morgan data, the U.S. high yield market saw gains of 13.5% in the United States and the European market saw gains of 12.7% during the year. Notably, lower-rated CCCs significantly outperformed higher-rated BBs over this period, generating returns of 19.9% and 11.8%, respectively. In U.S. high, yield bonds further tightened and ended the year at 377 basis points compared to 490 basis points to start the year. In Europe, high yield spreads tightened 44 points ending the year at 449 basis points. The high yield default rate rose modestly to 2.8% in the United States and 2.4% in Europe. Additionally, the J.P. Morgan U.S. Leveraged Loan Index posted a 13.5% return and the J.P. Morgan European Leveraged Loan Index posted a 13.6% return for the year ended 2023. From a spread and yield basis, the US Leveraged Loan Index ended the year at a yield of 8.6% and 500 basis point spread while the European Leverage Loan Index ended the year at a yield of 7.96% and 542 basis point spread.

Major U.S. equity indices rallied significantly in 2023, after posting losses in 2022. The S&P 500, Dow Jones, and Nasdaq gained 24.2%, 13.7%, and 43.4% respectively during the year. Growth oriented sectors were market leaders, with the Information Technology and Communication Services sectors rising 56.4% and 54.4% respectively on the year. Energy and Utilities were laggards, declining (4.8%) and (10.2%) respectively. Volatility, as measured by the CBOE Volatility Index, continued its downward trend over the year from 21.7 at the start of the year to 12.5 at the end of 2023.

In commercial real estate, the Green Street Commercial Property Price Index ended December 2023 down 9.5% from its the beginning of 2023. Commercial property transaction volume in the United States and Europe remained relatively muted, consistent with 2022, primarily due to continued elevated borrowing rates and reductions in liquidity and credit availability. Major Asian markets faced similar challenges, with commercial property transaction volume for the year declining 17 year-over-year overall; however, Q4 2023 saw an uptick in volume, registering a 3% rise year-on-year. In Hong Kong full year 2023 investment volume reached HK$40.4 billion, marking the weakest period since 2008. In China, transaction volume fell 13.0% year-over-year, largely due to prolonged overseas interest rate hikes and ongoing geopolitical tension. Similarly, Japan saw investment volume decline 3.0% year-over-year, mostly due to a decrease in foreign investment.

U.S. residential real estate improved slightly during the quarter, with national U.S. home prices rising approximately 6.0% year-to-date through November 2023, slightly above the peak recorded in June 2022 according to the S&P/Case-Shiller U.S. National Home Price Index, in part due to constrained housing supply.

Organization

We are a holding company and our only business is to act as the owner of the entities serving as the general partner of the TPG Operating Group partnerships and our only material assets are Common Units representing approximately 22% of the legally outstanding Common Units and 100% of the interests in certain intermediate holding companies as of December 31, 2023. 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.

Acquisition of Angelo Gordon

On November 1, 2023, we acquired Angelo Gordon pursuant to the terms and subject to the conditions set forth in the Transaction Agreement. Pursuant to the Transaction Agreement, we acquired Angelo Gordon for both cash and non-cash consideration under U.S. GAAP equal to $1,145.9 million (the “Purchase Price”), comprised of:

•$740.7 million in cash paid at closing;

•$18.8 million in payable as of December 31, 2023 to the escrow agent on behalf of the sellers of Angelo Gordon, subject to adjustment;

•9.2 million vested Common Units (and an equal number of Class B common stock) and 43.8 million unvested Common Units which are deemed to be compensatory under U.S. GAAP;

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•the rights to an aggregate cash payment, payable in three payments of up to $50.0 million each, reflecting an aggregate of $150.0 million (the “Aggregate Annual Cash Holdback Amount”); and

•the non-compensatory portion under U.S. GAAP of a total earnout payment of up to $400.0 million in value (the “Earnout Payment”), subject to the satisfaction of certain fee-related revenue (“FRR”) targets during the period beginning on January 1, 2026 and ending on December 31, 2026 (the “Measurement Period”).

On November 1, 2023, Angelo Gordon had $75.3 billion in assets under management, with $57.4 billion attributable to its credit business and $17.9 billion attributable to its real estate business.

Operating Segments

We operate our business in a single operating and reportable segment, which is consistent with how our CEO, who is our chief operating decision maker, reviews financial performance and allocates resources. We operate collaboratively across platforms with a single expense pool.

Basis of Accounting

We consolidate the financial results of TPG Inc., TPG Operating Group and its consolidated subsidiaries, management companies, the general partners of funds and entities that meet the definition of a variable interest entity (“VIE”) for which we are considered the primary beneficiary.

When an entity is consolidated, we reflect the accounts of the consolidated entity, including its assets, liabilities, revenues, expenses, investment income, cash flows and other amounts, on a gross basis. While the consolidation of an entity does not impact the amounts of net income attributable to controlling interests, the consolidation does impact the financial statement presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). This is a result of the fact that the accounts of the consolidated entities being reflected on a gross basis, with intercompany transactions eliminated, while the allocable share of those amounts that are attributable to third parties are reflected as single line items. The single line items in which the accounts attributable to third parties are recorded are presented as non-controlling interests on the Consolidated Statements of Financial Condition and net income (loss) attributable to non-controlling interests on the Consolidated Statements of Operations.

We are not required under U.S. GAAP to consolidate the majority of investment funds we advise in our Consolidated Financial Statements because we do not have a more than insignificant variable interest. Following our Reorganization and IPO, we no longer have a controlling financial interest in certain TPG Funds. Public SPACs are consolidated pursuant to U.S. GAAP. Management fees and performance allocations from the consolidated Public SPACs are eliminated in the Consolidated Financial Statements. The assets and liabilities of the consolidated Public SPACs are generally held within separate legal entities and, as a result, the liabilities of the consolidated Public SPACs are non-recourse to us. Since we only consolidate a limited portion of our TPG investment funds, the performance of the consolidated Public SPACs is not necessarily consistent with or representative of the aggregate performance trends of our TPG investment funds.

Key Financial Measures

Our key financial and operating measures are discussed below.

Revenues

Fees and Other. Fees and other consists primarily of (i) management and incentive fees, (ii) monitoring fees, (iii) transaction fees, (iv) incentive fee income and (v) expense reimbursements from unconsolidated funds, portfolio companies and third parties. These fee arrangements are documented within the contractual terms of the governing agreements and are recognized when earned, which generally coincides with the period during which the related services are performed and in the case of transaction fees, upon closing of the transaction. Monitoring fees may provide for a termination payment following an initial public offering or change of control. These termination payments are recognized in the period in which the related transaction closes.

Capital Allocation-Based Income (Loss). Capital allocation-based income (loss) is earned from the TPG funds when we have (i) a general partner’s capital interest and (ii) performance allocations which entitle us to a disproportionate

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allocation of investment income or loss from investment funds. We are entitled to a performance allocation (typically 20%) based on cumulative fund or account performance to date, irrespective of whether such amounts have been realized. These performance allocations are subject to the achievement of preferred returns or high water marks, where applicable, in accordance with the terms set forth in the respective fund’s governing documents. We account for our investment balances in the TPG funds, including performance allocations, under the equity method of accounting because we are presumed to have significant influence as the general partner or managing member; however, we do not have control as defined by Accounting Standards Codification (“ASC”) Topic 810, Consolidation. The Company accounts for its general partner interests in capital allocation-based arrangements as financial instruments under ASC Topic 323, Investments – Equity Method and Joint Ventures as the general partner has significant governance rights in the TPG funds in which it invests which demonstrates significant influence. Accordingly, performance allocations are not deemed to be within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Expenses

Compensation and Benefits. Compensation and benefits expense includes (i) cash-based compensation and benefits, (ii) equity based compensation and (iii) performance allocation compensation. Bonuses are accrued over the service period to which they relate. In addition, we have equity-based compensation arrangements that require certain TPG executives and employees to vest ownership of a portion of their equity interests over a service period of generally one to six years, which under U.S. GAAP will result in compensation charges over current and future periods. In connection with our IPO and subsequent acquisition, we granted restricted stock units (“RSUs”) to executives and employees. Distributions of performance allocations in the legal form of equity made directly or indirectly to our partners and professionals are allocated and distributed, when realized, pro rata based on ownership percentages in the underlying investment partnership and are accounted for as distributions on the equity held by such partners rather than as compensation and benefits expense prior to the Reorganization and IPO. We account for these distributions as performance allocation compensation.

General, Administrative and Other. General and administrative expenses include costs primarily related to professional services, occupancy, travel, communication and information services and other general operating items.

Depreciation and Amortization. Depreciation and amortization of tenant improvements, furniture and equipment and intangible assets are expensed on a straight-line basis over the useful life of the asset.

Interest Expense. Interest expense includes interest paid and accrued on our outstanding debt and the amortization of deferred financing costs.

Expenses of Consolidated TPG Funds and Public SPACs. Expenses of consolidated TPG Funds and Public SPACs consist of interest expense and other expenses related primarily to professional services fees, research expenses, trustee fees, travel expenses and other costs associated with organizing and offering these entities.

Investment Income

Net Gains (Losses) from Investment Activities. Realized gains (losses) may be recognized when we redeem all or a portion of an investment interest or when we receive a distribution of capital. Unrealized gains (losses) result from the appreciation (depreciation) in the fair value of our investments. Fluctuations in net gains (losses) from investment activities between reporting periods are primarily driven by changes in the fair value of our investment portfolio and, to a lesser extent, the gains (losses) on investments disposed of during the period. The fair value of, as well as the ability to recognize gains (losses) from, our investments is significantly impacted by the global financial markets. This impact affects the net gains (losses) from investment activities recognized in any given period. Upon the disposition of an investment, previously recognized unrealized gains (losses) are reversed and an offsetting realized gain (loss) is recognized in the period in which the investment is sold. Since our investments are carried at fair value, fluctuations between periods could be significant due to changes to the inputs to our valuation process over time.

Interest, Dividends and Other. Interest income is recognized on an accrual basis to the extent that such amounts are expected to be collected using the effective interest method. Dividends and other investment income are recorded when the right to receive payment is established.

Net Gains from Investment Activities of consolidated TPG Funds and Public SPACs. Net gains (losses) from investment activities includes (i) realized gains (losses) from the sale of equity, securities sold and not yet purchased, debt and derivative instruments and (ii) unrealized gains (losses) from changes in the fair value of such instruments.

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Unrealized Gains (Losses) on Derivative Liabilities of Consolidated Public SPACs. Unrealized gains (losses) on derivative liabilities of consolidated Public SPACs are changes in the fair value of derivative contracts entered into by our consolidated Public SPAC entities, which are included in current period earnings.

Interest, Dividends and Other of Consolidated TPG Funds and Public SPACs. Interest income is recognized on an accrual basis to the extent that such amounts are expected to be collected using the effective interest method. Dividends and other investment income are recorded when the right to receive payment is established.

Income Tax Expense

The Company is treated as a corporation for U.S. federal and state income tax purposes. We are subject to U.S. federal and state income taxes, in addition to local and foreign income taxes, with respect to our allocable share of taxable income generated by the TPG Operating Group partnerships.

Non-Controlling Interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than TPG. The aggregate of the income or loss and corresponding equity that is not owned by us is included in non-controlling interests in the Consolidated Financial Statements.

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Key Components of our Results of Operations

Results of Operations

The following table provides information regarding our consolidated results of operations for the periods presented:

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(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenues

Revenues consisted of the following for the years ended December 31, 2023 and 2022:

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(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Fees and other revenues increased by $288.0 million, or 23%, during the year ended December 31, 2023 compared to the year ended December 31, 2022. This change resulted from a $268.1 million increase in management fees, a $24.2 million increase in expense reimbursements and other and a $4.3 million decrease in transaction, monitoring and other fees, net.

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Management Fees. Management fees increased by $268.1 million, or 29%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by fee earning capital raised resulting in additional management fees of $107.6 million from TPG IX, $47.9 million from Asia VIII, $40.7 million from THP II, and $29.2 million from Rise III, each of which were activated during the third quarter of 2022. Management fees also increased $87.3 million due to the additional fees earned from TPG Angelo Gordon, primarily $18.8 million from Middle Market Direct Lending funds, $12.4 million from Real Estate Multi-Strategy funds, and $9.8 million from Credit Solutions funds. These increases were partially offset by a decrease in management fees of $36.9 million earned from Asia VII resulting from a decrease in fee earning AUM during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Certain management fees totaling $41.5 million earned during the year ended December 31, 2023 were considered catch-up fees as a result of additional capital commitments from limited partners primarily related to TPG IX of $18.0 million, THP II of $8.7 million, Rise III of $6.7 million and Asia VIII in the amount of $6.3 million.

Transaction, Monitoring and Other Fees, Net. Transaction, monitoring and other fees, net decreased by $4.3 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by a $9.5 million decrease in transaction, monitoring and incentive fees earned from portfolio companies in our Real Estate and Capital platforms, partially offset by a $6.3 million increase in our Market Solutions platform as a result of increased capital markets activity among our portfolio companies involving our broker-dealer.

Expense Reimbursements and Other. Expense reimbursements and other increased by $24.2 million, or 12%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by a $21.2 million increase in income from services rendered to TPG funds and a $5.1 million increase in additional reimbursements from funds, mainly due to increase in expense reimbursements attributable to TPG Angelo Gordon.

Performance Allocations. Performance allocations increased by $88.1 million to $808.2 million, or 12%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. Realized performance allocations for the year ended December 31, 2023 and 2022 totaled $582.2 million and $1,409.8 million, respectively. Unrealized performance allocation gains for the year ended December 31, 2023 was $226.0 million. The change in unrealized performance allocations for the year ended December 31, 2022 was a loss of $689.7 million.

The table below highlights performance allocations for the years ended December 31, 2023 and 2022, and separates the entities listed into two categories to reflect the Reorganization: (i) TPG general partner entities from which the TPG Operating Group Common Unit holders are expected to receive a 20% performance allocation and (ii) TPG general partner entities from which the TPG Operating Group Common Unit holders are not expected to receive any performance allocation.

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(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

(2)After the Reorganization, we retained an economic interest in performance allocations from the Growth III and Asia VI general partner entities, which entitles us to a performance allocation equal to 10%; however, we intend to allocate the full amount as performance allocation compensation expense. As such, net income available to controlling interest holders is zero for each of these funds following the Reorganization.

(3)The TPG Operating Group Excluded entities’ performance allocations are 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.

The increase in total performance allocations for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by higher realized and unrealized appreciation in TPG VIII, THP I, Growth IV, Growth V, Rise Climate and Rise II. These increases were partially offset by lower realized and unrealized appreciation in TREP III and Asia VI. Performance allocations also increased $127.3 million due to the acquisition of TPG Angelo Gordon primarily due to realized and unrealized appreciation from TPG AG Credit.

As of December 31, 2023, accrued performance allocations presented as investments in the Consolidated Statement of Financial Condition for Common Unit holders TPG Operating Group shared TPG general partner entities totaled $5.3 billion. As of December 31, 2023, accrued performance allocations presented as investments in the Consolidated Statement of Financial Condition for Common Unit holders TPG Operating Group excluded TPG general partner entities totaled $0.4 billion.

Capital Interests. Capital interests income increased by $10.9 million, or 30%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by an increase in income from our investments in TRTX in our Real Estate platform and Rise Climate in our Impact platform. These increases were partially offset by a decrease in income from our investments in TPG VII, TPG VIII and TPG AAF in our Capital platform.

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Expenses

Cash-Based Compensation and Benefits. Cash-based compensation and benefits expense increased by $73.7 million, or 16%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by a $63.9 million increase in salaries and benefits driven by an increase in headcount as a result of the Acquisition for the year ended December 31, 2023, and an $8.7 million increase in bonuses for the year ended December 31, 2023.

Equity-Based Compensation. Equity-based compensation expense increased by $27.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily attributable to a net $36.6 million increase in expenses largely associated with RSUs granted to TPG employees and certain of our executives and a $12.8 million expense associated with RSUs granted to TPG Angelo Gordon employees as a result of the Angelo Gordon acquisition, partially offset by the vesting of certain Other Awards, as defined in Note 19, during the year ended December 31, 2022.

Performance Allocation Compensation. Performance allocation compensation increased by $175.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily attributable to the increase in performance allocations, which drives the compensation allocated to our partners and professionals during the year ended December 31, 2023, inclusive of $103.4 million attributable to TPG Angelo Gordon.

General, Administrative and Other. General and administrative expenses increased by $113.7 million, or 31%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by a $78.0 million increase in professional fees and an increase of $7.6 million in travel and other administrative expenses. General and administrative expense also increased $39.1 million from TPG Angelo Gordon. These increases were partially offset by a decrease in insurance expenses, primarily related to a $20.6 million insurance policy purchased in connection with the IPO during the year ended December 31, 2022.

Depreciation and Amortization. Depreciation and amortization increased by $14.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily due to the amortization of intangible assets resulting from the acquisition of Angelo Gordon in November 2023.

Interest Expense. Interest expense increased by $16.9 million, or 78%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to higher interest rates on certain borrowings and increased interest expense on draws under our Senior Unsecured Revolving Credit Facility to partially fund the Acquisition.

Expenses of Consolidated TPG Funds and Public SPACs. Expenses of consolidated TPG Funds and Public SPACs decreased by $2.3 million, or 68%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Net Gains (Losses) from Investment Activities. Net gains (losses) from investment activities was a gain of $6.6 million for year ended December 31, 2023 compared to a loss of $110.1 million for the year ended December 31, 2022. This change was primarily attributable to a gain of $15.3 million from our investment in Nerdy Inc, partially offset by a loss of $7.7 million from our investment in Vacasa, Inc. during the year ended December 31, 2023.

Interest, Dividends and Other. Interest, dividends and other increased by $33.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily driven by additional interest income earned due to higher interest rates during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Unrealized Gains on Derivative Liabilities of Public SPACs. The $0.7 million and $12.4 million of unrealized gain on derivative instruments recognized during the year ended December 31, 2023 and 2022, respectively, were attributable to warrants issued by the consolidated Public SPAC entities and forward purchase agreements held by third parties. The warrants held by public investors and forward purchase agreements are treated as liability instruments rather than equity instruments and subject to mark-to-market adjustments each period. Upon the consummation of acquisitions of target companies by our Public SPACs or the wind down of a Public SPAC, the associated liability will no longer be included in our Consolidated Financial Statements. Pursuant to the redemption of Class A Ordinary shares of AFTR and YTPG during the year ended December 31, 2023, we no longer have any derivative liabilities associated with SPACs in our Consolidated Financial Statements as of December 31, 2023.

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Interest, Dividends and Other of Consolidated TPG Funds and Public SPACs. Interest, dividends and other of consolidated TPG Funds and Public SPACs increased by $1.0 million, or 14%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Income Tax Expense. Income tax expense increased by $27.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the Pre-Closing TPG Transactions, (as defined herein) which resulted in an increase to our valuation allowance for the year ended December 31, 2023.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenues

Revenues consisted of the following for the years ended December 31, 2021 and December 31, 2020:

Fees and other revenues increased by $268.7 million, or 27%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This change resulted from a $201.5 million increase in management fees, a $54.8 million increase in expense reimbursements and other and a $12.5 million increase in transaction, monitoring and other fees, net.

Management Fees. Management fees increased by $201.5 million, or 28%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by fee earning capital raised resulting in additional management fees of $40.3 million from TPG IX, $22.0 million from Asia VIII, $19.4 million from Rise III and $10.4 million from TPH II, each of which were activated during the third quarter of 2022; $76.2 million from TREP IV, which was activated during the first quarter of 2022; and $65.4 million from Rise Climate, which was activated during the third quarter of 2021. These increases were partially offset by a decrease in management fees of $29.9 million earned from TPG VII resulting from a decrease in fee earning AUM during the year ended December 31, 2022 compared to the year ended December 31, 2021.

Certain management fees in the year ended December 31, 2022 were considered catch-up fees as a result of additional capital commitments from limited partners to Rise Climate and TTAD II in the amount of $2.8 million.

Transaction, Monitoring and Other Fees, Net. Transaction, monitoring and other fees, net increased by $12.5 million, or 12%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by a $9.6 million increase in transaction fees earned from portfolio companies in our Real Estate and Capital platforms and a $5.1 million increase in our Market Solutions platform as a result of increased capital markets activity among our portfolio companies involving our broker-dealer.

Expense Reimbursements and Other. Expense reimbursements and other increased by $54.8 million, or 35%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by a $18.4 million increase in additional reimbursements from TPG funds due to increased fundraising activities, $19.8 million in administrative service fees from RemainCo earned during the year ended December 31, 2022, and a $14.9 million increase in income from services rendered to TPG funds and Portfolio Companies.

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Performance Allocations. Performance allocations decreased by $3,072.8 million to $720.1 million, or 81%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by an 8% appreciation of our realized and unrealized portfolio during the year ended December 31, 2022 compared to a 38% appreciation of our realized and unrealized portfolio during the year ended December 31, 2021. Realized performance allocations for the year ended December 31, 2022 and 2021 totaled $1,409.8 million and $1,956.2 million, respectively. The change in unrealized performance allocations for the year ended December 31, 2022 was a loss of $689.7 million. Unrealized performance allocation gains for the year ended December 31, 2021 totaled $1,836.7 million.

The table below highlights performance allocations for the years ended December 31, 2022 and 2021, and separates the entities listed into two categories to reflect the Reorganization: (i) TPG general partner entities from which the TPG Operating Group Common Unit holders are expected to receive a 20% performance allocation and (ii) TPG general partner entities from which the TPG Operating Group Common Unit holders are not expected to receive any performance allocation.

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(1)After the Reorganization, we retained an economic interest in performance allocations from the Growth III and Asia VI general partner entities, which entitles us to a performance allocation equal to 10%; however, we intend to allocate the full amount as performance allocation compensation expense. As such, net income available to controlling interest holders is zero for each of these funds following the Reorganization.

(2)The TPG Operating Group Excluded entities’ performance allocations are 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. See “—Unaudited Pro Forma Condensed Consolidated Financial Information and Other Data” which reflects the projected impact of the Reorganization.

The decrease in total performance allocations for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily driven by lower realized and unrealized appreciation in TPG VII, Asia VI, Asia VII, Growth III, Growth IV, THP I, Rise I and TREP III. For the year ended December 31, 2022, our investments have generated realized and unrealized portfolio appreciation of 8% compared to 38% for the year ended December 31, 2021.

As of December 31, 2022, accrued performance allocations presented as investments in the Consolidated Statement of Financial Condition for Common Unit holders TPG Operating Group shared TPG general partner entities totaled $4.1 billion. As of December 31, 2022, accrued performance allocations presented as investments in the Consolidated Statement of Financial Condition for Common Unit holders TPG Operating Group excluded TPG general partner entities totaled $0.6 billion.

Capital Interests. Capital interests income decreased by $169.5 million, or 82%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by a decrease in income from our investments in TPG VII, TPG VIII, Asia VI and Asia VII in our Capital platform, TRTX in our Real Estate platform, Growth III, Growth IV and TTAD I in our Growth platform, and Rise I in our Impact platform. These decreases were partially offset by an increase in income from our investment in AAF in our Capital platform.

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Expenses

Cash-Based Compensation and Benefits. Cash-based compensation and benefits expense decreased by $106.0 million, or 18%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by a $127.7 million decrease in bonuses for senior professionals for the year ended December 31, 2022 which, following our Reorganization and IPO, are recorded in performance allocation compensation expense. This decrease was partially offset by increases in salaries and benefits and accrued bonuses of $29.8 million and $11.0 million, respectively, driven by an increase in headcount for the year ended December 31, 2022.

Equity-Based Compensation. Equity-based compensation expense increased by $627.7 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily attributable to the Reorganization and IPO, which resulted in $550.0 million of expense associated with unvested units granted prior to or in conjunction with the IPO to certain of our employees at TPG Partner Holdings, RemainCo, and the TPG Operating Group as well as $77.7 million of expense associated with RSUs granted to TPG employees and certain of our executives upon completion of our IPO in January 2022. We had no such expense during the year ended December 31, 2021.

Performance Allocation Compensation. Performance allocation compensation increased by $416.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily attributable to the recognition of partnership distributions to our partners and professionals as compensation expense following our IPO. We had no such expense during the year ended December 31, 2021 as we were a private partnership.

General, Administrative and Other. General and administrative expenses increased by $90.3 million, or 32%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by a $18.4 million increase in expenses related to our fundraising activities that are ultimately reimbursable from TPG funds, a $28.8 million increase in office overhead and other, inclusive of a $20.6 million insurance policy purchased in connection with the IPO and a $26.5 million increase of other administrative expenses.

Depreciation and Amortization. Depreciation and amortization increased by $11.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily due to the amortization of intangible assets resulting from the acquisition of NewQuest in July 2021.

Interest Expense. Interest expense increased by $5.3 million, or 33%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher interest rates on certain borrowings.

Expenses of Consolidated TPG Funds and Public SPACs. Expenses of consolidated TPG Funds and Public SPACs decreased by $17.4 million, or 84%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily driven by a reduction in non-recurring professional services expenses as a result of business combinations associated with TPG PACE Tech Opportunities Corp. (“PACE”) and TPG Pace Solutions Corp. (“TPGS”) during the year ended December 31, 2021.

Net (Losses) Gains from Investment Activities. Net losses from investment activities for the year ended December 31, 2022 were $110.1 million compared to a gain of $353.2 million for the year ended December 31, 2021. This change was primarily attributable to a gain of $122.7 million recognized on the deconsolidation of PACE, a gain of $109.9 million on the deconsolidation of TPGS, and a gain of $95.0 million recognized on the acquisition of NewQuest during the year ended December 31, 2021. Additionally, we incurred losses of $80.4 million and $25.1 million from our investments in Vacasa, Inc. and Nerdy Inc, respectively, during the year ended December 31, 2022. Following the Reorganization, we no longer recognize net gains or losses from certain strategic investments that were transferred to RemainCo on December 31, 2021.

Interest, Dividends and Other. Interest, dividends and other increased by $2.7 million, or 42%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Net Gains (Losses) from Investment Activities of Consolidated TPG Funds and Public SPACs. Net gains (losses) from investment activities of consolidated TPG Funds and Public SPACs had no activity during the year ended December 31, 2022 compared to a net gain of $23.4 million for the year ended December 31, 2021. Following certain Reorganization activities, we no longer consolidate TPEP as we do not have a controlling financial interest.

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Unrealized Gains on Derivative Liabilities of Public SPACs. The $12.4 million and $211.8 million of unrealized gain on derivative instruments recognized during the year ended December 31, 2022 and 2021, respectively, were attributable to warrants issued by the consolidated Public SPAC entities and forward purchase agreements held by third parties. The warrants held by public investors and forward purchase agreements are treated as liability instruments rather than equity instruments and subject to mark-to-market adjustments each period. Upon the consummation of acquisitions of target companies by our Public SPACs or the wind down of a Public SPAC, the associated liability will no longer be included in our Consolidated Financial Statements.

Interest, Dividends and Other of Consolidated TPG Funds and Public SPACs. Interest, dividends and other of consolidated TPG Funds and Public SPACs decreased by $3.6 million, or 35%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily related to an expense reimbursement of EUR 15.0 million on the termination of a proposed business combination, recognized by TPG Pace Beneficial Finance Corp. during the year ended December 31, 2021. These decreases were partially offset by increased interest income resulting from higher interest rates on the balance of assets held in Trust Accounts by Consolidated Public SPACs.

Income Tax Expense. Income tax expense increased by $23.4 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was due to the Company now being treated as a corporation for U.S. federal and state income taxes in connection with the Reorganization and IPO, beginning in January of 2022.

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Unaudited Condensed Consolidated Statements of Financial Condition (U.S. GAAP basis)

Cash and cash equivalents decreased $442.3 million during the year ended December 31, 2023 primarily due to the acquisition of Angelo Gordon. The acquisition resulted in cash paid of $740.7 million, which is comprised of $270.7 million of cash on hand and $470.0 million of proceeds from drawing on our Senior Unsecured Revolving Credit Facility. This is partially offset by cash and cash equivalents acquired in the transaction of $383.9 million.

Investments increased $1,394.2 million during the year ended December 31, 2023 primarily attributable the acquisition of Angelo Gordon of $1,046.4 million. Investments also increased due to net capital allocation-based income of $855.3 million, which was partially offset by net proceeds from performance allocations of $582.2 million.

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Goodwill and intangible assets increased $719.2 million for the year ended December 31, 2023, primarily due to the acquisition of Angelo Gordon. As a result of the acquisition, we recognized $547.5 million of intangible assets and $205.9 million of goodwill.

Debt obligations increased $500.5 million during the year ended December 31, 2023 primarily due to borrowings on our Senior Unsecured Revolving Credit Facility used to finance the Angelo Gordon acquisition.

Accrued performance allocation compensation increased $826.2 million for the year ended December 31, 2023, primarily attributable the acquisition of Angelo Gordon of $745.0 million and net increases in performance fee compensation expense of $591.7 million, partially offset by settlements of performance allocation compensation of $497.8 million during the year ended December 31, 2023.

Other liabilities increased $500.0 million for the year ended December 31, 2023. The majority of the change is attributable to the acquisition of Angelo Gordon which resulted in $99.9 million of lease obligations, $80.3 million of accounts payable and accrued expenses, and $83.3 million of repurchase agreement liabilities as of December 31, 2023. In addition, we recorded contingent consideration related to the acquisition valued at $156.3 million, as well as $73.8 million in amounts payable to the sellers of Angelo Gordon.

Redeemable equity from consolidated Public SPACs decreased $653.6 million primarily due to the redemption of Class A ordinary shares of YTPG and AFTR during the year ended December 31, 2023. See Note 15 to our Consolidated Financial Statements.

Total equity increased $275.3 million, primarily due to the Common Units granted at fair value of $233.9 million in connection with the Angelo Gordon acquisition, as well as net income for the year ended December 31, 2023 of $23.4 million offset by payments of dividends and distributions to our Class A common stockholders and to holders of non-controlling interests in subsidiaries.

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Non-GAAP Financial Measures

Distributable Earnings. 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 U.S. GAAP measure of net income. DE differs from U.S. GAAP net income computed in accordance with U.S. 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 other items, such as contingent reserves.

While we believe that the inclusion or exclusion of the aforementioned U.S. GAAP income statement items provides investors with a meaningful indication of our core operating performance, the use of DE without consideration of the related U.S. GAAP measures is not adequate due to the adjustments described herein. This measure supplements U.S. GAAP net income and should be considered in addition to and not in lieu of the results of operations presented in accordance with U.S. GAAP discussed further under “—Key Components of our Results of Operations—Results of Operations” prepared in accordance with U.S. GAAP.

After-Tax Distributable Earnings. 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 U.S. GAAP net income computed in accordance with U.S. 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 U.S. GAAP income tax expense adjusted to include only the current tax expense (benefit) calculated on U.S. 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 Statements 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.

We believe that while the inclusion or exclusion of the aforementioned U.S. GAAP income statement items provides investors with a meaningful indication of our core operating performance, the use of After-tax DE without consideration of the related U.S. GAAP measures is not adequate due to the adjustments described herein. This measure supplements U.S. GAAP net income and should be considered in addition to and not in lieu of the results of operations presented in accordance with U.S. GAAP discussed further under “—Key Components of our Results of Operations-Results of Operations.”

Fee-Related Earnings. 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 U.S. 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-core 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 U.S. GAAP measures is not adequate due to the adjustments described herein.

Fee-Related Revenues. Fee-related revenues is a component of FRE. Fee-related revenues is comprised of (i) management fees, (ii) fee-related performance revenues, (iii) transaction, monitoring and other fees, net, and (iv) other income. Fee-related performance revenues refers to incentive fees from perpetual capital vehicles that are: (i) measured and expected to be received on a recurring basis and (ii) not dependent on realization events from the underlying investments. Fee-related revenue differs from revenue computed in accordance with U.S. GAAP in that it excludes certain reimbursement expense arrangements. Refer to “—Reconciliation to U.S. GAAP Measures” to the comparable line items on the combined statements of operations.

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Fee-Related Expenses. Fee-related expenses is a component of FRE. Fee-related expenses differs from expenses computed in accordance with U.S. GAAP in that it is net of certain reimbursement arrangements and does not include performance allocation compensation. Fee-related expenses is used in management’s review of the business. Refer to “—Reconciliation to U.S. GAAP Measures” to the comparable line items on the combined statements of operations.

Fee-related revenues and fee-related expenses are presented separately in our calculation of non-GAAP measures in order to better illustrate the profitability of our FRE. The use of fee-related revenues and FRE without consideration of the related U.S. GAAP measures is not adequate due to the adjustments described herein.

Our calculations of DE, FRE, fee-related revenues and fee-related expenses may differ from the calculations of other investment managers. As a result, these measures may not be comparable to similar measures presented by other investment managers.

The following table sets forth our total FRE and DE for the years ended December 31, 2023, 2022 and 2021:

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(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Fee-Related Revenues

Fee-related revenues increased by $251.2 million, or 23%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to additional management fees of $248.9 million.

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Management Fees

The following table presents management fees in our platforms for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Management fees increased by $248.9 million, or 27%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was largely due to fee earning capital raised resulting in additional management fees of $130.9 million earned from the Capital platform, largely from the activation of TPG IX, Asia VIII and THP II in the third quarter of 2022, partially offset by a decrease of $36.7 million in Asia VII. Management fees also increased $50.5 million and $33.6 million due to the additional fees earned from TPG AG Credit and TPG AG Real Estate, respectively, which we acquired in November 2023. Management fees generated from the Impact platform increased $21.5 million, primarily due to the activation of Rise III in the second quarter of 2022. Management fees for the Growth platform increased $13.7 million primarily from additional actively invested capital in TTAD II, and the activation of LSI in the first quarter of 2023.

Certain management fees totaling $41.5 million earned during the year ended December 31, 2023 were considered catch-up fees as a result of additional capital commitments from limited partners primarily related to TPG IX of $18.0 million, THP II of $8.7 million, Rise III of $6.7 million and Asia VIII in the amount of $6.3 million.

Fee-related Performance Revenues

The following table presents fee-related performance revenues for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Fee-related performance revenues decreased $3.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Performance revenues for the year ended December 31, 2022 related to incentive fees earned from TRTX in our Real Estate platform.

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Transaction, Monitoring and Other Fees, Net

The following table presents transaction, monitoring and other fees, net in our platforms for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Transaction, monitoring and other fees, net increased by $3.8 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily attributable to an increase in fees received by our Market Solutions platform as a result of increased capital markets activity among our portfolio companies involving our broker-dealer.

Other Income

The following table presents other income for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Total other income increased by $2.1 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Fee-Related Expenses

Fee-related expenses increased by $98.8 million, or 16%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, comprised primarily of higher cash-based compensation and benefits, net of $59.3 million and increased operating expenses, net of $38.1 million.

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Cash-based Compensation and Benefits, Net

The following table presents cash-based compensation and benefits, net for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Total cash-based compensation and benefits, net increased by $59.3 million, or 15%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was primarily due to an increase in salaries of $39.6 million and benefits and other of $12.1 million as a result of headcount growth due to the acquisition of TPG Angelo Gordon. Total cash-based compensation and benefits, net also increased due to an increase of $16.2 million in bonuses, primarily due to bonus expense for TPG Angelo Gordon. These increases were partially offset by an increase in compensation reimbursements related to services provided to certain fund and portfolio companies of $8.6 million.

Fee-related Performance Compensation

The following table presents fee-related performance compensation for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Total fee-related performance compensation increased by $1.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Operating Expenses, Net

Operating expenses, net includes general and administrative expenses as well as reimbursements for professional services and travel expenses related to investment management and advisory services provided to investment funds that we manage and monitoring services provided to our portfolio companies. Operating expenses, net were $277.3 million and $239.2 million for the year ended December 31, 2023 and 2022, respectively, with the increase of $38.1 million primarily due to an increase in professional fees of $22.9 million, travel expenses of $8.2 million, and other administrative expenses of $7.0 million.

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Realized Performance Allocations, Net

The following table presents realized performance allocations, net from our platforms for the years ended December 31, 2023 and 2022:

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(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Realized performance allocations, net of $74.0 million for the year ended December 31, 2023 were largely generated from realizations of $39.5 million from TPG AAF and $14.9 million from TPG VIII in the Capital platform, $6.6 million from TPEP in the Market Solutions platform, and $4.1 million from TREP III within the Real Estate platform. Realizations also include $5.6 million primarily from MVP Fund in TPG AG Credit. This activity included realizations sourced from portfolio companies such as Creative Artists Agency, DirecTV and Alloy Properties.

Realized Investment Income and Other, Net

The following table presents realized investment income and other, net for the years ended December 31, 2023 and 2022:

___________

(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

Realized investment income and other, net decreased by $89.3 million, or 212%, due to lower realizations of $54.6 million from investments in funds we manage, plus additional non-core expenses of $34.6 million primarily driven by the Acquisition.

Depreciation

Depreciation expense increased $2.0 million, or 44%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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Interest Expense, Net

The following table presents interest expense, net for the years ended December 31, 2023 and 2022:

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(1)Includes amounts from TPG Angelo Gordon from November 1, 2023, the date of the Acquisition, through December 31, 2023.

The decrease in interest expense, net during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to higher interest income from interest earned on cash and cash equivalents, partially offset by higher interest rates on certain borrowings and increased interest expense on draws under our Senior Unsecured Revolving Credit Facility to partially fund the Acquisition.

Distributable Earnings

The decrease in DE for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to lower realized performance allocations, net, partially offset by a 34% increase in our Fee-Related Earnings.

Income Taxes

Income taxes decreased $17.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, driven by lower realized performance allocations, net.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Fee-Related Revenues

Fee-related revenues increased by $218.9 million, or 25%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily due to additional management fees of $211.5 million and fee-related performance revenues of $5.2 million.

Management Fees

The following table presents management fees in our platforms for the years ended December 31, 2022 and 2021:

Management fees increased by $211.5 million, or 29%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was largely due to fee earning capital raised resulting in additional management fees of $83.5 million earned from the Real Estate platform, primarily as a result of the activation of TREP IV during the first quarter of 2022. Management fees generated from the Impact platform increased $73.6 million, due to the activation of

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Rise Climate in the third quarter of 2021, and Rise III in the second quarter of 2022. The Capital platform had an increase of $47.6 million in management fees, largely from the activation of both TPG IX and Asia VIII in the third quarter of 2022, partially offset by a decrease of $30.0 million in TPG VII. The Market Solutions platform also contributed $7.4 million to the overall management fee increase primarily due to the acquisition of NewQuest in July 2021.

Certain management fees earned during the year ended December 31, 2022 were considered catch-up fees as a result of additional capital commitments from limited partners to Rise Climate and TTAD II in the amount of $2.8 million.

Fee-related Performance Revenues

The following table presents fee-related performance revenues for the years ended December 31, 2022 and 2021:

Fee-related performance revenues increased $5.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, attributable to the Real Estate platform driven by TRTX incentive fees.

Transaction, Monitoring and Other Fees, Net

The following table presents transaction, monitoring and other fees, net in our platforms for the years ended December 31, 2022 and 2021:

Transaction, monitoring and other fees, net increased by $1.9 million, or 2%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Other Income

The following table presents other income for the years ended December 31, 2022 and 2021:

___________

(1) Includes other income of $13.5 million during the year ended December 31, 2021, generated by certain other investments that were transferred to RemainCo as Excluded Assets on December 31, 2021. Accordingly, there was no impact for the year ended December 31, 2022.

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Total other income increased by $0.4 million, or 1%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change primarily resulted from an increase in income earned from RemainCo under the RemainCo administrative agreement, offset by the transfer of certain of our strategic investments to RemainCo on December 31, 2021.

Fee-Related Expenses

Fee-related expenses decreased by $56.4 million, or 8%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, comprised primarily of lower cash-based compensation and benefits, net of $128.4 million partially offset by increased operating expenses, net of $72.1 million.

Cash-Based Compensation and Benefits, Net

The following table presents cash-based compensation and benefits, net for the years ended December 31, 2022 and 2021:

___________

(1)Includes bonus compensation of $140.3 million during the year ended December 31, 2021 for TPG senior professionals.

Total cash-based compensation and benefits, net decreased by $128.4 million, or 25%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. This change was primarily due to a decrease in bonuses of $146.2 million as a result of certain TPG senior professionals no longer receiving discretionary bonuses, and increased compensation reimbursements related to services provided to certain fund and portfolio companies. The decrease was partially offset by increased salaries of $28.0 million driven by firm headcount expansion.

Operating Expenses, Net

Operating expenses, net includes general and administrative expenses as well as reimbursements for professional services and travel expenses related to investment management and advisory services provided to TPG funds and monitoring services provided to our portfolio companies. Operating expenses, net were $239.2 million and $167.1 million for the year ended December 31, 2022 and 2021, respectively, with the increase of $72.1 million primarily due to an increase in professional fees of $26.1 million, travel expenses of $19.8 million, and other administrative expenses of $26.3 million.

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Realized Performance Allocations, Net

The following table presents realized performance allocations, net from our platforms for the years ended December 31, 2022 and 2021:

___________

(1)Includes realized performance allocation, net of $794.9 million during the year ended December 31, 2021 attributable to the TPG Operating Group Excluded entities. As previously described herein, these entities’ performance allocations are not a component of distributable earnings beginning in the fiscal year ending December 31, 2022.

Realized performance allocations, net of $282.4 million for the year ended December 31, 2022 were largely generated from realizations of $191.8 million from TPG VII, $25.9 million from TPG VIII and $19.4 million from Asia VII within the Capital platform. Realizations within the Impact platform of $16.0 million were generated from Rise I. This activity consisted of realizations sourced from portfolio companies including McAfee, Wind River, Kelsey-Seybold Clinics, Greencross, and DirecTV.

Realized performance allocations, net of $999.6 million for the year ended December 31, 2021 were largely generated from realizations in TPG VII of $501.6 million, TPG VI of $173.5 million and Asia VI of $28.4 million in the Capital platform. Realizations from the Growth platform were generated from Growth III of $131.2 million, Growth II of $35.8 million, Biotech III of $27.8 million, TSI of $24.0 million and TTAD I of $11.2 million. Realizations from the Real Estate platform were generated from Real Estate II of $24.5 million. The activity consisted of realizations sourced from portfolio companies including Astound, Kindred at Home, Transplace Holdings, Creative Artists Agency, DirecTV and Medical Solutions.

Realized Investment Income and Other, Net

The following table presents realized investment income and other, net for the years ended December 31, 2022 and 2021:

___________

(1)Includes realized investment income and other, net of $26.0 million during the year ended December 31, 2021 generated by certain other investments that were transferred to RemainCo as of December 31, 2021.

Realized investment income and other, net decreased by $50.7 million, or 55%, resulting from lower realizations of $29.0 million from our investments in TPG funds and the transfer of certain of our strategic investments to RemainCo on December 31, 2021.

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Depreciation

Depreciation expense decreased $2.2 million, or 32%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Interest Expense, Net

The following table presents interest expense, net for the years ended December 31, 2022 and 2021:

The decrease in interest expense, net during the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to higher interest income from interest earned on cash and cash equivalents, partially offset by higher interest rates on certain borrowings.

Distributable Earnings

The decrease in DE for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to lower realized performance allocations, net, partially offset by a 154% increase in our Fee-Related Earnings.

Income Taxes

Income taxes increased $50.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase in income taxes is a result of the Company being subject to federal income taxes subsequent to the Reorganization and IPO.

Unaudited Non-GAAP Balance Sheet Measures

Book assets, book liabilities and net book value are non-GAAP performance measures of TPG Operating Group’s assets, liabilities and equity on a deconsolidated basis which reflects our investments in subsidiaries as equity method investments. Additionally, the book assets, book liabilities and net book value include the tax assets and liabilities of TPG Inc. We utilize these measures to assess the unrealized value of our book assets after deducting for book liabilities as well as assess our indirect interest in accrued performance allocations from our TPG funds and our co-investments in TPG funds and third-party investments. We believe these measures are useful to investors as they provide additional insight into the net assets of the TPG Operating Group on a deconsolidated basis. These non-GAAP financial measures should not be considered as a substitute for, or superior to, similar financial measures calculated in accordance with U.S. GAAP. These non-GAAP financial measures may differ from the calculations of other alternative asset managers and, as a result, may not be comparable to similar measures presented by other companies. Refer to “––Reconciliation to U.S. GAAP Measures” for reconciliations of the Consolidated Statements of Financial Condition to the non-GAAP Balance Sheet.

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The following table sets forth our non-GAAP book assets, book liabilities and net book value as of December 31, 2023 and December 31, 2022:

During the year ended December 31, 2023, net book value increased primarily due to vested equity interest of $233.9 million recognized in connection with the acquisition of Angelo Gordon. Net book value also increased due to increases in net accrued performance and investments in funds, primarily associated with TPG VIII, Rise Climate, Growth V, Growth IV and THP I. This was partially offset by the distribution of proceeds received during the year ended December 31, 2023 from TPG AAF and TPG VIII.

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Reconciliation to U.S. GAAP Measures

The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP to non-GAAP financial measures for the years ended December 31, 2023, 2022 and 2021:

Revenue

Expenses

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Net income

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Balance sheet

The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP to non-GAAP financial measures as of December 31, 2023 and 2022:

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___________

(1)Certain amounts were reclassified to reflect how we utilize our non-GAAP balance sheet measures. We separately analyze our investments on a non-GAAP basis between accrued performance fees and other investments, which consists of co-investments into our funds and other equity method investments. Additionally, we reclassified U.S. GAAP financial statement amounts due from affiliates and certain amounts within other assets, net for non-GAAP purposes and reclassified U.S. GAAP financial statement amounts due to affiliates and other liabilities within accounts payable, accrued expenses and other for non-GAAP purposes.

(2)The $653.6 million redeemable equity represents ownership interest in each SPAC that is not owned by the TPG Operating Group and is presented separately from U.S. GAAP partners’ capital in the accompanying Consolidated Financial Statements.

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SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION AND OTHER DATA

Defined terms included below have the same meaning as terms defined and included elsewhere in this Form 10-K.

The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 depicts the accounting required under U.S. GAAP for the Acquisition, the related borrowing under the Senior Unsecured Revolving Credit Facility and certain changes in compensation arrangements assuming they occurred on January 1, 2023. An unaudited pro forma condensed combined statement of financial condition is not presented because the Acquisition, the related borrowing under the Senior Unsecured Revolving Credit Facility and certain changes in compensation arrangements are fully reflected in the consolidated statement of financial condition of TPG Inc. as of December 31, 2023 in this Annual Report on Form 10-K. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. Management believes this pro forma presentation is meaningful as the Acquisition is a material acquisition, which occurred close to year-end.

Pursuant to the Transaction Agreement, TPG purchased the Acquired Interests for a combination of cash, vested Common Units, the Aggregate Annual Cash Holdback Amount and the portion of the Earnout Payment not considered compensatory under U.S. GAAP. Total consideration in accordance with U.S. GAAP was $1,145.9 million (“Purchase Price”) as described in Note 2. All Common Units issued were accompanied by an equal number of Class B Shares.

TPG funded the cash consideration for the Acquisition by drawing $470.0 million under its Senior Unsecured Revolving Credit Facility and paid the remainder with cash on hand.

In addition to the Purchase Price, TPG issued to certain Angelo Gordon partners unvested Common Units and RSUs under the TPG Omnibus Plan, in each case as reflected in the Transaction Agreement. The issuance of the unvested Common Units and RSUs is considered compensation under U.S. GAAP, and is subject to ongoing service requirements intended to promote retention. Additionally, following the consummation of the Acquisition, TPG aligned the compensation structure for Angelo Gordon partners with TPG’s, which resulted in replacing some historically received cash-based compensation with a greater share of performance allocation compensation.

The unaudited pro forma condensed combined financial information is being furnished solely for informational purposes and is not necessarily indicative of the results of operations that might have been achieved for the period indicated, nor is it necessarily indicative of the future results of the combined company. It does not reflect potential revenue synergies or cost savings expected to be realized from the Acquisition. No assurance can be given that cost savings or synergies will be realized at all. The adjustments contained in the unaudited pro forma condensed combined financial information are based on currently available information and assumptions that we believe are reasonable in order to reflect, on a pro forma basis, the effect of the Acquisition, the financing and the change in compensation arrangements for Angelo Gordon subsequent to the closing of the Acquisition. Such assumptions include, but are not limited to, the Purchase Price allocation of Angelo Gordon’s assets acquired and liabilities assumed based on fair value and post-combination compensation expense. The unaudited pro forma condensed combined financial information does not project TPG’s results of operations for any future period or date.

The unaudited pro forma condensed consolidated financial information should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1 – Basis of Presentation

The unaudited pro forma condensed combined financial information is derived from TPG’s and Angelo Gordon’s historical audited and unaudited consolidated financial statements and depicts the accounting for the Acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with TPG being deemed the accounting acquirer. ASC 805 references fair value, as defined under ASC 820, Fair Value Measurements and Disclosures. Fair value determinations are inherently subjective, and reasonable persons evaluating the same facts and circumstances may develop different assumptions and arrive at different estimates. The accounting for the related financing and the change in compensation arrangements is depicted under ASC 835, Interest, and ASC 718, Compensation - Stock Compensation, respectively.

Note 2 – Purchase Price

The following table provides additional information on the total Purchase Price (in thousands):

_________________

1.Represents the closing cash consideration of $740.7 million which is comprised of $270.7 million of cash on hand and $470.0 million of proceeds from drawing on the Company’s Senior Unsecured Revolving Credit Facility. Out of the closing cash consideration of $740.7 million, $100.0 million was held in escrow on behalf of the sellers.

2.Represents the expected difference between the Estimated Cash Consideration paid at closing and the Final Cash Consideration to be determined no later than 120 days from closing in accordance with the terms of the Transaction Agreement.

3.Represents the fair value of approximately 9.2 million vested Common Units granted to the Angelo Gordon partners upon consummation of the Acquisition. The fair value of Common Units is based on a $28.18 closing price for the shares of Class A common stock on the Acquisition Date, adjusted for a discount for lack of marketability. Approximately 43.8 million unvested Common Units and 8.4 million RSUs available to be granted in connection with the Acquisition were considered compensatory under U.S. GAAP and not part of the Purchase Price.

4.Represents the estimated fair value of the Aggregate Annual Cash Holdback Amount of up to $150.0 million, which is payable in three equal annual installments of $50.0 million, subject to the absence of promote shortfall in each respective calendar year (2024, 2025, and 2026). The estimated fair value of $125.2 million, reflected as contingent consideration, was determined using a present value approach. Inputs to fair value include the present value period and the discount rate applied to the annual payments.

5.Represents the estimated fair value of the non-compensatory portion of the Earnout Payment expected to be paid in the form of cash and vested Common Units to Angelo Gordon partners upon satisfaction of certain FRR targets during the Measurement Period. This amount, reflected as contingent consideration, was determined using a multiple probability simulation approach. Inputs to the fair value include probability adjusted FRR amounts and FRR target thresholds. The compensatory portion of the Earnout Payment to the Angelo Gordon partners is treated as post-combination compensation expense, as services are required from such partners post-Closing.

The total Purchase Price was allocated to the fair value of assets acquired and liabilities assumed as of the Acquisition Date, with the excess Purchase Price recorded as goodwill. A third-party valuation specialist assisted the Company with the fair value estimates for the assets acquired and liabilities assumed. As the Acquisition Date was close to December, 31, 2023, the purchase accounting analysis is subject to subsequent adjustments that are identified through the measurement period, which is limited to one year from the Acquisition Date.

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Note 3 - Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Statement of Operations

(A)Reflects statement of operations activities that will not continue for the combined company, including:

1.Removal of amounts related to Angelo Gordon’s CLOs that were deconsolidated in Angelo Gordon’s unaudited consolidated financial statements as of June 30, 2023 in accordance with the terms of the Transaction Agreement. Such activities include:

i.Removal of interest expense of $50.5 million, general, administrative and other of $1.0 million and total net investment income of $52.7 million for the year ended December 31, 2023.

ii.Recognition of $3.0 million in management fee income (before the management fee reduction adjustment in Note (D)) and $1.0 million of capital allocation-based loss for the year ended December 31, 2023.

2.Removal of $1.3 million recorded within Angelo Gordon’s general, administrative and other expenses, related to an insurance policy for a founder partner of Angelo Gordon that did not continue after closing.

(B)The following table presents the amortization expense of the acquired finite lived intangible assets following the consummation of the Acquisition (refer to Note 3 to our Consolidated Financial Statements for estimated fair values and useful lives):

(C)Reflects an adjustment to interest expense of $25.2 million for the year ended December 31, 2023 related to the $470.0 million draw on the Company’s Senior Unsecured Revolving Credit Facility using an estimated effective interest rate of 6.54% per annum based on the terms of the facility. The effective interest rate is based on the one-month SOFR plus 110 basis points. The portion of historical unused commitment fee was reversed, partially offsetting the increase in interest expense. A 0.25% change in the interest rate of the Senior Unsecured Revolving Credit Facility would cause a corresponding increase or decrease in interest expense of $1.2 million for the year ended December 31, 2023.

This adjustment also reflects the removal of interest expense of $1.7 million for the year ended December 31, 2023 as a result of the repayment and termination of an Angelo Gordon credit facility prior to closing.

(D)Represents the reduction of management fee income related to a certain fund where TPG did not acquire 100% of the on-going management fee stream. This arrangement results in a reduction of management fees of $3.5 million for the year ended December 31, 2023.

(E)Represents the net increase of Angelo Gordon lease expense of $2.1 million for the year ended December 31, 2023, as a result of remeasuring Angelo Gordon’s right of use asset and lease liability balances in conjunction with the Acquisition.

(F)TPG Operating Group has been and is expected to continue to be treated as partnerships for U.S. federal and state income tax purposes. Following the Acquisition, the income from the Acquired Interests allocable to TPG Inc. from its ownership interest in the TPG Operating Group, is subject to U.S. federal income taxes and local income taxes.

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As a result, the unaudited pro forma condensed combined financial information reflects adjustments to income tax expense to incorporate the income tax effects in connection with the additional allocable income from the Acquired Interests and the transaction accounting adjustments attributable to TPG Inc. at a blended statutory income tax rate of 23.0%. The blended statutory income tax rate was calculated on a pro forma basis, assuming the U.S. federal rate currently in effect of 21% and the statutory income tax rates applicable to each state and local jurisdiction where we estimate our income will be taxable.

The applicable blended statutory tax rate used for the unaudited pro forma condensed combined financial information will likely vary from the actual effective tax rates in future periods subsequent to the Acquisition.

The following table summarizes pro forma income tax expense associated with Transaction Accounting Adjustments:

The following table summarizes pro forma income tax expense associated with Transaction Accounting Compensation Adjustments:

(G)For purposes of the unaudited pro forma condensed combined statement of operations, TPG owns approximately 25.31% of the Common Units, while non-controlling interest holders of the TPG Operating Group, including former Angelo Gordon partners who received Common Units, own the remaining 74.69% for the year ended December 31, 2023. The following table presents the calculation of the pro forma income attributable to other non-controlling interests in the TPG Operating Group:

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In order to reflect the net loss attributable to non-controlling interests in TPG Operating Group and to adjust historical allocations of loss to non-controlling interests for Angelo Gordon, we made pro forma adjustments of $88.2 million and $1.3 million, respectively, for the year ended December 31, 2023.

Transaction Accounting Adjustment - Compensation Adjustments

As described in the summary of the Acquisition above, TPG issued unvested Common Units and RSUs to Angelo Gordon partners that are considered compensatory under U.S. GAAP and are not included in the Purchase Price. Such offering of equity instruments is considered a separate transaction entered into between TPG and Angelo Gordon and is therefore presented separately from the Acquisition.

(H)At Closing, TPG issued to certain partners approximately 43.8 million unvested Common Units. TPG also granted approximately 7.0 million RSUs to certain partners and professionals out of a pool of 8.4 million RSUs. The unvested Common Units and RSUs were determined to be compensatory for the combined company. The unvested Common Units and RSUs will generally vest over five years, subject to the recipient’s continued provision of services to the combined company through the vesting date.

A total grant date fair value of $1,110.4 million for the unvested Common Units will be recognized as post-combination compensation expense during the periods in which the Angelo Gordon partners provide services. The grant date fair value of the unvested Common Units is based on the same inputs as the vested Common Units as detailed in Note 2. The issuance of such unvested Common Units results in the recognition of an additional $186.9 million of compensation expense for year ended December 31, 2023.

A total grant date fair value of $201.8 million for the RSUs will be recognized as post-combination compensation expense during the periods in which the Angelo Gordon partners and employees provide services. The grant date fair value of the RSUs is based on the closing price for the shares of Class A common stock on the grant date. The RSU grants result in the recognition of an additional $31.9 million of compensation expense for the year ended December 31, 2023.

Additionally, post-combination expense is recognized for the portion of the Earnout Payment that requires provision of on-going services from Angelo Gordon partners. As the Earnout Payment contains both a performance condition and a requisite service period, the Company recognizes compensation expense using the accelerated attribution method. The compensatory portion of the Earnout Payment results in the recognition of an additional $62.1 million of compensation expense for the year ended December 31, 2023.

Angelo Gordon historical equity-based compensation of $13.4 million for the year ended December 31, 2023 is reversed.

(I)Reflects the additional performance allocation income that is attributed to certain partners of Angelo Gordon as a result of an additional 30% increase in their share of performance allocations. Approximately $52.9 million for the year ended December 31, 2023 is reflected as additional performance allocation compensation allocated to those Angelo Gordon partners and professionals. Within this amount, approximately $4.9 million represents cash amounts paid to certain legacy interest holders of Angelo Gordon, which were reflected within General, administrative and other expenses during the year ended December 31, 2023.

(J)Reflects the reduction of cash-based bonuses that were historically paid to certain Angelo Gordon partners and professionals and reflected within compensation and benefits, net. After the Acquisition, the share of performance allocations to certain Angelo Gordon partners and professionals increased to approximately 80%. Additionally, share-based compensation was granted to such partners in the form of unvested Common Units (as discussed in Note (H). The reduction of cash-based bonuses amounts to $92.7 million for year ended December 31, 2023.

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Note 4 - Earnings Per Share

The following table presents a reconciliation of the numerator and denominator used to compute pro forma basic and diluted net income (loss) per share (in thousands, except share and per share data):

_________________

1.Represents the Class A Common Stock outstanding at Transaction closing.

2.The assumed exchange of Common Units to Class A Common Stock includes closing Common Units of 228.7 million and 53.0 million vested and unvested Common Units granted to the Angelo Gordon partners upon consummation of the Acquisition.

In computing the dilutive effect, if any, that share-based awards would have on earnings per share, TPG considers the reallocation of net income between holders of its Class A Shares and non-controlling interests.

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Unaudited Pro Forma Non-GAAP Financial Measures

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 U.S. GAAP measure of net income. DE differs from U.S. GAAP net income computed in accordance with U.S. 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.

While TPG and Angelo Gordon believe that the inclusion or exclusion of the aforementioned U.S. GAAP income statement items provides investors with a meaningful indication of core operating performance, the use of DE without consideration of the related U.S. GAAP measures is not adequate due to the adjustments described herein. This measure supplements U.S. GAAP net income and should be considered in addition to and not in lieu of the results of operations presented in accordance with U.S. GAAP.

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 holders of our Class A Shares and Common Unit holders. After-tax DE differs from U.S. GAAP net income computed in accordance with U.S. 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 U.S. GAAP income tax expense adjusted to include only the current tax expense (benefit) calculated on U.S. 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 TPG 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 stockholders.

TPG and Angelo Gordon believe that while the inclusion or exclusion of the aforementioned U.S. GAAP income statement items provides investors with a meaningful indication of core operating performance, the use of After-tax DE without consideration of the related U.S. GAAP measures is not adequate due to the adjustments described herein. This measure supplements U.S. GAAP net income and should be considered in addition to and not in lieu of the results of operations presented in accordance with U.S. GAAP.

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 U.S. 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-core 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 U.S. GAAP measures is not adequate due to the adjustments described herein.

Fee-Related Revenues. Fee-related revenues is a component of FRE. Fee-related revenues is comprised of (i) management fees, (ii) fee-related performance revenues, (iii) transaction, monitoring and other fees, net, and (iv) other income. Fee-related performance revenues refers to incentive fees from perpetual capital vehicles that are: (i) measured and expected to be received on a recurring basis and (ii) not dependent on realization events from the underlying investments. Fee-related revenue differs from revenue computed in accordance with U.S. GAAP in that it excludes certain reimbursement expense arrangements. Refer to “Angelo Gordon Information—Management’s Discussion and Analysis of Financial Condition and Results of Operations of Angelo Gordon—Reconciliation to U.S. GAAP Measures” to the comparable line items on the combined statements of operations.

Fee-Related Expenses. Fee-related expenses is a component of FRE. Fee-related expenses differs from expenses computed in accordance with U.S. GAAP in that it is net of certain reimbursement arrangements and does not include performance allocation compensation. Fee-related expenses is used in our review of the business. Refer to “Angelo Gordon Information—Management’s Discussion and Analysis of Financial Condition and Results of Operations of Angelo Gordon—Reconciliation to U.S. GAAP Measures” to the comparable line items on the combined statements of operations.

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The following table sets forth the pro forma non-GAAP financial measures after Adjustments for the year ended December 31, 2023: