UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                           to                          .

OR

☐    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report                                  

Commission file number: 001-39155

XP Inc.
(Exact name of Registrant as specified in its charter)

Not applicable
(Translation of Registrant’s name into English)

Cayman Islands
(Jurisdiction of incorporation or organization)

Av. Chedid Jafet, 75, Torre Sul, 30th floor,
Vila Olímpia – São Paulo
Brazil 04551-065
+55 (11) 3075-0429
(Address of principal executive offices)

Bruno Constantino Alexandre dos Santos, Chief Financial Officer
Tel: +55 (11) 3075-0429
Av. Chedid Jafet, 75, Torre Sul, 30th floor,
Vila Olímpia – São Paulo
Brazil 04551-065
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Copies to:
Manuel Garciadiaz
Byron B. Rooney
Davis Polk & Wardwell LLP
450 Lexington Avenue

New York, NY 10017
Phone: (212) 450-4000

Fax: (212) 701-5800

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common shares, par value US$0.00001 per share	XP	The NASDAQ Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding shares as of December 31, 2020 was 377,764,985 Class A common shares and 181,293,980 Class B common shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒

No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐

No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒

No ☐ (not required)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☒

Accelerated Filer ☐

Non-accelerated Filer ☐

Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this annual report:

U.S. GAAP ☐

International Financial Reporting Standards as issued by
the International Accounting Standards Board ☒

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ☐

Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

XP INC.
TABLE OF CONTENTS

		Page
Presentation of Financial and Other Information		3
Cautionary Statement Regarding Forward-Looking Statements		7
PART I
ITEM 1.	IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS	8
A.	Directors and Senior Management	8
B.	Advisers	8
C.	Auditors	8
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	8
A.	Offer Statistics	8
B.	Method and Expected Timetable	8
ITEM 3.	KEY INFORMATION	8
A.	Selected Financial Data	8
B.	Capitalization and Indebtedness	13
C.	Reasons for the Offer and Use of Proceeds	14
D.	Risk Factors	14
ITEM 4.	INFORMATION ON THE COMPANY	49
A.	History and Development of the Company	49
B.	Business Overview	55
C.	Organizational Structure	102
D.	Property, Plant and Equipment	103
ITEM 4A.	UNRESOLVED STAFF COMMENTS	104
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	104
A.	Operating Results	104
B.	Liquidity and Capital Resources	123
C.	Research and Development, Patents and Licenses, etc.	126
D.	Trend Information	126
E.	Off-Balance Sheet Arrangements	126
F.	Tabular Disclosure of Contractual Obligations	126
G.	Safe Harbor	127
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	127
A.	Directors and Senior Management	127
B.	Compensation	135
C.	Board Practices	136
D.	Employees	138
E.	Share Ownership	139
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	139
A.	Major Shareholders	139
B.	Related Party Transactions	140
C.	Interests of Experts and Counsel	142
ITEM 8.	FINANCIAL INFORMATION	142
A.	Consolidated Statements and Other Financial Information	142
B.	Significant Changes	145
ITEM 9.	THE OFFER AND LISTING	145
A.	Offering and Listing Details	145
B.	Plan of Distribution	145
C.	Markets	145
D.	Selling Shareholders	145
E.	Dilution	145
F.	Expenses of the Issue	145

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ITEM 10.	ADDITIONAL INFORMATION	146
A.	Share Capital	146
B.	Memorandum and Articles of Association	146
C.	Material Contracts	155
D.	Exchange Controls	155
E.	Taxation	155
F.	Dividends and Paying Agents	158
G.	Statement by Experts	158
H.	Documents on Display	159
I.	Subsidiary Information	159
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	159
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	162
A.	Debt Securities	162
B.	Warrants and Rights	162
C.	Other Securities	162
D.	American Depositary Shares	162
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	163
A.	Defaults	163
B.	Arrears and Delinquencies	163
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	163
A.	Material Modifications to Instruments	163
B.	Material Modifications to Rights	163
C.	Withdrawal or Substitution of Assets	163
D.	Change in Trustees or Paying Agents	163
E.	Use of Proceeds	163
ITEM 15.	CONTROLS AND PROCEDURES	164
A.	Disclosure Controls and Procedures	164
B.	Management’s Annual Report on Internal Control Over Financial Reporting	164
C.	Attestation Report of the Registered Public Accounting Firm	164
D.	Changes in Internal Control Over Financial Reporting	164
ITEM 16.	[RESERVED]	165
ITEM 16A.	Audit Committee Financial Expert	165
ITEM 16B.	Code of Ethics	165
ITEM 16C.	Principal Accountant Fees and Services	166
ITEM 16D.	Exemptions from the Listing Standards for Audit Committees	166
ITEM 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	166
ITEM 16F.	Change in Registrant’s Certifying Accountant	167
ITEM 16G.	Corporate Governance	167
ITEM 16H.	Mine Safety Disclosure	172
PART III
ITEM 17.	FINANCIAL STATEMENTS	173
ITEM 18.	FINANCIAL STATEMENTSFINANCIAL STATEMENTS	173
ITEM 19.	EXHIBITS	173

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references to “U.S. dollars,” “dollars” or “$” are to the U.S. dollar. All references to “real,” “reais,” “Brazilian real,” “Brazilian reais,” or “R$” are to the Brazilian real, the official currency of Brazil. All references to “IFRS” are to International Financial Reporting Standards, as issued by the International Accounting Standards Board, or the IASB.

Financial Statements

XP was incorporated on August 29, 2019, as a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies. Until the contribution of XP Brazil shares to it prior to the consummation of our initial public offering of Class A common shares completed on December 13, 2019 (the “initial public offering” and the “Share Contribution”), XP had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments.

We maintain our books and records in Brazilian reais, the presentation currency for our financial statements and the functional currency of our operations in Brazil. Our annual consolidated financial statements were prepared in accordance with IFRS, as issued by the IASB. Unless otherwise noted, our consolidated statement of financial position information presented herein as of December 31, 2020, 2019 and 2018 and the consolidated statements of income for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 is stated in Brazilian reais, our reporting currency. Our consolidated financial information contained in this annual report is derived from our audited consolidated financial statements as of December 31, 2020 and 2019 and statements of income for the years ended December 31, 2020, 2019 and 2018, together with the notes thereto. All references herein to “our financial statements,” “our audited consolidated financial information” and “our audited consolidated financial statements” are to our consolidated financial statements included elsewhere in this annual report.

This financial information should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements, including the notes thereto, included elsewhere in this annual report.

Our fiscal year ends on December 31. References in this annual report to a fiscal year, such as “fiscal year 2020,” relate to our fiscal year ended on December 31 of that calendar year.

Corporate Events

Our Incorporation

We are a Cayman Islands exempted company incorporated with limited liability on August 29, 2019 for purposes of effectuating our initial public offering. At the time of our incorporation, XP Controle, Itaú, GA Bermuda and DYNA III Fundo de Investimento em Participações Multiestratégia, or DYNA III, held 2,036,988,542 shares (prior to giving effect to the Share Split, as defined herein) of XP Brazil, which were all of the shares of XP Brazil. All references to “XP Brazil” refer to XP Investimentos S.A., our Brazilian principal non-operating holding company.

Itaú Transaction and 2022 Acquisition

In connection with the Itaú Transaction entered into on May 11, 2017, Itaú Unibanco shall purchase in 2022, subject to certain conditions precedent (including regulatory approval from the Central Bank), the equivalent of 11.5% of XP’s total outstanding capital stock (pre-initial public offering), which stock is currently held by XP Controle, GA Bermuda and DYNA III, for a certain and adjusted price previously agreed in the relevant share purchase agreement relating to the Itaú Transaction.

Our Corporate Reorganization

On November 29, 2019, XP Controle, Itaú, GA Bermuda and DYNA III contributed all of their shares in XP Brazil to us. In return for this contribution, we issued new Class B common shares to XP Controle, new Class A common shares and Class B common shares to Itaú, new Class A common shares and Class B common shares to GA Bermuda and new Class A common shares to DYNA III in a one-to-one exchange for the shares of XP Brazil contributed to us. In addition and following the Share Contribution, we implemented a four-to-one reverse share split (or consolidation), effective as of November 30, 2019, which we refer to herein as the Share Split.

As of the date of this annual report, we had a total of 559,058,965 common shares issued and outstanding, 181,293,980 of these shares were Class B common shares beneficially owned by XP Controle, GA Bermuda and Itaú and 377,764,985 of these shares were Class A common shares beneficially owned by Itaú, GA Bermuda and public holders.

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The following chart shows our corporate structure as of the date hereof:

Please read the information in the section entitled “Item 4. Information on the Company—C. Organizational structure” for a more thorough description of the operations of our material operating subsidiaries.

Itaú Unibanco Holding S.A. Proposed Transaction

On November 3, 2020, Itaú Unibanco Holding S.A., or Itaú Unibanco Holding, issued a material fact announcement and subsequently filed a corresponding Form 6-K with the U.S. Securities and Exchange Commission, or the SEC, stating that it was studying the segregation of its investment in XP Inc. from the Itaú Unibanco Holding S.A. conglomerate including by transferring its shares in XP Inc. to XPart S.A., a newly incorporated entity, or XPart, or the “Itaú Corporate Reorganization.”

On February 1, 2021, we issued a press release stating that we entered into two agreements as consenting party with the Itaú Corporate Reorganization to allow the Company to merge XPart, so that XPart shareholders receive, as a result of the merger into the Company, Class A common shares, directly or in the form of Brazilian depositary receipts, or BDRs, and XPart will cease to exist. Furthermore, pursuant to the Itaú Corporate Reorganization, certain changes to the shareholders’ agreement entered into on November 29, 2019 among XP Controle, GA Bermuda, ITB Holding Brasil Participações Ltda., Itaú Unibanco S.A., XP, XP Brazil and the companies that we control that are incorporated in Brazil, or the “Shareholders’ Agreement,” have been agreed, including, among others: (i) the possibility of partial private sales of XP shares by IUPAR – Itaú Unibanco Participações S.A., or IUPAR, and Itaúsa – Investimentos Itaú S.A., or Itaúsa, subject to certain conditions; (ii) end of the lock-up provision for a sale by XP Controle of XP shares resulting in a change of control of XP; (iii) the possibility of transfer of XP shares by IUPAR to its shareholders Itaúsa and Companhia E. Johnston de Participações S.A., or E. Johnston, as well as from E. Johnston to its shareholders; (iv) a lock-up provision for a sale of XP shares by IUPAR and Itaúsa up to October 30, 2021; (v) changes to the tag-along provision, to provide that the IUPAR and Itaúsa tag-along right will be limited solely to a sale of XP shares resulting in a change of control of XP; (vi) elimination of all the veto rights of IUPAR and Itaúsa; (vii) IUPAR and Itaúsa will have the right to jointly appoint two members to the XP board of directors and one of them will also serve as member of XP auditing committee, as long as they hold at least 5% of XP’s share capital; and (viii) inclusion of IUPAR’s and Itaúsa’s right to receive certain XP information. In addition, the Shareholders’ Agreement will expire on October 30, 2026. The foregoing changes in relation to ITB Holding Brasil Participações Ltda. and Itaú Unibanco S.A. will become effective upon implementation of the Itaú Corporate Reorganization and in relation to IUPAR and Itaúsa upon implementation of the Merger. See “Item 6. Directors, Senior Management and Employees—A. Directors and senior management—Shareholders’ Agreement.”

4

The proposed transaction is being proposed by XPart and XP to streamline and simplify the corporate structure at shareholders’ level at XP, specifically by giving XPart’s shareholders more accessible ways to trade XP shares as they will directly own an interest in XP.

Financial Information in U.S. Dollars

Solely for the convenience of the reader, we have translated some of the real amounts included in this annual report from reais into U.S. dollars. You should not construe these translations as representations by us that the amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated. Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$5.196 to US$1.00, the commercial selling rate for U.S. dollars at December 31, 2020 as reported by the Central Bank. See “Item 3. Key Information—A. Selected financial data—Exchange rates” for more detailed information regarding translation of reais into U.S. dollars and for historical exchange rates for the Brazilian real.

Special Note Regarding Non-GAAP Financial Measures

This annual report presents our Floating Balance, Adjusted Gross Financial Assets, Adjusted EBITDA and Adjusted Net Income information for the convenience of the investors.

We present Floating Balance because we believe this measure helps to understand the effect on our balance sheet from uninvested cash balances from retail clients’ investment accounts at XP companies. We calculate Floating Balance as the sum of securities trading and intermediation (liabilities), minus securities trading and intermediation (assets). It is a metric that our management tracks internally and that investors and analysts typically want to calculate. Unlike the portions of Retail AUC invested by clients in equities, fixed income, mutual funds and almost all our other asset classes, Floating Balance is accounted for on our balance sheet, resulting in a net increase in our liabilities, and is a source of funds that we allocate to securities and financial instruments, which generates interest revenues for us. Given the size of our current AUC and the pace of our growths, Floating Balance, despite being historically only in the range of 1% to 3% of total AUC, is material and therefore helps explain the variation of the assets and liabilities in our balance sheet.

We present Adjusted Gross Financial Assets because we believe this metric captures the liquidity that is in fact available to us, net of the portion of liquidity that is related to our Floating Balance (and therefore attributable to clients). We calculate Adjusted Gross Financial Assets as the sum of (1) Cash and Financial Assets (comprised of Cash plus Securities – Fair value through profit or loss, plus Securities – Fair value through other comprehensive income, plus Securities – Evaluated at amortized cost, plus Derivative financial instruments, plus Securities purchased under agreements to resell, plus Loan operations), less (2) Financial Liabilities (comprised of the sum of Securities loaned, Derivative financial instruments, Securities sold under repurchase agreements and Private pension liabilities, Deposits and Structured operation certificates), and (3) less Floating Balance. It is a measure that we track internally on a daily basis, and it more intuitively reflects the effect of the operational profits we generate and the variations between working capital assets and liabilities (cash flows from operating activities), investments in fixed and intangible assets (cash flows from investing activities) and inflows and outflows related to equity and debt securities in our capital structure (cash flows from financing activities). Our management treats all securities and financial instrument assets, net of financial instrument liabilities, as balances that compose our total liquidity, with sub line items (such as, for example, “securities at fair value through profit and loss” and “securities at fair value through other comprehensive income”) expected to fluctuate substantially from quarter to quarter as our treasury manages and allocates our total liquidity to the most suitable financial instruments.

We present Adjusted EBITDA because we believe this measure can provide useful information to investors and analysts regarding the operational results of the business, EBITDA being a fairly common metric that market participants are familiar with, in particular when understanding and analyzing service companies. Despite having two subsidiaries that are financial institutions in Brazil, we believe our business is primarily an asset-light services and fees business. We calculate Adjusted EBITDA as net income, plus income tax, plus depreciation and amortization, plus interest expense on debt, minus share of profit or (loss) in joint ventures and associates, plus Itaú Transaction and deal-related expenses, plus offering process-related expenses, plus our share-based plan expenses, minus tax claim recognition (2010-2018).

We present Adjusted Net Income because we believe this measure can provide useful information to investors and analysts regarding the net results of the business, excluding one-time revenues or expenses related to transactions or events that are not reflective of our core operating performance. We calculate Adjusted Net Income as net income, plus Itaú Transaction and deal-related expenses, plus offering process-related expenses, plus our share-based plan expenses, minus tax claim recognition (2010-2018), plus/minus taxes.

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The non-GAAP financial measures described in this annual report are not a substitute for the IFRS measures of earnings. Additionally, our calculation of Adjusted EBITDA and Adjusted Net Income may be different from the calculation used by other companies, including our competitors in the financial services industry, and therefore, our measures may not be comparable to those of other companies. Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments.

Market Share and Other Information

This annual report contains data related to economic conditions in the market in which we operate. The information contained in this annual report concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this annual report were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission website) and industry publications. We obtained the information included in this annual report relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, a report dated September 2019 by management consulting company Oliver Wyman commissioned by us, public information and publications on the industry prepared by official public sources, such as the Brazilian Central Bank, the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or the IBGE, the Institute of Applied Economic Research (Instituto de Pesquisa Econômica Aplicada), or the IPEA, as well as private sources, such as B3, ANBIMA, Nielsen, consulting and research companies in the Brazilian financial services industry, the Brazilian Economic Institute of Fundação Getulio Vargas (Instituto Brasileiro de Economia da Fundação Getulio Vargas), or FGV/IBRE, among others.

Industry publications generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, neither we nor our affiliates or agents have independently verified it. Governmental publications and other market sources, including those referred to above, generally state that their information was obtained from recognized and reliable sources, but the accuracy and completeness of that information is not guaranteed. In addition, the data that we compile internally and our estimates have not been verified by an independent source. Except as disclosed in this annual report, none of the publications, reports or other published industry sources referred to in this annual report were commissioned by us or prepared at our request. Except as disclosed in this annual report, we have not sought or obtained the consent of any of these sources to include such market data in this annual report.

Calculation of Net Promoter Score

Net Promoter Score, or NPS, is a widely known survey methodology that measures the willingness of customers to recommend a company’s products and services. It is used to gauge customers’ overall satisfaction with a company’s products and services and their loyalty to the brand, and it is typically based on customer surveys. NPS measures satisfaction using a scale of zero to 10 based on a customer’s response to the following question: “How likely is it that you would recommend XP to a friend or colleague?”. Responses of nine or ten are considered “Promoters.” Responses of seven or eight are considered neutral. Responses of six or less are considered “Detractors.” The NPS, a percentage expressed as a numerical value, is calculated by subtracting the percentage of respondents who are Detractors from the percentage who are Promoters and dividing that number by the total number of respondents, which means that the higher the number, the higher the measure of customer satisfaction. The NPS calculation gives no weight to customers who decline to answer the survey question. The NPS calculation as of a given date reflects the average of the answers in the previous six months, e.g., the NPS as of December 2020 reflects the average of answers from July 2020 to December 2020. Our NPS score as calculated by us as of December 2018, December 2019 and December 2020 was 64, 73 and 71, respectively.

Rounding

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this annual report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others.

Forward-looking statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to of various factors, including, but not limited to, those identified under the section entitled “Item 3. Key information—D. Risk Factors” in this annual report. These risks and uncertainties include factors relating to:

•general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business;

•fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future;

•public health crises, such as the ongoing COVID-19 pandemic;

•competition in the financial services industry;

•our ability to implement our business strategy;

•our ability to adapt to the rapid pace of technological changes in the financial services industry;

•the reliability, performance, functionality and quality of our products and services, the investment performance of investment funds managed by third parties or by our asset managers and the quality, reliability and performance of our suitability, risk management and business continuity policies and processes;

•the availability of government authorizations on terms and conditions and within periods acceptable to us;

•our ability to continue attracting and retaining new appropriately skilled employees;

•our capitalization and level of indebtedness;

•the interests of our controlling shareholders;

•changes in government regulations applicable to the financial services industry in Brazil and elsewhere;

•our ability to compete and conduct our business in the future;

•the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors;

•changes in consumer demands regarding financial products, customer experience related to investments and technological advances, and our ability to innovate to respond to such changes;

•changes in labor, distribution and other operating costs;

•our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us;

•other factors that may affect our financial condition, liquidity and results of operations; and

•other risk factors discussed under “Item 3. Key information—D. Risk Factors.”

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

7

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.    Directors and Senior Management

Not applicable.

B.    Advisers

Not applicable.

C.    Auditors

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A.    Offer Statistics

Not applicable.

B.    Method and Expected Timetable

Not applicable.

ITEM 3. KEY INFORMATION

A.    Selected Financial Data

The following tables set forth, for the years and as of the dates indicated, our summary financial and operating data. This information should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements, including the notes thereto, included elsewhere in this annual report.

8

The summary statements of financial position as of December 31, 2020, 2019, 2018 and 2017 and the statements of income for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 have been prepared in accordance with IFRS, as issued by the IASB. Share and per-share data in the table below has been retroactively adjusted to give effect to reverse share split.

Income Statement Data

	For the year ended  December 31,
	2020	2020	2019	2018	2017	2016
	(US$)(1)	(R$)
	(in millions, except earnings per share)
Gross revenue and income(2)	1,676	8,711	5,518	3,216	2,065	1,347
Sales tax(3)	(108)	(560)	(390)	(258)	(158)	(95)
Total revenue and income	1,569	8,152	5,128	2,958	1,907	1,252
Operating costs and expenses
Operating costs	(509)	(2,645)	(1,597)	(933)	(576)	(369)
Selling expenses	(26)	(135)	(155)	(96)	(33)	(24)
Administrative expenses	(580)	(3,014)	(1,891)	(1,177)	(650)	(471)
Other operating expenses, net	33	171	153	(31)	(8)	(6)
Expected Credit Losses	(11)	(56)	(9)	(8)	(4)	(7)
Interest expense on debt	(10)	(53)	(84)	(72)	(61)	—
Share of profit or (loss) in joint ventures and associates	—	1	—	—	—	—
Income before income tax	466	2,421	1,544	641	576	374
Income tax expense	(65)	(340)	(455)	(175)	(152)	(130)
Net income for the year	401	2,081	1,089	465	424	244
Net income attributable to:
Owners of the Parent company	400	2,076	1,080	461	414	189
Non-controlling interest	1	5	9	4	10	55
Basic earnings per shares – R$(4)	0.7234	3.7597	2.1125	0.9358	0.8535	0.5440
Diluted earnings per share – R$(4)	0.7146	3.7138	2.1115	0.9358	0.8535	0.5440

(1)	For convenience purposes only, amounts in reais for the year ended December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5.1967 to US$1.00, the commercial purchase rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange rates” for further information about recent fluctuations in exchange rates.
(2)	The sum of (i) Revenues from services rendered; and (ii) Income from financial instruments, in each case gross of taxes and contributions on revenue.
(3)	The sum of (i) Sales taxes and contributions on revenue; and (ii) Taxes and contributions on financial income.
(4)	The basic and diluted earnings per share have been retroactively adjusted to give effect to reverse share split which occurred on November 30, 2019.

9

Balance Sheet Data

	As of December 31,
	2020	2020	2019	2018	2017
	(US$)(1)	(R$)
	(in millions)
Assets
Cash	376	1,955	110	68	153
Securities purchased under agreements to resell	1,275	6,627	9,490	6,571	935
Securities trading and intermediation	202	1,052	505	898	672
Other securities and derivative financial instruments(2)	15,013	78,017	31,411	8,834	4,339
Loans operations	754	3,918	—	—	—
Investments in associates and joint ventures	135	700	—	—	—
Property and equipment	39	204	142	99	47
Goodwill and Intangible assets	137	714	553	505	483
Other assets(3)	547	2,842	1,410	749	507
Total assets	18,479	96,029	43,623	17,724	7,136
Liabilities
Securities sold under repurchase agreements	6,127	31,839	15,638	6,641	514
Securities trading and intermediation	3,907	20,303	9,115	5,307	3,111
Securities loaned and derivative financial instruments(4)	1,935	10,057	5,251	2,251	1,037
Assets
Deposits and Structured Operation Certificates	1,001	5,200	90	—	—
Borrowings, lease liabilities, and debentures(5)	159	828	1,473	876	867
Private pension liabilities	2,576	13,388	3,759	16	—
Other liabilities(6)	677	3,516	1,141	542	456
Total liabilities	16,382	85,132	36,467	15,632	5,984
Total equity	2,097	10,898	7,156	2,092	1,152
Total liabilities and equity	18,479	96,029	43,623	17,724	7,136

(1)	For convenience purposes only, amounts in reais as of December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5,1967 to US$1.00, the commercial purchase rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange rates” for further information about recent fluctuations in exchange rates.
(2)	The sum of (i) Fair value through profit or loss – Securities; (ii) Fair value through profit or loss – Derivative financial instruments; (iii) Fair value through other comprehensive income – Securities; and (iv) Evaluated at amortized cost – Securities.
(3)	The sum of (i) Evaluated at amortized cost – Accounts receivable; (ii) Evaluated at amortized cost – Other financial assets; (iii) Other assets; and (iv) Deferred tax expenses.
(4)	The sum of (i) Securities loaned and (ii) Derivative financial instruments.
(5)	The sum of (i) Borrowings; (ii) Lease liabilities; and (iii) Debentures.
(6)	The sum of (i) Accounts payable; (ii) Other financial liabilities; (iii) Social and statutory obligations; (iv) Taxes and social security obligations; (v) Provisions and contingent liabilities; (vi) Other liabilities; and (vii) Deferred tax liabilities.

10

Non-GAAP Financial Measures

This annual report presents our Floating Balance, Adjusted Gross Financial Assets, Adjusted EBITDA and Adjusted Net Income and their respective reconciliations for the convenience of investors, which are non-GAAP financial measures. A non-GAAP financial measure is generally defined as a numerical measure of historical or future financial performance, financial position, or cash flows that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. For further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures, please see “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures.”

Floating Balance

	As of December 31,
	2020	2020	2019	2018
	(US$)(1)	(R$)
	(in millions)
(+) Securities trading and intermediation (Liabilities)	3,907	20,303	9,115	5,307
(-) Securities trading and intermediation (Assets)	(202)	(1,052)	(505)	(898)
Floating Balance	3,705	19,252	8,610	4,408

(1) For convenience purposes only, amounts in reais as of December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5,1967 to US$1.00, the commercial purchase rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange rates” for further information about recent fluctuations in exchange rates.

Adjusted Gross Financial Assets

	As of December 31,
	2020	2020	2019	2018
	(US$)(1)	(R$)
	(in millions)
Cash and financial assets
(+) Cash	376	1,955	110	68
(+) Securities – Fair value through profit or loss	9,543	49,590	22,443	6,291
(+) Securities – Fair value through other comprehensive income	3,664	19,039	2,616	696
(+) Securities – Evaluated at amortized cost	352	1,829	2,267	155
(+) Derivative financial instruments (Assets)	1,455	7,559	4,085	1,692
(+) Securities purchased under agreements to resell	1,275	6,627	9,490	6,571
(+) Loan operations	754	3,918	—	—
Financial liabilities
(-) Securities loaned	(431)	(2,237)	(2,022)	(1,260)
(-) Derivative financial instruments	(1,505)	(7,819)	(3,229)	(991)
(-) Securities sold under repurchase agreements	(6,127)	(31,839)	(15,638)	(6,641)
(-) Private pension liabilities(2)	(2,576)	(13,388)	(3,759)	(16)
(-) Deposits	(581)	(3,022)	(70)	—
(-) Structured operations certificates	(419)	(2,178)	(19)	—
Subtotal	5,779	30,033	16,274	6,565
(-) Floating Balance	(3,705)	(19,252)	(8,610)	(4,408)
Adjusted Gross Financial Assets	2,075	10,782	7,664	2,157

(1)

For convenience purposes only, amounts in reais as of December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5,1967 to US$1.00, the commercial purchase rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange rates” for further information about recent fluctuations in exchange rates.

(2)

Relates to balances of retail clients invested in pension funds through XP VP. Those balances are identified in the financial statements as “Securities—Fair value through profit or loss,” with a corresponding balance in “Private Pension Liabilities.”

11

Adjusted EBITDA

	For the year ended December 31,
	2020	2020	2019	2018	2017
	(US$)(1)	(R$)
	(in millions)
Net Income	401	2,081	1,089	465	424
(+) Income Tax	65	340	455	175	152
(-) Share of profit or (loss) in joint ventures and associates	(0)	(1)	—	—	—
(+) Depreciation and Amortization	28	143	91	53	27
(+) Interest Expense on Debt	10	53	84	72	61
(-) Pre-tax Adjustments(2)	58	301	(41)	39	6
Adjusted EBITDA	561	2,918	1,679	805	670

(1)

For convenience purposes only, amounts in reais for the year ended December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5,1967 to US$1.00, the commercial purchase rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange rates” for further information about recent fluctuations in exchange rates.

(2)

Itaú Transaction and deal-related expenses, plus offering process-related expenses, plus our share-based plan expenses, minus tax claim recognition (2010-2018). For further information on our Pre-tax Adjustments, see “—Adjusted net income.”

Adjusted Net Income

	For the year ended December 31,
	2020	2020	2019	2018	2017
	(US$)(1)	(R$)
	(in millions)
Net Income	401	2,081	1,089	465	424
(+) Itaú Transaction and deal-related expenses(2)	—	—	—	39	6
(+) Share-Based Plan(3)	56	293	8	—	—
(+) Offering expenses(4)	2	8	22	—	—
(-) Tax claim recognition (2010-2018)(5)	—	—	(71)	—	—
(+/-) Pre-Tax Adjustments(6)	58	301	(41)	39	6
(-/+) Taxes(7)	(22)	(113)	25	(13)	(2)
Adjusted Net Income	437	2,270	1,074	491	428

(1)	For convenience purposes only, amounts in reais for the year ended December 31, 2020 have been translated to U.S. dollars using an exchange rate of R$5,1967 to US$1.00, the commercial purchase rate for U.S. dollars as of December 31, 2020 as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange rates” for further information about recent fluctuations in exchange rates.
(2)	Expenses of R$6 million in 2017 related to the potential IPO process that was discontinued after the Itaú Transaction, including legal, auditing, advisory and travel, among others. In 2018, expenses of R$39 million related to the payment of fees and expenses in respect of the closing of the Itaú Transaction.
(3)	In December 2019, we implemented our new partnership model, pursuant to which existing or new partners may be entitled to share-based compensation based on individual performance. For further information, please see “Item 6. Directors, senior management and employees—B. Compensation—Long-Term Incentive Plan.”
(4)	Expenses of (i) R$22 million in 2019 related to the IPO (in the IPO, we incurred a total amount of R$44 million in offering expenses, out of which R$22 million was recognized directly in our income statement and R$22 million was recognized in equity as a transaction cost in our consolidated financial statements, included elsewhere in this prospectus); and (ii) R$8 million in 2020 related to the follow-on offering in December 2020 (we incurred in R$8 million regarding other offering expenses, of which R$6 million was recognized directly in our income statements and an amount of R$2 million in our equity as transaction costs).
(5)	Income of R$71 million in 2019 related to the recognition of PIS/COFINS credits.
(6)	Itaú Transaction and deal-related expenses, plus offering process-related expenses, plus our share-based plan expenses, minus tax claim recognition (2010-2018).
(7)	The tax rates applicable are the statutory rates defined according to the entities’ main activity and local jurisdiction/domicile.

12

Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

The real depreciated against the U.S. dollar from mid-2011 to early 2016. In particular, during 2015, due to the poor economic conditions in Brazil, including as a result of political instability, the real depreciated at a rate that was much higher than in previous years. Overall in 2015, the real depreciated 47.0%, reaching R$3.905 per US$1.00 on December 31, 2015. In 2016, the real fluctuated significantly, primarily as a result of Brazil’s political instability, appreciating 16.5% to R$3.259 per US$1.00 on December 31, 2016. In 2017, the real depreciated 1.5% against the U.S. dollar, ending the year at an exchange rate of R$3.307 per US$1.00. In 2018, the real depreciated 17.1% against the U.S. dollar, ending the year at an exchange rate of R$3.874 per US$1.00 mainly due to the result of lower interest rates in Brazil as well as uncertainty regarding the results of the Brazilian presidential elections, which were held in October 2018. The real/U.S. dollar exchange rate reported by the Central Bank was R$4.031 per US$1.00 on December 31, 2019, which reflected a 4.0% depreciation in the real against the U.S. dollar in 2019. The real/U.S. dollar exchange rate reported by the Central Bank was R$5.1967 per US$1.00 on December 31, 2020, which reflected a 28.9% depreciation in the real against the U.S. dollar in 2020. There can be no assurance that the real will not depreciate or appreciate further against the U.S. dollar. The Central Bank has previously intervened in the foreign exchange market to attempt to control instability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that the Brazilian government will not place restrictions on remittances of foreign capital abroad in the future.

The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressed in Brazilian reais per U.S. dollar. The average rate is calculated by using the average of reported exchange rates by the Central Bank on each business day during a monthly period and on the last day of each month during an annual period, as applicable. As of April 28, 2021, the exchange rate for the purchase of U.S. dollars as reported by the Central Bank was R$5.401 per US$1.00.

Year	Period-End	Average(1)	Low(2)	High(3)
2016	3.259	3.483	3.119	4.156
2017	3.307	3.193	3.051	3.381
2018	3.874	3.656	3.139	4.188
2019	4.031	3.946	3.651	4.259
2020	5.196	5.158	4.021	5.937

Source: Central Bank.
(1)	Represents the average of the exchange rates on the closing of each business day during the year.
(2)	Represents the minimum of the exchange rates on the closing of each business day during the year.