Your Directors have pleasure in presenting the Seventeenth Annual Report and Audited Accounts of the Company for the year ended March 31, 2012.

I. Operations

Your company, a wholly-owned subsidiary of National Stock Exchange of India Limited (NSEIL), carries out the clearing and settlement of the trades executed on the Capital Market (CM), Futures & Options (F&O), Currency Derivatives (CD), Securities Lending and Borrowing (SLBS), Mutual Funds (MFSS) segment and OTC trades in Corporate Bonds. National Securities Clearing Corporation Limited (NSCCL) guarantees settlement of trades executed on the Capital Market, Futures and Options, Securities Lending & Borrowing and Currency Derivatives segments.

1. Settlement – Capital Market segment

NSCCL successfully continued its track record of completing all settlements in a timely manner. During the period under review, 249 rolling settlements were handled in de-materialised mode. Per settlement figures in value terms in the current year are as follows:

The average value of securities handled per settlement was Rs 3,153.69 crores in 2011-12 compared to Rs 3,840 crores in 2010-11. The average funds pay-in per settlement during the above periods was Rs 1,011 crores and Rs 1,150 crores respectively. The average number of shares processed per settlement was about 1,783 lakhs in 2011-12 compared to 1,954 lakhs in 2010-11. Short deliveries per settlement averaged around 0.16% in 2011-12 as compared to 0.13% in 2010-11.

The highest trading volume of Rs 23,555.42 crores was observed on February 24, 2012 and the highest deliverable value of Rs 10,831.64 crores was observed on February 28, 2012. Percentage of number of shares deliverable to number of shares traded increased to 27.66% in 2011-12 from 27.51% in 2010-11. Percentage of value of shares deliverable to value of shares traded increased to 28.01% in 2011-12 from 27.47% in 2010-11. During the year under review, there was no physical settlement. The Settlement Guarantee Fund stood at Rs 4,820.83 crores as on 31st March 2012. The details of settlements carried out by NSCCL are presented in Table 1.

Table No.1 : Settlement Statistics for 2011-2012 – Capital Market segment

2. Securities Lending and Borrowing segment

NSCCL is an Approved Intermediary (AI) for SLBS with SEBI. In 2011-12, the volumes in SLBS increased over 350% from Rs 754.16 crore in 2010-11 to Rs 2,729.67 crore. As compared to previous year, during 2011-12, securities traded in SLBS increased from 41 to 87 and number of participants traded too increased from 16 to 25. As on March 31, 2012, there are 85 participants, 3 custodian-cum-participants and 5 custodians registered in SLBS.

3. Settlement – F&O segment

The period April 2011 - March 2012 witnessed a decrease in the total amount settled. The total value of settlement decreased from around Rs 83,700.87 crores in 2010-11 to Rs 72,296.22 crores in 2011-12. The highest monthly settlement was Rs 9,358.72 crores in the month of August 2011. March 2012 witnessed the highest monthly trading volumes of Rs 29,79,231.03 crores while the highest daily trading volumes on NSE during this period was Rs 2,59,284.55 crores, witnessed on November 24, 2011 with total of 1,11,36,171 contracts being traded.

The details of turnover and month-wise settlement values during the year April 01, 2011 to March 31, 2012 are tabulated below:

As of March 31, 2012, the Settlement Guarantee Fund in F&O segment stood at Rs 25,377.12 Crores.

4. Settlement – Currency Derivatives segment

The year 2011-12 witnessed an increase in the total settlement values from around Rs 2,577.08 crores in 2010-11 to Rs 7,171.65 crores. The highest monthly settlement value was Rs 917.06 crores in the month of September 2011. The highest trading volume in currency futures on NSE during this period was Rs 33,422.90 crores, witnessed on August 09, 2011 with total of 72,31,120 contracts being traded & in currency options it was Rs 17,305.21 crores, witnessed on August 18, 2011 with total of 37,92,800 contracts being traded. NSCCL also began clearing and settlement of Interest Rate Derivatives based on Government of India Treasury Bills in July 2011 as trading in futures on these instruments was launched on NSEIL.

The details of turnover and month-wise settlement values during the period April 1, 2011 to March 31, 2012 are tabulated below:

* Includes futures on 10 Yr G Sec & 91 Day GOI T-Bill

As on March 31, 2012, the corpus of the settlement fund for the Currency derivatives segment is Rs 1,498.32 crores.

5. Risk Management

(i) Capital Market & Securities Lending & Borrowing segments

NSCCL has laid requisite focus towards risk management by putting in place an On-line Position monitoring system which has successfully and efficaciously addressed the market risks. Margins are computed on an on-line real time basis at client level. The Value at Risk (VaR) Margins are applied which is statistically arrived at covering 99% value at risk.

With effect from April 21, 2008, margins in Capital market are being levied on institutional trades also. These margins are levied on T+1 day in the Capital Market segment.

(ii) F&O & Currency Derivatives segments

NSCCL has in place many risk management measures including monitoring of exposure on a real time basis through the system called PRISM (Parallel Risk Management System) and also end of day monitoring of client level exposures.

The most critical component of PRISM is the online real time client level portfolio based margining and monitoring system. The robustness of the system is time tested and has proved its efficient handling of volatile situations effectively, on numerous occasions in the past and especially on highly volatile days in the year. The actual margining and position monitoring is done on-line, on an intra-day basis. NSCCL uses the SPAN (Standard Portfolio Analysis of Risk) system for the purpose of margining, which is a portfolio based system.

SPAN is a registered trademark of the Chicago Mercantile Exchange, used herein under License. The objective of SPAN is to identify overall risk in a portfolio of futures and options contracts for each member. The system treats futures and options contracts uniformly, while at the same time recognising the unique exposures associated with options portfolios like extremely deep out-of-the-money short positions and inter-month risk. As SPAN is used to determine margin requirements, its overriding objective is to determine the largest loss that a portfolio might reasonably be expected to suffer from one day to the next day. The parameters used in the computation of margins are revised six times a day.

There have been no defaults during the financial year.

6. Corporate Bond settlement

The current financial year 2011-12 witnessed an increase in the number of trades settled. The total trades settled increased by 12.11% to 34,697. However, the average daily settlement value decreased by 6.15% to 1,646.78 crores as compared to 2010-11. The highest settlement value of Rs 4,790.94 crores was recorded on February 28, 2012.

In January 2011, FIMMDA came up with its own reporting platform ‘FTRAC’ replacing its existing reporting platform. The deals reported in the new FIMMDA platform are sent to the respective clearing corporation through a STP mechanism for settlement. The month-wise settlement statistics are as under:

RBI has permitted repo transactions in corporate bonds vide directions issued on January 8, 2010. During the financial year 2011-12, NSCCL settled 23 repo trades valuing 618.05 crores.

SEBI and RBI vide their circulars dated March 05, 2012 permitted DVP-1 based settlement of OTC trades in Commercial Papers (CP) and Corporate Deposits (CD) through clearing corporations w.e.f. April 01, 2012. National Securities Clearing Corporation Limited (NSCCL) has put in place the infrastructure to provide settlement of OTC trades in CPs and CDs on DVP-1 basis w.e.f. April 01, 2012. The settlement mechanism will be in line with the existing process for settlement of Corporate Bonds.

7. Mutual Fund Service System (MFSS)

As on March 31, 2012, 31 mutual fund houses with 1,991 schemes were enabled under the revised MFSS scheme.

(i) Subscription

The average daily value of funds settled for subscription of mutual fund units for the period April 1, 2011 to March 31, 2012 was

Rs 1.99 crores. The highest settlement value was Rs 55.83 crores and was observed on September 09, 2011. The average daily quantity of units allotted under subscription for the period April 1, 2011 to March 31, 2012 was 10.37 lakhs. The highest quantity allotted was 258.11 lakhs and was observed on September 09, 2011.

(ii) Redemption

The average daily value of funds settled for redemption of mutual fund units for the period April 1, 2011 to March 31, 2012 was

Rs 1.36 crores. The highest settlement value was Rs 53.56 crores and was observed on January 16, 2012. The average daily quantity of units redeemed for the period April 1, 2011 to March 31, 2012 was 6.04 lakhs. The highest quantity redeemed was 312.96 lakh units and was observed on January 12, 2012.

8. New Initiatives and Developments

(i) Preferred depository for securities payout:

An option has been provided to the members to give one time instruction to receive the securities payout in the depository of their choice. The payout shall go to the members preferred depository pool account (NSDL/CDSL). This has resulted in better time management at the members back office since client payout activities can be pre-planned and also convenient to the members for monitoring receipt of securities payout.

(ii) Acceptance of Mutual Funds units in demat form as collaterals

Open ended mutual units (gilt and non gilt) are now being accepted as collaterals. The valuation of units is done daily based on the computed VaR margin and NAV. It has enabled investors to provide an additional class of asset as collateral thus increasing alternatives and saving on cost of borrowing.

(iii) Voluntary Close out Facility in F&O and CM segments

A facility has been provided whereby members are allowed to define the margin utilisation limit (upper and lower limit) beyond which they shall move into/out of Voluntary Close out mode. Similarly members may also define separate limits for margins and positions (upper and lower limit) beyond which they shall move into/out of Voluntary Close out mode.

(iv) Security Specific Disablement

Members have been provided a facility enabling security specific disablement. This enables members to get disabled for trading only in the security where in the TM position limit has been violated. Earlier in such cases the members trading rights were completely withdrawn causing discomfort to the members and their clients.

(v) Intraday provisional margin file generation

In order to facilitate efficient risk management and margin collection at members end provisional margining reports are now downloaded to member on intra-day basis. The reports are generated 4 times during the day after application of SPAN

parameters. The reports contain provisional margins based on the open positions of the clients at that point of time.

(vi) Clearing and settlement of derivatives on global indices

With the introduction of trading in derivatives on global indices by the National Stock Exchange, NSCCL successfully developed the systems and processes to clear and settle derivatives on products listed and traded abroad in time zones different from India. NSCCL successfully continued its track record of completing all settlements in a timely manner even in the case of global derivatives. With this experience, NSCCL has proved its ability to clear and settle global products irrespective of their home country time zones.

(vii) Clearing and settlement of derivatives on 91 Day Treasury Bills

With the introduction of trading in futures on 91 Day Treasury Bills by the National Stock Exchange, NSCCL successfully developed the systems and processes to clear and settle futures on the product. With this addition, NSCCL has now gained the ability and experience of clearing and settling two types of Interest Rate Futures viz. physically settled futures on Notional coupon bearing 10 year GOI securities and cash settled 91 Day Treasury Bills.

9. Other achievements

CRISIL has continued its highest corporate credit rating of ‘AAA' to the National Securities Clearing Corporation Limited (NSCCL). ‘AAA' rating indicates highest degree of strength with regard to honouring debt obligations. NSCCL is the first Indian Clearing Corporation to get this rating. The rating reflects NSCCL's status as Clearing Corporation for NSE, India's largest stock exchange. The rating also factors in NSCCL's rigorous risk management controls and adequate settlement guarantee cover.

NSCCL has been accorded this rating for the fourth consecutive year.

10. Opportunities and increased coverage

(i) Clearing Members

New Clearing Members have been added on both Capital Market and F&O segments thereby providing a wider choice to clients. Clearing membership was granted to 14 new members in the F&O segment and 33 new members in Capital Market segment. In Currency Derivatives segment, 10 Clearing Members have been enabled.

(ii) Custodian Clearing Members & Professional Clearing Members (PCM)

In the Capital Market segment, 16 Custodians and 4 Professional

Clearing Members (PCM) are enabled through whom clients can settle their transactions. Of these, one PCM has been enabled during April 2011 to March 2012.

(iii) Participants & custodians in SLBM

11 new participants and 1 participant-cum-custodian became active in SLBM segment in 2011-12. The total number of 85 participants, 3 participant-cum-custodian and 5 custodians are enabled in SLBM as on March 31, 2012.

11. Multiple Depositories /Banks

NSCCL is electronically connected to both the depositories National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for securities settlement and 13 clearing banks namely Axis Bank Ltd., Bank of India, Canara Bank, Citibank N.A, HDFC Bank Ltd., Hongkong & Shanghai Banking Corporation Ltd., ICICI Bank Ltd., IDBI Bank Ltd., IndusInd Bank Ltd., Kotak Mahindra Bank Ltd., Standard Chartered Bank, State Bank of India and Union Bank of India for funds settlement.

II. Financial Results

The working of NSCCL during the year has resulted in a net profit after tax of Rs 240.89 crores as per particulars given below: -

III. Dividend

In view of the above results, the Directors recommend payment of dividend of Rs 45/- per share for the year 2011-12.

IV. Directors

The Board regrets to report the sad demise of Dr. R. H.Patil, a member of the Board and former Chairman of NSCCL on April 12, 2012 and his consequent cessation as a Director of the Company effective from that date. Mr. R.P. Chitale retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment. However, he expressed his desire not to seek reelection at the forthcoming annual general meeting of members of NSCCL. It is therefore proposed not to fill the vacancy so caused. The Board wishes to place on record its sincere appreciation and gratitude for their valuable contribution made during their tenure as Directors.

The Board of NSCCL in its meeting held on May 9, 2012, co-opted Mr. Anjan Barua and Mr. K. R. Ramamoorthy as Additional Directors. However, they are eligible for appointment as Director by members. The Company has received notice, under Section 257 of the Companies Act, 1956, in writing along with requisite deposit from a member proposing their candidatures for the office of the Directors at the forthcoming Annual General Meeting. The Board considers that, having regard to their wide sphere of knowledge and experience, it will be in the interest of the Company to appoint Mr. Anjan Barua and Mr. K.R. Ramamoorthy as Directors of the Company. Therefore, the Board recommends their appointment as Directors on the Board of NSCCL by the members.

V. Directors’ Responsibility Statement

Your Directors confirm that -

(i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

(ii) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of NSCCL at the end of the financial year i.e., 31st March 2012 and of the profits of NSCCL for that year;

(iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of NSCCL and for preventing and detecting fraud and other irregularities ; and

(iv) the Directors had prepared the annual accounts on a going concern basis.

VI. Audit Committee

The Audit Committee comprises of four Directors viz., Mr. Y. H. Malegam, Mr. R. P. Chitale, Dr. R. H. Patil and Mr. S. Venkiteswaran as its members. Mr. Y. H. Malegam is the Chairman of the Audit Committee. Dr. R.H.Patil ceased to be a member of the Audit Committee with effect from April 12, 2012 consequent upon his demise. Mr. K. R. Ramamoorthy has become a member of Audit Committee w.e.f. May 9, 2012. The Committee met four times during the year on April 28, 2011, August 2, 2011, November 14, 2011 and January 17, 2012. The details of the attendance of members of the Audit Committee at their meetings held on the above dates are given in the following table:-

* Member w.e.f. May 9, 2012

VII. Auditors

The Auditors, M/s. Haribhakti & Co., Chartered Accountants, will retire at the forthcoming Annual General Meeting of NSCCL and are eligible for re-appointment. NSCCL has received a certificate from the Auditors to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224 (1B) of the Companies Act, 1956.

VIII. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings / Outgo

1. Conservation of Energy, Technology Absorption

As the Company does not fall under any of the industries listed out in the Schedule appended to Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988, particulars required to be disclosed with respect to conservation of energy and technology absorption in terms of Section 217(1)(e) of the Companies Act, 1956, read with the aforesaid Rules are not applicable to the Company.

2. Foreign Exchange earnings/outgo during the year under review

There was no foreign exchange earning during the year. However, the foreign exchange outgo during the year was Rs 0.09 crores.

IX. Particulars of Employees

All the persons who are working with NSCCL are on deputation from National Stock Exchange of India Limited and accordingly the remuneration paid in respect of them has been reimbursed to NSEIL by NSCCL. A statement under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 is enclosed.

X. Acknowledgment

Your Directors wish to place on record their gratitude for the cooperation and support extended by the Government of India, Securities and Exchange Board of India and Reserve Bank of India. The Board also wishes to place on record their sincere appreciation for the unstinted efforts of the employees at all levels towards the continued growth of NSCCL.

ANNEXURE TO DIRECTORS' REPORT

STATEMENT PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (PARTICULARS OF

EMPLOYEES) RULES, 1975.

Notes:

1 Gross Remuneration includes Salary and other benefits, Company's contribution to Provident Fund, Superannuation Fund, taxable value of perquisites etc. Net remuneration represents gross remuneration less company's contribution to provident and superannuation funds, taxable value of perquisites, profession tax and income tax. Where applicable, the amounts also includes certain allowances accrued during previous year(s) but claimed in the current year.

2 The above mentioned employee is not a relative of any Director.

3 The above employee is on deputation basis from the Company's holding company i.e. National Stock Exchange of India Limited (NSEIL) and the remuneration mentioned above in respect of him has been reimbursed to NSEIL by the Company

4 None of the employees is holding equity shares in the Company within the meaning of sub-clause (iii) of clause (a) of sub-section (2A) of Section 217 of the Companies Act, 1956.

5 The Company does not have any Employees Stock Option Plan (ESOP) Scheme for its employees.