The merger between Eltek and Nera was completed on 19 October 2006 but took accounting effect from 13 September, when the two companies had the same Board of Directors (shareholders' elected directors). The effect of the merger is reflected in the Balance Sheet Statement of Eltek as at 30 September 2006, whereas the effect on the consolidated Income Statement will be recognised as of 1 October 2006.

A pro forma Income Statement and Cash Flow Statement for the merged company are included as a section in this report. The interim results for former Nera are presented in a separate report.

Structural developments Significant progress has been made since the plan for the merger of Eltek and Nera was approved by the Boards of Directors in the two companies in June.

During the quarter, Nera divested its stake in Nera Electronics in Singapore and also entered into an agreement for the divestment of its satellite communications activities (completed after the end of the quarter). Both divestments were made at significant premiums to book value and untie a substantial cash amount. The effects for Eltek will be described in more detail in the Balance Sheet section.

For the continuing operations in Nera, the new management will implement major restructuring measures over the coming six months, and in addition exploit the merger synergy potential to restore profitability in the transmission business in 2007. The associated costs and benefits will be described in more detail in the Outlook section of the report.

Key financials Eltek (Figures for 2005 in brackets)

Eltek achieved revenues of NOK 682.8 million in the third quarter of 2006, an increase of 14 percent from NOK 600.1 million in the third quarter of 2005. Gross margin was 25.7 percent (28.4). After depreciation and amortisation of NOK 15.5 million, EBIT was NOK 64.0 million (74.7). Net financial items amounted to NOK -13.7 million (-1.5), reflecting a negative currency effect of NOK 4.4 million and increased borrowings. Profit before tax was NOK 50.3 million (73.3).

For the first nine months 2006, revenues increased by 29 percent to NOK 1,914 million (1,489), whereas profit before tax increased by 6 percent to NOK 171 million (162).

Revenues Revenues in the third quarter 2006 were NOK 682.8 million, an increase of 14 percent from the third quarter 2005. Revenues were 8 percent higher than in the previous quarter.

Split into regions, revenues were NOK 394 million in the EMEA region, which was an increase of NOK 34 percent from the third quarter last year. The growth was driven by a particularly strong development in the Middle East, although revenues were higher also in the more mature markets in the UK and France.

Revenues declined year-on-year in the two other main regions. In Asia Pacific, revenues declined by 4 percent to NOK 149 million, due to lower revenues in Australia and Singapore. Revenues increased in Malaysia and China. Revenues in the Americas declined by 7 percent to NOK 140 million, due to weak development in North America, although development in Latin America was positive.

EMEA revenues increased by 17 percent from the previous quarter, driven by higher sales in the Middle East, UK, France and Germany. Revenues declined by 13 percent in Asia Pacific due to completion of a contract in Australia in the previous quarter, and lower revenue in India. Revenues increased in China and Malaysia.

Revenues in Americas increased by 15 percent from the previous quarter, due to the strong development in Brazil.

Gross margin Gross margin was 25.7 percent in the third quarter (28.4). The declining quarter-on-quarter trend was reversed, as gross margin improved slightly from 25.4 percent in the previous quarter. Production at the system assembly hubs is increasing and additional measures to reduce product cost are ongoing.

Operating costs Operating costs were NOK 111.5 million in the third quarter 2006, compared with NOK 95.5 million in the third quarter 2005 and NOK 107.4 million in the previous quarter.

Order entry - market development Eltek recorded new orders of NOK 693 million in the third quarter 2006, which was an increase of 15 percent from the third quarter 2005 and 5 percent above the previous quarter.

The increase from the previous quarter is explained by a sharp rebound in the Americas.

Compared with the third quarter 2005, order entry increased in all the main regions, with continued strong order levels in the Middle East, UK and Germany. Order entry in emerging markets such as Russia, Ukraine, China and India declined from high levels in the third quarter last year and in the previous quarter.

The order backlog stood at NOK 455 million at the end of the third quarter, of which NOK 400 million was for delivery within 90 days. This compares with an order backlog of NOK 394 million at the end of the third quarter 2005, and NOK 444 million at the end of the second quarter 2006.

Merger with Nera The merger of Eltek and Nera was completed on 19 October but took accounting effect from 13 September, when the two companies had the same shareholders' elected Board of Directors.

The effect of the merger will be recognised in the consolidated Income Statement of Eltek as of 1 October 2006, whereas the merger is reflected in the below Balance Sheet Statements of Eltek as of 30 September 2006.

For further information about the merger, please also refer to an extensive Information Memorandum dated 2 October 2006.

Balance sheet The changes in the consolidated Balance Sheet from previous periods primarily relate to the merger of former Nera into Eltek .

At 30 September 2006, total assets were NOK 5,773 million, including an increase in total assets of NOK 3,304 million resulting from the merger with Nera.

Equity was NOK 2,527 million at 30 September, corresponding to an equity ratio of 43.8 percent.

The consolidation of Nera increased the equity of Eltek by NOK 1,487 million. This includes NOK 1,238 in shares (which were issued to former Nera shareholders at the completion of the merger on 19 October 2006), and an increased minority interest of NOK 249 million related to NeraTel in Singapore.

The purchase price allocation (PPA) is not final. As of 30 September, unallocated excess value of NOK 571 million has been included in the balance sheet.

Assets held for sale of NOK 893 million and related liabilities of NOK 236 million reflect the fair value of Nera SatCom, which was divested in October.

At the end of the third quarter, Eltek had a gross cash position of NOK 1,063 million. The net cash position was NOK 32 million.

The net assets held for sale has in October been converted into NOK 479 million in cash and 472,000 shares in Thrane & Thrane.

Cash Flow Statement Reflecting the consolidation of former Nera into the Balance Sheets, the total net cash flow for Eltek was NOK 736 million in the third quarter.

Cash flow from operations was NOK -60 million in the third quarter, primarily reflecting an increase in working capital.

Net cash flow from investments was NOK 685 million in third quarter, reflecting an effect of the merger of NOK 720 million. Net cash flow from financing was NOK 110 million.

Pro forma key financials Pro forma revenue for the merged company Eltek was NOK 1,067 million in the third quarter 2006, and NOK 3,277 million for the first nine months of the year.

The value of assets in the continuing operations in Nera has been reduced by NOK 144 million, as a result of write-downs and provisions. Please refer to the review of the financial development of Nera in a separate report.

The consolidation of Nera in the pro forma statements is based on continuing operations. The comments below are related to the pro forma financials excluding non-recurring items.

Gross profit was NOK 249 million in the third quarter and NOK 749 million for the first nine months, and gross margin 23.4 percent and 22.8 percent, respectively.

Operating costs were NOK 214 million for the merged company in the third quarter and NOK 607 million for the first nine months.

EBIT was NOK 36 million for the third quarter and NOK 141 million for the first nine months.

After net financial items of NOK -28 million, profit before tax was NOK 8 million for the third quarter. For the first nine months, net financial items were NOK -34 million, and profit before tax NOK 107 million.

Net loss after tax was NOK 11 million for the third quarter, whereas net profit after tax was NOK 48 million for the first nine months.

Outlook Restructuring of Nera Networks As previously announced, a significant restructuring of Nera Networks was initiated in the beginning of the fourth quarter 2006. The overriding goal of the program is to regain profitability in the transmission business.

The restructuring is designed to improve operating profit in Nera Network by NOK 100 million on an annual basis. In addition, other merger synergies are expected to give a profit contribution of NOK 40 million.

The main element in the restructuring process is the transfer of manufacturing activities from Nera Networks in Bergen to Eltek's system assembly hub in Slovakia. This entails significant manning reductions in Bergen and also relocation to one building in Nera's complex in Bergen.

Costs related to the restructuring are estimated at NOK 63 million, which will be charged to the income statement in the fourth quarter of 2006. In addition, the income statements will be charged with operational expenses of approximately NOK 15 million over the next three quarters, related to the transfer of manufacturing to Slovakia.

Market development The merger of Eltek and Nera creates a uniquely positioned Norwegian and global telecom equipment and solutions supplier, with first-tier customers, leading engineering capabilities and low production costs.

The company sees an overall healthy market development and believes the merger will open new market opportunities.

Drammen, 29 October 2006 The Board of Directors, Eltek ASA

Nera - Report third quarter 2006

This review of the third quarter results of former Nera ASA is an appendix to the interim report for the third quarter 2006 for Eltek ASA. The merger of Eltek ASA and Nera ASA is recognized in Eltek ASA's Balance Sheet Statement as at 30 September, whereas the continuing activities in Nera will be consolidated in Eltek's Income Statement with effect from 1 October, 2006.

Order entry Nera received orders of NOK 458 million in the third quarter 2006 (428). Order entries were affected by delayed transmission projects in Africa, Europe and Middle East. The order entries have also been affected by start-up problems in the manufacturing of the new Evolution series.

Revenues Revenues were NOK 384.9 million in the third quarter 2006 (547.8) and NOK 1,363 million for the first nine months (1,511 million). The revenue figures reflect the continuing business. The revenue was negatively affected by delays in the manufacturing process in the third quarter, due to shortage of components and the start-up problems for Evolution. The late deliveries are expected to be completed in the fourth quarter, as this situation is expected to improve.

Non-recurring charges After the merger of Eltek ASA and Nera ASA, the new management of Nera Networks has revaluated certain assets, which negatively affect Nera's third quarter results by NOK 144 million. The revaluation of assets primarily concern inventory obsolescence (NOK 38 million), provisions for warranties and claims (NOK 50 million), provisions for bad debt (NOK 25 million) and write-off of a share option connected to a sale of shares in a company in Venezuela (NOK10 million). Other non-recurring items comprise cost of stock options being converted to options in Eltek (NOK 5 million), severance payments (NOK 7 million), and costs related to relocation to one building in Nera's office complex in Bergen (NOK 10 million).

The non-recurring charges are fully reflected in the consolidated Balance Sheet of Eltek ASA as at 30 September.

Gross profit Adjusted for the effect of the non-recurring items, gross profit was NOK 73.9 million in the third quarter (111.4). The adjusted gross margin was 19.2 percent, which was a decline from 20.3 percent in the third quarter 2005 but a slight improvement from 19.0 percent in the previous quarter. Non-recurring items affected the gross profit by NOK 76.5 million, reflecting inventory obsolescence and parts of the provisions for warranties and claims.

Operating costs Adjusted for the effect of the non-recurring items, the operating costs were NOK 101.1 million in the third quarter (73.2), which was a decline from NOK 104.1 million in the previous quarter. Non-recurring items negatively affected operating costs by NOK 57.9 million, reflecting parts of provisions for warranties and claims, provisions for bad debt, severance pay and options and relocation costs.

Operating profit (loss) Adjusted for the effect of the non-recurring items, the operating loss was NOK 27.2 million, compared with an operating profit of NOK 26.6 million in the third quarter 2005, and an operating loss of NOK 15.9 million in the previous quarter. Non-recurring costs negatively affecting the operating profit was NOK 134.4 million.

Net financial items Adjusted for the effect of the non-recurring items, the net financial items were NOK -14.1 million in the third quarter (-18.0). The negative non-recurring financial items of NOK 10 million in the quarter reflects the write-off of a share option.

Results of continuing operations Adjusted for the effect of the non-recurring items, the loss before tax was NOK 41.3 million and the loss after tax NOK 43.1 million. In the third quarter 2005, the corresponding results were a profit of NOK 15.8 million before tax and NOK 1.2 million after tax. Non-recurring items had a negative effect of NOK 144.4 million.

Results of discontinued operations The result after tax from divested activities and activities held for sales was NOK 143.9 million in the third quarter (-25.7). The figures include a sales gain of NOK 136 million related to the divestment of Nera Electronics from Nera's 50.1 percent owned subsidiary NeraTel.

Minorities and net results after minorities Minorities were NOK -72.6 million in the third quarter 2006 (-10.7). The increase reflects the minorities' share of the sales gain in the 50.1 percent owned subsidiary NeraTel. The net loss after minorities was NOK 116.2 million (-35.3), including the effects of non-recurring items.

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