Report of the Board of Directors

GROUP STRUCTURE

The business activities of Eltek are being conducted through a series of wholly and partially owned subsidiaries across several countries and regions. The Group headquarters are in Drammen, Norway, where Eltek was established in 1971. The shares of Eltek ASA have been listed on the Oslo Stock Exchange since 1998. On a global basis, the Eltek Group counted 2,370 employees at the end of 2011 (2,175), of which 201 in Norway (173). This does not include 522 employees in Nera Telecommunications Ltd. in Singapore, for which the company has entered into an agreement to divest.

Eltek is a power electronics specialist with more than 40 years of experience. The company develops, manufactures and markets energy systems for the telecom industry and other industrial applications. The systems are based on a wide selection of power conversion modules and advanced controllers, assembled into complete solutions meeting required power and voltage ratings. Eltek’s product offering also includes grid inverters for the solar power industry and onboard battery chargers for electrical vehicles.

PRESENTATION OF ACCOUNTS

Pursuant to Section 3-3 of the Norwegian Accounting Act, the Directors confirm that the accounts have been prepared under the assumption that the enterprise is a going concern and that this assumption was realistic at the date when the accounts were approved.

The Eltek Group reports its Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS). For more information, please refer to the notes to the Consolidated Financial Statements.

FINANCIAL PERFORMANCE – INCOME STATEMENT

As a consequence of the entry into an agreement - on certain conditions - to divest the majority shareholding in Nera Telecommunications Ltd. (NeraTel), the activities in NeraTel are recognized as discontinued operations and accounted for on one line net of tax in the Income Statement for 2011. Historical figures have been reclassified accordingly. The divested assets and liabilities are accounted for as assets and liabilities held for sale in the Balance Sheet.

Unless otherwise indicated, the below information describes the development for the continuing operations in the Eltek Group in 2011, with figures in brackets referring to the corresponding figures for 2010.

REVENUE AND ORDER ENTRY

Revenue for the continuing operations in the Eltek Group increased 13 percent to NOK 3,565 million in 2011 (3,166). Adjusted for currency developments the revenue increase was 18 percent.

This growth reflects continued strong performance in the legacy business in Telecom power. The company also showed strong revenue growth for its Industrial applications, driven by the main markets in Power Utilities and Rail & Metro.

Telecom power and Industrial applications are expected to remain the main revenue generators in the years to come, with Eltek seeking to exploit growth opportunities and standardize operations, logistics and products to ensure cost efficiency.

The new business initiatives in the Renewable and E-Mobility markets generated limited revenue in 2011, and the company has adopted a selective approach in its venture into these markets.

In geographical terms, revenue increased in all major regions. EMEA continues to be the largest region for the company, accounting for NOK 1,569 million or 44 percent of revenue in 2011. Revenue in the region increased 19 percent from 2010, with growth in Europe and Africa but a modest revenue decline in the Middle East. Revenue developed very positively in both Germany and Russia, by far the two largest markets in EMEA.