<PAGE>

                                  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

   [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934
            FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            ACT OF 1934
            FOR SUCH TRANSITION PERIOD FROM _______ TO _______

                         Commission file number: 0-26258

                                    NERA ASA

             (Exact name of Registrant as specified in its charter)

                                KINGDOM OF NORWAY

                 (Jurisdiction of incorporation or organization)

                          Kokstadveien 23, PO Box 7090
                              N-5020 Bergen, Norway
                                011 47 5522 5100

                    (Address of principal executive offices)

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

   Title of each class                 Name of each exchange on which registered

          None                                       Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                    Ordinary Shares, nominal value NOK 2 each

                                (Title of Class)

        American Depositary Shares, each representing one ordinary share

                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

                                      None

                                (Title of Class)

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: 123,529,371

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 [X]         No [ ]

Indicate by check mark which financial statement item the registrant has elected
to follow:

                                                  Item 17 [X]     Item 18 [ ]

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                             <C>
PART I     ...................................................................................................    2
        ITEM 1.      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS....................................    2
        ITEM 2.      OFFER STATISTICS AND EXPECTED TIMETABLE..................................................    2
        ITEM 3.      KEY INFORMATION..........................................................................    2
        ITEM 4.      INFORMATION ON THE COMPANY...............................................................    9
        ITEM 5.      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.............................................   31
        ITEM 6.      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...............................................   45
        ITEM 7.      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS........................................   53
        ITEM 8.      FINANCIAL INFORMATION....................................................................   53
        ITEM 9.      THE OFFER AND LISTING....................................................................   54
        ITEM 10.     ADDITIONAL INFORMATION...................................................................   55
        ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...............................   63
        ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...................................   66
PART II    ...................................................................................................   66
        ITEM 13.     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..........................................   66
        ITEM 14.     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS...........   66
        ITEM 15.     [RESERVED]...............................................................................   67
        ITEM 16.     [RESERVED]...............................................................................   66
PART III   ...................................................................................................   67
        ITEM 17.     FINANCIAL STATEMENTS.....................................................................   67
        ITEM 18.     NOT APPLICABLE...........................................................................  103
        ITEM 19.     EXHIBITS.................................................................................  103
</TABLE>

                                      -i-

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PART I

         ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not applicable.

         ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

         ITEM 3.  KEY INFORMATION

         This document contains certain forward-looking statements with respect
to our financial condition, results of operations and business and certain of
our plans and objectives with respect to these items. In particular, this
document contains forward-looking statements with respect to:

             -    management's objectives with respect to our current focus on
                  core business areas and the related changes in the structure
                  of our company,

             -    management's objectives with respect to cash generation and
                  expansion of some of our operations,

             -    reduced market demand for the telecommunications
                  infrastructure equipment we develop, manufacture, market and
                  sell,

             -    potential recovery of the telecommunications market and the
                  anticipated timing of this recovery,

             -    the continuing global economic downturn,

             -    the shift from low capacity ranges from two to 34 megabits per
                  second, or PDH technology, to high capacity ranges from 34 to
                  155 megabits per second, or SDH technology,

             -    opportunities to supply satellite terminals and land earth
                  station equipment for new satellite communications systems,

             -    levels of future research and development expenditure and the
                  development and introduction of new products,

             -    trends in market shares and product volumes,

             -    levels of research and development expenditure,

             -    margins,

             -    overall market trends,

             -    our liquidity and capital resources,

             -    risk management,

             -    foreign currency exchange rate risk, and

             -    interest rate sensitivity.

         By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend upon circumstances that may
occur in the future. There are a number of factors that could cause our actual
results and developments to differ materially from those expressed or implied by
these forward-looking statements. These factors include, but are not limited to,
our ability to achieve our goals in connection with our current business
activities, to respond to market conditions, to continuously improve our cash
generation capability, to foresee demand for our products, to predict the
development of new satellite communications systems, to allocate the requisite
amounts of research and development expenditures, to determine the cost of
components, to be prepared to react to future exchange rates and interest rates
charges, and to conduct our manufacturing operations in an efficient manner.

                                       2

<PAGE>

         A.       SELECTED FINANCIAL DATA

         The following selected consolidated financial data have been derived
from our consolidated financial duplicative of statements, which have been
audited by PriceWaterhouseCoopers, independent accounts through December 31,
1998, and by Arthur Andersen, independent accountants, for the years ended
December 31, 1999, 2000 and 2001, and by Ernst & Young for the year ended
December 31, 2002. Effective May 1, 2002, and subsequent to completion of the
audit of our financial statements for the year ended December 31, 2001, Arthur
Andersen and Ernst & Young in Norway merged their activities. Effective as of
that date, Arthur Andersen in Norway became part of the international
organization of Ernst & Young. You should read the selected consolidated
financial data for each of the years presented in conjunction with, and they are
qualified in their entirety by reference to, the selected consolidated financial
statements, including the notes thereto, that are included in item 17 below.
Nera Telecommunications Ltd. (known as NeraTel), our Singapore subsidiary, was
not consolidated in our financial statements from July 1999 to November 2001, as
we owned less than 50% of NeraTel during that period. Prior to July 1, 1999 and
starting again on December 1, 2001 when we increased our ownership of NeraTel
above 50%, NeraTel's results have been consolidated in our financial statements.
Due to the different accounting treatment of NeraTel during the periods
presented, our results for these periods are not comparable. For more
information about the effects of consolidation of NeraTel, please see note 8 to
the consolidated financial statements in Item 17 below.

         Unless otherwise indicated, our consolidated financial data are stated
on the basis of Norwegian GAAP, which varies in certain respects from U.S. GAAP.
The differences between Norwegian GAAP and U.S. GAAP that are significant to our
consolidated financial statements for 2000, 2001 and 2002 for the
reconciliations of net income/loss and shareholders' equity from Norwegian GAAP
to U.S. GAAP for 2001 and 2002 are explained in note 30 to the consolidated
financial statements in Item 17 below.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                              1998(1)        1999           2000           2001           2002             2002
                                             --------      --------        -------        -------        -------       ----------
                                               NOK           NOK             NOK            NOK            NOK            U.S.$
                                                                                                                       (UNAUDITED)
                                                                             (IN MILLIONS)
<S>                                          <C>           <C>             <C>           <C>            <C>            <C>
OPERATING REVENUE
Sales.................................        3,034.7       2,765.7        2,549.8        2,893.3        2,444.8           352.4
Cost of materials.....................       -1,382.7      -1,068.0         -966.6       -1,411.1       -1,285.6          -185.3
Changes of inventory of work in
      Progress and finished goods.....           -4.4         -19.3          -37.3           54.8          -24.2            -3.5
Payroll expense.......................         -747.7        -657.3         -649.6         -722.8         -679.8           -98.0
Depreciation..........................          -71.2         -58.7          -66.9          -87.9          -83.5           -12.0
Other operating expense...............         -952.0        -786.0         -724.9         -894.4         -505.0           -72.8
Operating income (loss) before
     Restructuring gain and loss......         -123.3         176.4          104.5         -168.1         -133.3           -19.2
Restructuring gain and loss...........         -171.7         112.8             --         -264.0          -11.1            -1.6
Operating income (loss)...............         -295.1         289.2          104.5         -432.1         -144.4           -20.8
Net financial items...................          -94.3           7.6           88.8          -16.2          -17.8            -2.6
Income (loss) before taxes............         -389.4         296.8          193.3         -448.3         -162.2           -23.4
Income (loss) tax expense.............           63.3         -89.2          -57.0           81.3           33.7             4.9
Net income (loss).....................         -326.1         207.6          136.3         -367.0         -128.5           -18.5

Earnings per ordinary share (basic)...          -4.49          2.16           1.22          -3.02          -1.19           -0.17
Earnings per ordinary share (fully
  diluted)............................          -4.49          2.15           1.22          -3.02          -1.19           -0.17
Cash dividends declared per
     ordinary share...................            0.0           0.0           0.22             --             --              --
</TABLE>

                                       3

<PAGE>

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                              1998(1)        1999           2000            2001           2002            2002
                                             --------      --------        -------        -------        -------        ---------
                                               NOK           NOK             NOK            NOK            NOK             U.S.$
                                                                                                                        (UNAUDITED)
                                                                             (IN MILLIONS)
<S>                                           <C>           <C>            <C>            <C>            <C>            <C>
Approximate amounts in accordance
with US GAAP

Net income/loss.......................         -283.6         188.7          108.6         -340.0         -190.1           -27.3
Basic earnings per share..............          -3.90          1.96           0.97          -2.77          -1.56           -0.22
Diluted earnings per share............          -3.90          1.96           0.97          -2.77          -1.56           -0.22

SELECTED CONSOLIDATED
BALANCE SHEET DATA
Amounts in accordance with
Norwegian GAAP

Cash and cash equivalents.............          232.7         481.5        1,320.3          899.5          795.8           114.7
Short term receivables................        1,331.3       1,038.4        1,171.7        1,156.8          803.9           115.9
Short term investments................           34.4           2.3             --             --             --              --
Inventories...........................          431.7         309.3          269.1          534.7          382.9            55.2
Long term receivables and others......          192.1         271.3          396.1          219.9          161.5            23.3
Intangible assets.....................           70.3          28.8          141.4          137.2          216.6            31.2
Property, plant and equipment, net....          212.5         141.2          178.6          268.1          199.1            28.7
Total assets..........................        2,505.0       2,272.8        3,477.2        3,216.2        2,559.8           369.0

Current liabilities...................        1,092.4         968.3        1,198.8        1,386.3          855.2           123.3
Long-term liabilities.................          627.3         335.0          301.4          101.8           92.0            13.3
Shareholders equity...................          785.3         969.5        1,977.0        1,728.1        1,612.6           232.4
Total liabilities and shareholders'
  equity..............................        2,505.0       2,272.8        3,477.2        3,216.2        2,559.8           369.0

Approximate amount in accordance with
US GAAP

Shareholders' equity..................        778.372         983.2        1,972.0        1,525.7        1,262.9           182.0
</TABLE>

--------------------
(1)      The financial statements for the year ended December 31, 1998 were
restated in 1999 as a result of the requirements of the Norwegian Accounting Act
of 1998 and include deferred tax assets that were not recognized previously.

                  We publish our consolidated financial statements in Norwegian
         krone. References herein to "U.S. dollars," "USD" and "$" are to U.S.
         dollars, and references to "Norwegian krone" and "NOK" are to the
         currency of the Kingdom of Norway. For the convenience of the reader,
         this annual report contains translations of certain Norwegian krone
         amounts into U.S. dollars at the rate of NOK 6.9375 = $1 ($0.1441 = NOK
         1), the noon buying rate in New York City for cable transfers payable
         in foreign currencies as certified for customs purposes by the Federal
         Reserve Bank of New York on December 31, 2002. On June XX, 2003, such
         rate was NOK X.XX = $1 ($0.1XX = NOK 1). These translations should not
         be construed as representations that the Norwegian krone amounts
         actually represent such U.S. dollar amounts or could be converted into
         U.S. dollars at the rate indicated or at any other rate. "Item 5.
         Operating and Financial Review and Prospects--Operating
         Results--Currency Fluctuations" and "Item 11. Quantitative and
         Qualitative Disclosures about Market Risk" include a discussion of the
         effects of fluctuations in exchange rates on our financial results.

                  The table below sets forth, for the periods and dates
         indicated, certain information concerning the exchange rate for the
         Norwegian krone against the U.S. dollar, based on the noon buying rate
         and expressed in Norwegian

                                       4

<PAGE>

         krone per U.S. dollar. The average is computed using the noon buying
         rate on the last business day of each month during the period
         indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31                NORWEGIAN KRONE PER U.S. DOLLAR
----------------------       ---------------------------------------------
                             PERIOD-END       AVERAGE
CALENDAR YEAR                  RATE          RATE (1)       HIGH      LOW
-------------                ----------      --------
<S>                          <C>             <C>            <C>       <C>
1998                           7.58            7.55         8.32      7.31
1999                           8.01            7.81         8.10      7.11
2000                           8.80            8.81         9.56      7.93
2001                           8.97            9.00         9.45      8.54
2002                           6.95            8.00         9.14      6.97
2003(until June 26)            7.25            7.03         7.49      6.60
</TABLE>

         The table below shows the high and low noon buying rates for each month
during the six months prior to the date of this annual report.

<TABLE>
<CAPTION>
                                                  NORWEGIAN KRONE PER U.S. DOLLAR
                                           -----------------------------------------
                                           PERIOD-END
  MONTH                                       RATE            HIGH              LOW
  ------                                      ----            ----              ---
<S>                                        <C>                <C>               <C>
December 2002                                 6.95            7.31              6.54
January 2003                                  6.92            7.00              6.83
February 2003                                 7.22            7.20              6.91
March 2003                                    7.28            7.46              7.06
April 2003                                    7.04            7.32              7.00
MAY 2003                                      6.65            6.82              6.60
JUNE 2003(UNTIL JUNE 26)                      7.25            7.26              6.69
</TABLE>

         On June 26, 2003, the noon buying rate of Norwegian krone per U.S.
dollar was NOK 7.234 = $1.00.

         Fluctuations in the exchange rate between the Norwegian krone and the
U.S. dollar will affect the U.S. dollar equivalent of the Norwegian krone price
of the shares traded on the Oslo Stock Exchange and, as a result, may affect the
market price, if any, of our American depositary shares in the United States
which we voluntarily delisted from Nasdaq on May 30, 2002. For more information,
please see "Item 9.C. --Markets." Such fluctuations will also affect the U.S.
dollar amounts received by holders of American depositary shares on conversion
by The Bank of New York, which is the depositary, of any cash dividends paid in
Norwegian krone on the shares represented by the American depositary shares.
Information regarding currency fluctuations is provided in "Item 5. Operating
and Financial Review and Prospects--Operating Results--Currency Fluctuations."

         B        CAPITALIZATION AND INDEBTEDNESS

         Not applicable.

         C.       REASONS FOR OFFER AND USE OF PROCEEDS

         Not applicable.

         D.       RISK FACTORS

         WE FACE STRONG COMPETITION FROM ALTERNATIVE PRODUCTS AND NEW SUPPLIERS
IN A SHRUNKEN MARKET AND OUR REVENUES WILL SUFFER SIGNIFICANTLY IF WE DO NOT
RESPOND EFFECTIVELY TO THESE COMPETITIVE PRESSURES.

         Competition is strong among providers of telecommunications equipment
and systems and is increasing as a result of the reduction of the worldwide
telecommunications market, as well as the entry into the market of new suppliers
and telecommunications equipment and systems. Our products face substantial
competition from other

                                        5

<PAGE>

telecommunications products and alternative telecommunications transmission
media in the international market in which we operate. In addition, as a result
of rapid technological development, the prices for our products are under
constant pressure. If we do not respond effectively to these competitive
pressures, our market share will erode or fail to increase, and our revenues
will suffer significantly. Many of our competitors have significantly greater
financial, marketing and operating resources than us, and some have broader
product lines.

         THE GLOBAL ECONOMIC DOWNTURN HAD, AND IS EXPECTED TO CONTINUE TO HAVE,
A MATERIAL ADVERSE EFFECT ON THE DEMAND FOR OUR PRODUCTS, OUR BUSINESS, RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.

         Since 2001 there has been a significant downturn in economic conditions
in the world generally, exacerbated by the September 11 terrorist attacks on the
U.S., and in the telecommunications industry in particular. We have recognized
that the global economic downturn was deeper and has lasted longer than we had
previously expected and we expect that this condition will [not change] in the
next one to two years. Many telecommunications companies have not achieved their
financial and operating goals and have been unable to obtain additional
financing to run their business and to acquire equipment from us and other
providers. Accordingly, many of these companies are seeking to reduce the level
of their expenditures and some have sought bankruptcy protection. The financial
difficulties experienced by the telecommunications industry may diminish our
ability to obtain additional capital and may require us to consider undertaking
further restructurings to reduce costs in addition to the restructuring we
already carried out in 2001 and 2002.

         In addition to the effect on any new orders, the global downturn may
also affect the amount of products we deliver to some of our existing customers,
as they may be having difficulty obtaining necessary capital resources required
to fund the expansion of their businesses. The current volatility of the
financial markets and economic conditions in the U.S. and internationally may
also intensify the uncertainty experienced by some of our customers, who may
find it increasingly difficult to predict demand for their products and
services. As a result, some customers may attempt to slow or postpone the
development of new technologies and products. These factors may adversely affect
demand for our products and services, including possible suspension of contracts
with us and the reluctance of potential customers to evaluate our products or
services. Also due to the difficult financing and economic conditions, some of
our customers may not be able to pay us for products that we have already
delivered. These factors together could have a material adverse effect on our
business, results of operations and financial condition.

         DUE TO THE CURRENT VOLATILITY OF THE TELECOMMUNICATIONS EQUIPMENT
MARKET, FUTURE DEMAND FOR OUR PRODUCTS IS DIFFICULT TO PREDICT AND, THEREFORE,
WE MAY NOT RESPOND TO SUCH DEMAND ACCURATELY.

         The market for telecommunications equipment, in which we operate, is
currently very volatile. This makes it difficult for us to predict future demand
for our products. As a result of this volatility, some equipment manufacturers
may have recently experienced periods of production overcapacity, oversupply,
reduced prices or lower net sales. At the beginning of 2001, we responded to
high demand for our products and overproduced, as it turned out during the
second half of that year, which resulted in our having excess stock and
experiencing downward pressure on prices for our products. We are now awaiting
increase in the demand for our products. However, due to the market volatility
it is difficult to predict the extent of changes in future demand and,
therefore, we may be unable to respond accurately to such changes.

         OUR WORKING CAPITAL NEEDS, FUTURE CAPITAL EXPENDITURES AND POTENTIAL
ACQUISITIONS MAY REQUIRE ADDITIONAL FINANCING, WHICH MAY BE DIFFICULT TO OBTAIN.

         We may require additional capital to fund our operations, achieve our
business strategy and sustain our business. We cannot offer any assurance that
our existing and anticipated sources of capital will be sufficient for our
needs, or that we will be able to access additional capital if needed. Our
future capital requirements will depend on competitive conditions, potential
acquisitions in a consolidating market, regulatory and technological
developments and equipment costs and other costs associated with the manufacture
of our products. In particular, the actual amounts and timing of our capital
requirements may vary significantly from our estimates. We may not be able to
obtain additional capital on terms that are favorable or even acceptable to us.
Any failure by us to raise such capital would require us to delay or abandon
some or all of our plans, which could materially adversely affect our business.

                                       6

<PAGE>

         THE LOSS OF KEY TECHNICAL AND SCIENTIFIC PERSONNEL COULD HAVE A
SIGNIFICANT NEGATIVE IMPACT ON OUR ABILITY TO OPERATE OUR BUSINESS.

         We rely on being at the forefront of technological developments in our
areas of expertise. In order to maintain this position, we must attract
personnel with high levels of expertise within our core business areas. Loss of
key technical and scientific personnel, especially in Norway, the United Kingdom
and Singapore, could result in the loss of vital expertise which would have a
negative effect on the development of new products, the improvement of existing
products, customer service and other areas of our operations.

         WE ARE DEPENDENT ON THE TIMELY DEVELOPMENT OF NEW PRODUCTS IN RESPONSE
TO RAPID TECHNOLOGICAL CHANGES AND IF WE FAIL TO DELIVER NEW PRODUCTS, OUR
ABILITY TO COMPETE WILL SUFFER, SIGNIFICANTLY AFFECTING OUR RESULTS OF
OPERATIONS.

         The technology underlying our products is subject to significant and
rapid changes. Because of the significant technological changes that have taken
place in the telecommunications industry and those that may occur in the future,
our business is dependent on whether we can design, develop, manufacture and
market competitive products in a timely manner. As a result, our activities
require significant expenditure on research and development, which has accounted
for approximately 12% and 10% of our sales, not including grants from the
Norwegian government, in 2001 and 2002. Any prolonged delay, technical
impossibility of completion or substantial cost overruns in our research and
development efforts could impair our ability to introduce new products, which
could adversely affect our results of operations.

         The introduction of new technologies has resulted, and may in the
future result, in delays in the production of our products. Any prolonged delay
in our production processes could impair our ability to deliver our products in
a timely manner, which could adversely affect our results of operations.

         OUR PLANS TO EXPAND OUR BUSINESS AFTER THE END OF THE ECONOMIC DOWNTURN
MAY REQUIRE SIGNIFICANT MANAGEMENT RESOURCES THAT WOULD OTHERWISE BE USED IN OUR
OPERATIONS AND RESULT IN A DECREASE IN REVENUES.

         We plan to expand our business after the end of the economic downturn.
This expansion will require us to implement a variety of additional systems,
procedures and controls to manage higher inventory levels and working capital
requirements. We cannot assure you that any expansion that we undertake will be
successfully completed. In addition, expansion may cause a significant strain on
our management, financial and other resources. We cannot assure you that sales
will remain at, or increase above, the levels we had prior to the economic
downturn, or that our systems, procedures or controls will be adequate to
support our operations. If we are unable to manage expansion effectively, our
business and financial results could be adversely affected.

         WE ARE STILL DEPENDENT ON THE PRODUCTS WE PROVIDE TO USERS OF THE
INMARSAT SYSTEMS WHICH IS A MATURE MARKET WITH LIMITED GROWTH.

         Our mobile satellite communications products are designed to operate in
the INMARSAT systems, which currently offer the only global mobile satellite
communications network in full operation. This market is mature and offers few
opportunities for growth. We are in the process of developing user terminals for
the next generation INMARSAT service, but we do not expect that sub-market to
offer growth opportunities either. If we are unable to take advantage of the
limited growth opportunities of this segment of our business, or if we are not
successful in further development of our other business segments, our company
will not experience substantial growth.

         WE ARE DEPENDENT ON A NUMBER OF FACTORS AFFECTING OUR CUSTOMERS'
SATISFACTION WITH OUR PERFORMANCE. IF WE DO NOT MEET THEIR EXPECTATIONS, OUR
BUSINESS AND FINANCIAL RESULTS WILL SUFFER.

         Every year, we enter into a number of major contracts, each of which
has many milestone requirements we must meet. If our customers experience delays
in our performance under these contracts, they can make contractual claims
against us and our project costs would be increased. We may also be subjected to
guarantee claims with respect to repairs and upgrades relating to the high
technology products we manufacture. In addition, we are dependent on our regular
use of subcontractors for various projects. We are generally responsible for
ensuring that

                                       7

<PAGE>

the subcontractors supply products or services timely and correctly. While we
attempt to use back-to-back contracts, as well as establish long-term
relationships with significant suppliers and identify alternative supply
sources, there is no assurance that these strategies will be successful. Our
failure or the failure of our subcontractors to deliver satisfactory performance
to the customers, as well as assertion against us of guarantee claims relating
to our products, may have a material adverse effect on our business.

         WE ARE DEPENDENT PRIMARILY ON ONE MANUFACTURER IN THE SATELLITE
COMMUNICATIONS AREA, AND POSSIBLY IN THE TRANSMISSION NETWORKS AREA, AND THE
FAILURE OF THIS MANUFACTURER TO PERFORM WOULD RESULT IN A MATERIAL LOSS OF SALES
AND CUSTOMERS.

         We outsource the manufacturing of our satellite communications
terminals pursuant to long-term agreements primarily to Flextronics in Oslo,
Norway, and also to Kitron in Risor, Norway, as an alternative supplier. We also
use the same manufacturers in our transmission networks business when we do not
have sufficient manufacturing capacity ourselves. If Flextronics and Kitron do
not perform when required, we will have trouble meeting delivery schedules,
which could result in a material loss of sales and customers. In addition, in
such event, we would be required to find an alternative source of satellite
communications terminals and possibly of equipment used in our transmission
networks business, resulting in the incurrence of additional costs.

         WE ARE DEPENDENT ON A SINGLE MANUFACTURING FACILITY FOR MICROWAVE
TRANSMISSION EQUIPMENT. ANY SIGNIFICANT INTERRUPTION MAY LEAVE US WITHOUT A
READILY AVAILABLE SOURCE FOR OUR CUSTOM-DESIGNED COMPONENTS.

         Our manufacturing activities with respect to our microwave transmission
equipment and systems currently takes place in our production facility in
Bergen, Norway. A significant interruption of production at this facility could
result in our failure to meet delivery schedules which could result in the loss
of sales and customers. In addition, because the microwave transmission
components manufactured at our production facility are custom-designed for
assembly into our products, there is no readily available alternative source for
these components.

         WE MAY FACE DELAYS IN PAYMENTS ON LARGE CONTRACTS CAUSING US TO
RESTRICT THE USE OF OUR FUNDS TO COVER OUR OPERATIONAL EXPENSES.

         From time to time, we enter into contracts with our customers that
involve large purchase prices. The number of these contracts and the total
revenue that they generate, as a percentage of our total contracts and of our
total revenue, has decreased in two of the last three years but may increase
again in the future. Any delays in payment under these contracts could adversely
affect our cash flow positions and may, at that time, result in the need for
additional borrowings to fund current operations. In addition, any delays in, or
cost overruns relating to, our performance under these contracts may have
adverse period-on-period earnings effects and result in the incurrence of
contractual penalties.

         WE ARE DEPENDENT ON OUR SIGNIFICANT INTERNATIONAL OPERATIONS, WHICH
FACE UNIQUE OBSTACLES AND COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         Sales of products delivered to customers outside of Norway represented
approximately 88.7% of our total sales in 2002 as compared to 90.1% of total
sales in 2001. We made a substantial portion of our sales in Europe, Asia and
America. Various international risks could negatively impact our international
operations, which could have a material adverse effect on our revenues, access
to capital and market position. Our international sales and manufacturing
operations are subject to the risks normally associated with international
operations, including:

             -    currency conversion risks and currency fluctuations,

             -    political instability, civil unrest and economic instability,

             -    imposition of tariffs,

             -    limitations, including taxes, on the repatriation of earnings,

                                       8

<PAGE>

             -    greater difficulty enforcing intellectual property rights and
                  weaker laws protecting such rights,

             -    complications in complying with laws in varying jurisdictions
                  and changes in governmental policies,

             -    concentration of credit risk of customers and Nera's own
                  credit risk, which may be increasing due to the present trend
                  of concentration around major units in the international
                  telecommunications industry;

             -    natural disasters and the greater difficulty and expense in
                  recovering therefrom, and

             -    transportation delays and interruptions.

         WE ARE EXPOSED TO CURRENCY FLUCTUATIONS WHICH INFLUENCE OUR COMPETITIVE
POSITION AND OUR REVENUES REGARDLESS OF THE MARKET ACCEPTANCE OF OUR PRODUCTS
AND THE SALES EFFORTS OF OUR EMPLOYEES AND BUSINESS PARTNERS.

         As an international group, we are exposed to major exchange
fluctuations between currencies. Changes in the relative strengths of different
currencies affect our competitive positions and our revenues. Our foreign
exchange policy is based on utilizing financial instruments to balance the
difference between accounts receivable and liabilities in foreign currencies,
however, no assurance can be given that this policy will ultimately be
successful. "Item 5. Operating and Financial Review and Prospects--Operating
Results" and "--Liquidity and Capital Resources" contains a description of the
effect of currency fluctuations on our financial results.

         ITEM 4.  INFORMATION ON THE COMPANY

         A.       HISTORY AND DEVELOPMENT OF THE COMPANY

         We are a joint-stock company incorporated in the Kingdom of Norway on
September 1, 1987 under the Norwegian Companies Act. Our principal executive
offices are located at Kokstadveien 23, P.O. Box 7090 N-5020 Bergen, Norway, and
our telephone number is 011 47 5522 5100.

         While we have been in existence as a joint-stock company in Norway only
since 1987, we began producing radio-based wireless communication equipment more
than 50 years ago and have been a leader in this field for a significant portion
of our history. As the world of telecommunications equipment has changed, we
have changed as well to meet the challenges of the times. The following
description of our development over the last five years provides the latest
chapter in our history as background for the description of our current business
and our results of operations, which follow below.

         On April 1, 1998, we implemented a reorganization, pursuant to which we
became a holding company, Nera ASA, with four operating subsidiaries: Nera
Networks AS (comprising the transmission systems business area); Nera SatCom AS
(comprising the satellite communications business area); Nera Electronics AS
(comprising our production operations) and Nera Transmission Management Network
AS. Our Norwegian subsidiaries in the dedicated communications business area
(Contec, Infotema and Mobildata) remained independent subsidiaries and Datacomm,
Electrical/CATV and cables, the other businesses in this area remained in our
Southeast Asian operations. The 1998 reorganization was aimed at improving
financial controls within, and providing stronger strategic focus for, each of
those business areas. In December 1998, in line with our desire to focus on our
core business, we sold our transmission management network business, which
formerly provided integrated solutions for a wide range of telecommunications
systems, to Protek Network Management Ltd. (UK) for cash.

         During 1999, as part of our comprehensive program of corporate
improvements and increased focus on our core activities, we reduced our
ownership interest in NeraTel, our Singapore subsidiary, divested our airtime
billing business, sold a portion of our production facilities and entered into
agreements to acquire two businesses in the United States from World Access with
activities in the areas of wireless local loop infrastructure and radio-link
transmission equipment. These acquisitions were made in 2000. On June 23, 1999,
NeraTel launched an initial public offering for its Singapore dollar listing on
the Mainboard of the Stock Exchange of Singapore Limited.

                                       9

<PAGE>

NeraTel is a solutions provider for the telecommunications and information
technology industries with a comprehensive product and service range covering
satellite communications, microwave radio transmissions, information technology
networking infrastructure and high value-added electronic contract
manufacturing. 44,400,000 ordinary shares were sold in the offering,
representing 49.3% of NeraTel's share capital. 13,000,000 shares were sold to
the public and the remaining 31,400,000 shares were privately placed, of which
4,440,000 shares were reserved for NeraTel's employees and business associates
who contributed to our success. After the initial public offering, we held 47.3%
of the shares in NeraTel. The sale resulted in proceeds to us of approximately
NOK 150 million ($17.0 million) and the gain on the sale was approximately NOK
106 million ($12.0 million). The shares of NeraTel started trading on the Stock
Exchange of Singapore on July 1, 1999. In addition, in December 1999 we sold our
airtime billing business in Merstham (United Kingdom) in return for
approximately NOK 107 million ($11.92 million) and a 20% interest in the share
capital of the acquiror (NOK 137 million ($15.27 million) in total). We sold CNH
Communications de Venezuela as well, for approximately NOK 19.4 million ($2.16
million). The financial impact of this reorganization is described in "Item 5.
Operating and Financial Review and Prospects."

         The year 2000 brought developments in our broadband operations, a
public offering in Norway and outsourcing of some of our manufacturing capacity.
In April 2000, we acquired two businesses from World Access for a total amount
of $13.6 million with the goal of giving us a basis to develop
point-to-multipoint products for wireless broadband access, strengthening our
existing transmission networks business and giving us expertise on which to
establish a presence in North America.

         In May 2000, we issued 25 million shares in a public offering in Norway
with preemptive rights for existing shareholders and raised NOK 887.5 million
($100.7 million) (including underwriting discounts and expenses). The offering
was not made available to U.S. and Canadian shareholders or investors. We intend
to continue to use the proceeds of this offering to continue our operations
during these more challenging times and grow our business once an economic
recovery is evident. In July 2000, we sold our production facilities in Oslo to
Flextronics AS for approximately NOK 101.7 million ($11.33 million) and entered
into a strategic cooperation agreement with Flextronics with respect to the
production of electronics used in our satellite communications products.

         The year 2001 saw a declining world economy in general and the near
collapse of the telecommunications industry in particular. We saw the necessity
to take restructuring measures in the middle and at the end of the year. In June
2001, we restructured the wireless broadband access operations we had acquired
in 2000. Due to the adverse changes in the worldwide economic environment which,
among other things, delayed the development of the broadband market, we have
slowed down our efforts to develop point-to-multipoint products and penetrate
the U.S. market. However, this has not affected our long-term assessment of the
potential of the broadband market, in which the system design experience and
technology development acquired by us may prove invaluable. We moved our
satellite broadband activities to a separate subsidiary, called Nera Broadband
Satellite AS. As a result, our wireless broadband access business will be
targeted only to terrestrial activities, with a more focused approach to
operations and investment.

         In November 2001, we increased our ownership interest in NeraTel, our
Singapore subsidiary, from 47.3% to 50.18%. As a result of the acquisition of a
majority interest in this subsidiary, we changed our accounting practice for
NeraTel from consolidation according to the equity method to full consolidation
as a subsidiary.

         In December 2001, we undertook a restructuring in order to address the
continuation of weaker market conditions and our strategic challenges. The
effects of the measures taken in December 2001 continue in 2002. The
restructuring included lay-offs in the United States, Latin America and Norway
and reduction of some activities. Approximately 120 employees at our
transmission business area in Bergen received notice of temporary lay-offs
effective in January 2002. During the second half of 2001, activities at
production plants in Sao Paulo, Brazil, and Boston, U.S., have been reduced, and
broadband activities by our subsidiary NeraTel Inc. in Dallas, U.S. have been
closed down. Further, in March 2002 we sold some assets related to our Velocity
2000 broadband access product line developed in Dallas to SR Telecom Inc. in
Canada. The financial impact of this reorganization, including related
extraordinary provisions and write-downs in 2001, is described in "Item 5.
Operating and Financial Review and Prospects."

                                       10

<PAGE>

         In 2002 we decided that further restructuring was necessary as the
market conditions continued to be weak. As a result, we discontinued all
production within Nera, Ltd., our unit in Great Britain. The related
restructuring cost is described in Item 5-- Operating and Financial Review and
Prospects and in Note 12 to the Financial Statements in item 17.

         In March 2003 Nera Telecommunications Ltd. (Singapore) terminated the
joint venture with TVMobile PTE Ltd. and disposed of its entire investment in
TVMobile comprising 8,000,000 ordinary shares of S$ 1.00 (NOK 4.15) each fully
paid-up capital of TVMobile. The cash consideration of S$1,500,000 represented a
capital gain of approx. NOK 6 million in the financial Statements of Nera in the
first quarter of 2003.

         Management of Nera expects to continue addressing market conditions
that remain weaker than its earlier estimates and to continue reducing product
costs during the remainder of 2003 and 2004 by entering into more favorable
purchase agreements and simplified technical solutions. Management has also
announced that it will assess the production locations, the global sales
structure and the level of development costs.

         B.       BUSINESS OVERVIEW

         INTRODUCTION

         We design, develop, manufacture, market and sell wireless
telecommunications equipment and systems. We have organized our business into
the following three segments:

             -    TRANSMISSION NETWORKS - This business area provides radio link
                  equipment and systems, antenna systems and turnkey
                  telecommunications transmission networks in the 2GHz to 38GHz
                  frequency and from the low capacity ranges (from two to 34
                  megabits per second also referred to as PDH) to the high
                  capacity (from 34 to 620 megabits per second, also referred to
                  as SDH) ranges. We sell primarily to original equipment
                  manufacturers such as Ericsson, Lucent, Nokia and Nortel
                  Networks and to public telecommunications providers and
                  private network operators. We have been in this business since
                  the early 1950s and we believe that we currently have an
                  approximate market share of 5% of the world's radio link
                  market, 1% of the PDH world market and approx. 15% of the SDH
                  world market. Transmission networks accounted for 54.5% of
                  sales in 2002, 76.8% in 2001 and 70.7% in 2000. As at December
                  31, 2002, transmission networks accounted for 48.6% of our
                  backlog. Our transmission networks backlog has been
                  substantially reduced in the course of 2002 as a result of a
                  decline in sales in all of our markets except Asia.

             -    SATELLITE COMMUNICATIONS - This business area provides
                  satellite communication equipment to professionals and
                  consumers for use on the seas as an alternative to terrestrial
                  networks where those networks do not meet the requirements of
                  the user and in remote locations where land-based wireless
                  mobile communications are not available. We have been in this
                  business since the early 1970s and are the market leader for
                  microwave radio relay systems, mobile satellite terminals, and
                  land earth stations used in the International Maritime
                  Satellite Organization's global satellite communications
                  system, generally referred to as INMARSAT. Satellite
                  communications accounted for 25.2% of sales in 2002, 20.7% in
                  2001 and 27.8% in 2000. In 2002, satellite communications
                  accounted for 24.4% of our backlog. During 2002, our satellite
                  communications backlog has been stable.

             -    WIRELESS BROADBAND ACCESS - We expanded into this business
                  area in the first quarter of 2000 by acquiring a company that
                  was developing the Velocity 2000 radio link equipment for
                  point-to-multipoint wireless transmission, referred to as a
                  local multipoint distribution systems, or LMDS. Due to current
                  slowdown in the broadband market, we restructured our
                  broadband operations by moving the satellite activities to
                  Nera Broadband Satellite AS, our subsidiary. However, our goal
                  remains to become a leading supplier of wireless terrestrial
                  broadband access using our core expertise, radio technology.
                  To date, this business area has not contributed materially to
                  our sales (2.8%), and the reduction in our wireless activities
                  resulted in restructuring charges in 2001. We expect the
                  remainder of our terrestrial wireless broadband access
                  operations to become part of our transmission networks
                  business area in the future.

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<PAGE>

         In addition to these main three business segments, we also own a 50.18%
interest in NeraTel, a public company in Singapore. NeraTel contributed 30.2% to
our sales in 2002, of which 13.1% is reported under the business areas
Transmission Networks and Satellite Communications described above. The
remaining 17.1% is reported under NeraTel's Contract Manufacturing and
IT-business as further described under "--NeraTel" below. We increased
our ownership interest in NeraTel on November 28, 2001 and, as a result,
NeraTel's sales of the month of December, 2001 were the only sales included in
our income statement for the year 2001. Following a discussion of our strategy,
we describe each of our three business areas, NeraTel, our suppliers, our
customers, product warranty and service, backlog, sales, marketing and
distribution, intellectual property, competition and the regulation we are
subject to.

         STRATEGY

         Until the end of the economic downturn, we intend to preserve and
develop our core expertise and our capital. Through our restructuring efforts we
are cutting costs and improving our operations, our marketing and our product
range. Once the economic conditions improve, our strategic objective is to
expand our operations in selected areas of the telecommunications market, for
which we anticipate increased global demand and in which we believe that our
experience and capabilities in the design, development, manufacturing and
marketing of telecommunications equipment, systems and services give us a
competitive advantage compared to existing or potential competitors. We believe
that our core area of technological expertise is the transmission and processing
of microwave signals and that our core areas of experience are in the design,
development, manufacture and marketing of wireless telecommunications equipment
and systems, areas in which we and our predecessors have operated since 1947.

         Effective March 27, 2002, we sold some assets related to our Velocity
2000 broadband access product line developed in Dallas, U.S. to SR Telecom Inc.
in Canada. This transaction follows a halting of further testing of Velocity
products in late September 2001 and the related discontinuation of activities of
our subsidiary NeraTel Inc. in Dallas as a result of continued adverse market
conditions in the broadband market in the U.S.

         In April 2002 we implemented changes to our organizational structure to
improve focus on our customers' needs and to better manage our market and
product development, production and supply. Our operations are now divided into
three regions, Europe/Middle East/Africa, Asia Pacific and Americas. The units
covering these three operations are dedicated to our specific markets and
customers, while contributing to our global activities. We also formed new
operative units for Client Management/Product Portfolio, Supply Chain Management
and Technology Management, which allows us to better coordinate our activities,
exploit market opportunities through global customers and use research and
development investments more efficiently. Nera's executive committee now
comprises the chief executive officer, regional directors, unit directors, and
directors of staff functions.

         We market our equipment and systems worldwide from our facilities in
Norway and through our network of subsidiaries, sales offices, local agents and
distributors. During 2002, we have experienced, and expect a continuation in,
reduced demand for our products as compared to 2001. In 2002, sales of products
delivered to customers outside of Norway represented approximately 88.7% of our
total sales. Our important markets outside Norway include Asia (principally
Philippines, Malaysia, Thailand and Singapore) with 35.3%, continental Europe
(principally France, Italy, Poland, Russia, Sweden and Germany) with 20.4%,
North America and South America with 22.0% and the United Kingdom, with 4.5% of
sales.

         The markets in which we operate are characterized by deregulation and
rapid technological change. The increasing convergence of information technology
and telecommunications creates attractive growth opportunities for us based on
the expertise and market knowledge we have built up over many years, provided
the general economic environment is positive. Both the pace of technical change
and the increased willingness of companies and individuals to make use of the
opportunities technology offers are creating an increase in the demand for
transmission capacity and efficient access to its use, although that increase is
not as rapid as was once expected. While the telecommunications industry has
experienced a slowdown internationally since 2001, this does not change our
long-term view of this industry and the opportunities it presents to us.

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<PAGE>

         TRANSMISSION NETWORKS

         We design, develop, manufacture, market and sell selected
telecommunications transmission equipment and systems, consisting of high and
low capacity microwave radio transmission (also known as radio link or radio
relay) equipment and systems, turnkey telecommunications transmission networks
and antenna systems, for use in public, private, military and other cellular
telecommunications networks.

[PHOTO OF TRANSMISSION NETWORKS]

         Transmission networks provides radio link equipment and systems,
turnkey telecommunications networks and antenna systems. The two main elements
that define transmission networks characteristics are their capacity and
frequency. The various combinations (high capacity-high frequency, high
capacity-low frequency, low capacity -low frequency and low capacity-high
frequency) all have specific advantages in various environments and focus on
different market segments with specific products. Capacity primarily indicates
the volume of signals the products can handle. Products in the high capacity
range have the ability to transmit and receive more signals (Mb/s) than products
in the low capacity range. Products with high capacity are therefore often used
in networks, such as those between major cities. Frequency refers to wave length
and indicates primarily how long a distance signals can travel before they must
reach the next receiver-transmitter antennae to be regenerated and be sent on to
the following antennae. Low frequency signals can travel greater distances than
high frequency signals and are therefore often used in long haul transmission
networks, such as those in desolate areas. High frequency products offer the
best solutions in urban areas, where the required distance to transmit signals
is not as long but the requirement for capacity is high.

                                       13

<PAGE>

[PHOTO OF NERA RADIO PRODUCTS]

         As radio relay technology assumes new roles in telecommunications
networks, we have benefited from new opportunities for our transmission
equipment and systems. Deregulation has led to the implementation of new
transmission networks in a number of countries, and new geographic areas have
opened for market expansion in both developed and emerging economies. At the
same time, new network operators have been formed to meet the demand for new
services such as cellular telecommunications, paging and Internet and data
transmission. Many of these operators are choosing microwave radio as an
important part of their networks, both to extend the network coverage and to
serve as a back-up system for networks using other transmission media.

         Revenues generated from the transmission networks business area were
approximately NOK 1,343 million ($ 193 million) (54.9% of total sales) in 2002,
NOK 2,222 million ($247 million) (76.8% of total sales) in 2001 and NOK 1,803
million ($205 million) (70.7% of total sales) in 2000.

     -   MICROWAVE RADIO PRODUCTS. We develop, produce and sell high- and
low-capacity microwave radio equipment used in terrestrial telecommunications
networks carrying voice communication, facsimile, data and radar information, as
well as radio and television program transmissions. We manufacture digital radio
links incorporating devices such as modulators, demodulators, receivers,
transmitters, power supplies, branching units, signal encoders and decoders and
supervisory systems. Our microwave radio relay and access radio systems operate
at frequencies between 1.7 and 38 Ghz and have capacities of between two
megabits per second (providing 30 telephone channels) and 155 megabits per
second (providing 2,000 telephone channels).

         The most common standard for digital transmission networks is PDH. Our
traditional PDH equipment is primarily low-capacity transmission equipment
operating at eight or 34 megabits per second. We also market modular PDH
transmission equipment operating at integral multiples of two megabits per
second.

         In 1988, SDH was adopted as the new standard for digital transmission
networks by the International Telecommunications Union, known as the ITU, and
SDH products have become the predominant systems used for high capacity
transfers. We believe we are a leading supplier of radio relay equipment
worldwide for SDH transmission networks. Our STM-1 terminal, which has a
capacity of 155 megabits per second at frequencies between four and 38 GHz, can
serve as the transmission element for radio-based SDH networks. In April 2002,
we

                                       14

<PAGE>

have entered into an agreement with Nokia, pursuant to which we can use its PDH
radio and Nokia, in turn, can use some of our products developed at our Boston
site. This enhances our existing partnership with Nokia, which had previously
encompassed only SDH products. While we expect PDH systems to maintain a
significant market share during the next few years because they are more suited
to low-capacity transmission, we expect that there will be a continued shift to
SDH systems due to their increased capacity as compared to PDH systems.

         In response to the expected shift toward SDH products, we have
developed SDH radios in frequency bands of 6, 7, 8, 11, 13, 15, 18, 23, 26 and
38 Ghz, marketed under the "CityLink" name. We have developed equipment in
accordance with FCC (North American) standards and have obtained FCC approval
for some of the frequencies used with this equipment. CityLink is now also
marketed in a SONET version, the FCC equivalent to SDH. In June 2001, we have
expanded the CityLink family of products to include products with 28 Mhz
bandwidth, and we are now working on all versions of the new product family,
third generation CityLink, expected to be completed by the second half of 2002.
The new products are used in connection with the construction and increasing
popularity in the Nordic countries and some other parts of Europe of new
networks, such as GSM, General Packet Radio Service (wireless data
communications at speeds up to 115 Kbps) and Universal Mobile Telecommunications
System (third generation mobile telephony standard in Europe, or 3-G). These
products are based on the most modern SDH/SONET microwave radio for wireless
infrastructure. The new Nera CityLink also uses multiple modulation schemes, so
that one can accommodate STM-1 or 155 Mbit in 28, 40 and 50/56 MHz channel
plans, and is designed for access systems directly linked to the LAN networks.
We plan to gradually replace the rest of the product range by new generations of
equipment. SDH technology is also expected to be used for systems, which are
currently built using PDH technology.

         Through our expertise in the area of SDH technology, we intend to
develop a competitive advantage over other suppliers of radio link products in
the coming years. We also intend to play an active role in the process of
consolidation, which is expected to take place in this market over the next few
years. In addition, as 3-G systems are further developed, we will aim to be a
preferred partner of major operators and system integrators, as we can offer
greater efficiency for developing infrastructure networks and increasing
capacity of mobile networks base stations. Finally, we are following the early
stages of development of digital broadcasting networks. We gained invaluable
experience through our recent development of a terrestrial, digital TV network
in Australia for NTL, and we hope to apply this expertise in similar projects in
the future. There can be no assurance that these developments will occur, or
that they will be positive for our business.

         To supply customers with complete telecommunications systems, we
purchase certain equipment from several other suppliers, such as Ericsson
(Sweden), Nokia (Finland), Marconi (the United Kingdom) and ECI Telecom
(Israel). Equipment obtained from outside suppliers typically includes add-drop
multiplexers, digital cross-connects, various interface equipment and other
system elements. These elements are incorporated in our microwave radio products
at our facilities in Bergen, Norway, or at the facilities of Kitron ASA, with
whom we have a long-term cooperation agreement.

         We sell our transmissions systems to telecommunications operators,
cellular network operators and, to a lesser extent, to dedicated network users
such as oil and gas companies, power utilities, railroads and military
organizations. Contracts range in value from approximately NOK one million up to
approximately NOK 250 million. Because of the project-oriented nature of many of
our radio link equipment and systems contracts, our largest customers may change
from year to year.

         Our largest customers for transmissions systems in terms of contract
amount over the past three years have been NODECA (Norway), NTL (Australia),
Globe Telecom (Philippines), ETB (Columbia), IUSACELL (Mexico), and Ericsson
(Morocco). In addition, we have an original equipment manufacturers agreement
with Lucent Technologies, Nokia and Ericsson for the supply of SDH microwave
radio transmission systems for Lucent's transmission projects worldwide. We hope
to be able to capitalize on a possible trend indicated by these system
integrators toward outsourcing the responsibility of development of larger
sections of mobile networks. The sale of radio links has roughly the same
geographical spread as our total sales, but with a somewhat larger share in
Latin America. For more information regarding our sales by geographical
destination, please see "--Sales, marketing and distribution."

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<PAGE>

         Our microwave radio transmission equipment incorporates microwave
transistors, which can only be obtained from a small number of suppliers. We
maintain substantial inventories of microwave transistors and seek to maintain
long-term contracts with our principal suppliers whenever practicable.

         Manufacturing of our transmission networks equipment mainly takes place
at one plant at Kokstad, outside of Bergen, which mainly produces high-capacity
SDH radio transmitters and receivers. In addition to high-capacity radios, our
plant produces mechanical equipment, circuit boards, antennae up to 3.5 meters
in diameter and some military products. The largest customer for this plant is
the transmission networks business area. The Kokstad facility also engages in
manufacturing for a few third-party customers. At present, there are 345
employees at the Kokstad plant. When our manufacturing needs exceed the plant's
capacity, we outsource some of the production to Flextronics in Oslo, Norway,
and also to Kitron in Risor, Norway, as an alternative supplier. In 2000, we
entered into an agreement with Flextronics for the assembly of a number of our
transmission networks products. In 2001, we have entered into a similar
agreement with Kitron relating to our transmission networks business.

         The manufacturing operations at our production facility range from
complete assembly of a particular product by one individual or a small group of
individuals to semi-automated assembly lines for volume production of certain
pieces of equipment. We make extensive use of surface-mounted devices in the
assembly of printed circuit boards. Because many of our products include
precision electronic components requiring close tolerances, we conduct test and
inspection procedures throughout the manufacturing and assembly process. Final
test procedures include quality control inspections, temperature and burn-in
tests and factory acceptance tests on assembled equipment to simulate actual
system configuration.

     -   TURNKEY TELECOMMUNICATIONS TRANSMISSION NETWORKS. We are a turnkey
supplier of telecommunications transmissions networks, which comprise varying
combinations of radio relays, antennas, feeders, towers, fiber optic terminals
and cables, multiplexers and cross-connect equipment. We design, develop,
manufacture, sell and install complete telecommunications networks and
operations, administration and maintenance management systems. For most turnkey
projects, we conduct the necessary surveying work and produce transmitters,
receivers, waveguides, racks and antenna systems, which together typically
represent approximately one-half of the value of the turnkey projects. We
acquire the remainder of the equipment and facilities, such as towers, shelters,
diesel generators, battery banks, solar cells and add-drop multiplexers, from
subcontractors.

         We supply turnkey telecommunications transmission networks, principally
to telecommunications providers and utilities in the Indian subcontinent, the
Middle East, Southeast Asia, Latin America and Africa. Our two most important
turnkey projects in 2002 were in the Philippines and Jamaica.

         When supplying turnkey transmission systems, we obtain certain
equipment and facilities, such as towers, shelters, diesel generators, battery
banks, solar cells and add-drop multiplexers, from subcontractors.

     -   ANTENNA SYSTEMS. We also design and manufacture antennas (principally
dish aerials) to meet specific demands imposed by various operating environments
and by the radio relay equipment being employed. We produce a variety of
antennas in sizes up to six meters in diameter for all recommended frequency
bands. We sell our antennas both in conjunction with our other transmission
equipment and on a stand-alone basis.

         We manufacture our antenna systems with components from our suppliers.
Power supplies, masts and installation materials are purchased from approved
suppliers, usually local regional producers, by competitive tender. In 2002, our
principal customers for antenna systems were the microwave radio products and
antenna systems divisions of our transmission networks business area, Terra.com
(Sweden) and FMV (Sweden).

         Future Prospects

         2002 was a weak year for telecom equipment vendors in general and for
Nera's Transmission business as well. Partly, this was due to weak macroeconomic
development (e.g. recession in Latin America). In addition, the large in
debtedness of many large telecom operators worldwide - Europe and US operators
in particular - contributed to a decline in telecom capital spending. The
investment tightening was justified in view of the reduction in mobile
subscriber growth that we witnessed during the year - and in view of the fact
that the technology for next-

                                       16

<PAGE>

generation mobile systems was not yet available. The mobile market growth has
been the dominant factor behind telecom infrastructure market growth in the
recent years. Some regions were less affected by the downturn in 2002. Parts of
Eastern Europe experienced a strong growth in mobile subscribers - which
contributed to continued growth in mobile infrastructure in this region. The
same is true for parts of Asia-Pacific - primarily South East Asia.

         The liberalisation of the telecommunications market implemented in
Europe and in the US in the 1990s is now under way in other regions. The
traditional monopolists in a number of Asian and Middle Eastern countries are
now facing competition. Consequently, we anticipate continued growth in the
development of the infrastructure for telecommunications in certain areas, even
though there is little evidence of a significant growth in the overall demand
for our transmission products in the near future. We believe the transmission
market is approaching a more stable period. However, due to many factors which
influence new growth, not least macroeconomic factors, it is uncertain when
growth will come and how strong it will be.

         SATELLITE COMMUNICATIONS

         We design, develop, manufacture, market and sell mobile satellite
terminals (comprising marine and land mobile earth stations) and land earth
stations for satellite communications networks, principally INMARSAT. We supply
a full range of land earth stations and we are the supplier producing the widest
range of terminals for the INMARSAT system.

[PHOTO OF MOBILE SATELLITE COMMUNICATION]

         We also market our mobile satellite terminals and land earth stations
for various regional satellite systems. INMARSAT services include the following:

                                       17

<PAGE>

             -    the original INMARSAT A analog system, which provides maritime
                  and land mobile voice, data facsimile and telex links,

             -    the INMARSAT B system, a digital replacement for INMARSAT A
                  providing voice, data, facsimile and telex capabilities,

             -    the INMARSAT C analog system, which provides data and telex
                  links,

             -    the INMARSAT M system, a digital service providing voice,
                  facsimile and data capabilities for users of smaller
                  ship-borne and land mobile terminals,

             -    the INMARSAT Aero system, which provides global in-flight
                  telecommunications services for commercial airlines, and

             -    the INMARSAT Mini-M service, which is designed to allow the
                  operation of laptop-sized satellite terminals.

         INMARSAT's A, B, C, M and Aero systems operate through a network of
geostationary satellites owned and operated by INMARSAT since the late 1970s.
The INMARSAT Mini-M operates through a generation of geostationary satellites
launched in 1996. These satellites provide increased capacity through the use of
spot-beam technology, which concentrates signal power and provides increased
sensitivity at the earth's surface, thus enabling telecommunications
transmissions to be relayed from smaller and less powerful terminals. The
INMARSAT Mini-M system makes use of this new technology, including INMARSAT's
global area network digital service, which makes satellite communications with
laptop-sized equipment possible at ISDN-speed.

         We are also involved in continued developments within the INMARSAT
system to provide lighter and smaller terminals for high-speed data transfer via
mobile terminals. We have carried out research and a number of studies in this
area and we believe that we are well positioned to become a supplier of this
type of terminal. Our efforts in this area were recognized in April 2002, when
we entered into an agreement with INMARSAT to develop terminals for the next
generation INMARSAT satellite. The agreement contemplates our design,
development and production of light weight and advanced high data rate terminals
for the new INMARSAT Broadband Global Area Network, or BGAN. The new terminals
are expected to meet users' need for ease of use and increased data capacity at
speeds up to 422/110 kbit/s. We expect to launch the INMARSAT-4 satellites
during 2004, and we anticipate that the BGAN network to be compatible with the
earthbound UMTS/IMT-2000 (3G) networks currently being built. However, no
assurances can be given that we will be able to develop or successfully launch
these products.

         During the second half of 2001, we restructured our satellite
operations, including personnel reduction and adjustment of the rate and scope
of product developments to market conditions. We expect that this restructuring
will enable satellite communications to compete better in our markets. The
financial impact of this restructuring is described in "Item 5. Operating and
Financial Review and Prospects."

         Our sales from satellite communications amounted to approximately NOK
617 million ($77 million) (25.2% of total sales) in 2002, NOK 599 million ($66
million) (20.7% of total sales) in 2001, and NOK 709 million ($81 million)
(27.8% of total sales) in 2000. Satellite terminals and land earth stations
represented approximately 70% and 30% of satellite communications sales in 2002.

     -   Satellite Terminals. We design, develop, manufacture, market and sell
earth stations and land mobile earth stations (generally known as satellite
terminals or satellite telephones) for the INMARSAT M, Mini-M and M4 global area
network digital services. We discontinued our activities for IMMARSAT A and C
analog in 2000. Airborne satellite terminals for the INMARSAT Aero system are
not included in our delivery program in view of the specialized avionics
technology required to integrate the satellite terminals into an aircraft's
design.

                                       18

<PAGE>

[PHOTO OF EVOLUTION OF SATELLITE TERMINIALS]

         A satellite terminal is a compact transceiver of one or a few channels
linking individual ships or land mobile users to the INMARSAT satellite
communications network. Satellite terminals may be equipped with optional
features such as voice encryption, facsimile, circuit mode data, high-speed data
and credit card operation each of which permits the user to gain access to one
of the INMARSAT systems. Size, weight and service capability are the most
important design criteria for our satellite terminals. We market our satellite
terminals in over 70 countries.

         The WorldPhone is our INMARSAT Mini-M satellite terminal. The
WorldPhone utilizes the Mini-M systems spot-beam technology to target users
operating mostly outside the range of terrestrial and cellular networks. We
began commercial production of this product in early 1997 in response to orders
for over 3,000 WorldPhones received by the end of 1996, and we sold
approximately 4,000 units in 2002. While WorldPhone is a mature product for us,
we expect it to remain part of our product offering also during 2003 and 2004.
The WorldPhone Marine offers telecommunications via the Mini-M system that uses
spot-beam technology to cover the major ocean regions. Based on INMARSAT
registration data, we are one of the market leaders in terms of sales volume for
INMARSAT Mini-M satellite terminals.

         Our INMARSAT B products include marine, fixed and portable applications
for digital voice, data, facsimile and telex capabilities, such as the Marine
Saturn Bm which powers communications between a ship and the outside world via
INMARSAT B. Our INMARSAT B terminals offer bit rates of up to 16 kilobits per
second (voice) and 64 kilobit per second (data). We commenced sales of INMARSAT
B products in 1994.

         Our World Communicator is a terminal for the INMARSAT Global Area
Network digital servicethat we have been selling since the second quarter of
2000. In 2002 we sold 2,040 units as compared to 1,770 units in 2001.

                                       19

<PAGE>

         Our INMARSAT M products include fixed applications for digital voice,
facsimile and data capabilities for users of smaller ship-borne and land mobile
terminals, such as our Marine Saturn Mm, which provides comprehensive marine
communications services for vessels not obliged to meet full International
Maritime Organization, or IMO, carriage requirements via INMARSAT M.

         In 2002, the marine market accounted for approximately 43% of our
satellite terminal sales. The owners of larger commercial vessels and navy
fleets are our principal customers, for which we also supply, assemble and
install complete ship-borne telecommunications systems.

         Land mobile and portable terminals accounted for approximately 44% of
our total satellite terminal sales in 2002, as compared to approximately 52% of
our total satellite terminal sales in 2001 and 75% in 2000. We sell land mobile
terminals primarily to distributors in Europe and North America, for use in
overseas areas with less developed telecommunications infrastructures or in
areas experiencing natural or political emergencies, and in the states of the
former Soviet Union. In the land mobile market, our principal customers are
governmental organizations, U.N. organizations, news agencies and various aid
and rescue organizations operating in developing countries.

         We outsource manufacturing of our satellite terminals to Flextronics as
described more fully under "Suppliers and Manufacturing" , see page 24.

     -   Gateways and Land Earth Stations. We design, develop, manufacture, sell
and support gateways for satellite communications networks. Gateways, or land
earth stations, form the interface between terrestrial telecom networks and the
satellite system. Gateways are typically integrated systems consisting of
antennas and RF equipment, satellite modems, traffic control computers,
telephone/data switching equipment, terrestrial interface units and
administrative systems for alarm-handling, station configuration and billing. A
large satellite gateway can handle several hundreds of circuit-switched calls
simultaneously and thousands of packet-switched connections.

         To date, most of the satellite communications products and solutions
developed by us have been designed for the INMARSAT system, currently the
leading satellite-operator for global mobile personal communications systems.
Since we delivered our first INMARSAT-A gateway in 1982, we have introduced
successive product generations for the INMARSAT C, B, M, Mini-M and Aero
systems. In 1999, we launched the INMARSAT M4 global area network gateways. Our
sales of gateways were NOK 209 million ($26 million) in 2002, NOK 174 million
($19 million) in 2001 and NOK 237.6 million ($27 million) in 2000. INMARSAT has
a total of 266 earth stations in its network globally. We sell our products to
operators of land earth stations, or LES, and believe we are the biggest vendor
of existing systems in the INMARSAT market with a global market share of
slightly more than 50%. The INMARSAT network now serves 266 ocean regions, of
which we have delivered systems for 172 ocean stations. For purposes of these
numbers, we consider INMARSAT M and INMARSAT B as one system.

         During the past few years, there has been a further consolidation among
LES operators in the INMARSAT market. Some of these operators have either moved
their traffic to other LES sites or left the business and sold their customer
base to other operators. As a consequence, several sites have been closed down.
In spite of consolidation and its effects, we have increased the number of LES
operators we do business with, and we expect a further increase for 2003.

         We have developed a generic satellite gateway architecture for which we
are continually developing and improving building blocks for use in our gateway
products. Through the last few years we have been working on adding building
blocks targeted towards the systems where we currently see a market, primarily
systems that offer fixed/mobile Internet protocol multimedia services, but also
those offering narrowband handheld voice services. The building blocks are
generic modules or subsystems, which are based on industry-standard development
platforms, using industry-standard development tools and methods. Where we find
that we can add value to our customers, state-of-the-art Satcom-specific
technology is developed and integrated into the building blocks. All the
building blocks incorporate solutions for redundancy, enabling us to design
complete gateways with "no single point of failure." All the building blocks can
be tied together by industry-standard interfaces. This approach enables us to
offer anything from a complete turnkey system to any combination of subsystems
tailored to the needs of the

                                       20

<PAGE>

individual project. We can integrate both internally developed products and
best-of-class components from third-party vendors, or take part as a
subcontractor in somebody else's turnkey project.

         In supplying turnkey land earth stations, we obtain certain radio
frequency equipment and antennas from outside suppliers located principally in
the United States.

         Design and development of our gateways take place mainly at our
facilities in Oslo, Norway while manufacturing is currently outsourced to
Flextronics as described more fully under "Suppliers and Manufacturing" see page
24. Marketing, and distribution and sales is mostly geared towards direct sales
to customers and to a lesser extent through other business areas. However,
satellite terminals and satellite telephones are sold primarily through a
worldwide third-party distribution network. The business is co-ordinated across
our various subsidiaries and regional offices, which market and distribute the
products. For more information regarding our sales by geographical destination,
please see "--Sales, marketing and distribution."

         For information regarding our satellite broadband activities, please
see "-Broadband Access" below.

         Future prospects

         The unstable geo-politic situation in most of the world has resulted in
a better outlook for satellite communications markets especially during the last
part of 2002 and into 2003. However, it remains uncertain whether this
development will continue - and if so, for how long. Nera's recent success in
the satellite communication area are not only attributable to better market
conditions but also to sales of land-based and marine products that were
introduced in early 2002. We believe that innovations toNera's land-based and
maritime products position usfor changes in customer demand and increased
competition.

         In the longer term, an important part of our satellite business will be
to deliver terminals and upgrades of gateways within the INMARSAT market,
including the high-speed data terminal World Communicator and more updated
versions of the current INMARSAT products. We believe that the agreement we
reached with INMARSAT in April 2002 for the development of BGAN terminals, which
is described above, enhances our position as a major international supplier of
satellite based communication solutions.

         It it our ambition to maintain and strengthen our position as the
leading producer and supplier of satellite communications equipment within the
INMARSAT system. This implies further emphasis on product innovation and product
leadership within the maritime and land mobile markets, as well as the land
earth station market.

         BROADBAND ACCESS

         The broadband access business area was organized in the first quarter
of 2000 to benefit from the convergence of our experience in transmission
networks and satellite communications, with the goal of competing in the market
for fixed wireless access products. We expected that the wireless broadband
concept would offer last mile solutions because radios often offer advantages
which make them compete well with, or as supplement to, the fixed last mile
alternatives time of deployment, ease of installation, cost of deployment,
restitution of the equipment and scalable deployment. Telecommunications
providers have built fiber optic or other networks for transmission of traffic,
which are concentrated in areas where the number of connection points justifies
the expense of installing fixed network. The distance between the network and
the connection point in the customer's residence or place of business is
referred to as the "last mile" and there are many different technologies
available to make that last mile connection.

         Initially we concentrated our efforts within this area on our own
products under the name Velocity 2000, a wireless local loop infrastructure
which was acquired from Word Access in 2000, and the 40G LMDS product. Due to
changes in the market conditions, further testing of the Velocity product was
halted in September 2001 and we sold some of the Velocity assets in March 2002,
while retaining the LMDS technology pending future use.

                                       21

<PAGE>

         In late 2001, following a revision of our expectations for the wireless
broadband area, we divided our broadband activities bytransferring our satellite
broadband activities to a separate subsidiary, called Nera Broadband Satellite
AS incorporating the fixed wireless access activities into Nera Networks.

         Despite the temporary setbacks experienced in this area to date, we
intend to continue to develop our core technology, know-how and solutions in
preparation of becoming a player in the broadband access market. We aim to
become a leading supplier of wireless terrestrial broadband access using our
core expertise; radio technology. We believe we can offer cost-effective
solutions that can be installed quickly in both rural and urban areas. We
believe we can supply a competitive group of products particularly in areas
where infrastructure is limited as our broadband products do not depend on
existing infrastructure. During 2002 we have developed our core technology and
know-how through a number of projects described below.

         Since 2001, we are participatingd in an LMDS project piloted in
Svolvaer, Norway. The project's goal is to develop a quality broadband package
based on our advanced and unique radio technology. Initial LMDS pilot tests were
successful, and the project has continued in collaboration with Telenor, the
Norwegian national telephone operator until the present.

         After signing the first agreement to develop a wireless broadband
network for the municipal center Kyrksaeterora in Hemne, Norway, in the fall of
2001, we have won several contracts both nationally and internationally within
this area. In the beginning of 2002, we agreed with BaneTele, a net work
operator in Norway, to provide wireless broadband solutions to their
customer-base, mainly the utility-companies in Norway. By mid 2003 we have
delivered broadband wireless solutions to more than 50 projects in our home
market. We have also established business within this area southern Europe and
in South East Asia with installation in the Philippines, Indonesia and Malaysia,
in Latin America and the Caribbean and intend to expand into Africa.All of these
solutions are based on a combination point to multi point radio from
OEM-partners and our own point to point access radio and network management
system. We expect that about 50 per cent of our revenue within this area will
come from our foreign operation in 2003.

         Nera Broadband Satellite AS, which continues the company's activities
in the field of broadband via satellite were restructured in 2001. In 2002 we
were narrowly focused on digital video broadband return channel system, known as
DVB-RCS, technology. Within this business area we gained considerable knowledge
in 2001 through the development of a digital video broadcast products and
collaboration with Shinsat on the iPSTAR product. This product delivers data
over satellite and Nera entered the project with a firm belief on an emerging
market for this solution especially in Asia.

         At the end of 2002, Nera Broadband Satellite entered into a contract
with ShinSat for the delivery of 18 gateways for inexpensive broadband services
over the iPSTAR satellite system to Asia and the Pacific region. This is the
largest contract ever entered into by Nera Broadband Satellite. The fact that
Nera was selected for this contract consolidates our strong standing with
regards to technology for broadband over satellite. We expect that our
performance in this contract will lead to additional contracts in Asia. Nera
Broadband Satellite also won several minor contracts for DVB-RCS terminals on
the satellite market for broadcasting in 2002.

         FUTURE PROSPECTS

         In the years ahead, Nera Broadband Satellite expect to see interesting
and challenging opportunities, as the commercial market for its products has
slowly started to grow in 2003. Generally, the broadband market is becoming and
increasingly important market segment for us, and we intend to further develop
the wireless solutions to build a strong position in the wireless broadband
marketplace.

                                       22

<PAGE>

         NERATEL

         In November 2001, we purchased additional shares in our Singapore
subsidiary, NeraTel, to increase our ownership interest from 47.3% to 50.18%,
for a total purchase price of NOK 32.6 million (US$3.6 million). At that time,
NeraTel increased its involvement in our Asian business and began marketing our
products in India, China, Bangladesh, Mongolia and Sri Lanka. To date, we have
not yet seen significant results from that effort. NeraTel already served
Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, Brunei,
Laos, Cambodia, Myanmar, Taiwan and Korea for us and will continue to do so.
NeraTel is headquartered in Singapore, with its principal business address at
109 Defu Lane 10, Singapore 539225, telephone +65 281 3388.

         NeraTel's business activities are divided into the segments of
telecommunications, information technology and electronics contract
manufacturing, which are briefly described below:

     -   TELECOMMUNICATIONS -- this segment manufactures and markets microwave
         radio products which can be used as a flexible and cost-effective
         method of establishing networks. Rapid growth of cellular usage
         provides NeraTel with opportunities for further development in close
         cooperation with us. This business area of NeraTel also includes
         satellite communication through INMARSAT system and the Nera WorldPhone
         terminal used for phone calls, fax, data transmission or internet
         connection irrespective of location.

     -   INFORMATION TECHNOLOGY -- this segment recognizes the growing
         significance of internet communication and markets related products and
         services, such as security solutions and extended authentication
         services, and the internet traffic management, or ITM, consultation to
         ensure after-sale satisfaction of the customers. A separate unit
         dedicated to optical networks uses its experience as a system
         integrator to undertake technology and market research to provide
         solutions for next generation technology, such as optical wireless, or
         Infra-Red, and wired, or A-PON, technologies.

     -   CONTRACT MANUFACTURING -- this activity is operated by Nera
         Electronics, a subsidiary of Nera Tel and listed on the stock exchange.
         Nera Tel owns approximately 70 percent of Nera Electronics. The
         company's strategy is to offer customers a production capability for
         complex electronics in the low to medium-sized series. The company's
         customers include international companies within the health sector,
         telecommunications, measuring apparatus and optics. The company is in
         the process of qualification with several customers and is currently
         working on the completion of several prototypes. In 2002, the company
         established a sales office in the USA in order to expand its customer
         base, and plans similar offices in Europe and Asia in 2003.

         NERA FINANS AS

         Nera Finans AS was set up as a separate entity in March 1995 in order
to handle our operational finance activities. In May 2002, we decided to
centralize all activities performed by Nera Finans in Nera ASA treasury
department in Bergen and therefore close its existing branch in Dublin. This
change was effected through the merger of Nera Finans into Nera ASA in October
2002, with tax and accounting implications effective on January 1, 2002. This
change has resulted in reduction of costs and increased coordination between our
operations and financing activities.

         In addition to conducting our daily operational activities, Nera Finans
has historically also been responsible for our sales support financing program,
which provided some of our customers with credit through the financial markets
in Norway and abroad, provided guarantees to other credit institutions or
provided our direct participation in the form of leasing, loans, and, in some
cases, by purchasing equity. During 2002, we did not provide for any material
credit to new customers but limited our activity in this area to managing our
existing financing programs. At December 31, 2002, Nera ASA had a total of
approximately NOK 110 million ($15.9 million) in loans outstanding to customers
in connection with the financing of various projects

         One loan to customers is individually large enough to merit a separate
discussion. In October 1997, Nera Finans AS provided financing of $5.5 million
to CNH Communications de Venezuela, or CNH, in connection with

                                       23

<PAGE>

an order for radio link equipment for the purchase of such equipment. Through
a series of transactions and events, including bankruptcy proceedings for CNH's
parent in the United States, the nomal value on the loan is currently
approximately $10 million. Nera has made provisions regarding this loan. Some
of this amount is collateralized by the equipment we delivered. CNH, however,
continues to encounter financial problems, primarily due to the political and
economical situation in Venezuela. It is highly uncertain whether we will
recover the amounts outstanding on our loan but we continue to actively monitor
CNH's efforts to improve its financial situation and are working with CNH on
alternative financing methods.

         SUPPLIERS AND MANUFACTURING

         As described in our "Transmission networks," "Satellite communications"
and "Broadband access" business segments, we obtain components and subsystems
for our products and projects from suppliers worldwide, and we seek to use
commercially available components and subsystems wherever practicable. We
attempt to increase the number of common components across all our product lines
to permit more efficient use of capital and more flexibility in logistics
control. Logistics and process control techniques have assumed greater
importance in our manufacturing activities as the relative value of our products
represented by materials has increased while that of labor has decreased. We
therefore seek to establish close cooperation with a limited number of approved
suppliers.

         Certain components and subsystems for our products can be obtained from
only a limited number of sources. A significant interruption in the delivery of
such items in a satisfactory manner could adversely affect our ability to make
timely deliveries of particular products.

         The most important components of our products are application-specific
integrated circuits known as ASICs, which are designed by us for manufacture by
third parties. Only a small number of suppliers in the United States, Japan and
Europe manufacture ASICs suitable for our needs. While this market is currently
competitive, it is possible that one supplier may come to dominate the market
for ASICs. Any change in supplier may result in production delays as a new
supplier's products are adapted to our requirements. We take measures to reduce
our reliance on any one supplier by maintaining substantial inventories of the
ASICs we require, by obtaining these components from more than one approved
supplier, to the extent practicable, and by maintaining relatively long-term
contracts with our principal suppliers.

         We outsource the manufacturing of our satellite communications
terminals to Flextronics and use Kitron as an alternative manufacturer. We use
the same suppliers for manufacturing relating to our transmission networks
business if we do not have sufficient manufacturing capacity ourselves. In
connection with the sale of our production facilities in Oslo to Flextronics in
May 2000, we entered into a number of agreements setting forth the scope of our
long-term cooperation and of manufacturing by Flextronics of various products
for our business. These agreements are generally on terms standard in the
industry, have initial terms of three years (subject to one-year renewals) and
can be terminated by either party with notice, and by us due to quality
concerns. During each year of the three-year initial term, we must use
Flextronics' Oslo facility to manufacture products with a minimum value of NOK
200 million, NOK 180 million and NOK 140 million, respectively. During the first
two years, we have met the thresholds and expect to reach the threshold during
2003 as well. Flextronics must dedicate a certain amount of resources to us. Our
relationship with Kitron is governed by two frame agreements, which are also
generally on terms standard in our industry.

         CUSTOMERS

         From 2000 through 2002, our principal customers have included the
Norwegian Defense Communications Agency (Norway), Ericsson (Poland, Mexico,
Morocco and Brazil), Telefonos de Mexico (Mexico), IUSACELL (Mexico), Promon
Electronica Ltda. (Brazil), Telenor (Norway), British Telecom PLC, Telcel
(Venezuela), Lucent Technologies (Peru, India, Czech Republic and Saudi Arabia),
NTL (Australia), Globe Telecom (Philippines), Datang (China), ITI (India),
Microcell Links (United Kingdom), National Logistics Cell (Pakistan), Telecom
Italia (Italy), Hong Kong Telecom (Hong Kong), Total Access Communications
(Thailand), and Singapore Telecommunications Ltd. (Singapore). All of the
Ericsson entities, taken together accounted for approx. 12% of all sales in
2001. No single customer accounted for 10% or more of our sales in 2002.

         PRODUCT WARRANTY AND SERVICE

                                       24

<PAGE>

         Although the terms of specific warranties vary, we typically warrant
the performance of our goods for a period of one year following acceptance of
such goods and/or two years following the shipment of such goods. We generally
agree to perform all warranty work at our own expense, including parts, labor
and miscellaneous cost, such as travel to the site of repairs, shipment of goods
to us and insurance. When carrying out our contracts, we typically post a
warranty bond, usually in the amount of 10% of the total value of a contract, at
the time of provisional acceptance of goods by the customer. Once the customer
has utilized the goods for one year, the customer takes final acceptance and the
warranty bond is canceled. We generally guarantee that we will stock spare parts
for the goods sold for periods ranging from five years through fifteen years,
depending upon the specific terms of the particular contract. At the end of
2002, our reserve for warranty claims amounted to approximately NOK 36.7 million
($5.3 million).

         In addition, we issue bid and performance bonds in connection with many
of our contracts, which may be called by customers in certain circumstances,
such as where there is a major default in our performance of a contract. As of
December 31, 2002, we had approximately NOK 119 million ($17 million) of bid and
performance bonds outstanding. We have experienced no material losses to date in
relation to any calling of performance bonds.

         BACKLOG

         The following table indicates the amount of unfilled customer orders
for our products on December 31 of each of the years presented:

<TABLE>
<CAPTION>
                   1998          1999         2000        2001        2002
                   ----          ----         ----        ----        ----
                                       (NOK IN MILLIONS)
<S>               <C>            <C>         <C>         <C>          <C>
Backlog.........  1,336           998        1,158       1,023         908
</TABLE>

         These amounts reflect only those orders believed to be firm, based on
executed contracts and that portion of long-term contracts which had been
released for production but which were incomplete as of the applicable date.
Amounts contained in backlog for any contract or order may not represent the
total amount of such contractor order. Anticipated, but not yet firm, orders are
not included within backlog but are taken into account in determining our
available production capacity.

         During the first six months of 1998, the order backlog was reviewed and
individual orders were removed or reduced with a total reduction of NOK 300
million. The sales of Nera transmission management network and power network
communications also contributed to the reduction of backlog. The backlog figures
through 1998, include an estimated amount of airtime billing sales for airtime
billing services rendered, but not yet billed, as of the relevant date.
Approximately NOK 113 million of estimated airtime billing sales are included in
the backlog figure for December 31, 1998. The major reason for the decline in
order backlog in 1999 was the result of the sale of a majority of NeraTel in
Singapore and of the airtime billing business in the UK. As a consequence of
these sales, the order backlogs of these entities were no longer included in our
order backlog. The value of this order backlogs was approximately NOK350 million
at the time each of these businesses were sold. In addition to this, there were
fewer turnkey contracts registered as order backlog. The amount of our backlog
as of any date does not otherwise reflect expected sales for any period. Our
backlog increased during 2000 due to improved market conditions primarily for
our transmission networks products and to a lesser extent for satellite
communications products. Our backlog decreased during 2001 and 2002 due to the
global economic slowdown in general, and its adverse effects on the
telecommunications equipment market, in which we operate, in particular.

         We believe that approximately 85% of our backlog as of December 31,
2002 will be shipped during 2003.

                                       25

<PAGE>

         SALES, MARKETING AND DISTRIBUTION

         We have invested significant resources in order to expand our
international market presence through the establishment of our own distribution
network in regions where we have previously sold products through local agents.
We have wholly or partially owned subsidiaries in Norway, the United Kingdom,
Germany, Singapore, Hong Kong, Brazil, Colombia, Mexico, Venezuela, India, and
the United States, and market our products in over 70 countries. We have sales
offices, or representatives, in: Moscow, Russia; Warsaw, Poland; Jakarta,
Indonesia; Islamabad and Lahore, Pakistan; Johannesburg, South Africa; Beijing,
China; Hanoi, Vietnam; Madrid, Spain; Amman, Jordan; Manila, the Philippines;
Bangkok, Thailand; Kuala Lumpur, Malaysia; Dubai; United Arab Emirates, Lucca,
Italy and Buenos Aires, Argentina. In 1999 and 2000, we focused our marketing
efforts on strengthening our subsidiaries in Latin America and our sales offices
in Asia by increasing the number of sales engineers. During 2001, we opened new
offices in Prague, the Czech Republic; Sydney, Australia; and Madrid, Spain. In
2002, we did not make any changes to our international market presence.

         The figures below show the geographical distribution of our orders
received and sales in 2002.

<TABLE>
<CAPTION>
                                   ORDERS RECEIVED FROM GEOGRAPHICAL      SALES BY GEOGRAPHICAL
                                          DESTINATION IN 2002              DESTINATION IN 2002
                                 -------------------------------------    ---------------------
                                               (NOK IN MILLIONS, EXCEPT PERCENTAGES)
<S>                                <C>                   <C>               <C>            <C>
Asia......................           899                 35.7%               863          35.3%
Americas..................           545                 21.6%               538          22.0%
Rest of Europe............           442                 17.5%               498          20.4%
Norway....................           282                 11.2%               276          11.3%
United Kingdom............           197                  7.8%               110           4.5%
Oceania...................            41                  1.7%                55           2.2%
Africa....................           113                  4.5%               105           4.3%
   Total..................         2,519                  100%             2,445           100%
                                   -----                 ----              -----          ----
</TABLE>

         Transmission networks

         We distribute our transmission equipment and systems through direct
marketing from Norway and through our regional sales offices and subsidiaries,
as well as through selected agents. In recent years we have has set up a number
of sales and representative offices in various countries in order to strengthen
our local presence. Sales of equipment for radio link systems and turnkey
networks may also be made through other telecommunications network suppliers
such as Lucent Technologies, Nokia and Ericsson. Our sales force consists of
engineers and other employees involved in the sales process based in Norway and
in various regional offices. Our sales representatives work with customers and
our engineering and manufacturing personnel to configure systems to meet
specific customer requirements.

         We market our microwave radio transmission equipment and systems
throughout the world, principally in Southeast Asia, Norway, the United Kingdom,
several countries in Western Europe, selected markets in eastern Europe
(principally the Czech Republic, Poland, Romania and Russia), China, Latin
America, the Indian subcontinent and sub-Saharan Africa.

         We expect that our CityLink products, which also are available for the
SONET standard used in the United States, may present new opportunities for us
in the U.S. and Canadian markets.

                                       26

<PAGE>

         Satellite communications

         We distribute our satellite terminals primarily through our
subsidiaries in the United Kingdom, Germany and Southeast Asia, and through
independent distributors in Southeast Asia, the United States, Europe and other
regions. Management estimates that this network of subsidiaries and independent
distributors, which serves approximately 70 countries, accounts for
approximately 90% of our sales of satellite terminals.

         Because the market for land earth stations consists primarily of a
small number of large projects requiring extensive technical support, we
coordinate our sales and marketing activities for land earth station systems and
equipment from our offices in Norway and through our associated companies in
Southeast Asia.

         Broadband access

         We intend to distribute our broadband access terrestrial products
primarily though our network of subsidiaries and agents. For our broadband
access satellite products, we intend to use distributors based primarily in
Scandinavia, South-East Asia and Europe.

         INTELLECTUAL PROPERTY

         Given the rapid pace of product development and the short product life
cycles in our principal businesses, we formerly did not attempt to secure patent
protection for our products and processes. We seek patent protection for some of
our products and processes. We have applied for and have been granted patent
protection for several product and process developments within our transmission
networks and satellite communications business areas.

         We have also applied for, and have obtained, trademark protection for
our logo in 70 countries.

         COMPETITION

         Our products face substantial competition from other telecommunications
product lines and alternative telecommunications transmission media. Many of our
competitors have significantly greater financial, marketing and operating
resources than us, as well as broader product lines.

         Our principal competitors in transmission equipment, systems and
services are large telecommunications equipment suppliers that have a strong
presence in the markets for transmission and switching equipment and that can
supply all elements of telecommunications networks. Most of these suppliers have
greater resources than us. Our major competitors in the market for transmission
systems include: Alcatel Alsthom (France), NEC Corporation (Japan), Fujitsu Ltd.
(Japan), Northern Telecom Limited (Canada), Marconi (the United Kingdom) and
Siemens AG (Germany) Digital Microwave Corp. (United States) and Harris (United
States). In the market for antenna systems, our principal competitor is Andrews
(United States). In addition, we face competition from a number of niche players
in certain markets, especially in the market for low-capacity microwave radio
equipment. Competition between firms is based primarily on price and on a number
of other factors, depending on the nature of the customer. For contracts with
PTTs, competition is also generally based on technical merit, while ability to
make rapid delivery typically is more important for contracts with newly
established telecommunications providers. Competition to supply
telecommunications systems in developing countries and to new operators in any
given market is often based on the ability to arrange development aid financing.

         We believe that the market for radio link systems (radio equipment with
accompanying third-party equipment and services) amounts to around USD 30
billion. Worldwide, three suppliers are each believed to have approximately 10%
of the market (Ericsson, Alcatel and Siemens), while five to eight suppliers,
including us, are believed to have market shares of approximately 5% to 8%. The
other players in the transmission market are each believed to have market shares
of approximately 2%.

         The market for mobile satellite terminals and land earth stations is
characterized by strong competition and by an increasing number of new
suppliers. Our main competitors are: Japan Radio Corporation Ltd. (Japan), NEC
Corporation (Japan), MTI Technology Corp. (United States), Atlas (Germany),
Scientific Atlanta Inc. (United

                                       27

<PAGE>

States), Thrane & Thrane (Denmark), SED Systems Inc. (Canada), Comsat
Corporation (United States), Toshiba (Japan), Hughes Network Systems, Inc.
(United States), Mobile Satellite Products Corp. (United States), Trimble
Navigation (United States) and Magellan (United States). Competition in the
markets for both mobile satellite terminals and land earth station systems is
based primarily on technical merit and price. Other competitive factors include
size, weight and ease of use for satellite terminals. Today the traditional
market for INMARSAT products is mature. In the future, INMARSAT will probably
face increased competition from new satellite systems if and when financing
solutions for these systems have been found. Growth prospects for the
traditional products and services for the INMARSAT market are therefore still
good. The traditional products will still be an important platform and reference
point for future growth within new systems. We believe that our broad experience
in supplying a variety of land earth stations and the operational reliability of
our stations, together with our multiprocessor technology, make us a competitive
supplier of land earth station equipment and complete land earth stations. While
we believe there will be opportunities to supply equipment for new satellite
communications systems as they become operational, we cannot assure you that we
will be able to compete effectively in these markets.

         The market for broadband access products to bridge the last mile is
very competitive. Our main competitors in the point-to-multipoint transmission
area are ECI (Israel), RadWin (Israel), AirSpan (Israel) and Alcatel (France)
and in the LMDS area are Harris (United States), BreezeCom (United States),
Alcatel (France), Spike (Israel), Floware (United States), Netro (United States)
and Adaptive Broadband (United States).

         Future prospects

         Due to the uncertainty surrounding the world economy and the
telecommunications industry and related adverse effects on financial investments
in this area, as well as overproduction in some sectors and pressure on prices
of products similar to ours, we do not forecast any overall growth for our
products in our markets during 2003. We had hoped to see a gradual increase in
investments in the telecommunications sector resulting in part from the launch
of the next generation mobile, or 3-G, designs but have not yet seen this
increase. This is partly due to a perceived lack of consumer interest in 3-G
products. We do not know when or if 3-G designs will have widespread acceptance.
However, even if 3-G designs become more popular, negative growth rates in any
of the national economies that we operate in may continue to affect us
negatively along with other wireless infrastructure providers.

         In the years ahead, an important part of our satellite business will be
to deliver terminals and upgrades of gateways within the INMARSAT market,
including the next generation service, INMARSAT-4, and later versions of the
current INMARSAT products, niche markets in which it has a strong position
today.

         Developments in the transmission market are currently being driven by
the expansion of mobile services, the Internet and the growing demand for data
transfer services. Although the traditional PDH market is still growing, with
the exception of the U.S., demand for faster and larger transmission capacity is
expected to lead to increased demand for radio link products utilizing SDH
technology.

         The constantly growing traffic is also expected to lead to a sharp rise
in high-capacity SDH systems of the CityLink type and LMDS products. An
increased volume in terms of numbers of units may compensate for price
reductions for these products.

         REGULATION

         International standards

         The telecommunications industry is to a large extent regulated by
internationally agreed standards. The common standards are set for the purpose
of linking networks and services and ensuring the interoperability of equipment
on an international basis. In addition, the use of frequency spectrum for
wireless communication is also regulated by international agreement. In
designing and developing our products, we comply with all material regulations
and standards relevant in the markets in which we operate. The main standard
setting bodies are international organizations, such as the ITU and ETSI.
Certain organizations such as INMARSAT can also operate as de facto standard
setting bodies. The standards set for the telecommunications industry by such
bodies are made

                                       28

<PAGE>

in conjunction with feedback received from telecommunications operators and, to
a lesser extent, from producers of telecommunications products, such as us.

         Environmental matters

         Our manufacturing operation is subject to various laws governing the
protection of the environment. These laws and regulations are subject to change,
and such change may require us to improve technology or incur expenditures to
comply with such laws and regulations. We believe that we comply in all material
respects with applicable environmental laws and regulations and do not expect
that any costs incurred in connection with complying with such laws and
regulations will have a material effect on our results of operations, financial
position or liquidity.

         Our manufacturing facility is located in Norway, which has
comprehensive and stringent environmental regulatory frameworks. We use certain
materials and processes that may be hazardous to the environment. Pursuant to
Norwegian environmental regulations, we are required to carry out regular tests
for water pollutants in respect of the Bergen facility and to file an annual
pollution report with the Statens Forurensningstilsyn, the Norwegian
environmental agency, detailing the level of pollution produced by us. We
believe that we are in material compliance with acceptable pollution limits.

         Export licenses

         Our operations in Norway are subject to Norwegian export license
requirements. Export licenses are required only for our high-capacity microwave
radio transmission equipment. The Norwegian export control authorities grant
export licenses for products after scrutinizing military end-users, end user
countries where there is a war or warlike conditions or countries known for
their violations of human rights or support of international terrorism. The
Norwegian export license requirements have not materially restricted our ability
to make export sales.

         Because we are given access on an open license basis to certain
high-technology products having their origins in the United States, we are
subject to compliance with the U.S. Export Administration Regulations. Since
1986 we have maintained an internal export control program under which we have
achieved compliance with such regulations. These regulations have not materially
restricted our ability to make export sales.

         C.       ORGANISATIONAL STRUCTURE

         The following is a list of the subsidiaries we consider significant to
our business, including the country of formation and our direct and indirect
proportion of ownership interest in each subsidiary:

<TABLE>
<CAPTION>
                                                                                          % OF
DIRECT SUBSIDIARIES                            COUNTRY OF FORMATION                     OWNERSHIP
<S>                                            <C>                                      <C>
Nera WBA AS                                          Norway                                100
Nera Networks AS                                     Norway                                100
Nera Satcom AS                                       Norway                                100
Nera Telecommunications Ltd                          Singapore                           50.18
Nera Telecommunicaciones Latin-America SA            Venezuela                             100
</TABLE>

<TABLE>
<CAPTION>
                                                                                          % OF
INDIRECT SUBSIDIARIES                          COUNTRY OF FORMATION                     OWNERSHIP
<S>                                            <C>                                      <C>
Nera Networks Pty Ltd                                Australia                             100
Nera America Latina Ltda                             Brazil                                100
Nera America Latina Ltda Sucursal Colombia           Colombia                              100
Nera GmbH                                            Germany                               100
Nera Ltd                                             Great Britain                         100
Nera (HK) Ltd                                        Hong Kong                             100
PT Nera Indonesia                                    Indonesia                             100
</TABLE>

                                       29

<PAGE>

<TABLE>
<S>                                            <C>                                      <C>
Nera (India) Ltd                                     India                                 100
Nera Networks Srl                                    Italy                                 100
Nera de Mexico SA de CV                              Mexico                                100
Nera Infocom (M) Sdh Bhd                             Malaysia                              100
Nera (Malaysia) Sdn Bhd(1)                           Malaysia                               30
Nera Mechatronics AS                                 Norway                                100
Nera Broadband Satellite AS                          Norway                                100
Nera (Philippines) Inc.                              Philippines                           100
Nera Networks Polska Sp.z.o.o.                       Poland                                100
Nera Electronics Ltd                                 Singapore                              68
Nera (Thailand) Ltd                                  Thailand                              100
Nera Telecommunications (Taiwan) Co, Ltd             Taiwan                                100
Nera Americas Holding Inc.                           USA                                   100
Nera Americas Inc.                                   USA                                   100
Nera Networks Inc.                                   USA                                   100
Nera Telecommunications Inc.                         USA                                   100
</TABLE>

---------------------
(1)      Nera (Malaysia) Sdn Bhd is consolidated based on a shareholder
         agreement, that result in ownership of more than 50%.

         With respect to our operations in some countries in South America,
there may be restrictions on our subsidiaries' ability to transfer funds to us.
These restrictions may be in the form of taxation of dividends. Should these or
similar restrictions limit our ability to receive funds from our subsidiaries,
they would generally be able to extend the same funds to us in the form of
loans.

         D.       PROPERTY, PLANTS AND EQUIPMENT

         As of December 31, 2002 we had production facilities in Bergen, Norway.
This facility is leased by us and encompasses approximately 20,000 square meters
of workshops for electronic, electrical and mechanical engineering and
manufacturing. The following table gives the location and general character of
the principal plants and properties that were owned or leased by us and our
subsidiaries as of December 31, 2002:

<TABLE>
<CAPTION>
   LOCATION                    PRINCIPAL ACTIVITIES                            TITLE                          AREA
   --------                    --------------------                            -----                          ----
<S>                    <C>                                         <C>                                     <C>
Bergen, Norway         Headquarters; production of microwave       Leasehold expires 2011 with option      20,000m(2)
                       transmission equipment and systems          to extend to 2026

Bergen, Norway(1)      Office space; production of satellite       Leasehold expires 2003(1)                4,000m(2)
                       terminals, land earth station equipment
                       and power systems telecommunications
                       equipment

Asker, Norway          Office space                                Leasehold expires 2008                   3,000m(2)

Luton, England         Office space                                Leasehold expires 2008                   2,800m(2)

Singapore(2)           Office space, warehouse, production         Leasehold expires 2012 with an           3,200m(2)
                       facilities                                  option for a further term of 30 years
</TABLE>

-----------
(1)      Since our lease is expiring, we have decided to exercise our option to
purchase this 4,000 m2 building at Kokstadveien 25 for NOK 22.5 million plus an
option premium in the amount of NOK 5 million. This acquisition will be
effective on December 31, 2003.

(2)      Relates to our majority-owned subsidiary, NeraTel.

                                       30

<PAGE>

         In 2002, we paid an aggregate of NOK 42.5 million ($5.3 million) in
periodic rental payments on our principal plants and properties. We believe our
facilities are sufficient for our business activities.

         ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

         APPLICATION OF CRITICAL ACCOUNTING POLICIES

         Our consolidated financial statements are prepared in accordance with
the Norwegian Accounting Act 1998 and Norwegian generally accepted accounting
principles, and in addition are reconciled to accounting principles generally
accepted in the United States. Below is a description of accounting policies,
which we consider critical to the preparation, and understanding of our
consolidated financial statements, including the accounting principles selected
for the annual reporting of our US GAAP results. In addition, certain amounts
included in or affecting our financial statements and related disclosure must be
estimated, which requires us to make assumptions with respect to values or
conditions which cannot be known with certainty at the time the financial
statements are prepared. Actual results may differ from these estimates under
different assumptions or conditions. The selection of critical accounting
policies, the judgments and other uncertainties affecting the application of
those policies and the sensitivity of reported results to changes in conditions
and assumptions are factors to be considered when reviewing our consolidated
financial statements. We believe that the following critical accounting policies
set forth below involve the most significant judgments and estimates used in the
preparation of our consolidated financial statements. We evaluate these policies
on an ongoing basis, based upon historical results and experience, consultation
with experts, trends and other methods we consider reasonable in the particular
circumstances, as well as our forecasts as to how these might change in the
future.

         Revenue Recognition

         Approximately 20%, 25% and 25% of our revenues for the years ended
December 31, 2002, 2001 and 2000, respectively were derived from projects
involving the customization, installation and integration of complex
telecommunications equipment. Many of these contracts are for large turnkey
projects, for which we purchase a relatively high proportion of components from
third-party suppliers, and thus our sales and margins may fluctuate depending on
the proportion of our large turnkey projects. Revenues on long term contracts
are recognized using the percentage of completion method of accounting.
Additionally, income recognition on longer term contracts is deferred until
progress reaches a level of completion (generally based on established
milestones) sufficient to reasonably estimate the probable outcome. Project
revenues include direct materials, wages, and other direct costs, together with
indirect costs and portion of profit, which can be allocated to the project. For
certain contracts, where the delivery of equipment is clearly separable from
installation, training and other aspects of the contract, we segment the
contract and recognize revenue on each segmental portion individually. If
estimated total costs on a contract indicate a loss, the entire amount of the
estimated loss is provided for currently.

         Revenue from sale of goods is recognized net of discounts and recorded
when shipped and/or services are performed and the risk of loss passed to the
customer. This requires us to assess at point of delivery whether these criteria
have been met. Upon making such assessment revenue is recognized.

         Allowances for doubtful accounts and obsolete inventory

         We maintain allowances for doubtful accounts for estimated losses
resulting from the subsequent inability of our customers to make required
payments. If the financial conditions of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required. Management specifically analyses accounts
receivables and analyses historical bad debt, customer concentrations, customer
creditworthiness, current economic trends and changes in our customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts. If
market and economic conditions are less favorable then those predicted by
management additional allowance may be required.

                                       31

<PAGE>

         We periodically review the lower of cost or market carrying value of
inventory. This requires management to estimate the market value based upon
assumptions about future demand and market conditions. Any difference between
the cost of inventory and the estimated market value results in a write-down of
inventory for the estimated obsolescence or unmarketable inventory. If actual
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.

         Impairment

         We have made investments in tangible assets, goodwill and other
intangible assets, and other investments. These assets and companies are tested
for impairment when circumstances trigger an impairment test. During 2001 and
2002, the market prices for telecom companies and assets have decreased
significantly. In 2001 , we made substantial write-downs of tangible assets,
goodwill and other intangible assets.

         Factors that we consider important and that could trigger an impairment
review include the following:

             -    significant fall in market values;

             -    significant underperformance relative to expected historical
                  or projected future operating results;

             -    significant changes in the use of our assets or the strategy
                  for our overall business; and

             -    significant negative industry or economic trends.

         The principles for impairment testing are described in the accounting
policies. For tangible and intangible assets, the assessment is made based on
estimated recoverable amount, which is the higher of estimated discounted future
cash flow and sales price less cost to sell. When such amounts are less than the
carrying amount of the asset, a write-down to estimated recoverable amount is
recorded.

         If quoted market prices for an asset or a company are not available, or
the quoted market prices cannot be regarded as fair market value due to low
trading liquidity, fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Estimating fair values of assets and companies must in part be based on
management evaluations, including estimates of future performance, revenue
generating capacity of the assets, assumptions of the future market conditions
and the success in marketing of new products and services. Changes in
circumstances and in management's assumptions may give rise to impairment losses
in the relevant periods.

         Goodwill is reviewed based on an estimated fair value of the reporting
unit it refers to. Fair value of the reporting unit is based on quoted market
share price (adjusted to reflect a control premium for thosesubsidiaries in
which we have effective control) or discounted cash flows of the reporting unit
where quoted market share price is not available.

         To assess impairment of property, plant and equipment and amortizing
intangible assets for purposes of U.S. GAAP, we apply the guidance outlined in
SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets as of
January 1, 2002. Prior to 2002, we applied SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", to
all long-lived assets, including goodwill. If we conclude that impairment
indicators exist, we will initially review for possible impairment by assessing
the undiscounted cash flows expected to be derived from the asset or group of
assets, comparing the lowest level of total expected undiscounted cash flow to
the carrying value. If the carrying value of the asset or the group of assets
exceeds the sum of the undiscounted cash flows, impairment is considered to
exist. An impairment charge is assessed by comparing the assets fair value to
the carrying value. Fair value can be calculated by a number of different
approaches, including discounted cash flow, comparables, market valuations or
quoted market prices. The process and steps required to assess the possible
impairments of assets, including the identification of possible impairment
indicators, assessing undiscounted cash flows, selecting the appropriate
discount rate, the calculation of

                                       32

<PAGE>

the weighted average cost of capital and the discounts or premiums inherent in
market prices requires a substantial amount of management discretion and
judgment. If actual results differ from these estimates, or if we adjust these
estimates in future periods, operating results could be significantly affected.
This did not result in any material differences from the result in accordance
with Norwegian GAAP as December 31, 2002.

         As of January 1, 2002, for US GAAP reporting purposes, we adopted the
requirements of SFAS 142, Goodwill and Other Intangible Assets, and as a result
we have ceased amortization of goodwill and indefinite lived intangible assets
for U.S. GAAP purposes. The requirements of SFAS 142 include that goodwill be
tested for impairment at least annually (and between annual tests when certain
triggering events occur) using a two-step methodology. The first step screens
for potential impairment at the reporting unit level, while the second step
measures the impairment, if any. Under U.S. GAAP, the quoted market price of an
asset, if available, should be used. If not available, then other valuation
techniques, including discounted cash flow, comparables, etc., are acceptable.
The selection of the various assumptions that are necessary to arrive at the
fair value of a reporting unit, including the assumptions used in the underlying
business plans, require substantial management judgment and discretion. If
actual results differ from these estimates, or if we adjust these estimates in
future periods, operating results could be significantly affected. Based on our
review at January 1, 2002 upon transition and at December 31, 2002, no goodwill
impairments were noted.

         Deferred tax assets, valuation allowances for deferred tax assets, and
tax losses.

         Significant management judgment is required in determining our
provision for income taxes, deferred tax assets, deferred tax liabilities and
valuation allowances to reflect the potential inability to fully recover
deferred tax assets. We record valuation allowances to reduce our deferred tax
assets to an amount that is more likely than not to be realized. Our analysis of
realizability includes estimating taxable income in the jurisdictions in which
we operate and the period over which the deferred tax assets and liabilities
will be recoverable. If actual results differ from these estimates, or we adjust
these estimates in future periods, we may need to establish an additional
valuation allowance which could adversely affect our financial position and
results of operations. Our income taxes have been increased by valuation
allowances mainly related to our foreign operations. Furthermore, we have not
recorded deferred tax assets that may be realized upon possible future
disposalof shares in subsidiaries and associated companies only if it is
apparent that the difference will reverse in the foreseeable future.

         A.       OPERATING RESULTS

         We have restructured our operations significantly during the past six
years, including during 2002. The effects of the most recent restructuring
continue to be felt in 2002. These restructurings are described in "Item 4.A.
History and Development of the Company" as well as below in this section.

         Prior to 2001, we grew significantly in response to market trends that
increased worldwide demand for telecommunications equipment and infrastructure.
This growth imposed a significant strain on our resources, particularly our
financial resources, as we made substantial efforts and expenditures to increase
sales to meet demand. Among other things, we invested significant resources in
research and development in order to maintain our technological expertise and
renew our product lines. Our research and development expenditures, not
including grants from suppliers and governments, amounted to NOK 239.6 million,
NOK 347 million, and NOK 286.7 million in 2002, 2001 and 2000. We expect that we
will be required to maintain substantial amounts in research and development
activities, even though our business has seen a significant drop in demand, so
that we may maintain the competitiveness of our products.

         With respect to our operating results discussed below, please note that
NeraTel, our Singapore subsidiary, was not consolidated in our financial
statements from July 1999 to November 2001, as we owned less than 50% of NeraTel
during that period. Prior to July 1999 and starting again in December 2001 when
we increased our ownership of NeraTel above 50%, NeraTel's results have been
consolidated with our results. Due to the different accounting treatment of
NeraTel, our results for the above periods are not comparable. It should be
noted, however,

                                       33

<PAGE>

that for 2001, the impact of NeraTel on our results is not material, given that
only its December 2001 results are included in our results. For 2002, Nera Tel's
results are included for the entire year. For more information about the effects
of consolidation of NeraTel, please see note 8 to the consolidated financial
statements in Item 17 below.

         The table below shows a number of income statement items as a
percentage of sales for the periods indicated:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                        ------------------------------------
                                                        2000             2001           2002
                                                        ------------------------------------
                                                         NOK             NOK            NOK
<S>                                                     <C>              <C>            <C>
OPERATING EXPENSES AND OPERATING INCOME BEFORE
RESTRUCTURING AS A PERCENTAGE OF SALES:
Cost of materials.............................          37.9%            48.8%          52.6%
Changes in inventory of work in progress
     and finished goods.......................           1.5%            -1.9%           1.0%
Payroll expense...............................          25.5%            25.0%          27.8%
Depreciation..................................           2.6%             3.0%           3.4%
Other operating expense.......................          28.4%            30.9%          20.7%
Operating income (loss) before restructuring
     gain and loss............................           4.1%            -5.8%          -5.5%
</TABLE>

The table below shows sales by product line for the periods indicated:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                       --------------------------------------
                                                        2000             2001           2002
                                                       -----            -----          ------
                                                                    (NOK IN MILLION)
<S>                                                    <C>          <C>                <C>
SALES BY BUSINESS AREA:
Transmission networks..........................        1,803            2,222          1,343
Satellite communications ......................          709              599            617
Broadband access...............................           16               47             69
Production.....................................           --               --             --
Dedicated communications.......................           --               --             --
Other operations...............................           22               25            416
                                                       -----            -----          -----
         Total.................................        2,550            2,893          2,445
                                                       =====            =====          =====
</TABLE>

         The following table sets forth our sales by geographic destination for
the periods indicated:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                       --------------------------------------
                                                       2000             2001            2002
                                                      ------           ------          ------
                                                                 (NOK IN MILLION)
<S>                                                   <C>        <C>                   <C>
SALES BY GEOGRAPHIC DESTINATION:
Norway.........................................          168              288             276
United Kingdom.................................          310              202             110
Rest of Europe.................................          711              559             498
Asia...........................................          463              671             863
North and South America .......................          668              814             538
Africa ........................................          180              190             105
Other (1)......................................           49              169             55
                                                       -----            -----           -----
         Total.................................        2,550            2,893           2,445
                                                       =====            =====           =====
</TABLE>

------------------
(1)      The category "Other" primarily includes New Zealand, Australia and
         other countries in Oceania.

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2001

                                       34

<PAGE>

         Orders and Backlog. The total value of orders received was NOK 2,519
million in 2002, compared with NOK 2,277 million in 2001. The increase is due to
the consolidation of order backlog for Nera Tel, Singapore. Orders for
transmission networks products was NOK 1,243 million in 2002 compared with NOK
1,687 million in 2001, a decrease of 26.3%. Orders for satellite communications
products was NOK 677 million in 2002, as compared to NOK 586 million in 2001, an
increase of 15.5%.

         Backlog was NOK 908 million at the end of 2002, as compared with NOK
1,023 million at the end of 2001, a decrease of 11.2%. The decrease in order
backlog in 2002 was primarily the result of the continued decline in the world
economy in general and the telecommunications sector in particular.

         Sales. Our sales decreased to NOK 2,445 million in 2002 from NOK 2,893
million in 2001, a decrease of 15.5%, for the reasons described below.

         Sales within transmission networks decreased 39.6% in 2002 primarily
due to the continued economic slowdown in general and the decline in the
telecommunications sector in particular.

         Sales within satellite communications increased 3.0% in 2002 due to a
slight decrease in the sale of WorldPhones and an increase in the sale of land
earth stations. Approximately 6,000 WorldPhones were sold during 2002. In 2002,
sales of land earth stations increased by approximately NOK 35 million mainly
due to receiving more assignments to upgrade existing sites.

         Sales within wireless broadband access area increased from NOK 47
million to NOK 69 million as a result of increased activities by Nera Satellite
Broadband, our subsidiary, and despite the closing of our operations in Dallas,
U.S., and the sale of the Velocity line of products. .

         A comparison of geographic sales is set forth in the chart below:

<TABLE>
<CAPTION>
GEOGRAPHICAL DESTINATION                        2001                                 2002
--------------------------------        ---------------------               --------------------
                                               (AMOUNTS IN NOK MILLION, EXCEPT PERCENTAGES)
<S>                                     <C>             <C>                 <C>            <C>
Norway..........................          288            9.9%                 276          11.3%
United Kingdom..................          202            7.0%                 110           4.5%
Rest of Europe..................          559           19.3%                 498          20.4%
Americas........................          814           28.2%                 538          22.0%
Africa..........................          190            6.6%                 105           4.3%
Asia............................          671           23.2%                 863          35.3%
Oceania.........................          169            5.8%                  55           2.2%
                                        -----           ----                -----          ----
Total...........................        2,893            100%               2,455           100%
</TABLE>

         No single customer accounted for more than 10% of our sales in 2002.
However, we work with various Ericsson companies worldwide, which are organized
as separate legal entities. All of the Ericsson entities, taken together,
accounted for approximately 12% of our sales in 2001.

         Cost of materials and changes in inventory of work in progress and
finished goods. Cost of materials and changes in inventory of work in progress
and finished goods was NOK 1,309.8 million in 2002, as compared to NOK 1,356.3
million in 2001, a decrease of 3.4%. As a percentage of sales, cost of materials
and changes in inventory of work in progress and finished goods was 53.6% in
2002 and 46.9% in 2001. This increase is due to the fact that our cost of
materials grew more significantly than our revenues in the past fiscal year,
which is consistent with a trend of lower margins and price pressure observed in
the telecommunications industry during 2002.

         Payroll expense. Payroll expense was NOK 679.6 million in 2002, as
compared to NOK 722.8 million in 2001, a decrease of 5.9%. The decrease in
payroll expense is primarily due a reduction in employees during 2002as a result
of our restructuring. As a percentage of sales, payroll expense was 27.8% in
2002 and 25% in 2001.

         Depreciation. Depreciation was NOK 83.5 million in 2002, as compared to
NOK 87.9 million in 2001, a decrease of 5.0%. This decrease was due to low new
investments in fixed assets.

                                       35

<PAGE>



         Other operating expense. Other operating expense was NOK 505.0 million
in 2002, as compared to NOK 894.4 million in 2001, a decrease of 43.5%, which is
primarily due to a decrease in our research and development expenses. As a
percentage of sales, other operating expense was 20.7% in 2002 and 30.9% in
2001.

         Operating income (loss) before restructuring gain and loss. Operating
loss was NOK 133.3 million in 2002, as compared to operating loss of NOK 168.1
million in 2001. This decrease in loss before restructuring gain and loss is
primarily due to the reasons provided above.

         Restructuring expenses and write-downs. Restructuring expenses and
write-downs were NOK 11.1 million in 2002, as compared to NOK 264 million in
2001. The restructuring expenses and write-downs in 2002 are primarily due to
our discontinuation of all production within Nera Ltd., our unit in Great
Britain.

         The table below sets forth certain additional information relating to
our restructurings, including the events that took place during 2002.

<TABLE>
<CAPTION>
                                                BALANCE AT                                                        BALANCE AT
                                               DECEMBER 31,   PROVISIONS IN   WRITE-DOWN IN     APPLIED/DISBURS   DECEMBER 31,
                                                  2001            2002            2002           EMENT IN 2002        2002
------------------------------------------------------------------------------------------------------------------------------
                                                                        (NOK IN MILLIONS)
------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>               <C>               <C>
Restructuring of Nera Ltd, UK(1)........           2.5             1.6            21.4                2.5             1.6
Restructuring of Nera Networks AS(2)....            --             7.7              --                 --             7.7
Closing of the Dallas office(3).........          39.2           (15.5)             --               23.7              --
Restructuring of the Boston office(4) ..           0.2              --              --                0.2              --
Restructuring of satellite operations(5)           8.7            (4.1)             --                2.6             2.0
Restructuring of wireless broadband
access operations(5) ...................           7.0              --              --                7.0              --
------------------------------------------
TOTAL                                             57.6           (10.3)           21.4               36.0            11.3
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

-------------------

(1)      During 1998, our board of directors and management prepared a plan for
         restructuring of our unit in the U.K., in order to reestablish profit
         within this unit through a focused strategy and changes in the product
         range. This restructuring involved dismissal of personnel, write-downs
         of fixed assets and stock. Total provisions for this restructuring were
         NOK 71.0 million in 1998. The restructuring plan was extended in 1999,
         and another NOK 37.8 million was expensed. By the end of 2001, all
         payments relating to this restructuring were completed. In 2002, we
         decided to discontinue all production in Nera Ltd, our production unit
         in Great Britain. All of the costs and provisions inclusive write-down
         of inventory that were made in 2002 are related to this restructuring.

(2)      Due to changes in the market, parts of the business have been
         reorganized. The reorganization resulted in dismissals and early
         retirements. Provisions have been made for severance payments. All
         significant activities were completed in 2002.

(3)      In 2001, we decided to terminate our presence in Dallas, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities started in 2001 were completed in
         2002.

(4)      In 2001, we also decided to restructure our presence in Boston, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities started in 2001 were completed in
         2002.

(5)      In 2001, due to changes in the market conditions, we have reorganized
         parts of our satellite unit and our wireless broadband access
         operations. This reorganization resulted in personnel dismissals. We
         made provisions for severance payments and made all related payments
         during 2002. We wrote down fixed assets and stock to net realization
         value in 2002.

                                       36

<PAGE>



         For more information relating to above restructuring, please see "Item
4.A. -- History and Development of the Company" and note 12 of our financial
statements included in Item 17. See also note 30 to our financial statements
regarding other current liabilities.

         Net Financial Items. Net financial items increased from a loss of NOK
16.2 million to a loss of NOK 17.8 million. This decrease was primarily due to
losses taken on Nera Tel's write down of NOK 30.0 million on its joint venture
with TVMobile.

         Operating income (loss). We had an operating loss of NOK 144.4 million
in 2002, as compared to an operating loss of NOK 432.1 million in 2001, an
increase of 66.6% primarily due to the continued decline in the
telecommunications market and our ensuing restructuring and cost reduction
efforts. Operating loss as a percentage of sales was 5.9% in 2002 and 15% in
2001.

         Income tax expense. We had an income tax credit of NOK 33.7 million in
2002, as compared to an income tax credit of NOK 81.3 million in 2001. The tax
credit in 2002 is due to the fact that we had operating losses in 2002. Our
effective tax rate was -20.8% in 2002 and -18.1% in 2001.

         Net income (loss). We had a net loss of NOK 128.5 million in 2002, as
compared to a net loss of NOK 367 million in 2001, a decrease of 65% as a result
of the factors discussed above. Net loss as a percentage of sales was 5.3% in
2002 and 12.7% in 2001.

         Norwegian and U.S. GAAP reconciliation. Approximate net loss on a U.S.
GAAP basis was NOK 190.1 million for 2002, and approximate net loss was NOK 340
million for 2001, compared with net loss under Norwegian GAAP of NOK 145 million
for 2002 and net income of NOK 370.7 million for 2001. The differences in the
results under Norwegian GAAP compared with the results under U.S. GAAP were due
to a variety of factors, the most significant of which were the taxes gain on
subsidiary equity transaction and pensions. For a discussion of differences
between Norwegian GAAP and U.S. GAAP, see note 30 to the consolidated financial
statements included in Item 17 below.

         YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000

         Orders and Backlog. The total value of orders received was NOK 2,277
million in 2001, compared with NOK 2,902 million in 2000, a decrease of 21.5%,
due to the economic slowdown in general and the decline in the
telecommunications sector in particular. Orders for transmission networks
products was NOK 1,687 million in 2001 compared with 2,216 million in 2000, a
decrease of 23.9%. Orders for satellite communications products was NOK 586
million in 2001, as compared to NOK 576 million in 2000, an increase of 1.7%.

         Backlog was NOK 590 million at the end of 2001, as compared with NOK
1,158 million at the end of 2000, a decrease of 11.3%. The decrease in order
backlog in 2001 was primarily the result of the decline in the world economy in
general and the telecommunications sector in particular.

         Sales. Our sales increased to NOK 2,893 million in 2001 from NOK 2,550
million in 2000, an increase of 13.4%, for the reasons described below. The
increase in sales in 2001 compared with 2000 is primarily a result of increased
sales within the transmission networks area.

         Sales within transmission networks increased 23.2% in 2001 primarily
due to increased sales of SDH radio equipment to the providers of networks for
the cellular telephone markets in the first two quarters of 2001, which were
followed by a significant downturn. We also sold our existing substantial
backlog during 2001.

         Sales within satellite communications decreased 15.5% in 2001 due to a
decrease in the sale of WorldPhones and a decrease in the sale of land earth
station, which was slightly offset by our receiving more assignments to upgrade
our existing sites. Approximately 6,460 WorldPhones were sold during 2001. In
2001, sales of land earth stations decreased by approximately NOK 64 million due
to the mature nature of this market.

                                       37

<PAGE>



         Sales within wireless broadband access area increased from NOK 16
million to NOK 47 million as a result of increased activities by Nera Satellite
Broadband, our subsidiary, and despite the closing of our operations in Dallas,
U.S., and the sale of the Velocity line of products. We do not currently expect
to see any increase in the satellite and terrestrial broadband activities during
2002.

         A comparison of geographic sales is set forth in the chart below:

<TABLE>
<CAPTION>
GEOGRAPHICAL DESTINATION                         2001                               2000
--------------------------------        ---------------------                -------------------
                                               (AMOUNTS IN NOK MILLION, EXCEPT PERCENTAGES)
<S>                                     <C>             <C>                  <C>           <C>
Norway..........................          288            9.9%                  168          6.6%
United Kingdom..................          202            7.0%                  310         12.2%
Rest of Europe..................          559           19.3%                  711         27.8%
Americas........................          814           28.2%                  668         26.2%
Africa..........................          190            6.6%                  180          7.1%
Asia............................          671           23.2%                  463         18.2%
Oceania.........................          169            5.8%                   49          1.9%
                                        -----           ----                 -----         ----
Total...........................        2,893            100%                2,550          100%
</TABLE>

         No single customer accounted for more than 10% of our sales in 2001 and
2000. However, we work with various Ericsson companies worldwide, which are
organized as separate legal entities. All of the Ericsson entities, taken
together, accounted for approximately 12% of our sales in 2001.

         Cost of materials and changes in inventory of work in progress and
finished goods. Cost of materials and changes in inventory of work in progress
and finished goods was NOK 1,411.1 million in 2001, as compared to NOK 966.6
million in 2000, an increase of 46%. This increase is primarily due to a
write-down of our inventories. It is also due to an increase in overall
manufacturing costs in 2001, as compared to 2000, as we changed from
manufacturing our own products to outsourcing a significant portion of our
manufacturing to Flextronics and Kitron. We anticipate this effect on our cost
of materials to be short-term. As a percentage of sales, cost of materials and
changes in inventory of work in progress and finished goods was 48.8% in 2001
and 37.9% in 2000. This increase is due to the fact that our cost of materials
grew more significantly than our revenues in the past fiscal year, which is
consistent with a trend of lower margins and price pressure observed in the
telecommunications industry in 2001.

         Payroll expense. Payroll expense was NOK 722.8 million in 2001, as
compared to NOK 649.6 million in 2000, an increase of 11.3%. The increase in
payroll expense is primarily due to an increase in the number of employees
needed to address our significant backlog during the first two quarters of 2001,
offset by a reduction in employees during the last quarter of 2001 as a result
of our restructuring. As a percentage of sales, payroll expense was 25% in 2001
and 25.5% in 2000.

         Depreciation. Depreciation was NOK 87.9 million in 2001, as compared to
NOK 66.9 million in 2000, an increase of 31.4%. This increase was due to the
acceleration in depreciation of goodwill relating to our earlier purchase of a
business meant to become the core of our Dallas operations, based on our yearly
assessment of this asset's value.

         Other operating expense. Other operating expense was NOK 894.4 million
in 2001, as compared to NOK 724.9 million in 2000, an increase of 23.5%, which
is primarily due to an increase in our research and development expenses and
increased costs of implementation of our new logistics and computer systems. As
a percentage of sales, other operating expense was 30.9% in 2001 and 28.4% in
2000.

         Operating income (loss) before restructuring gain and loss. Operating
loss was NOK 168.1 million in 2001, as compared to operating income of NOK 104.5
million in 2000. This decrease in operating income (loss) before restructuring
gain and loss is primarily due to the reasons provided above.

         Restructuring expenses and write-downs. Restructuring expenses and
write-downs were NOK 264 million in 2001. We did not have any restructuring
gains or losses in 2000. The restructuring expenses and write-downs in 2001 are
primarily due to our reduction of activities in the United States (Dallas and
Boston) and Norway to respond to the continuing weak market conditions. The
restructuring included personnel lay-offs, decreased or closed down

                                       38

<PAGE>



business activities, streamlining of both our terrestrial and satellite
broadband operations, as well as the halting of development and subsequent sale
of the Velocity products.

         The table below sets forth certain additional information relating to
the 2001 restructuring. The various line items refer to those business
activities that were affected by the 2001 restructuring.

<TABLE>
<CAPTION>
                                               BALANCE AT                                                       BALANCE AT
                                              DECEMBER 31,   PROVISIONS IN   WRITE-DOWN IN   APPLIED/DISBURS   DECEMBER 31,
                                                  2000           2001            2001         EMENT IN 2001        2001
---------------------------------------------------------------------------------------------------------------------------
                                                                        (NOK IN MILLIONS)
---------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>             <C>             <C>               <C>
Restructuring of Nera Ltd, UK(1)...........       6.0              --              --               3.5             2.5
Nera ASA(2)................................       4.0              --              --               4.0              --
Closing of the Dallas office(3)............        --            91.2           101.2             153.2            39.2
Restructuring of the Boston office(4) .....        --            31.3             7.3              38.4             0.2
Restructuring of satellite operations(5)...        --             8.7             0.7               0.7             8.7
Restructuring of wireless broadband
access operations(5) ......................        --             2.5            21.1              16.6             7.0
--------------------------------------------
TOTAL                                            10.0           133.7           130.3             216.4            57.6
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

----------------

(1)      During 1998, our board of directors and management prepared a plan for
         restructuring of our unit in the U.K., in order to reestablish profit
         within this unit through a focused strategy and changes in the product
         range. This aspect of restructuring involved dismissal of personnel,
         write-downs of fixed assets and stock. Total provisions for
         restructuring were NOK 71.0 million in 1998. The restructuring plan was
         extended in 1999, and another NOK 37.8 million was expensed. By the end
         of 2001, all payments relating to this line item were completed.

(2)      During 1998, our board of directors and management prepared a plan for
         our restructuring, which is discussed in detail in Item 4.A. The
         restructuring plan was carried out during 1998 and 1999. By the end of
         2001 all payments related to this line item were completed.

(3)      In 2001, we decided to terminate our presence in Dallas, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities were started in 2001 and were
         completed in all material respects during the first quarter of 2002.

(4)      In 2001, we also decided to restructure our presence in Boston, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities were started in 2001 and largely
         completed in the first quarter of 2002, existing inventory has been
         reduced significantly and sold at approximately book value. Remaining
         restructuring activities are expected to be completed by the end of
         2002 and the costs associated with this remaining restructuring
         activities are included in those provided for in 2001.

(5)      In 2001, due to changes in the market conditions, we have reorganized
         parts of our satellite unit and our wireless broadband access
         operations. This reorganization resulted in personnel dismissals.
         Provisions for severance payments have been undertaken. Fixed assets
         and stock have been written down to net realization value.

         For more information relating to above restructuring, please see "Item
4.A. -- History and Development of the Company" and note 12 of our financial
statements included in Item 17. See also note 30 to our financial statements
regarding other current liabilities.

         Net Financial Items. Net financial items decreased from a gain of NOK
88.8 million to a loss of NOK 16.2 million. This decrease was primarily due to
losses taken on our outstanding loans to CNH which are more fully described
under "Item 4. Information on the Company. B. Business Overview - Nera Finans
AS" above.

                                       39

<PAGE>



         Operating income (loss). We had operating loss of NOK 432.1 million in
2001, as compared to operating income of NOK 104.5 million in 2000 primarily due
to the continued decline in the telecommunications market and the ensuing
restructuring and cost reduction efforts. Operating loss as a percentage of
sales was 15% in 2001 and generating income as a percentage of sales was 4.1% in
2000.

         Income tax expense. We had an income tax credit of NOK 81.3 million in
2001, as compared to an income tax expense of NOK 57 million in 2000. The tax
credit in 2001 is due to the fact that we had operating losses in 2001. Our
effective tax rate was -18.1% in 2001, 29.5% in 2000 and 30.06% in 1999.

         Net income (loss). We had a net loss of NOK 367 million in 2001, as
compared to net income of NOK 136.3 million in 2000, as a result of the factors
discussed above. Net loss as a percentage of sales was 12.7% in 2001. Net income
as a percentage of sales was 5.3% in 2000.

         Norwegian and U.S. GAAP reconciliation. Approximate net loss on a U.S.
GAAP basis was NOK 340 million for 2001, and approximate net income was NOK
108.6 million for 2000, compared with net loss under Norwegian GAAP of NOK 370.7
million for 2001 and net income of NOK 136.3 million for 2000. The differences
in the results under Norwegian GAAP compared with the results under U.S. GAAP
were due to a variety of factors, the most significant of which were the
accounting for goodwill, pensions, taxes and restructuring costs. For a
discussion of differences between Norwegian GAAP and U.S. GAAP, see note 30 to
the consolidated financial statements included in Item 17 below.

         CURRENCY FLUCTUATIONS

         Our sales and operating income are affected by the impact of
fluctuations in foreign currency exchange rates on product prices and certain
operating expenses. Fluctuations in the exchange rate of certain foreign
currencies (principally, the U.S. dollar, the pound sterling and the Singapore
dollar) against the Norwegian krone may affect our sales and operating income.
The table below sets forth the average currency fluctuations of the NOK against
the U.S. dollar, the pound sterling and the Singapore dollar for the years 1996
to the present.

<TABLE>
<CAPTION>
                                        NOK                            NOK                           NOK
  CURRENCY                   DEPRECIATION(APPRECIATION)    DEPRECIATION(APPRECIATION)     DEPRECIATION(APPRECIATION)
FLUCTUATIONS                    AGAINST THE USD (%)         AGAINST THE EURO IELU (%)        AGAINST THE SGD (%)
--------------------------------------------------------------------------------------------------------------------
<S>                          <C>                           <C>                            <C>
1996-1998                              16.9                           10.9                          (1.2)
--------------------------------------------------------------------------------------------------------------------
1998-1999                               3.7                           (9.0)                          2.1
--------------------------------------------------------------------------------------------------------------------
1999-2000                              12.3                            2.4                          10.2
--------------------------------------------------------------------------------------------------------------------
2000-2001                               2.5                           (3.6)                         (1.0)
--------------------------------------------------------------------------------------------------------------------
2001-2002                              (5.3)                          (8.6)                         (6.5)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

         A majority of our sales in non-Norwegian currencies are made pursuant
to long-term contracts with customers and it is our policy to hedge foreign
currency sales risks associated with these contracts in order to manage our
exposure to foreign currency risks. These hedging transactions, together with
our foreign currency translation accounting policy of using average forward
rates for translating hedging transactions, minimize the short-term impact of
the exposure of this sales revenue to currency fluctuations for the duration of
the hedged long-term contracts in progress. The differential in the timing of
the impact of currency fluctuations on our Norwegian GAAP and U.S. GAAP results
is expected to continue.

         Our hedging activities are conducted on a centralized basis. We use
foreign exchange contracts to hedge firm commitments. In addition, from time to
time we purchase foreign currency option contracts to hedge expected, but not
contracted for, foreign currency sales in connection with outstanding tender
bids. The costs of currency option premiums historically have not been material
to our operating results or liquidity. Although Norwegian GAAP permits the
hedging of foreign currency sales which are reasonably assured, U.S. GAAP
permits hedge accounting treatment only for instruments which hedge firm
commitments. This accounting difference resulted in an increase of U.S. GAAP
income of NOK 5.5 million in 2002,no difference between U.S. GAAP and Norwegian

                                       40

<PAGE>



GAAP for 2001 and no differences between U.S. GAAP and Norwegian GAAP for 2000,
in each case before tax. For a discussion of our hedging activities, see note 20
to the consolidated financial statements included in Item 17 below.

         Notwithstanding our hedging activities, we remain subject to foreign
exchange rate fluctuations as a result of a number of factors, including delays
in receiving payments from our customers, the cancellation of contracts that
have been hedged, as well as the impracticability of hedging each foreign
currency payment we receive. We believe that appreciation of the Norwegian krone
relative to other currencies (principally the U.S. dollar, the pound sterling
and the Singapore dollar) generally has an adverse effect on our sales and
operating income and on the international competitiveness of our Norwegian-based
operations. On the other hand, depreciation of the Norwegian krone against such
currencies generally has the opposite effect.

         At December 31, 2002, we had forward contracts outstanding amounting in
the aggregate NOK 649.6 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 2002 exchange rates). The amount of
forward contracts at December 31, 2002 included forward contracts to buy and
sell U.S. dollars, AUD (Australian dollars) euro and pound sterling totaling NOK
375 million, NOK 8 million, NOK 124 and NOK 141 million, respectively.

         At December 31, 2001, we had forward contracts outstanding amounting in
the aggregate NOK 806.3 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 2001 exchange rates). The amount of
forward contracts at December 31, 2001 included forward contracts to buy and
sell U.S. dollars, AUD (Australian dollars) and pound sterling totaling NOK 420
million, NOK 228 million and NOK 84 million, respectively.

         At December 31, 2000, we had forward contracts outstanding amounting in
the aggregate NOK 680.8 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 2000 exchange rates). The amount of
forward contracts at December 31, 2000 included forward contracts to buy and
sell U.S. dollars and pound sterling totaling NOK 465.5 million and NOK 51.3
million, respectively.

         At December 31, 2000 we had currency swaps outstanding in aggregate to
NOK 542.5 million (the total Norwegian krone equivalent of the buy and sell
amounts based on December 31, 2000 exchange rates). The amount of currency swaps
at December 31, 2000 included currency swaps to buy and sell U.S. dollars
totaling NOK 267.6 million.

         At December 31, 1999, we had currency swaps outstanding amounting in
aggregate to NOK 311.9 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 1999 exchange rates). The amount of
currency swaps at December 31, 1999 included currency swaps to buy and sell U.S.
dollars totaling NOK 243.2 million.

         EUROPEAN ECONOMIC AND MONETARY UNION

         The single European currency known as the euro came into existence on
January 1, 1999, but Norway is not participating in the union. Our sales have
not been affected by the change of currency. Although no decision has been made
as to when, or even if, Norway will participate in the single European currency,
we believe that our commercial operations can be adapted to accommodate the euro
without a material adverse effect on operations.

         B.       LIQUIDITY AND CAPITAL RESOURCES

         During the past three years, we have funded our working capital needs
from our operating cash flows, with the exception of the $17.1 million in net
proceeds stemming from the public offering of NeraElectronics on July 15, 2002,
a $21 million loan from the Nordic Investment Bank, which we repaid in the first
quarter of 2002, as well as small loans we may take out and repay from time to
time in the ordinary course of our business. The ratio of our indebtedness to
our revenues was 0.4% at December 31, 2002, 6.9% at December 31, 2001 and 9.8%
at December 31, 2000. Other than loans we may have outstanding from time to
time, we have commitments under performance guarantees we are required to give
from time to time to our customers when we undertake big projects for them. At

                                       41

<PAGE>



December 31, 2002, we had NOK 119.0 million in performance guarantees
outstanding, as compared to NOK 187.1 million in 2001. These performance
guarantees are standard in the industry and represent approximately 15% of the
contract's value. At the delivery date of the contract, the performance
guarantee is cancelled, unless there are disputes about our performance.
Historically, our performance guarantees have been cancelled in their totality.
In addition to performance guarantees, we have also granted other guarantees. At
December 31, 2002, we had NOK 120.5 million of other guarantees outstanding, as
compared to NOK 129.8 million in 2001. These guarantees relate mainly to our
sales support program, which is more fully described under "Item 4. B. Business
Overview--Nera Finans" above, as well as to a standby credit facility, under
which we have no borrowings.

         Our total cash was NOK 795.8 million and NOK 899.5 million as of
December 31, 2002 and 2001. The decrease in cash was primarily due to repayment
of a $ 21 million loan facility to Nordic Investment Bank in the first quarter
of 2002. We have experienced fluctuations in cash balances in the course of
2002. Generally, we believe our current cash balances (even in the event our
revenues decrease significantly in 2002 due to continued reduced levels of
demand for our products), available borrowings from financial institutions, cash
flows from operations, future share issuances, and our focus and introduction of
various strategies aimed at improving the underlying profitability and cash flow
generation of our business, both by increasing margins and cutting costs, will
be sufficient to meet our anticipated cash needs for working capital and capital
expenditures going forward.

         In addition, from time to time we may discuss with financial
institutions a possibility of establishing a credit line in an effort to ensure
that we have access to sufficient funds to meet our needs. However, we cannot
assure you that these efforts, together with items described above, will be
sufficient to fund our growth, or that external funding will be available to us
at favorable interest rates or at all. We do not have any current plans for
significant capital expenditures but we monitor acquisition opportunity in all
of our business areas and may make acquisitions in the future.

         Net cash provided by operating activities amounted to NOK 34.6 million
in 2002, as compared with net cash used in operating activities of NOK 326.5
million in 2001. The increase in cash provided by operating activities in 2002
was primarily due to decreased inventories and trade receivables partly offset
other working capital items as well as operating loss.

         Net cash provided by investing activities was NOK 57.2 million in 2002,
as compared with NOK 7.0 million provided by investing activities in 2001. Cash
used by investment activities was significantly lower in 2002 due to
significantly lower capital expenditure.

         Capital expenditures amounted to NOK 61.4 million, NOK 129.1 million
and NOK 105.8 million in 2002, 2001 and 2000, respectively.

         Of the 2002 total capital expenditures, NOK 51 million was used by
transmission networks, NOK 4 million by satellite communications, and NOK 5
million by broadband access. The 2001 capital expenditures were funded
principally by proceeds from the sale of shares in May of 2000.

         Of the 2001 total capital expenditures, NOK 82 million was used by
transmission networks, NOK 8 million by satellite communications and NOK 31
million by broadband access. The 2001 capital expenditures were funded
principally by proceeds from the sale of shares in May of 2000.

         Of the 2000 total capital expenditures, NOK 77.5 million was used by
transmission networks, NOK 19.6 million by satellite communications and NOK 8.4
million by broadband access. The 2000 capital expenditures were funded
principally by proceeds from the sale of shares in May 2000.

         On May 5, 2000, we initiated a public share issuance of 25,000,000 new
shares, which resulted in NOK 887.5 million in gross proceeds before the
deduction of costs. Our net proceeds were NOK 257 million, and NOK 50 million of
this amount was allocated to share capital, with the balance allocated to our
reserves.

         Shareholders' equity was NOK 1,612.6 million at December 31, 2002, NOK
1,728.1 million at December 31, 2001 and NOK 1,977 million at December 31, 2000.
Shareholders' equity on a U.S. GAAP basis was NOK

                                       42

<PAGE>



1,262.9 million at December 31, 2002 and NOK 1,527.7 million at December 31,
2001. The differences between Norwegian GAAP and U.S. GAAP amounts were due to a
variety of factors, the most significant of which was taxes, gain on subsidiary
equity transactions and pensions. For a discussion of differences between
Norwegian GAAP and U.S. GAAP, see note 30 to the consolidated financial
statements included in Item 17 below.

         C.       RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

         We operate in businesses characterized by extremely rapid technological
change. As a result, we devote substantial resources to research and development
for our products and services in order to remain competitive. We conduct an
active research and development program focused on strengthening our existing
products and systems and on developing new products and systems. We seek to
identify products and systems that are, or are expected to be, needed by
substantial numbers of customers worldwide and to allocate a greater share of
our research and development resources to areas we expect to have significant
potential for future benefits to us. In addition, we engage in research and
development activities that are not specifically tied to any one of our products
but that are expected to generate benefits in the longer term throughout our
business. The most important of these projects is our ongoing research into the
miniaturization and standardization of many of the components of our products.
We also devote substantial resources to the improvement of our manufacturing
processes or those of the companies to whom we outsource some of our
manufacturing processes.

         Our research and development efforts are largely decentralized, with
each business area managing its own research and development activities. Each
business area has dedicated technical staff and facilities and manages all key
technologies relevant to it. To encourage cooperation and to stimulate joint
research and development projects, representatives of the research and
development teams from each business area form a company-wide technology board,
which provides a means by which management allocates resources to the projects
that we believe to have potential for greatest return. In addition, we have a
small centralized research and development team of approximately 20 engineers
and scientists engaged in research and develop activities not specifically tied
to any of our units. We also cooperate with a number of Norwegian research
institutes and are also a member of the European Telecommunications Standards
Institute known as ETSI.

         Our net research and development expenditures, excluding customization
of products to customer needs, production engineering related to the
introduction of new products and development of manufacturing processes, has
accounted for approximately 9.8%, 11.9% and 11.2% of our sales in 2002, 2001 and
2000, respectively. We intend to maintain research and development expenditure
of approximately 7% to 12% of our sales in order to maintain our technological
expertise. We also concentrate our research and development spending on areas
where we already possess substantial know-how and for which we believe there are
markets internationally. We have financed our research and development
activities primarily from internally generated funds, although some funding is
obtained from customers and through grants from the Norwegian government. While
grant funding, particularly from the Norwegian government, has been a
significant source of product development funds in the past, it has been
declining in the past few years amounting to NOK 8.1 million, NOK 13.1 million
and NOK 13.5 million in 2002, 2001 and 2000, and we do not expect that grants
will be a significant source of funding in the future.

         The following table sets forth our total research and development
expenditures for each of the past three years. All research and development
costs we incurred are charged as expenses as and when they are incurred and
research and development acquisition costs are capitalized. The figures below
exclude customization of products to customer needs, production engineering
related to the introduction of new products and development of manufacturing
processes.

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                    2000             2001             2002
                                                   -----------------------------------------
                                                     (NOK IN MILLIONS, EXCEPT PERCENTAGES)
<S>                                                <C>              <C>               <C>
Gross research and development(1).........         300.3            360.1             247.7
% of sales................................          11.8%            12.4%             10.1%
Net research and development(2)...........         286.7            347.0             239.6
% of sales................................          11.2%            12.0%              9.8%
</TABLE>

----------------------------
(1)      Includes research grants.

                                       43

<PAGE>



         (2)      Net of research grants.

         Transmission networks

         We engage in a continuous program of research and development to expand
our range of microwave products and have a number of products currently under
development. We have significantly expanded the frequency range of our
high-capacity SDH products to a current high frequency of 7, 8, 13, 15, 18, 23,
26 and 38 GHz, principally for use in urban areas. Our line of SDH products also
has an STM-1 co-channel dual polarization radio which is designed to permit
better utilization of the frequency spectrum. In addition, we are developing
STM-0 class radios, with capabilities of 51 megabits per second, that would
facilitate the integration of small spur telecommunications links into large SDH
networks. In 2001 we have developed a new "trunk" radio to replace existing
STM-1 radios with this new family of radio utilizing our CityLink technology. We
expect the new radio, Nera Interlink, to be installed in all configurations by
the middle of 2002. We are also engaged in studies relating to STM-4 radios,
which would have a capacity of 625 megabits per second (equivalent to 8,000
telephone lines).

         In 2002, total research and development expenditures in transmission
networks amounted to approximately NOK 163 million, which represents
approximately 12.1% of sales of the business area. In 2000, 2001 and 2002
substantial research and development expenditure was put into the development
and completion of CityLink and the continued development of the SDH products.

         Satellite communications

         In 2002, research and development expenditure within the satellite
communications business area focused on further development and introduction of
the Nera World Communicator, the 64KB portable ISDN terminal for INMARSAT global
area network M4 service, as well as the supply of the gateway structure, for
this service. Substantial expenditure was also made in connection with the
further development of products for the INMARSAT M4 and INMARSAT 3 systems, as
well as development of new products for our Nera Broadband Satellite business.

         Net research and development expenditures amounted to NOK 44 million in
2002, which was equivalent to 7.1% of sales of this business area. In satellite
communications there are approximately 80 people working in research and
development.

         Through a substantial investment in research and development, we have
developed what we believe are technologically leading products in the area of
satellite communications with a large degree of ownership of the technology and
thus control over our own products. Changes in the market, including reuse of
technologies from land-based communications such as GSM, require increased use
of partnerships on certain technologies combined with a big effort to maintain a
lead in selected technologies such as radio and modem technology,
miniaturization, real-time software, user interfaces and satellite systems
integration.

         Broadband access

         In 2002, net research and development expenditure amounted to NOK 35
million. During 2002, research and development expenditure within the wireless
broadband access business area focused mainly on broadband via satellite,
including digital video broadband - return channel system, or DVB-RCS. This is a
system whereby broadband signals and return signals are transmitted over
satellite. DVB-RCS is an open European Telecommunications Standard Institute, or
ETSI standard. Core competence from the satellite communications business area
has been vital in this development.

         D.       TREND INFORMATION

         It is our long-term goal to make Nera a leading company within the
wireless telecommunications business. In order to do so, we will continue to
develop our existing business and at the same time look for strategic solutions
with other infrastructure providers.

                                       44

<PAGE>



         We have pursued, and will continue to pursue, growth opportunities
through internal development of existing business.

         Telecommunications industry is presently affected by the global
economic slowdown, which has also had an adverse effect on our company. Also,
wireless infrastructure suppliers are experiencing and will probably continue to
experience downward pricing pressure on products. As a result, we have in the
past experienced, and expect to continue to experience, declining average sales
prices for our products. The market for our products is extremely competitive
and we expect that competition will increase. We believe that our ability to
compete successfully will depend on a number of factors, both within and outside
our control, including global economic environment, price, quality,
availability, customer service and support, breadth of product line, product
performance and features, rapid time-to-market delivery capabilities,
reliability, timing of new products by us, our customers and competitors and the
ability of our customers to obtain financing.

         We expect that international sales will continue to account for a large
portion of our net product sales for the foreseeable future. As a result, we are
subject to the risks of doing business internationally, including unexpected
changes in regulatory requirements, fluctuations in foreign currency exchange
rates, imposition of tariffs and other barriers and restrictions, the burdens of
complying with a variety of foreign laws and general economic and geopolitical
conditions, including inflation and trade relationships.

         For more information about specific trends applicable to our business
segments, as well as for a discussion of our backlog, please refer to "Item 4.B.
-- Business Overview."

         ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

         A.       DIRECTORS AND SENIOR MANAGEMENT

         In accordance with Norwegian law, our affairs are managed by our board
of directors, which is also vested with overall control over our policy and
management. In accordance with Norwegian law, we also have a corporate assembly
of 12 members. The general meeting of shareholders elects eight members, and our
employees in Norway elect four members. There are currently three deputy members
representing three of the eight shareholder members. The chairman of the
corporate assembly is Henrik Lisaeth.

         Our articles of association provide that the board of directors shall
have no fewer than five members or greater than nine members. Our board of
directors currently has nine members. Under Norwegian law, one-third (and not
less than two) of the directors are elected as employee representatives, if
one-third of the members of the corporate assembly so demand. Currently, the
board of directors has nine members, three of which are elected as employee
representatives. In addition to reviewing and monitoring our business, the
powers generally held by the board of directors include the preparation of our
year-end accounts, the presentation of the accounts to the shareholders and the
convening of shareholders' meetings.

         Our directors serve two-year terms. There is no limitation on the
number of terms which a director may serve. However, our articles of association
provide that no one may be elected or reelected to the board of directors when
he or she has reached the age of 70. Under Norwegian law, at least one-half of
the directors must be citizens and residents of a European Union or European
Free Trade Area country. All of our directors are currently citizens or
residents of an EU or EFTA country.

         Our corporate assembly has the responsibility under our articles of
association for electing the members of the board of directors, including the
chairman. In addition to electing members of the board of directors, the
corporate assembly:

             -    fixes the remuneration of the board of directors,

             -    decides, upon proposal from the board of directors, matters
                  concerning investments that are substantial compared with our
                  resources, or efficiency measures or alterations of the
                  operations that would entail major changes or reallocation of
                  the labor force,

                                       45

<PAGE>



             -    expresses an opinion to the general meeting of shareholders as
                  to whether the board of director's proposal for the income
                  statement and balance sheet and the consolidated income
                  statement and consolidated balance sheet should be adopted,
                  and as to the board of director's proposal for the application
                  of profit or coverage of loss, and

             -    handles all other matters which a corporate assembly is
                  entitled to handle under Norwegian law.

         Overall control over our policy and management, however, is vested in
the board of directors and not in the corporate assembly. Members of the
corporate assembly are elected for a period of two years. No one may be elected
or reelected to the corporate assembly once he or she reaches the age of 70. We
believe there are no family relationships between any of the above officers or
directors, nor are there any arrangements or understandings under which any of
these officers or directors was elected to serve.

         The table below sets forth certain information regarding our directors
and executive officers as of December 31, 2002:

<TABLE>
<CAPTION>
                 NAME                              POSITION                           AGE
                 ----                              --------                           ---
<S>                                     <C>                                           <C>
Johan Fredrik Odfjell...............    Chairman of the Board                          54

Kari Broberg........................    Director                                       47

Gregers Mogensen....................    Director                                       56

Ole Petter Hakonsen.................    Director                                       63

Birger Magnus.......................    Director                                       48

Jostein Soreide.....................    Director (Employee Representative)             46

Kjell O. Ingebo.....................    Director (Employee Representative)             41

Jan Stenberg........................    Director                                       63

Marcel Petie........................    Director (Employee Representative)             46

Bjorn Ove Skjeie....................    President and Chief Executive Officer          51

Bjorn Olafsson......................    EVP Finance and Accounts                       44

Terje Ask-Henriksen.................    EVP Satellite Communications                   46

Oyvind Isaksen......................    EVP EMEA Region                                40

Samuel Ang..........................    EVP Asia Region                                48

Billy Cain..........................    EVP Americas Region                            47

Ove Bratsberg.......................    EVP Client Management and Product              42
                                        Portfolio

John Knudsen........................    EVP Supply Chain Management

Helge Skaar.........................    EVP Information and Public Affairs             47
</TABLE>

                                       46

<PAGE>



<TABLE>
<CAPTION>
                NAME                             POSITION                              AGE
                ----                             --------                              ---
<S>                                     <C>                                            <C>
Stig-Are Mogstad....................    EVP Technology Management                      38

Gro Hatleskog.......................    EVP Organization and Management                47
</TABLE>

         JOHAN FREDRIK ODFJELL (1948), CHAIRMAN, BERGEN

         Odfjell is a business economics graduate of the Norwegian School of
Economics and Business Administration and holds a MBA from Harvard University.
He has held the position of chairman since June 1998. Odfjell has a broad range
of experience from senior positions in Norwegian industry to a number of board
appointments in Norwegian and international companies. Odfjell's appointments
have included managing director of AS Investa (1980-1986), managing director of
Vesta Forsikring AS and deputy managing director of Skandia Forsakring AB
(1986-1994). In addition to his appointment as chairman, Odfjell is also
chairman of Hafslund ASA and Norges Handels- og Sjofarstidene, deputy chairman
of Nycomed Amersham plc. and Den norske Veritas. He also serves on the boards of
Skandia Forsakring AB, Bergesen ASA and Kvaerner ASA.

         KARI BROBERG (1956), OSTRE TOTEN

         Broberg is a business economics graduate of the Norwegian School of
Management. She has been a member of our board since June 1998. Broberg has a
broad range of business experience and has held a number of senior positions in
the Alcatel Group from 1981 to 1997. Her positions with Alcatel included head of
purchasing for the telecommunications division and divisional director for
transmission and exchanges. Broberg was the head of logistics for Jordan AS
until 2000 and is currently employed as a corporate consultant by Hartmark
Consulting AS. In addition to her appointment as a member of our board, Broberg
holds a number of appointments in Norwegian industry, including membership on
the boards of Telenor and Norsk Regnesentral.

         GREGERS MOGENSEN (1946), DENMARK

         Mogensen received an MS degree in electronic engineering in 1971, and a
PhD degree in 1977 from the Danish Technical University. During 1977-1979 he
held positions as Senior Development Engineer and Project Manager with Marconi
Communications. During 1979-1984 he was associate professor at the Danish
Technical University. During 1984-1991 he held positions as manager of research
and development, production manager and technical manager with NKT Electronics.
During 1991-2001 he worked at Tellabs Denmark AS, including the position of
Chief Technical Officer he has held since April 2001.

         OLE PETTER HAKONSEN (1939), OSLO

         Hakonsen is an engineering graduate of the Norwegian University of
Science and Technology from where he received his Ph.D. in 1968. Hakonsen has
held a number of positions in various technical environments in Norway. These
include research manager at Televerket's Research Institute (1972-1981),
assistant technical director of the Teledirektoratet (1981-1983), technical
director of the Teledirektoratet/Televerket (1983-1991) and deputy managing
director of Televerket responsible for mobile networks and services, satellite
networks and services, research and development and information technology
(1991-1994). Hakonsen has been an Executive Vice President of Telenor AS since
1994.

         JAN STENBERG (1939), SWEDEN

         Stenberg received a law degree from the Stockholm University in 1964.
In 1967 he joined Ericsson, and in 1975 he was appointed General Counsel and
Secretary of the board of directors of Ericsson. In 1981 he became Executive
Vice President of the Ericsson Group and a member of the Group's Corporate
Executive Committee. In 1982, Stenberg was appointed President of Ericsson
Cables AB and Head of Business Area Cables. During 1985-

                                       47

<PAGE>



1990, he was Head of Business Area Public Telecommunications. In 1994 he joined
the Scandinavian Airlines System as President and Chief Executive Officer, a
position he held until 2001, when he joined our company.

         BIRGER MAGNUS (1955), OSLO

         Magnus is an engineering graduate of the Norwegian University of
Science and Technology and holds a MBA from INSEAD (France). Magnus has been a
member of our board since June 1998. His professional background includes
experience as a systems engineer and running his own information technology
business from 1980 to 1984. From 1985 to 1995 Magnus was partner in McKinsey &
Co. and he was the managing partner of the Oslo office in the latter part of
this period as well as one of the leading partners in McKinsey's international
multimedia practice (telecomm. information technology, media). Magnus is now
executive vice president of Schibsted ASA with responsibility for the newspaper
business area.

         KJELL OLE INGEBO (1961), DRAMMEN

         Ingebo is an engineering graduate of the Kongsberg Ingeniprhoyskple and
holds a BS degree in Information Technology from the University of Strathclyde
(Scotland). He has been an employee of our group since 1983 and his professional
experience includes hardware and software development and systems work on our
earth stations. Since 1998 Ingebo has been a departmental manager for the
responsible for the development of SatCom's earth stations. Ingebo was an
employee representative on the corporate assembly from 1995-1999 and has been a
member of the board since 1999.

         MARCEL PETIE (1956), BERGEN

         Petie is an engineering graduate of the College of Advanced Technology
in Rotterdam, Holland. He has been an employee of our group's development
department in Bergen since 1981. Petie was elected as an employee representative
on the board in September 1999.

         JOSTEIN SOREIDE, (1956), BERGEN

         Spreide has been an employee of our group since 1981 and has been an
employee representative on the Board since 1997.

         BJORN OVE SKJEIE (1951) - PRESIDENT AND CHIEF EXECUTIVE OFFICER OF NERA
ASA

         Skjeie is business economics graduate of the Norwegian School of
Economics and Business Administration. From 1989-1990 Skjeie was finance
director of National Transformer. From 1991-1997, Skjeie held a number of senior
management positions with Asea Brown Boveri AS, or ABB, including managing
director of ABB Offshore Technology AS. From 1997-1998 Skjeie was responsible
for the satellite communications business area. In 1998, Skjeie was appointed
our president and chief executive officer.

         BJORN OLAFSSON (1958) - EXECUTIVE VICE PRESIDENT FINANCE AND ACCOUNTS

         Olafsson is a business economics graduate of the Norwegian School of
Management. He has many years of experience of working in executive positions in
banking and insurance fields, including various positions held within Vesta
Group, a position as a bank manager and financial director at Bergen Bank, and
group management positions at Vital Forsikring ASA. Olafsson has run businesses
he established for periods of time, and has also held a number of directorships
and executive positions.

         TERJE ASK-HENRIKSEN (1956) - EXECUTIVE VICE PRESIDENT SATELLITE
COMMUNICATION

         Ask-Henriksen is an engineering graduate of the Tinius Olsen
Ingeniprhpyskole and a business economics graduate from the Norwegian School of
Management. He also has post graduate qualifications in industrial marketing
from the Norwegian School of Management and IMD in Lausanne. His previous
employment includes Elopak AS, where he was Area Manager, Marketing Director and
the Director responsible for production and sales

                                       48

<PAGE>

in Norway. He has also been employed by Elcon Finans (Marketing Manager) Markem
Ships, Industriservice AS and Unitor Ships Service. In October 1998,
Ask-Henriksen was appointed managing director of Nera SatCom.

         OYVIND ISAKSEN (1963) - EXECUTIVE VICE PRESIDENT REGION EMEA

         Isaksen has a Dr. Scient degree in physics with the University of
Bergen. He has earlier held positions as president in Roxar Flow Measurement and
leading positions in i.a. ABB Research and Fluenta.

         SAMUEL ANG (1955) - EXECUTIVE VICE PRESIDENT REGION ASIA PASIFIC

         Ang is the CEO and President of Nera Tel, Singapore. He joined the
company in 1979 and previously served as its managing Director, Vice President
and General Manager. He was appointed as a director of the company and Nera
Electronics Ltd., Singapore in 1996. He is responsible for the management and
business strategies of the NeraTel Group.

         BILLY CAIN (1956) - EXECUTIVE VICE PRESIDENT REGION AMERICAS

         Qualified as a Telecommunications Engineer from the Royal Signals
Military College and the University of Northumbria. Currently studying an MBA in
Business Management with the Open University Business School through distance
learning. After a ten year military career as a Telecomms Engineer, Cain joined
Marconi where he held a variety of positions in sales, sales support and
operations. Joined Nera in June 1996 as Operations Director of the Nera Ltd
facility in the UK becoming General Manager of the Telecommunications Division
one year later. Assumed responsibilities for North America in mid 2001 and
became President of the Americas Region in April 2002.

         OVE BRATSBERG (1961) - EXECUTIVE VICE PRESIDENT CLIENT MANAGEMENT AND
PRODUCT PORTFOLIO

         Ove Bratsberg is an Engineering Graduate of the Horten Ingenior
Hogskole and Business Economic Graduate of the Norwegian School of Management.
He also has a Post Graduate qualification in International Business Management
from the Norwegian School of Management. Before joining Nera in 1994 Ove
Bratsberg had various positions within ABB including sales and research &
development management. Prior to taking up today's position Ove Bratsberg served
as Vice President of Nera in Latin America.

         JOHN KNUDSEN (1961) - EXECUTIVE VICE PRESIDENT SUPPLY CHAIN MANAGEMENT

         Knudsen is an Electrical Engineer from Bergen College of Engineering
and a Business Candidate from the Norwegian School of Management. Since 1987,
Knudsen has held various and leading positions within the Nera Group, primarily
within Research and Development and Operational Management as manufacturing and
supply. Knudsen became Executive Vice President of Supply Chain Management in
2002.

         HELGE SKAAR (1955) - EXECUTIVE VICE PRESIDENT INFORMATION AND PUBLIC
AFFAIRS

         Skaar is a graduate of the University of Bergen. Prior to 1995, he
worked within corporate communications at Den norske Bank. Skaar has also worked
for the Norwegian School of Economics and Business Administration and Haukeland
Hospital. In 1995, Skaar joined us as head of corporate communications.

         STIG-ARE MOGSTAD (1964) - EXECUTIVE VICE PRESIDENT TECHNOLOGY
MANAGEMENT

         Mogstad is a computer science graduate of the University of
Strathclyde. Since 1992, Mogstad has held various positions within the Nera
group, primarily with research and development and management of various
business units. Mogstad is a member of our executive committee and is
responsible for research and development and information technology.

         GRO HATLESKOG (1956) - EXECUTIVE VICE PRESIDENT ORGANISATION AND
MANAGEMENT

                                       49

<PAGE>



         Hatleskog is a graduate of the University of Bergen. Since 1991,
Hatleskog has held various positions within Vesta Forsikring AS, including
personnel director from 1995 to 2001. Hatleskog became executive vice president
of human resources in 2001.

         B        COMPENSATION

         For the year ended December 31, 2002, the aggregate compensation
(including salary, remuneration and pension benefits) paid or accrued by us for
our directors and executive officers (20 individuals) was NOK 20.2 million.
Salary and remuneration to the president in 2002 totaled NOK 2.3 million.
Remuneration to the members of the board totaled NOK 1.2 million. Remuneration
paid to the corporate assembly totaled NOK 0.3 million. For all employees or
past employees including the three members of the board of directors nominated
by the employees, we have pension schemes, which are administered by an
independent management company, based on actuarial principles. For more
information, please see note 10 to our consolidated financial statements
included in Item 17.

         We operate a bonus scheme for executive officers providing for a
maximum bonus of up to eight months' salary for our president, and six months'
salary for other executive officers. The level of bonus actually paid is based
on the attainment of specified financial and business measures established each
year. For the fiscal year 2002, there will be bonus disbursements to some of our
executive officers limited to NOK 1.5 million (exclusive NeraTel).

         Our chief executive officer and president, Mr. Skjeie, was granted
114,000, 99,000 and 81,000 options to purchase shares in 2000, 2001 and 2002,
respectively. In addition, we entered into a bonus agreement with Mr. Skjeie,
which connects his bonus arrangements to the trend in the trading price of our
shares and other criteria relating to the development of our company. For the
fiscal year 2002, there will be no bonus disbursement to the CEO. We and Mr.
Skjeie have 12 months notice of resignation or termination, which is extended to
24 months if his position changes significantly, or if we merge with, or are
acquired by, another company or investor. Mandatory retirement age is 60, with
pension limited to 80% of Mr. Skjeie's salary at the time of retirement. We have
entered into similar bonus agreements with other members of our executive
committee, based on the individual range of responsibilities of such persons.

         Our executive officers take part in our pension scheme. As at December
31, 2002, NOK 9.3 million was accrued for future pensions of executive officers.

         On May 5, 1999 and on March 14, 2000 our shareholders approved a stock
option plan for all of our permanent employees holding active positions with us
at the time of the option exercise, including management. The plan has a total
limit of 6.3 million shares and is subject to approval of the annual general
meeting of stockholders. Options to purchase 2.4 million shares were issued in
2000 (the "2000 plan"), options to purchase 2.1 million shares were issued in
2001 (the "2001 plan"), and options to purchase 1.8 million shares were issued
in 2002 (the "2002 plan") all at an exercise price equal to fair market value at
the time of issuance. The subscription price equals the average closing price
for our shares on the Oslo Stock Exchange, respectively, ten days prior to and
ten days after February 10, 2000 for the options granted under the 2000 plan,
ten days prior to and ten days after February 13, 2001 for the options granted
under the 2001 plan and ten days prior to and ten days after February 18, 2002
for the options granted under the 2002 plan. The exercise price increases by 1%
per month until the options are exercised for options issued in 2000 and 2001,
and 0.5% per month for options issued in 2002. Thus, the exercise price for the
options under the 2000 plan is NOK 52.45 on March 1, 2002 and NOK 62.69 on March
30, 2004 (to the extent options are not exercised on an earlier date). The
exercise price for the options under the 2001 plan is NOK 50.30 on March 1, 2003
and NOK 60.10 on March 30, 2005 (to the extent options are not exercised on an
earlier date). The exercise price for the options under the 2002 plan is NOK
19.22 on March 1, 2004 and NOK 21.36 on March 30, 2006 (to the extent options
are not exercised on an earlier date). Options under the 2000 plan may be
exercised from March 1, 2002 until March 30, 2004, options under the 2001 plan
may be exercised from March 1, 2003 until March 30, 2005 and options under the
2002 plan may be exercised from March 1, 2004 until March 30, 2006.

         Under this plan, all permanent employees receive options to purchase
500 shares per year, while key personnel and management, about 40 persons in the
aggregate, received approximately 3 million options to purchase shares. We
believe that the exercise of all options provided for under this stock option
plan are covered by our repurchase of our shares. At June 25, 2003, we held
1,627,901 of our own shares.

                                       50

<PAGE>



         C.       BOARD PRACTICES

         The terms of office for which the members of our board of directors
serve are provided in subsection 6.A above.

         Our board of directors does not have any committees, as is customary in
Norway.

         D.       EMPLOYEES

         At December 31, 2002, we had 1,669 employees, as compared to 1,820
employees at December 31, 2001. Our future performance will depend in part on
our ability to attract and retain highly skilled employees.

<TABLE>
<CAPTION>
EMPLOYEES PER BUSINESS AREA                           YEAR END
---------------------------                           --------
<S>                                                   <C>
TRANSMISSION NETWORKS
Norway                                                    666
UK                                                         33
Brazil                                                     21
Colombia                                                   45
Venezuela                                                  36
Mexico                                                     26
Miami                                                       5
India                                                      16
Boston                                                     32
                                                       ------
TOTAL                                                     880

SATELLITE COMMUNICATIONS

Norway: Mobile SatCom                                     206
Germany                                                    22
Hong Kong                                                   3
                                                        -----
TOTAL                                                     231

BROADBAND

Norway                                                     72
Dallas                                                      0
                                                        -----
TOTAL                                                      72

NERA CORPORATE FUNCTION                                    47

NERATEL (SINGAPORE)                                       431

TOTAL                                                   1,669
</TABLE>

         E.       SHARE OWNERSHIP

         The table below sets forth certain information as to the ownership of
our ordinary shares and stock options by our directors and executive officers as
of December 31, 2002 to the extent known to us:

                                       51

<PAGE>



<TABLE>
<CAPTION>
                                        NAME                                             NUMBER OF
                                        ----                                              ORDINARY
                                                                                           SHARES              PERCENT
                                                                                         ---------             -------
<S>                                                                                      <C>                   <C>
BOARD OF DIRECTORS
Johan Fredrik Odfjell......................................................                410,318                  *
Kari Broberg...............................................................                     --                 --
Gregers Mogensen...........................................................                     --                 --
Ole Petter Hakonsen........................................................                     --                 --
Birger Magnus..............................................................                     --                 --
Jostein Soreide(1).........................................................                  1,750                  *
Kjell O. Ingebo(2) ........................................................                  1,625                  *
Jan Stenberg...............................................................                     --                 --
Marcel Petie(3)............................................................                  1,839                  *
                                                                                          --------
TOTAL                                                                                      415,532              0.336%

EXECUTIVE COMMITTEE
Bjorn Ove Skjeie(4)........................................................                432,225                  *
Bjorn Olafsson (5).........................................................                 51,748                  *
Terje Ask-Henriksen (6)....................................................                198,378                  *
Ove Bratsberg (7)                                                                          136,291
John Knudsen (8)                                                                           154,510
Helge Skaar (9)............................................................                128,500                  *
Stig-Are Mogstad (10)......................................................                145,510                  *
Gro Hatleskog (11).........................................................                 75,098                  *
Samuel Ang                                                                                  20,000
Oyvind Isaksen (12)                                                                         37,478
Billy Cain (13)                                                                            134,623
                                                                                          --------
TOTAL                                                                                     1514,361               0.83%
</TABLE>
------------------

*        Owns less than one percent of outstanding ordinary shares.

(1)      Includes 500 stock options granted under the 2000 plan, 500 stock
         options granted under the 2001 plan and 500 stock options granted under
         the 2002 plan. The terms of the 2000 plan, 2001 plan and the 2002 plan
         are described above.

(2)      Includes 500 stock options granted under the 2000 plan, 500 stock
         options granted under the 2001 plan and 500 stock options granted under
         the 2002 plan.

(3)      Includes 500 stock options granted under the 2000 plan, 500 stock
         options granted under the 2001 plan and 500 stock options granted under
         the 2002 plan.

(4)      Includes 114,000 stock options granted under the 2000 plan, 99,000
         stock options granted under the 2001 plan and 81,000 options granted
         under the 2002 plan.

(5)      Includes 41,748 stock options, all of which are granted under the 2002
         plan

(6)      Includes 69,000 stock options granted under the 2000 plan, 66,000 stock
         options granted under the 2001 plan and 37,478 stock optins granted
         under the 2002 plan.

(7)      Includes 42,000 stock options granted under the 2000 plan, 39,000 stock
         options granted under the 2001 plan and 35,166 stock options granted
         under the 2002 plan.

(8)      Includes 42,000 stock options granted under the 2000 plan, 45,000 stock
         options granted under the 2001 plan and 37,385 stock options granted
         under the 2002 plan.

(9)      Consists of 54,000 stock options granted under the 2000 plan, 51,000
         stock options granted under the 2001 plan and 23,500 stock options
         granted under the 2002 plan.

(10)     Includes 48,000 stock options granted under the 2000 plan, 60,000 stock
         options granted under the 2001 plan and 37,385 stock options granted
         under the 2002 plan.

(11)     Consists of 48,000 stock options granted under the 2001 plan and 27,098
         stock options granted under the 2002 plan.

(12)     Consists of stock options, all of which are granted under the 2002
         plan.

(13)     Includes 42,000 stock options granted under the 2000 plan, 45,000 stock
         options granted under the 2001 plan and 37,498 stock options granted
         under the 2002 plan.

                                       52

<PAGE>



         Currently two third of the stock options granted under the 2000 plan,
and one third of the stock options granted under the 2001 plan are
excersiseable.

         ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

         A.       MAJOR SHAREHOLDERS

         As far as is known to us, we are not directly or indirectly owned or
controlled by another corporation, any government or by any natural or legal
person(s) severally or jointly, and there are no arrangements the operation of
which may result in a change in our control.

         The following table sets forth, as of June 16, 2003, (1) the ownership
of our shares by each person or entity which, to our knowledge, owns of record
or beneficially and has sole voting and investment power with respect to more
than 5% of our shares, and (2) the beneficial ownership of all our directors and
officers as a group. To our knowledge, our major shareholders do not have
different voting rights.

<TABLE>
<CAPTION>
                                        NAME                                          NUMBER        PERCENT
                                        ----                                          ------        -------
<S>                                                                                 <C>             <C>
SHAREHOLDERS
Folketrygdfondet...........................................................         13,122,600       10.62%
Orkla ASA..................................................................         11,455,963        9.27%
                                                                                    ----------       -----
MEMBERS OF THE BOARD OF DIRECTORS AND OFFICERS
Directors and officers as a group (20 persons) ............................          1,627,657        0.51%
                                                                                                      ----
Total......................................................................         26,206,220        20.4%
                                                                                    ----------        ----
</TABLE>

         B.       RELATED PARTY TRANSACTIONS

         There have been no material transactions during the last year nor are
there any presently proposed transactions, in which any director or officer, or
controlling shareholder, or any relative or spouse thereof had or has a direct
or indirect material interest. There is no significant indebtedness owed to us
by any director or officer or any associate of any director or officer.

         C.       INTERESTS OF EXPERTS AND COUNSEL

         Not applicable.

         ITEM 8.  FINANCIAL INFORMATION

         A.       CONSOLIDATED STATEMENT AND OTHER FINANCIAL INFORMATION

SALES BY GEOGRAPHICAL DESTINATIONS

<TABLE>
<CAPTION>
AMOUNTS IN MILLIONS OF NOK              YEAR                           2001      FOURTH     2002      FOURTH    2001
GEOGRAPHICAL DESTINATIONS               2002                 YEAR      -----     QUARTER    -----    QUARTER    -----
-------------------------               -----     -----     -----      -----     -------    -----    -------    -----
<S>                                     <C>       <C>       <C>        <C>       <C>        <C>      <C>        <C>
Norway                                    276     11.3%       288       9.9%       101      16.5%       124     15.3%
United Kingdom                            110      4.5%       202       7.0%        36       5.9%        28      3.4%
Rest of Europe                            498     20.4%       559      19.3%       144      23.4%       179     22.1%
Americas                                  538     22.0%       815      28.2%       114      18.5%       183     22.6%
Africa                                    105      4.3%       190       6.6%        27       4.5%        15      1.8%
Asia                                      863     35.3%       672      23.2%       182      29.6%       266     33.0%
Oceania                                    55      2.2%       169       5.8%         9       1.6%        14      1.8%
                                        -----     ----      -----      ----        ---      ----        ---     ----
TOTAL                                   2,445      100%     2,893       100%       614       100%       807      100%
                                        =====     ====      =====      ====        ===      ====        ===     ====
</TABLE>

                                       53

<PAGE>



         The consolidated statements and other financial information are
provided in Item 17 below.

         LEGAL PROCEEDINGS

         There are no pending legal proceedings to which we or any of our
subsidiaries is a party or to which any of our properties is subject which,
either individually or in the aggregate, are expected by us to have a material
adverse effect on our consolidated financial position, liquidity or results of
operations.

         DIVIDEND DISTRIBUTIONS

         In 2002, we do not plan to pay any funds in dividend distributions. Our
board of directors determines, on a year to year basis, if and when dividends
will be declared and what percent of earnings will be retained.

         B.       SIGNIFICANT CHANGES

         No significant change has occurred since the date of the financial
statements provided in Item 17 below, other than the sale of TVMobile PTE Ltd.
described in item 17 disclosure 33 below.

         ITEM 9.  THE OFFER AND LISTING

         A.       OFFER AND LISTING DETAILS

         Not applicable.

         B.       PLAN OF DISTRIBUTION

         Not applicable.

         C.       MARKETS

         The principal trading market for our shares is the Oslo Stock Exchange,
where they have been listed since January 1995 under the symbol NER. American
depositary shares, or ADRs, each representing one ordinary share, traded on
Nasdaq's National Market System under the symbol NERAY from June 28, 1995 until
we voluntarily delisted the ADRs on May 30, 2002. Following that date and until
the present time, our ADRs have been trading on the Other OTC Market under the
symbol NERAY. Based on the information received from The Bank of New York, the
depositary with respect to our American depositary shares, we believe that there
are 387 U.S. holders of record who, in the aggregate, hold approximately 260,390
of our shares as of June 22, 2002. We intend to terminate the registration of
our securities under the Securities Exchange Act soon after there are less than
300 US holders of record. Upon termination, we will no longer be required to
file reports with the SEC.

         The table set forth below, for the periods indicated, shows the
reported high and low quoted prices for the ordinary shares on the Oslo Stock
Exchange, as well as for the American depositary shares on Nasdaq and/or the
Other OTC Market, as applicable.

<TABLE>
<CAPTION>
                                         OSLO STOCK EXCHANGE                   NASDAQ AND/OR
                                                                           THE OTHER OTC MARKET
                                                                           (AFTER MAY 30, 2002)
                                         HIGH          LOW                   HIGH        LOW
                                         -----        -----                 -----       -----
                                              (IN NOK)                          (IN USD)
<S>                                      <C>          <C>                   <C>         <C>
1999..........................           38.00        10.50                 4.750       1.375
2000..........................           65.00        32.50                 8.500       3.625
2001..........................           44.30        16.70                 5.000       1.750
2002..........................           21.90         4.90                 2.500       0.200
</TABLE>

                                       54

<PAGE>



<TABLE>
<CAPTION>
                                                                   NASDAQ AND/OR
                                                               THE OTHER OTC MARKET
                                      OSLO STOCK EXCHANGE      (AFTER MAY 30, 2002)
                                      HIGH           LOW     HIGH              LOW
                                      ----           ---     ----              ---
<S>                                  <C>            <C>      <C>              <C>
2001
First quarter.................       44.30          36.70    4.875            4.250
Second quarter................       36.20          30.00    4.100            3.160
Third quarter.................       29.40          20.00    3.300            2.255
Fourth quarter................       24.90          16.70    2.950            1.750

2002
First quarter.................       21.90          15.50    2.500            1.800
Second quarter................       18.00           7.20    2.240            0.250
Third quarter.................        9.80           4.90    1.300            0.200
Fourth quarter................       10.70           5.06    1.330            0.600

2003
December 2002.................       10.70           7.45    1.330            0.900
January 2003..................        8.76           7.55    1.150            0.900
February 2003.................        8.00           5.82    1.150            0.800
March 2003....................        6.84           5.40    0.820            0.750
April 2003....................        8.90           5.75    1.050            0.810
May 2003......................        9.70           7.86    1.180            1.050
June 2003 (until June 26).....       11.20           9.90    1.500            1.180
</TABLE>

-------------

(1)      Until voluntary delisting on May 30, 2002.

         D.       SELLING SHAREHOLDERS

         Not applicable.

         E.       DILUTION

         Not applicable.

         F.       EXPENSES OF THE ISSUE

         Not applicable.

         ITEM 10.          ADDITIONAL INFORMATION

         A.       SHARE CAPITAL

         Not applicable.

         B.       MEMORANDUM AND ARTICLES OF ASSOCIATION

         Set forth below is certain information concerning our share capital and
related summary information concerning all material provisions of our articles
of association and applicable Norwegian law. Such summary information does not
purport to be complete and is qualified in its entirety by reference to our
articles of association, which have been previously filed with the Commission as
an exhibit to our annual report for the year ended December 31, 2000.

                                       55

<PAGE>



         VOTING RIGHTS

         As a general rule, decisions that shareholders are entitled to make
pursuant to Norwegian law or our articles of association may be made by a simple
majority of votes cast. Each ordinary share carries one vote. However, any
decision to amend our articles of association, including any amendment
increasing our share capital or altering the rights and preferences of any
ordinary share or class of shares, requires the approval of at least two-thirds
of the aggregate number of votes cast as well as at least two-thirds of the
share capital represented at a shareholders' meeting, whether or not holders of
such ordinary shares are otherwise entitled to vote. In certain cases, a
stricter voting requirement is applicable.

         To vote at an annual or extraordinary general meeting, a shareholder
must have registered his title to the ordinary shares to be voted in our share
register maintained at the Norwegian centralized registry of shares and other
securities, or VPS, or have given evidence that he is the holder of the ordinary
shares. Shareholders who intend to participate in a general meeting in person or
by proxy must give notice to us by the date stated in the notice convening the
meeting, which date must be not more than five business days before the date of
such meeting.

         The annual general meeting of our shareholders is held each year before
the end of June. Norwegian law requires that written notice of general meetings
be sent to shareholders whose addresses are known at least one week prior to the
date for notification of attendance stated in the notice convening the meeting.
A shareholder may vote by proxy. Although Norwegian law does not require us to
send proxy forms to our shareholders for general meetings, we will include a
proxy form with the notice of meetings.

         Apart from the annual general meeting, extraordinary general meetings
of shareholders may be held whenever considered necessary by the corporate
assembly, the chairman of the corporate assembly or the board of directors. An
extraordinary general meeting may also be convened for the consideration of
specific matters at the written request of our auditor or of shareholders
representing at least 10 percent of our share capital. Any matter that may be
raised at an annual general meeting (other than approval of the annual accounts
and distribution of cash dividends) may also be raised at an extraordinary
general meeting.

         RESTRICTIONS ON OWNERSHIP OF ORDINARY SHARES

         The articles of association contain no provisions restricting the
foreign ownership of the ordinary shares.

         There are no limitations under Norwegian law on the right of
non-resident or foreign owners to hold or vote our ordinary shares. However, in
accordance with Norwegian law, the acquisition of assets, partnership interests,
shares or other ownership interests of a company in Norway must be notified to
the Norwegian Ministry of Industry if the purchaser, regardless of nationality,
becomes the owner of either one-third, one-half or two-thirds of the assets,
partnership interests, shares or other ownership interests in such company and
the company has annual operating revenues exceeding NOK 50 million, has more
than 50 employees, or has received public support for research and development
exceeding NOK 5 million during the past eight years. For acquisitions requiring
notifications, the Norwegian Ministry of Industry may refuse to approve the
acquisition or may approve it with or without conditions.

         We meet the above-described criteria and, therefore, future holders
will be subject to these notification requirements with respect to any
qualifying acquisitions.

         THE VPS AND TRANSFER OF ORDINARY SHARES

         Norway has a paperless, centralized registry of shares and other
securities, the VPS, which began operation in 1986. For companies that are
obliged to, or elect to, register their shares in the VPS, share certificates
are no longer used. The VPS is a computerized bookkeeping system, operated by an
independent body, in which the ownership of, and all transactions relating to,
Norwegian listed shares must be recorded. Our share register is operated through
the VPS.

         All transactions relating to securities registered with the VPS are
made through computerized book entries. The VPS confirms each entry by sending a
transcript to the registered shareholder irrespective of any beneficial

                                       56

<PAGE>



ownership. To effect such entries, the individual shareholder must establish a
share account with a Norwegian account agent. Norwegian banks, the Bank of
Norway, authorized securities brokers in Norway and Norwegian branches of credit
institutions established within the European Economic Area, are allowed to act
as such agents. If the shareholder does not establish such an account, an agent
will be appointed on the shareholder's behalf by the issuer of the shares in
question.

         The entry of a transaction in the VPS is prima facie evidence in
determining the legal rights of parties as against the issuing company or a
third party claiming an interest in the security.

         The VPS is strictly liable for any loss resulting from an error in
connection with registering, altering or cancelling a right, except in the event
of contributory negligence, in which event compensation may be reduced or
withdrawn.

         Under Norwegian law, any acquisition of shares must be registered
within one month after such acquisition. A transferee or assignee of shares may
not exercise the rights of a shareholder with respect to such shares unless such
transferee or assignee has registered such shareholding, or has reported and
shown evidence of such share acquisition, and the acquisition of shares is not
prevented by law, the articles of association or otherwise.

         DISCLOSURE OBLIGATIONS

         Under Norwegian law, any transfer of shares in a company listed on the
Oslo Stock Exchange must be registered with the VPS by the transferor within one
month of the transfer.

         A person, entity or group acting in concert that acquires or disposes
of ordinary shares resulting in its beneficial ownership, directly or
indirectly, exceeding or falling below in the aggregate thresholds of 10
percent, 25 percent, 50 percent or 75 percent of the total number of ordinary
shares outstanding has an obligation under Norwegian law to notify us and the
Oslo Stock Exchange immediately. A corresponding disclosure obligation applies
with respect to any holder of American depositary receipts, or ADRs, who is
entitled upon surrender of the ADRs to acquire directly or indirectly the
beneficial ownership of a number of ordinary shares that, together with any
ordinary shares or additional ADRs held by such holder, in the aggregate exceeds
or falls below such thresholds.

         ADDITIONAL ISSUANCES AND PREEMPTIVE RIGHTS

         All issuances of ordinary shares by us, including bonus issues (share
dividends), requires an amendment to the articles of association, which requires
the same vote as other amendments to the articles of association. Furthermore,
under Norwegian law, shareholders have a preemptive right to subscribe for and
be allotted new ordinary shares issued by us. Such preemptive rights may be
waived by a resolution in a general meeting by the same vote required to approve
amendments to our articles of association. A waiver of the shareholders'
preemptive rights in respect of bonus issues (share dividends) requires the
approval of all ordinary shares outstanding. The issuance of ordinary shares to
holders who are citizens or residents of the United States, or U.S. holders,
upon the exercise of preemptive rights may require us to file a registration
statement in the Unites States under United States securities laws. If we decide
not to file a registration statement, such U.S. holders will not be able to
exercise their preemptive rights and would be required to sell them to Norwegian
persons or other non-U.S. holders to realize the value of such rights.

         Norwegian law also provides that if a Norwegian company's capital is
increased by a subscription for shares and the preemptive rights of shareholders
have not been waived, employees of that company have preferential rights to
subscribe for such shares, to the extent such shares have not been fully
subscribed or oversubscribed through the exercise of shareholders' preemptive
rights.

         Under Norwegian law, bonus issues (share dividends) of our ordinary
shares may be distributed, subject to shareholder approval, from amounts (i)
that could otherwise be distributed as dividends, (ii) that may be created by
transferring funds from our legal reserve discussed below to share capital or
(iii) that may result from an upward revaluation of our long-term assets. Such
bonus issues (share dividends) may be effected either by issuing ordinary shares
or by increasing the par value of the shares outstanding.

                                       57

<PAGE>



         DIVIDENDS

         Under Norwegian law, dividends in cash or in kind are only payable
annually. Any proposal to pay a dividend must be recommended by the directors
and approved by the shareholders at a general meeting. The shareholders at an
annual general meeting may vote to reduce (but not to increase) dividends
proposed.

         Dividends in cash or in kind are payable only out of (1) the annual
profit according to the income statement for the last financial year, (2)
retained profit from previous years and (3) distributable reserves, after
deduction of accumulated losses and any part of the annual profit which,
according to law or the Articles of Association, must be allocated to the
reserve fund or is non-distributable. Our annual income statement and balance
sheet, including the application of profit or coverage of loss, as the case may
be, as well as the consolidated income statement and consolidated balance sheet,
must be approved by the shareholders at a general meeting. In no event may
dividends be declared in excess of an amount that is compatible with good and
careful business practice with due regard to any losses that may have occurred
after the last balance sheet date or that may be expected to occur.

         Under Norwegian law, we are required to maintain a legal reserve at
least equal to a minimum amount prescribed by law and, until such minimum amount
is reached, we must allocate to our legal reserve a proportion of our specified
profit and income prescribed by law. No dividends in cash or in kind may be paid
out of such legal reserve unless the amount of such legal reserve exceeds the
prescribed minimum level, in which case up to 20 percent of any excess may be
paid out in any year.

         Under Norwegian foreign exchange controls currently in effect,
transfers of capital to and from Norway are not subject to prior government
approval except for the physical transfer of payments in currency, which is
restricted to licensed banks. Consequently, a non-Norwegian resident may receive
dividend payments without a Norwegian exchange control consent if such payment
is made only through a licensed bank.

         RIGHTS UPON WINDING-UP

         A Norwegian company may be wound-up by a resolution of the company in a
general meeting passed by a two-thirds majority of the aggregate votes cast by
its voting shares as well as two-thirds of the aggregate share capital
represented at such meeting irrespective of class.

         MANDATORY BID REQUIREMENT

         Norwegian law requires any person, entity or group acting in concert
that acquires more than 45 percent of the voting rights of a Norwegian company
listed on the Oslo Stock Exchange to make a general offer to acquire the whole
of the outstanding share capital of that company. Such offer may be conditioned
on the offeror becoming the owner of shares representing at least two-thirds of
the voting rights. The offer is subject to approval by the Oslo Stock Exchange
before submission of the offer to the shareholders. The offering price per share
must be at least as high as the highest price paid by the offeror in the
six-month period prior to the date the 45 percent threshold was exceeded. A
shareholder who fails to make the required offer must within four weeks dispose
of sufficient shares so that the obligation ceases to apply. Otherwise, the Oslo
Stock Exchange may cause to be sold by public auction the shares exceeding the
45 percent limit. During the time the mandatory bid requirement is in force, a
shareholder failing to make the required offer may not vote or exercise any
rights of share ownership unless a majority of the remaining shareholders
approve, other than the right to receive dividends and preferential rights in
the event of a share capital increase. In addition, the Oslo Stock Exchange may
impose a daily fine upon a shareholder who fails to make the required offer.

         The depositary has qualified and been recognized as a custodian of the
Shares in Norway, as a result of which the depositary is exempt from the
mandatory bid requirement.

         C.       MATERIAL CONTRACTS

         We have not entered into material contracts outside the course of
ordinary business.

                                       58

<PAGE>



         D.       EXCHANGE CONTROLS

         Under Norwegian foreign exchange controls, transfers of capital to and
from Norway are not subject to prior government approval, except for the
physical transfer of payments in currency, which is restricted to licensed
banks. Consequently, a non-resident of Norway may only receive dividend payments
without a Norwegian exchange control consent if such payment is made through a
licensed bank.

         Under the Norwegian Acquisition of Business Act of 1994, acquisitions
of shares, whereby the acquiring person, entity or group becomes owner of more
than one-third, one-half or two-thirds of our share capital or voting rights
must be notified to the Ministry of Industry, which may impose conditions upon
the acquiring person, entity or group or us and, if public policy so mandates,
require the acquiring person, entity or group to resell the acquired shares.

         E.       TAXATION

         GENERAL

         The following is a general summary of the principal Norwegian and
United States federal income tax consequences of the ownership and disposition
of American depositary receipts evidencing American depositary shares, or ADRs,
and/or shares to a beneficial owner of ADRs or shares who is a U.S. holder. A
U.S. holder means a beneficial owner of ADRs that is an individual who is a
citizen or resident of the United States, a United States domestic corporation,
an estate the income of which is subject to United States federal income tax
without regard to its source or a trust if (1) a court within the United States
is able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust and who is not a resident of Norway or (2) it has an
election in effect to be treated as a United States person under United States
federal income tax law. This summary is based

            -     on the tax laws of the United States and Norway, the income
                  tax convention between the United States and Norway, referred
                  to in this section as the convention, and interpretations
                  thereof by the relevant tax authorities that are currently in
                  effect, all of which are subject to change possibly with
                  retroactive effect, and

            -     in part on representations made by the depositary and assuming
                  that each obligation in the deposit agreement entered into
                  between us and the depositary and any related agreement will
                  be performed in accordance with its terms.

         The summary applies only to U.S. holders who hold ADRs or shares as
capital assets and does not address certain classes of persons (such as
tax-exempt entities, certain insurance companies, dealers in securities or
currencies, traders in securities that elect to mark-to-market, investors liable
for alternative minimum tax, banks, financial institutions, persons who hold
ADRs or shares as part of hedging or conversion transactions, persons whose
functional currency is not the U.S. dollar and persons who own, directly or
indirectly, at least 10% of our outstanding voting stock) that may be subject to
special rules. The discussion below does not address the tax treatment of
partnerships or persons who hold shares or ADRs through a partnership or other
pass-through entity. It also does not address the tax treatment of the ownership
and disposition of shares or ADRs under applicable state or local tax laws, or
the laws of any jurisdiction other than Norway or the United States.

         In general, and taking into account the earlier assumptions, for United
States and Norwegian tax purposes, U.S. holders of ADRs will be treated as the
owners of the shares represented by the ADRs. Unless otherwise stated below, the
Norwegian tax consequences and the United States federal income tax consequences
discussed below should apply equally to U.S. holders of ADRs and U.S. holders of
shares.

         NORWAY

         F.       NORWAY

                                       59

<PAGE>



         Taxation of dividends

         Under Norwegian tax law, withholding tax of 25% is levied on dividends
paid by Norwegian company to non-resident companies and individuals.

         The withholding tax may be reduced pursuant to the provisions of the
tax convention between Norway and the US. Pursuant to the convention, the
maximum rate of withholding tax is 15% on dividends paid by a Norwegian
corporation to a person resident (for purposes of the convention) in the United
States, provided that such person does not have a permanent establishment in
Norway with which the dividends are effectively connected. The 15% withholding
rate will apply to dividends paid on shares held directly by U.S. holders who
properly demonstrate to us and to the Norwegian tax authorities that they are
entitled to the benefits of the convention. Additionally, the 15% withholding
tax rate will also apply to dividends paid to the depositary, but only if the
depositary has obtained consent in advance (upon fulfilment of certain
conditions) from the Norwegian Tax Directorate. If such consent is not obtained
in advance, dividends paid to the depositary will be subject to withholding at
the 25% rate. U.S. holders of ADRs who believe they are entitled to the benefits
of the convention may apply to the Norwegian tax authorities for a refund of
amounts withheld in excess of 15%. The application is to be filed with the
Norwegian Tax Directorate. However, there is some uncertainty as to whether and
when such a refund may be obtained.

         We intend to file any reports with the Norwegian authorities or
agencies necessary to obtain the benefits of the convention for those U.S.
holders who are entitled to them. We will exercise our right under the deposit
agreement to reasonably request from the depositary such information from its
records to enable us to file such reports.

         If, however, the recipient of a dividend is a U.S. holder who, it is
determined, is engaged in a business activity taxable in Norway, and the shares
or ADRs with respect to which the dividend is paid are effectively connected
with such activity, then the amount distributed to such U.S. holder will be
treated as taxable ordinary income in Norway, subject to the provisions of the
convention, where applicable. Norway has an imputation system where company
surplus, including dividend payments, is taxed at company level as ordinary
income at a rate of 28%. Dividend income is also taxed as ordinary income at
shareholder level at a rate of 28%, however, as a rule, the shareholder receives
full credit for this tax.

                           a)       Taxation of dispositions

         A U.S. holder normally is not taxed in Norway on gains from the sale or
other disposition of shares or ADRs, unless the shareholding is effectively
connected with a permanent establishment in Norway, or the U.S. holder is an
individual who (1) maintains for at least 183 days during the taxable year a
fixed base in Norway with which such gains are effectively connected or (2) is
physically present in Norway for at least 183 days during taxable year.

         The same rules apply to gains realized upon our complete liquidation or
upon redemption of shares.

         Repayment in connection with a reduction of the share capital by
reducing the nominal value of the shares is, however, subject to withholding tax
as dividend distribution, if exceeding paid-in capital.

         Deposits and withdrawals of shares in exchange for ADRs will not result
in taxable gain or loss for Norwegian tax purposes.

                           b)       Transfer tax

         There is currently no Norwegian tax on the transfers of shares.
Transfers of shares, however, may be subject to nominal registration fees.

                           c)       Inheritance tax

         When shares are transferred, either through inheritance or as a gift,
such transfer may give rise to inheritance tax in Norway if the deceased, at the
time of death, or the donor, at the time the gift is made, is a resident

                                       60

<PAGE>



or citizen of Norway. However, if the deceased, at the time of death, is not a
resident of Norway but rather a citizen of Norway, Norwegian inheritance tax
will not be levied in the country of residence. Irrespective of residency or
citizenship, Norwegian inheritance tax may be levied if the shares are
effectively connected to a permanent establishment in Norway.

         Norway and the US have entered into a convention with the aim to
prevent double inheritance tax on inheritance or gift in Norway and the US.

                           d)       Property taxes or similar taxes

         Norway does not levy any property tax or similar tax on shares. A U.S.
holder of shares is not subject to Norwegian wealth tax with respect to such
shares, unless the U.S. holder is an individual and his shareholding is
effectively connected with a business carried out by the U.S. holder through a
permanent establishment in Norway.

         UNITED STATES

         TAXATION OF DIVIDENDS

         Subject to the discussion under "--Passive Foreign Investment Company
Rules," for United States federal income tax purposes, the gross amount of
distributions (including any withholding tax thereon) made by us out of our
current or accumulated earnings and profits (as determined for United States
federal income tax purposes) will be included in the gross income of a U.S.
holder as dividend income on the day the distribution is actually or
constructively received by the U.S. holder, in the case of shares, or by the
depositary, in the case of ADRs. These dividends will not be eligible for the
dividends-received deduction generally allowed to domestic corporations. The
amount of any dividend paid in Norwegian krone will be equal to the U.S. dollar
value of the krone on the date of receipt by the U.S. holder, in the case of
shares, or by the depositary, in the case of ADRs, regardless of whether the
payment is converted into U.S. dollars. If the krone received as a dividend is
not converted into U.S. dollars on the date of receipt, a U.S. holder will have
a basis in the krone amount equal to its U.S. dollar value on the date of
receipt. Gain or loss, if any, recognized by a U.S. holder on the subsequent
sale or disposition of the krone will generally be United States source ordinary
income or loss.

         A distribution with respect to our shares or ADRs in excess of our
current and accumulated earnings and profits will be treated as a tax-free
return of basis in the shares to the extent of the U.S. holder's adjusted basis
in such shares, with the balance of the distribution, if any, treated as gain
realized by the U.S. holder from the sale, exchange or other disposition of the
shares or ADRs.

         Subject to certain limitations, U.S. holders may elect to claim a
credit against their United States federal income tax liability for Norwegian
tax withheld in accordance with the convention from dividends, or, if they do
not elect to credit any foreign tax for the taxable year, they may deduct such
tax. Any additional withholding tax in excess of the rate applicable under the
convention generally will not be eligible for such deduction or credit. For more
information regarding the availability of a refund of such additional
withholding tax, see "Norway Taxation of Dividends," above. For foreign tax
credit purposes, dividends paid by us will generally be foreign source "passive
income" or, in the case of certain U.S. holders, "financial services income."
Any distribution in excess of our current and accumulated earnings and profits
generally will not give rise to foreign source income, and a U.S. holder will
not be able to use the foreign tax credit arising from any Norwegian withholding
tax imposed on such distribution unless such credit can be applied (subject to
applicable limitations) against U.S. federal income tax due on other foreign
source income in the appropriate category for foreign tax credit purposes.

                                       61

<PAGE>



         Taxation of dispositions

         Subject to the discussion under "--Passive Foreign Investment Company
Rules," a U.S. holder will recognize capital gain or loss for United States
federal income tax purposes on a sale or other disposition of shares or ADRs in
an amount equal to the difference between the U.S. dollar value of the amount
realized and the U.S. holder's tax basis in the shares or ADRs. Such gain or
loss will be long-term capital gain or loss if the U.S. holder's holding period
for such shares or ADRs exceeds one year. Long-term capital gain of a
non-corporate U.S. holder is generally subject to a maximum tax rate of 20%. For
corporate U.S. holders, capital gains are currently taxed at the same rate as
ordinary income. The deductibility of a capital loss, however, is subject to
limitations for both non-corporate and corporate U.S. holders.

         Any such gain or loss recognized by a U.S. holder will generally
constitute United States source income. Because capital gains will generally
constitute United States source income, any Norwegian or other foreign tax
imposed upon capital gains in respect of the shares or ADRs may not be currently
creditable unless a U.S. holder had other foreign source income for the year in
the appropriate foreign tax credit limitation basket. Capital losses will
generally be allocated against United States source income.

         Passive Foreign Investment Company Rules

         Special United States federal income tax rules apply to holders of
equity interests in a corporation classified as a passive foreign investment
company, or PFIC. We would be a PFIC for United States federal income tax
purposes if 75% or more of our gross income for a taxable year were to consist
of passive income, or 50% or more of our average assets held during a taxable
year were to consist of passive assets. Based on our current and projected
financial data, we believe that we will not currently be treated as a PFIC for
U.S. federal income tax purposes and we do not expect to become one in the
future. However, this conclusion is a factual determination made annually and
thus may be subject to change based on future operations and the composition and
valuation of our assets.

         If we were to constitute a PFIC, a U.S. holder could be subject to
materially adverse United States federal income tax consequences for certain
distributions made by us and with respect to gain realized by the holders on
disposition of shares or ADRs. Prospective U.S. holders should consult with
their own tax advisors regarding the potential application of PFIC rules.

         United States backup withholding tax and information reporting

         Payments made by a paying agent within the United States to U.S.
holders other than corporations and other exempt recipients in respect of shares
or ADRs may be subject to information reporting to the United States Internal
Revenue Service, or IRS. Backup withholding tax will also apply to those
payments if made to a non-exempt U.S. holder that fails to provide certain
information to the paying agent, including the holder's taxpayer identification
number, and to comply with certain other requirements concerning backup
withholding. Currently, this backup withholding rate is 30% for payments made in
2002 and 2003, but this rate will be reduced to 29% for payments made in 2004
and 2005, and 28% for payments made in 2006 and thereafter. Non-U.S. holders may
be required to comply with certain documentation and certification procedures to
establish that they are not U.S. holders in order to avoid the application of
such information reporting and backup withholding requirements.

         Any amounts withheld under the backup withholding rules from a payment
to a holder of shares or ADRs generally will be allowed as a refund or a credit
against such holder's U.S. federal income tax, provided that the required
information is furnished to the IRS.

         G.       DIVIDENDS AND PAYING AGENTS

         Not applicable.

         H.       STATEMENT BY EXPERTS

                                       62

<PAGE>



         Not applicable.

         I.       DOCUMENTS ON DISPLAY

         We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the Securities and Exchange Commission. These
materials, including this annual report and the exhibits thereto, may be
inspected and copied at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the Commission's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of the materials may be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The public may obtain information on the operation of
the Commission's Public Reference Room by calling the Commission in the United
States at 1-800-SEC-0330. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy statements and other information
regarding registrants that file electronically with the Commission.

         J.       SUBSIDIARY INFORMATION

         Not applicable.

         ITEM 11.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
         RISK

         MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT

         We sell our products and services internationally and we are subject to
market risks, primarily from changes in foreign exchange rates and interest
rates. We are not materially affected by commodity price fluctuations. In the
normal course of business we also face risks that are either nonfinancial or
nonquantifiable. Such risks principally include country risk and credit risk and
are not represented in the following analyses.

         Our board of directors has issued a policy that determines the maximum
level of foreign exchange rate and interest rate risks that can be assumed by
individual companies and our group as a whole. The calculations and measurement
techniques used by the treasury center are in accordance with established
banking practices.

         FOREIGN CURRENCY EXCHANGE RATE RISK

         We have manufacturing, sales and distribution facilities around the
world and thus make investments and enter into transactions denominated in
various foreign currencies. Our operating cash flows denominated in foreign
currency as a result of these international business activities are exposed to
changes in foreign exchange rates. In order to maintain strict control and
achieve the benefits of our global diversification, foreign exchange exposures
may be hedged with financial instruments. We primarily enter into forward
exchange controls and currency swaps to reduce the earnings and cash flow of
non-functional currency denominated receivables and payables. Gains and losses
resulting from hedging instruments usually offset the gains or losses on the
underlying assets, liabilities, and investments being hedged. Our forward
exchange contracts and currency swaps generally do not exceed 12 months, and the
maturities coincide with our best estimate as to the settlement dates of the
related firm and anticipated transactions.

         The currencies that we were primarily exposed to before hedging at
December 31, 2002 were the Norwegian krone versus the U. S. dollars, Euros and
the pound sterling.

         The following table provides the Norwegian krone equivalents of the net
foreign exchange contracts and currency swaps outstanding by currency and the
corresponding impact on the value of these instruments assuming both a 10%
appreciation and depreciation of the respective currencies from their levels at
December 31, 2002, with all other variables (including interest rates) held
constant. The resulting gains and losses are translated into Norwegian krone
using the appropriate exchange rate at December 31, 2002. The instruments held
by us are not leveraged and are held for purposes other than trading.

                                       63

<PAGE>



<TABLE>
<CAPTION>
                                                                     Foreign exchange gain/(loss)
                                                                                 from
                                                                         10%             10%
                                        Foreign                    appreciation of  depreciation of
Forward contracts and currency         currency      Foreign         the foreign      the foreign
           swaps:                       bought    currency sold        currency         currency
-----------------------------          ------------------------------------------------------------
                                                        (in NOK millions)
<S>                                    <C>        <C>              <C>               <C>
United Arab Emirates dirham........       0.0          0.2            -0.02              0.02
Australian dollars.................       2.0          6.3             -0.4               0.4
Euro...............................      15.4        109.5             -9.3               9.3
Pounds Sterling                          41.4        101.9             -5.7               5.7
Japanese yen                              0.4          0.0             0.04             -0.04
Danish krona                              0.8          0.0             0.08             -0.08
U. S. dollar...................2004      24.2        391.2            -32.6              32.6
                                         ----        -----             ----              ----
         TOTAL                           84.2        609.1            -47.9              47.9
</TABLE>

         In addition, please see note 21 to our consolidated financial
statements included in Item 17.

         INTEREST RATE SENSITIVITY

         We are exposed to changes in interest rates primarily as a result of
liquidity invested in short-term interest bearing instruments, primarily bank
deposits with a consequently low risk to value. Some interest rate exposure is
also related til project financing. Project financing in Pound Sterling has a
fixed interest rate and project financing in US dollars has a variable interest
rate with short time to maturity. The nature and amount of our bank deposits,
long-term and short-term debt can be expected to vary as a result of future
business requirements, market conditions and other factors. Due to the variable
rates, our interest cost will fluctuate during the course of any financial year.
We do not undertake any specific actions to cover our exposure to interest risk
and we are not a party to any interest risk management transactions.

         Note 21 to the consolidated financial statements discusses the fair
value of our financial instruments.

         NEW U.S. ACCOUNTING STANDARDS

         In November 2002, the EITF reached a consensus on Issue 00-21,
addressing how to account for arrangements that involve the delivery or
performance of multiple products, services, and/or rights to use assets. Revenue
arrangements with multiple deliverables are divided into separate units of
accounting if the deliverables in the arrangement meet the following criteria:
(1) the delivered item has value to the customer on a standalone basis; (2)
there is objective and reliable evidence of the fair value of undelivered items;
and (3) delivery of any undelivered item is probable. Arrangement consideration
should be allocated among the separate units of accounting based on their
relative fair values, with the amount allocated to the delivered item being
limited to the amount that is not contingent on the delivery of additional items
or meeting other specified performance conditions. The final consensus will be
applicable to agreements entered into in fiscal periods beginning after June 15,
2003 with early adoption permitted. Nera will adopt EITF Issue 00-21on January
1, 2004.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to expense, (4) subsequent
measurement of the liability and (5) financial statement disclosures. SFAS 143
requires

                                       64

<PAGE>



that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset and depreciated over the
life of the associated fixed asset. An entity shall measure changes in the
liability for an asset retirement obligation due to passage of time by applying
an interest method of allocation to the amount of the liability at the beginning
of the period. The interest rate used to measure that change shall be the
credit-adjusted risk-free rate that existed when the liability was initially
measured. That amount shall be recognized as an increase in the carrying amount
of the liability and as an expense classified as an operating item in the
statement of income.

         SFAS 143 is effective for fiscal years beginning after June 15, 2002,
with early application encouraged. We will adopt SFAS 143 effective January 1,
2003 and have not yet evaluated the effect upon adoption.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which is effective for financial
statements where exit or disposal activities are initiated after December 31,
2002. This statement nullifies EITF Issue 94-3, "Liability Recognition for
Certain Employee Termination Benefits and other Costs to Exit an Activity,"
which allowed recognition of a liability for exit and disposal activities upon
management's intent to exit or dispose of an activity. This statement requires
that a liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. Nera will adopt this statement for
exit or disposal activities initiated after January 1, 2003.

         In May 2003 the FASB issued SFAS 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", the new
accounting standard for certain types of freestanding financial instruments and
disclosure regarding possible alternatives to settling financial instruments.
The Group has not evaluated what impact, if any, adoption of the Statement will
have on the Group's consolidated financial condition and results of operation.
The Statement is effective for all financial instruments entered into or
modified after May 31, 2003 and is otherwise effective at the beginning of the
first interim period after June 15, 2003.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure." This Statement amends
SFAS No. 123, "Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The disclosure provisions of this Standard are effective for fiscal
years ending after December 15, 2002. Since Nera are en Item 17 filer no
additional disclosures are necessary.

         In November 2002, FASB issued Interpretation (FIN) 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". This Interpretation clarifies certain
elements related to measurement and disclosure of guarantees, including product
warranties. The interpretation clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the obligations it
has undertaken in issuing the guarantee, including its ongoing obligation to
stand ready to perform over the term of the guarantee in the event that the
specified triggering events or conditions occur. The recognition and measurement
provisions are applicable to guarantees issued or modified after December 31,
2002. Nera will determine the impact of (FIN) 45 and has reflected its findings
in this Form 20-F during preparing the 2003 20 F filing.

         In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51 ("FIN 46"). The
Interpretation requires the consolidation of entities in which an enterprise
absorbs a majority of the entity's expected losses, receives a majority of the
entity's expected residual returns, or both, as a result of ownership,
contractual or other financial interests in the entity. Currently, entities are
generally consolidated by an enterprise when it has a controlling financial
interest through ownership of a majority voting interest in the entity. The
company does not believe that the adoption of FIN 46 will have a material impact
on the financial position, results of operations or cash flows of the Company.

                                       65

<PAGE>



         ITEM 12.          DESCRIPTION OF SECURITIES OTHER THAN EQUITY
         SECURITIES

         Not applicable.

PART II

         ITEM 13.          DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         Not applicable.

         ITEM 14.          MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES
         HOLDERS AND USE OF PROCEEDS

         Not applicable.

         ITEM 15.          CONTROLS AND PROCEDURES

         As of a date within 90 days of the filing date of this annual report
(the "Evaluation Date"), an evaluation was performed under the supervision and
with the participation of our management, including the chief executive officer
and the chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)). Based on that evaluation our management,
including the chief executive officer and the chief financial officer, concluded
that our disclosure controls and procedures were effective as of the Evaluation
Date. There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent to
the Evaluation Date.

         In designing and evaluating our disclosure controls and procedures, our
management, including the chief executive officer and the chief financial
officer, recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the company have been detected.

         ITEM 16.          [RESERVED]

                                       66

<PAGE>



PART III

         ITEM 17.          FINANCIAL STATEMENTS

Index to Consolidated Financial Statements of Nera ASA and Subsidiaries

<TABLE>
<CAPTION>
                                                                           Page
<S>                                                                     <C>
Report of Independent Auditors-
   Report of Ernst & Young AS for the fiscal year
   ended December 31, 2002, dated March 31, 2003                               F-2

   Report of Arthur Andersen & Co. for the fiscal years
   ended December 31, 2000 and 2001, dated March 20 and April 30, 2002         F-3

Consolidated Statements of Profit and Loss for the years
ended December 31, 2000, 2001 and 2002                                         F-4

Consolidated Balance Sheets as of December 31,
2001 and 2002                                                                  F-5

Consolidated Statements of Cash Flows for the
years ended December 31, 2000, 2001 and 2002                                   F-7

Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 2000, 2001 and 2002                    F-8

Notes to the Consolidated Financial Statements                          F-9 - F-34
</TABLE>

                                       67

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

         THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NERA ASA

         We have audited the accompanying consolidated balance sheet of Nera ASA
and subsidiaries as of December 31, 2002, and the related consolidated
statements of profit and loss, shareholders' equity, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of Nera ASA and
subsidiaries as of December 31, 2001 and for the years ended December 31, 2001
and 2000, were audited by other auditors who have ceased operations as a foreign
associated firm of the Securities and Exchange Commission Practice Section of
the American Institute of Certified Public Accountants and whose report dated
March 20 and April 20, 2002, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Nera ASA and
subsidiaries at December 31, 2002, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in Norway.

Accounting principles generally accepted in Norway vary in certain respects from
accounting principles generally accepted in the United States. The application
of the latter would have affected the determination of the consolidated net loss
of Nera ASA and subsidiaries for the year ended December 31, 2002, and of
consolidated shareholders' equity as of December 31, 2002, to the extent
summarized in Note 30 of the consolidated financial statements.

Ernst & Young AS

Bergen, Norway
March 31, 2003

                                       68

<PAGE>



    This report (i) is a copy of the accountants' report, dated March 20, and
April 20, 2002, previously issued by Arthur Andersen & Co. for the financial
statements of Nera ASA as of December 31, 1999, 2000 and 2001, and for the years
then ended, (ii) has not been reissued by Arthur Andersen & Co. and (iii) is
included herein pursuant to Rule 2.02(e) of Regulation S-X.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Nera ASA:

         We have audited the accompanying consolidated balance sheets of Nera
ASA and its subsidiaries (the "Company") as of December 31, 1999, 2000 and 2001,
and the related consolidated statements of profit and loss, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1999, 2000 and 2001, and the related consolidated statements of profit and loss,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in Norway.

Accounting practices used by the Company in preparing the accompanying financial
statements conform with generally accepted accounting principles in Norway, but
do not conform with accounting principles generally accepted in the United
States. A description of these differences and a complete reconciliation of
consolidated net income and shareholders' equity to US generally accepted
accounting principles is set forth in Note 32.

/S/ ARTHUR ANDERSEN
-------------------

ARTHUR ANDERSEN & CO
Bergen, Norway, March 20 and April 20, 2002

                                       69

<PAGE>



                            NERA ASA AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF PROFIT AND LOSS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
(Amounts in NOK million except share data)                        Note        2002         2001        2000
-------------------------------------------------------------------------------------------------------------
<S>                                                              <C>        <C>          <C>         <C>
Sales revenue                                                                2 438,5      2 880,6     2 539,1
Other operating revenues                                                         6,3         12,7        10,7
-------------------------------------------------------------------------------------------------------------
Operating revenue                                                   2,4      2 444,8      2 893,3     2 549,8
-------------------------------------------------------------------------------------------------------------
Changes in work in progress and finished goods                                 (24,2)        54,8       (37,3)
Cost of materials                                                           (1 285,6)    (1 411,1)     (966,6)
Payroll expense                                                      10       (679,8)      (722,8)     (649,6)
Depreciation                                                        5,6        (83,5)       (87,9)      (66,9)
Other operating expense                                          7,9,13       (505,0)      (894,4)     (724,9)
-------------------------------------------------------------------------------------------------------------
Operating costs                                                             (2 578,1)    (3 061,4)   (2 445,3)
-------------------------------------------------------------------------------------------------------------
Operating income (loss) before restructuring and writedowns                   (133,3)      (168,1)      104,5
-------------------------------------------------------------------------------------------------------------
Restructuring expenses and writedowns                                12        (11,1)      (264,0)          -
-------------------------------------------------------------------------------------------------------------
Operating income (loss)                                                       (144,4)      (432,1)      104,5
-------------------------------------------------------------------------------------------------------------
Income (loss) from investments in associated companies               16        (23,8)        30,2        26,5
Financial income                                                     11         74,8        108,8       103,6
Financial expense                                                    11        (68,8)      (155,2)      (41,3)
-------------------------------------------------------------------------------------------------------------
Net financial items                                                            (17,8)       (16,2)       88,8
-------------------------------------------------------------------------------------------------------------
Income (loss) before tax                                                      (162,2)      (448,3)      193,3
-------------------------------------------------------------------------------------------------------------
Taxes                                                                14         33,7         81,3       (57,0)
-------------------------------------------------------------------------------------------------------------
Net income (loss)                                                             (128,5)      (367,0)      136,3
-------------------------------------------------------------------------------------------------------------
Minority interest                                                              (16,5)        (3,7)
-------------------------------------------------------------------------------------------------------------
Net income (loss) after minority interests                                    (145,0)      (370,7)      136,3
-------------------------------------------------------------------------------------------------------------
Earnings (loss) per share, primary (NOK)                             15        (1,19)       (3,02)       1,22
Earnings (loss) per share, diluted (NOK)                             15        (1,19)       (3,02)       1,22
-------------------------------------------------------------------------------------------------------------
</TABLE>

  The accompanying notes form an integral part of these consolidated financial
                                  statements.

                                       70

<PAGE>



                            NERA ASA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
(Amounts in NOK million)                                    Note       December 31,
-------------------------------------------------------------------------------------
                                                                      2002      2001
-------------------------------------------------------------------------------------
<S>                                                        <C>      <C>       <C>
ASSETS:
Deferred tax asset                                             14     174,0     113,5
IT software                                                     6      23,7
Goodwill                                                        6      18,9      23,7
-------------------------------------------------------------------------------------
Intangible fixed assets                                               216,6     137,2
-------------------------------------------------------------------------------------
Land, buildings and other property                              5      13,0      17,3
Machinery and plant                                             5      83,0     105,7
Fixtures and fittings, tools, office machinery, etc.            5     103,1     145,1
-------------------------------------------------------------------------------------
Property, plant and equipment                                         199,1     268,1
-------------------------------------------------------------------------------------

Investments in associates                                  16, 18      33,3      72,5
Investments in other shares                                    18       0,6       0,6
Prepaid pension costs                                          20      35,8      27,1
Other long-term receivables                                    21      91,8     119,7
-------------------------------------------------------------------------------------
Financial non-current assets                                          161,5     219,9
-------------------------------------------------------------------------------------
Non-current assets                                                    577,2     625,2
-------------------------------------------------------------------------------------
Raw materials                                                  22     161,6     272,4
Work in progress                                               22      88,3     142,6
Finished goods                                                 22     133,0     119,7
-------------------------------------------------------------------------------------
Inventories                                                           382,9     534,7
-------------------------------------------------------------------------------------
Trade receivables                                              23     518,6     781,6
Cost in excess of billings                                            202,8     222,7
Other short-term receivables                                   25      82,5     152,5
-------------------------------------------------------------------------------------
Debtors                                                               803,9   1 156,8
-------------------------------------------------------------------------------------
Cash and cash equivalents                                      19     795,8     899,5
-------------------------------------------------------------------------------------
Current assets                                                      1 982,6   2 591,0
-------------------------------------------------------------------------------------
ASSETS                                                              2 559,8   3 216,2
-------------------------------------------------------------------------------------
</TABLE>

  The accompanying notes form an integral part of these consolidated financial
                                   statements.

                                       71

<PAGE>



                            NERA ASA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (continued)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
(Amounts in NOK million)                            Note        December 31,
--------------------------------------------------------------------------------
                                                              2002       2001
--------------------------------------------------------------------------------
<S>                                                 <C>     <C>         <C>
EQUITY AND LIABILITIES:
Share capital                                       27,30      247,1       247,1
Treasury stock                                      27,30       (3,3)       (2,5)
Share premium reserve                                  30    1 265,2     1 265,2
--------------------------------------------------------------------------------
Paid-in capital                                              1 509,0     1 509,8
--------------------------------------------------------------------------------
Other equity                                           30     (136,6)       61,3
--------------------------------------------------------------------------------
Retained earnings                                             (136,6)       61,3
--------------------------------------------------------------------------------
Minority interest                                      30      240,2       157,0
--------------------------------------------------------------------------------
Equity                                                       1 612,6     1 728,1
--------------------------------------------------------------------------------
Pension liabilities                                    20       41,8        36,3
Deferred tax                                           14        3,2         0,5
--------------------------------------------------------------------------------
Provisions for liabilities                                      45,0        36,8
--------------------------------------------------------------------------------
Liabilities to financial institutions                            4,3         8,4
Other non-current liabilities                           7       42,7        56,6
--------------------------------------------------------------------------------
Other non-current liabilities                                   47,0        65,0
Liabilities to financial institutions                            4,8       192,4
Trade creditors                                                313,2       427,3
Customer advances and billings in excess of cost       28      196,8       291,1
Tax payable                                            14       24,5        37,1
Public duties                                                     45        50,4
Dividends
Other short-term liabilities                        12,17      270,9       388,0
--------------------------------------------------------------------------------
Current liabilities                                            855,2     1 386,3
--------------------------------------------------------------------------------
Liabilities                                                    947,2     1 488,1
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES                                       2 559,8     3 216,2
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Contingent liabilities                                 29      239,5       316,9
--------------------------------------------------------------------------------
</TABLE>

  The accompanying notes form an integral part of these consolidated financial
                                   statements.

                                       72

<PAGE>



                            NERA ASA AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
(Amounts in NOK million)                                                 2002       2001        2000
-----------------------------------------------------------------------------------------------------
<S>                                                                     <C>       <C>         <C>
Net income (loss)                                                       (128,5)    (367,0)      136,3
Ordinary depreciation                                                     83,5       87,9        66,9
Writedown of goodwill and financial non-current assets                       -      236,4           -
Gain (loss) on sales of property, plant and equipment                    (17,9)     (10,8)       12,9
Gain (loss) on sales of shares                                               -          -        (1,3)
Unrealized loss on shares                                                    -          -           -
Deferred taxes                                                           (89,9)    (102,8)       (0,1)
Provision for bad debts                                                   15,6       13,1         0,3
Net income from associated companies                                      23,8      (30,2)      (26,5)
Change in inventory                                                      151,8      (91,5)      (43,0)
Change in trade receivables                                              247,3      203,8      (193,6)
Change in costs in excess of billings                                       20      (18,3)      (89,5)
Change in customer advances and billings in excess of cost               (94,3)    (124,9)       81,9
Change in trade payable                                                 (114,0)     (46,9)       84,4
Difference in pension costs recognized and net pension payments           (3,2)      (8,2)       (8,8)
Items classified as investment or financing activities                       -          -           -
Change in other accruals                                                 (59,6)     (67,1)       57,9
-----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                       34,6     (326,5)       77,8
-----------------------------------------------------------------------------------------------------
Proceeds from sales of property, plant and equipment                       7,9        1,0        10,6
Capital expenditures                                                     (61,4)    (129,1)     (105,8)
Net proceed from sale of shares                                              -          -       155,5
Loans to third parties                                                    27,8      (15,8)      (38,0)
Investments in other shares                                                  -          -       (33,0)
Other investments                                                         82,9      150,8       (56,1)
-----------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities                       57,2        7,0       (66,9)
-----------------------------------------------------------------------------------------------------
Repayment of long-term loans                                              (4,1)    (237,6)       (2,4)
Principal payments on capital leases                                         -          -           -
Repayment of short-term loans, net                                      (188,4)     182,3         3,1
Net borrowings (repayment) of bank overdraft facilities                    0,8       (4,3)        4,6
Proceeds from issuance of shares                                          37,7        5,2       860,6
Change, own shares                                                        (2,8)     (26,8)      (10,9)
Dividends paid                                                           (26,8)     (27,1)      (19,6)
Net cash provided by (used in) financing activities                     (188,6)    (108,3)      835,5
-----------------------------------------------------------------------------------------------------
Effect of changes in current exchange rates                               11,9        7,0        (7,6)
-----------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                                 (103,7)    (420,8)      838,8
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period                         899,5    1 320,3       481,5
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                               795,8      899,5     1 320,3
-----------------------------------------------------------------------------------------------------
</TABLE>

  The accompanying notes form an integral part of these consolidated financial
                                  statements.

                                       73

<PAGE>



                            NERA ASA AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                            Accumulated
PART II. Amounts in              Number of     Share Capital                                   other          Net
NOK 1,000s, except for            Shares        (par value      Restricted   Unrestricted   Translation     income
number of shares                Outstanding       NOK 2)         Reserves      Reserves     adjustment      (loss)     Total
<S>                             <C>            <C>              <C>          <C>            <C>             <C>       <C>
Balance at Dec 31, 1999            96,093.7        192.2          569.9          211.9         -4.5             0.0     969.5

Net income                                                                                                    136.3     136.3

Translation adjustments                                             3.2                         0.3                       3.5

Issuance of shares                 27,096.6         54.2          881.7                                                 935.9

Purchase of own shares                                             -0.6          -10.3                                  -10.9

Cost of shares issued                                             -41.8                                                 -41.8

Tax effect shares issued                                           11.7                                                  11.7

Dividend                                                                                                      -27.2     -27.2

Allocation of net income and
transfers                                                          29.6           79.5                       -109.1       0.0

Balance at Dec 31, 2000           123,190.4        246.4        1,453.7          281.1         -4.2             0.0   1,977.0

Net income                                                                                                   -366.9    -366.9

Translation adjustments                                                                       -13.7                     -13.7

Issuance of shares                      339          0.7            4.5                                                   5.2

Purchase of own shares                                             -1.9          -24.9                                  -26.8

Allocation of net income and
transfers                                                        -102.9         -267.7                        366.9      -3.7

Balance at Dec 31, 2001           123,529.4        247.1        1,353.4          -11.5        -17.9             0.0   1,571.1
Net loss                                                                                                     -145.0    -145.0
Purchase of own shares                                             -0.8           -2.0                                   -2.8
Changes in other equity                                                           -6.6                                   -6.6
Translation difference                                                                        -44.3                     -44.3
Balance at Dec 31, 2002           123,529.4        247.1        1,352.6          -20.1        -62.2          -145.0   1,372.4
</TABLE>

  The accompanying notes form an integral part of these consolidated financial
                                   statements.

                                       74

<PAGE>



                           NERA ASA AND SUB SIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING PRINCIPLES

The annual accounts have been prepared in accordance with the Norwegian
Accounting Act of 1998 and generally accepted accounting principles. The
financial statements are based on the established accounting principles in
accordance with the generally accepted accounting principles in Norway;
principles of transactions, accrual, matching, prudence, congruence, hedging,
best estimate and the going concern assumption. Financial statements preparation
require estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses as well as disclosures of contingencies.
Actual results may differ from estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the parent
company, Nera ASA, and each of those companies in which it owns, directly or
indirectly through subsidiaries, over 50 % of the voting rights, or has the
power to control the financial and operational policies of the company (the
"Company" or the "Group"). The accounting principles are uniform for the Group.
All significant intercompany transactions and balances are reconciled and
eliminated in the consolidated accounts. Companies acquired, have been
consolidated from the transaction date. At gradual acquisition the over/under
value are measured on every single acquisition. When subsidiaries are sold or
otherwise disposed of, the results until the date of disposal is included in the
consolidated accounts.

When subsidiaries are acquired the cost price of the shares in the parent
company is eliminated against the equity of the subsidiary at the time of the
acquisition. Value in excess of the book equity of the subsidiary is allocated
to identifiable assets and liabilities. Acquired assets and liabilities are
recorded at market value at the time of the acquisition. Any additional excess
value that cannot be allocated to assets and liabilities is recorded on the
balance sheets as goodwill or negative goodwill. Deferred taxes are taken into
account and recorded when excess value is assigned to assets and liabilities,
however, goodwill is recorded net of tax. Goodwill and excess value associated
with foreign subsidiaries are translated from the relevant currency at the
exchange rate at the time of acquisition.

The Company's share of the profit or loss from associated companies in which the
Company owns 20 - 50 % of the voting rights and has significant financial and
operational influence, is included in the consolidated financial statements
according to the equity method. Accordingly, the investments carrying amount is
periodically increased (decreased) by the investor's proportionate share of the
earnings (losses) of the investee and decreased by all dividends received by the
investor from the investee. Value in excess of book value of equity in the
associated company is amortised on a straight-line basis over the periods
estimated to be benefited. The share of profit or loss is presented as a
financial item in the statements of profit and loss and the carrying amount is
included in the balance sheets as financial non-current assets.

The Company's foreign subsidiaries are considered as independent units and are
translated from their respective functional currencies into Norwegian kroner at
the exchange rates in effect at the balance sheet date. Results of operations
are translated using average exchange rates in effect during the reporting
period. Resulting translation adjustments are accumulated as a component of
shareholders' equity.

Subsidiaries in countries with hyperinflation are translated as if functional
currency (USD) was the entities' accounting currency. The effect of the
translation to functional currency is charged to the statements of profit and
loss.

MINORITY INTERESTS

The share of the profit/loss after tax attributable to minority interests is
presented on a separate line after the Group's net income (loss) for the year.
The share of the equity attributable to minority interests is presented on a
separate line as a specification of the Group's equity.

The share of equity attributed to minority interests is calculated to fair value
of assets and liabilities at time of acquisition.

SUBSIDIARIES/ASSOCIATED COMPANIES

In the parent company's financial statements, investments in subsidiaries are
included in accordance with the cost method and associated companies in
accordance with the equity method.

                                       75

<PAGE>



REVENUE RECOGNITION

Revenues from sale of goods are recognised net of discounts and recorded when
shipped and/or services are performed and the risk passed to the customer.
Revenues on long-term contracts are recognised using the percentage of
completion inclusive net profit method. Project revenues include direct
materials, wages, and other direct costs, together with indirect costs and
portion of profit, which can be allocated to the project.

For certain contracts, where the delivery of equipment is clearly separable from
installation, training and other aspects of the contract, the Company segments
the contract and recognises revenue on each segmental portion individually.
Income recognition on contracts is deferred until progress reaches a level of
completion (generally based on established milestones) sufficient to reasonably
estimate the probable outcome. If estimated total costs on a contract indicate a
loss, the entire amount of the estimated loss is provided for currently.

For certain long-term contracts, the Company obtains advance payments from
customers to finance necessary project investments. To present operating margins
and financial expenses as if the investments had been financed through third
parties, the Company calculates an imputed interest amount when recognising
sales under these long-term contracts (if material). The imputed interest is
added to sales and financial expense, with no impact on the Company's net
income.

FOREIGN CURRENCY

Monetary items denominated in foreign currencies are translated into Norwegian
kroner using the exchange rate in effect on the balance sheet date. Since 2001
the resulting currency gain/loss is recorded net as financial income or
expenses. The corresponding figures that previously were presented on a gross
basis have been revised. Due to its considerable international operations, the
Group is exposed to changes in exchange rates. The Group policy is to balance
the differences in debtors and liabilities through financial instruments like
bank deposits in currency, forward contracts and options. The Company does not
issue or hold financial derivatives for trading or speculative purposes. Forward
foreign exchange contracts (forward contracts), and currency swaps are used to
hedge future sales or purchases and are not recorded until the respective sale
or purchase transaction is recorded. Such foreign currency transactions are
considered hedges of sales when the foreign currency commitment is reasonably
assured and the foreign currency transaction is designated as a hedge of the
foreign currency exposure. Forward contracts are also used to hedge accounts
receivable and accounts payable. Accounts receivable/payable have been
translated using the exchange rate in effect on the balance sheet date.
Unrealised gain or loss on foreign currency forwards designated as hedging
contracts is netted against gain/loss on the hedged items.

RESTRUCTURING COSTS

Restructuring provisions and write-downs of assets are made if the Company,
within the balance sheet date, has announced or started a restructuring plan, in
which the Company clearly states what part of the Company the plan embraces,
approximately how many employees will be affected, actions to be taken and
period for implementation. Provisions only include costs, which cannot be
associated with future earnings.

CLASSIFICATION AND VALUATION OF BALANCE SHEET ITEMS

Assets intended for permanent ownership or use are classified in the balance
sheets as fixed assets. Other assets are classified as current assets.
Liabilities that fall due later than one year after the end of the financial
year are classified as long-term liabilities. Other liabilities are classified
as short-term liabilities.

Current assets are valued at the lower of cost and fair value (the lower of cost
and market). Current liabilities are stated at the nominal amount at the
transaction date. Non-current assets are stated at cost unless a permanent
deterioration in value has occurred, in which case the change in value must be
recognised as a write-down. Long-term debt is valued at the nominal amount at
the transaction date.

RESEARCH AND DEVELOPMENT COSTS (R&D)

Internal research and development costs are expensed as incurred. Purchased
technology is capitalised at acquisition cost and amortised over the lifetime of
the project.

INCOME TAXES

Income tax expense includes tax payable and changes in deferred taxes. Deferred
tax liabilities/assets are calculated in accordance with the liability method.
Deferred income taxes are provided for all temporary differences between
financial accounts and tax basis of assets and liabilities, and tax loss carry
forwards. Deferred tax liabilities are not discounted. An allowance is made, if
deemed necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realised through future earnings.

                                       76

<PAGE>



FIXED ASSETS AND LEASING AGREEMENTS

Property, plant and equipment (fixed assets) are stated at cost, less
accumulated depreciation and write-downs. Depreciation is recorded on a
straight-line basis over the expected economic life of the assets. Expenditures
for additions, significant renewals and betterments are capitalised, whereas
expenditures for maintenance and repairs are charged to profit and loss as
incurred. When assets are sold or retired, any gain or loss is included in other
operating revenues and other operating expenses, respectively. Leases, which
provide Nera with substantially all rights and obligations of ownership, are
accounted for as capital leases and recorded as assets under property, plant and
equipment. Present value of lease payments is recorded as interest bearing under
long-term debt. The assets are depreciated and the related liabilities are
reduced by the amount of the lease payments less the effective interest expense.
Other leases are accounted for as operating leases with lease payments
recognised as an expense over the lease term. Fixed and intangible assets are
reviewed for impairment whenever events or changes in circumstances indicate
loss in value. Calculations are undertaken based on discounted future cash flow
for assets still being used within the Company, and based on estimated sales
price net of sales cost for assets for sale. If calculated value is lower then
recorded, write-downs will be undertaken and the assets will be recorded to fair
value or sales price net of cost of sales for assets for sale.

SHARES

Short-term shareholdings are stated at the lower of cost and market value.
Investments in other shares are stated at cost. Write-downs are undertaken
individually if fair value is understood to be lower than cost and if it is not
considered temporary. Gain and loss from short-term shareholdings and
investments in other shares are recorded as financial items.

PENSION ACCOUNTING

According to the Norwegian accounting standard for pensions, the projected
benefit obligation (funded and unfunded defined benefit pension plans) is the
actuarial present value of benefits based upon the pension benefit formula,
taking into consideration the years of service rendered and assumptions about
future compensation and pension benefit level. Pension plan assets are measured
at market value. Net periodic pension costs (gross pension costs less estimated
return on plan assets) are included in payroll expenses. The gross pension cost
includes service cost, interest costs on the projected benefit obligation, and
amortisation of unrecognised gain and loss.

Changes in estimates and deviations between actual and expected return on plan
assets are amortised over the remaining average service period. The aggregate
net asset or net obligation is recorded as a financial non-current asset or as a
long-term liability, respectively. One pension scheme is over-funded (plan
assets exceed projected benefits). Due to known future obligations and
expansions in the Group, the assets in the over-funded pension plans are
expected to be utilised to satisfy future obligations. Provisions for social
security tax are based on the net-recorded liability/asset and presented as part
of the pension liabilities/assets.

EMPLOYEE OPTIONS CONTRACT

Stock options for employees defined as fixed plans are recognised as
compensation costs if the quoted market price of the stock at the grant date is
higher than the strike price. Social security tax is calculated based on the
difference between the quoted stock price and the strike price at any time.
Social security taxes are recorded as compensation cost over the remaining
vesting period.

INVENTORIES

Inventories are stated at the lower of cost, using the first-in, first-out
(FIFO) method, and net realisable value. Company manufactured products are
valued to full production cost. Provisions are made for obsolete inventories.

RECEIVABLES

Trade receivables and other receivables are recorded at their nominal value less
provisions for any expected losses. Provision for expected loss on trade
receivables are made on a concrete assessment of both single items and the
total.

COMPLETED, BUT NOT BILLED PRODUCTION/CUSTOMER ADVANCES

Earned, but not billed revenues on long-term contracts under the percentage of
completion method, represent completed but not billed productions, and are
classified as current receivables. Billings in excess of project revenues
represent advances received on contracts. The net billings in access of project
revenues are classified as current liabilities.

                                       77

<PAGE>



CASH AND CASH EQUIVALENTS

The Company considers cash, bank deposits and all highly liquid investments
having an original maturity of three months or less at the date of purchase as
cash equivalents.

CONTINGENT LIABILITIES

Provisions are recognised if the probability of occurrence is more then 50 %.
Best estimate is used to calculate the settlement value.

GOVERNMENTAL CONTRIBUTIONS AND GRANTS

Subsidies from governmental agencies are received as operational or investment
contributions. Operational subsidies are matched to the relevant income and
expense. Investment subsidies are recognised gross and amortised over the life
of the investment as an adjustment to the investment deprecations.

SEGMENTS

The segment information is based on the Group's management- and reporting
structure. Segment revenues and costs are the portion of the Company's total
revenues and operating costs that could be directly allocated to the activities
in the segments. Segment assets and liabilities are balance sheet items directly
connected to the activity in the segments.

STATEMENTS OF CASH FLOWS

The cash flow statement illustrates the overall cash flow broken down by
operation, investment and financing activities. The statements illustrates the
effect of the activities on cash and cash equivalents.

EARNINGS PER SHARE (EPS)

Earnings per share are the majority share of profit, in the period, divided by a
weighted average of numbers of ordinary share in the same period. When
calculating diluted earnings per share, adjustments are made for all options
(from date of assignment). Potential shares in periods with a net loss are not
included.

                                       78
<PAGE>



2            Segment information                          Amounts in NOK million

In 2002 Nera reported within the following three business segments: Transmission
Networks, Satellite Communications and Wireless Broadband Access. Nera
Telecommunications Ltd, Singapore has been consolidated since 1 December 2001.
The activities within Telecommunications are divided into the Group's business
segments, while Contract Manufacturing and Information Technology are reported
under Other activities and headquarters staff/eliminations.

<TABLE>
<CAPTION>
           BUSINESS AREAS:                     TRANSMISSION NETWORKS     SATELLITE COMMUNICATIONS  WIRELESS BROADBAND ACCESS
----------------------------------------------------------------------------------------------------------------------------
        INCOME STATEMENTS                      2002      2001    2000    2002    2001       2000     2002     2001      2000
----------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>       <C>      <C>      <C>     <C>        <C>      <C>      <C>       <C>
Third party orders received                   1 243     1 687    2 216    677     586        576      215        4        72
Third party operating revenues                1 343     2 222    1 803    617     599        709       69       47        16
Operating costs (excl. R&D & Depreciation)   (1 297)   (1 890)  (1 476)  (494)   (482)      (512)     (80)    (134)      (57)
Depreciation                                    (48)      (41)     (31)   (10)    (11)       (12)      (6)     (32)      (19)
Income (loss) before R&D expenses                (2)      291      295    113     106        185      (17)    (119)      (61)
Net R&D expenses (5)                           (163)     (166)    (135)   (44)    (47)       (88)     (35)    (139)      (63)
Income (loss) before special charges (4)       (165)      161      160     69      65         98      (52)    (258)     (123)
Operat. inc. before restr. and write-downs     (165)      125      160     69      59         98      (52)    (258)     (123)
Restructuring costs and write-downs (1)         (31)      (39)       -      4       -          -       15     (225)        -

Operating income (loss)                        (196)       86      160     73      59         98      (37)    (483)     (123)
----------------------------------------------------------------------------------------------------------------------------
KEY FIGURES
----------------------------------------------------------------------------------------------------------------------------
Assets                                          966     1 376    1 223    174     223        214       53       48       171
Liabilities                                     368       553      591     97     100        121       28       31        44
Investments (2)                                  51        82       70      4       8         24        5       31       157
Number of man-years (average) (3)             1 021       972      906    251     301        300       79      100        47
Number of man-years as of 31 Dec                961     1 066      925    257     315        291       77       60        89
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                OTHER ACTIVITIES AND
                                                   HEADQUARTERS
           BUSINESS AREAS:                      STAFF/ELIMINATIONS                GROUP
--------------------------------------------------------------------------------------------------
           INCOME STATEMENTS                    2002     2001    2000     2002      2001     2000
--------------------------------------------------------------------------------------------------
<S>                                            <C>      <C>     <C>      <C>       <C>      <C>
Third party orders received                      384       -       37      2519      2277     2902
Third party operating revenues                   417       25      22      2445      2893     2550
Operating costs (excl. R&D)                     (384)    (120)    (46)    (2254)    (2626)   (2092
Depreciation                                     (19)      (4)     (4)      (84)      (88)     (67)
Income (loss) before R&D expenses                 14      (99)    (29)      107       179      391
Net R&D expenses(5)                                2        5      (1)     (240)     (347)    (287)
Income (loss) before special charges(4)           16      (59)    (30)     (133)      (91)     104
Operat. inc. before restr. and write-downs        16      (94)    (30)     (133)     (168)     104
Restructuring costs and write-downs(1)             -        -       -       (11)     (264)       -
Operating income (loss)                           16      (94)    (30)     (144)     (432)     104
--------------------------------------------------------------------------------------------------
KEY FIGURES
--------------------------------------------------------------------------------------------------
Assets                                          1367     1569    1868      2560      3216     3477
Liabilities                                      454      804     744       947      1488     1500
Investments (2)                                    2        8       -        61       129      252
Number of man-years (average) (3)                371       70     103      1722      1443     1356
Number of man-years 31 Dec                       374      379      35      1669      1820     1340
--------------------------------------------------------------------------------------------------
</TABLE>

                                       79

<PAGE>



1. Restructuring and write-downs in 2002 are described in note 12.

2. Capital expenditures on fixed assets, IT software, goodwill, capitalised R&D
(purchased technology).

3. Man-years, monthly average.

4. Operating costs include special charges of NOK 77,0 million in 4th Quarter
2001.

5. In order to get comparable figures net R&D costs are reclassified between
Satellite Communication and Wireless Broadband Access for 2001. The effect is
increased R&D cost and decreased operating costs for Wireless Broadband Access
with NOK 18 million and a corresponding reduction and increase for Satellite
Communications.

The segment information is based on the Group's management reporting and is in
all material respects presented in accordance with the Group's accounting
policies.

3            Order intake per geographical destination    Amounts in NOK million

<TABLE>
<CAPTION>
    GROUP :               2002                2001                 2000
-----------------------------------------------------------------------------
<S>                 <C>      <C>       <C>        <C>       <C>        <C>
Norway                281,5   11,2%      291,2     12,8%      192,4      6,6%
Great Britain         196,6    7,8%       95,8      4,2%      276,2      9,5%
Rest of Europe        441,7   17,5%      547,5     24,0%      702,8     24,2%
America               544,5   21,6%      673,7     29,6%      802,2     27,7%
Africa                113,5    4,5%       55,6      2,4%      292,3     10,1%
Asia                  899,3   35,7%      590,2     26,0%      438,3     15,1%
Oceania                41,5    1,7%       23,4      1,0%      197,8      6,8%
-----------------------------------------------------------------------------
TOTAL                2518,6  100,0%     2277,4    100,0%     2902,0    100,0%
-----------------------------------------------------------------------------
</TABLE>

Order intake for Nera Telecommunications Ltd, Singapore for 2001 and 2000 is not
included.

4            Sales per geographical destination           Amounts in NOK million

<TABLE>
<CAPTION>
    GROUP :                2002                2001                 2000
-------------------------------------------------------------------------------
<S>                 <C>       <C>       <C>         <C>      <C>         <C>
Norway                276,4    11,3%      287,6       9,9%     168,5       6,6%
Great Britain         110,3     4,5%      202,1       7,0%     310,2      12,2%
Rest of Europe        497,7    20,4%      558,5      19,3%     710,9      27,9%
America               538,4    22,0%      814,5      28,2%     667,7      26,1%
Africa                104,6     4,3%      189,8       6,6%     180,1       7,1%
Asia                  862,7    35,3%      671,5      23,2%     463,0      18,2%
Oceania                54,7     2,2%      169,2       5,8%      49,5       1,9%
-------------------------------------------------------------------------------
TOTAL                2444,8   100,0%     2893,3     100,0%    2549,8     100,0%
-------------------------------------------------------------------------------
</TABLE>

                                       80

<PAGE>



5            Property, plant and equipment                Amounts in NOK million

<TABLE>
<CAPTION>
                                                  LAND AND      MACHINERY   FIXTURE AND
                   GROUP :                        BUILDINGS     AND PLANT    FITTINGS       TOTAL
---------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>         <C>            <C>
Purchase cost as of 1 January 2002                 28,8          221,0        366,9          616,7
Acquisitions during the year                          -           13,4         22,7           36,1
Disposals during the year                             -          (53,8)       (47,0)        (100,8)
Translation differences                            (5,0)         (19,2)       (33,8)         (58,0)
--------------------------------------------------------------------------------------------------
PURCHASE COST AS OF 31 DECEMBER 2002               23,8          161,4        308,8          494,0
--------------------------------------------------------------------------------------------------
Depreciation as of 1 January 2002                 (11,5)        (115,3)      (192,7)        (319,5)
Depreciation this year                             (1,4)         (29,2)       (45,3)         (75,9)
Disposal of depreciations during the year             -           53,9         15,8           69,7
Translation differences                             2,1           12,2         16,5           30,8
--------------------------------------------------------------------------------------------------
DEPRECIATION AS OF 31 DECEMBER 2002               (10,8)         (78,4)      (205,7)        (294,9)
--------------------------------------------------------------------------------------------------
Write-downs as of 31 December 2002                    -              -        (29,1)         (29,1)
Disposal of write-downs during the year               -              -         26,2           26,2
Translation differences                                              -          2,9            2,9
--------------------------------------------------------------------------------------------------
WRITE-DOWNS AS OF 31 DECEMBER 2002                    -              -            -              -
--------------------------------------------------------------------------------------------------
BOOK VALUE AS OF 31 DECEMBER 2002                  13,0           83,0        103,1          199,1
--------------------------------------------------------------------------------------------------
RATE OF DEPRECIATION                                  2 %        10-33%       10-33%
--------------------------------------------------------------------------------------------------
</TABLE>

6            Goodwill/IT software                         Amounts in NOK million

<TABLE>
<CAPTION>
                                                                 IT
               Group:                             Goodwill    software
------------------------------------------------------------------------
<S>                                               <C>         <C>
Purchase cost as of 1 January 2002                  24,1            -
Acquisitions during the year                           -         26,5
------------------------------------------------------------------------
Purchase cost as of 31 December 2002                24,1         26,5
------------------------------------------------------------------------
Depreciation as of 1 January 2002                   (0,4)           -
Depresiation this year                              (4,8)        (2,8)
Depreciation as of 31 December 2002                 (5,2)        (2,8)
------------------------------------------------------------------------
Book value as of 31 December 2002                   18,9         23,7
------------------------------------------------------------------------
Rate of depreciation                                  20%       20-33%
------------------------------------------------------------------------
</TABLE>

GOODWILL RELATES TO THE FOLLOWING INVESTMENTS AS OF 31 DECEMBER 2002:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                  TIME OF     PURCHASE       BOOK      DEPRECIATION       BOOK       DEPRECIATION
            COMPANY:            ACQUISITION     COST     VALUE 1 JAN    THIS YEAR     VALUE 31 DEC      PERIOD
-----------------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>        <C>           <C>            <C>            <C>
Nera Telecommunications Ltd,
Singapore                       28 Nov 2001     24,1         23,7          4,8            18,9         5 years
-----------------------------------------------------------------------------------------------------------------
TOTAL                                           24,1         23,7          4,8            18,9
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       81

<PAGE>



7            Rental agreements                            Amounts in NOK million

The following amounts have been charged as an expense for rental agreements of
operating equipment not capitalised in the balance sheet:

<TABLE>
<CAPTION>
                                                               GROUP
---------------------------------------------------------------------------
                                                         2002   2001   2000
---------------------------------------------------------------------------
<S>                                                      <C>    <C>    <C>
Buildings                                                58,1   60,4   43,4
Machinery and plant                                       0,6    0,3    0,5
Fixtures and fittings, tools, office machinery, etc.      6,4   14,1   21,4
---------------------------------------------------------------------------
TOTAL                                                    65,1   74,8   65,3
</TABLE>

In 1996, the production and office buildings at Kokstadveien 23 and 27, Bergen
were sold. The premises were leased back from 1 October 1996. Supplementary
offices are leased in Kokstadveien 25. This year's rental costs were NOK 21.1
million, compared to NOK 21.4 million in 2001, and include Kokstadveien 23, 25
and 27. Nera is responsible for the maintenance of the leased premises. The
lease agreement is for 15 years, with a renewal option for an additional 15
years.

In accordance with Norwegian generally accepted accounting principles, the gain
wich resulted from the sale-leaseback of the buildings at Kokstadveien, was
deffered. The amortisation period has been changed to comply with the lease term
of 15 years, as compared to the previous amortisation period of 30 years, which
included the renewal option period. The effect from the adjustment of the
amortisation period amounts to NOK 12.0 million, which is accounted for as cost
reduction in this year's accounts. The deferred gain at year-end of NOK 33.8
million (NOK 47.7 million as of 31 December 2001) is included in Other
non-current liabilities.

Nera has a pre-emptive right to buy the premises at Kokstadveien 23 and 27 at
market value. Nera has exercised an option to buy Kokstadveien 25 at a fixed
price (NOK 22.5 mullion plus option premium), and the acquisition will be
effective 31 December 2003.

The Company has also entered into a lease agreement for office, warehouse and
production facilities at Bergerveien 12, Asker from 1 July 1998 to 30 June 2008
with a 10-year renewal option. The rental cost for 2002 is NOK 18.2 million (NOK
17.4 million in 2001).

8       Significant transactions and pro forma figures    Amounts in NOK million

Nera Electronics Ltd, Singapore, which was a 100 % owned subsidiary of Nera
Telecommunications Ltd (Nera Tel), was listed on the Singapore Stock Exchange on
15 July 2002. The price per share was fixed at SGD 0.33, corresponding to a
total market value for Nera Electronics of SGD 110 million.

Nera Electronics issued 30,000,000 shares in this initial public offering and
Nera Tel sold an additional 74,764,000 shares in this offering. In addition,
Nera Electronics issued an extraordinary dividend of SGD 11.2 (NOK 48.0) As a
result of these transactions, Nera Group earned NOK 94 million in cash and
continues to hold 68.18% of Nera Electronics through Nera Tel.

Until 1 July 1999 Nera Tel was a 100 % owned subsidiary of Nera ASA and
consequently fully consolidated. At 1 July 1999 Nera Tel was listed on the
Singapore Stock Exchange. Through issue of shares and second-hand sale, Nera
reduced its shareholder position to 47,34 %. Since 1 July 1999 Nera Tel has been
considered an associated company.

                                       82

<PAGE>



On 28 November 2001 Nera ASA bought 10 million shares in Nera Tel for NOK 32.6
million and increased its ownership to 50,2 %. Based on this transaction, Nera
Tel's financial statements have been fully consolidated since 1 December 2001.
Some of Nera Tel's employees have options to purchase shares of Nera. These
options will not significantly affect Nera's ownership and control of the
company.

Pro forma accounting figures: We have prepared pro forma financial information
to provide a basis for comparing Nera Group's performance in 2001 with that of
2000 as if NeraTel had been included in, and its financial statements had been
fully consolidated with, Nera Group since 1 January 2000. There is a greater
degree of uncertainty associated with pro forma financial information than with
a comparison of actual financial information, Pro forma financial information
does not necessarily reflect the results that would have been achieved if the
acquisitions of Nera Tel were made at any time earlier than its acquisition on 1
December 2001. The pro forma financial information below has been prepared as if
we had increased our ownership in Nera Tel on 1 January 2000.

Excess value and amortisation of excess values: The amortisation of excess
values and goodwill in the pro forma figures are based on the excess value
analysis made at the time of the acquisition. Goodwill is amortised over the
expected earning period of 5 years.

(a) Accounting principles: No accounting principles have been identified that
make a material effect on the proforma figures.

(b) Translation of the result: The profit and loss accounts for Nera Tel have
been translated through the use of the average exchange rates for 2000 and 2001.

(c) Intercompany transactions and gains: In the pro forma figures transactions
between group companies have been eliminated according to the current structure
of the Group. An intercompany gain of NOK 105,9 million (3rd Quarter 1999)
related to equity issue and second-hand sale in Nera Tel, is eliminated in the
pro forma figures.

<TABLE>
<CAPTION>
                                         2001         2000
-----------------------------------------------------------
<S>                                    <C>          <C>
Operating revenues                      3635,5       3204,2
Operating result                        (361,0)       168,1
Net profit (loss) for the year          (340,2)       157,0
Minority interest share                   35,5         30,1
Earnings per share (NOK)                 (3,06)        1,14
Diluted earnings per share (NOK)         (3,06)        1,13
-----------------------------------------------------------
</TABLE>

(d) Merger between Nera ASA and Nera Finans AS: Nera ASA and Nera Finans AS were
merged with effects on taxes and the accounts as of 1 January 2002. The merger
was carried out in accordance with the group concept of consistency. The parent
company's Financial Statements from 2001 are used as corresponding figures.

9            Research and development                    Amounts in NOK million

The Company expenses all research and development (R&D) when incurred. Purchased
research and development (R&D, purchased technology) is capitalised. The table
below outlines expensed R&D:

<TABLE>
<CAPTION>
                                           GROUP
-----------------------------------------------------------
                                 2002       2001      2000
-----------------------------------------------------------
<S>                              <C>        <C>       <C>
Expensed R&D                     239,6      346,9     286,7
-----------------------------------------------------------
TOTAL                            239,6      346,9     286,7
-----------------------------------------------------------
</TABLE>

                                       83

<PAGE>



Future earnings related to R&D in progress are presumed to be at least
equivalent to costs.

Throughout 2002, Transmission Networks' R&D activities continued to be related
to the completion of the new SDH long-haul radio InterLink (NL2000). To satisfy
the developing market for the new 3G mobile network, new configuration and
frequencies were also developed to complement the CityLink family.

Mobile Satellite Communication has carried out major, continous R&D activities
in connection with the development of mobile broadband terminals, and has also
introduced its new maritime Fleet family of products. Broadband Satellite
continued its development of DVB-RCS and regional systems for both earth
stations and terminals.

10           Payroll expenses, number of employees, etc   Amounts in NOK million

<TABLE>
<CAPTION>
-------------------------------------------------------------------
                                                 GROUP
-------------------------------------------------------------------
                                       2002        2001        2000
-------------------------------------------------------------------
<S>                                   <C>         <C>         <C>
Salaries, wages and holiday pay       518,5       565,8       505,6
Other compensations, etc               53,6        45,6        44,7
Payroll tax                            77,6        88,3        82,4
Pension costs                          30,1        23,1        16,9
-------------------------------------------------------------------
TOTAL                                 679,8       722,8       649,6
-------------------------------------------------------------------
Average number of man-years           1 722       1 443       1 356
</TABLE>

Total salary and remuneration, including pensions, to the Chief Executive
Officer and the other members of the Executive Committee and Members of the
Board of Directors and Corporate Assembly was as follows in 2002:

<TABLE>
<CAPTION>
                                                  SALARY     PENSION    REMUNERATION     TOTAL
----------------------------------------------------------------------------------------------
<S>                                               <C>        <C>        <C>              <C>
President and CEO (1)                              2,1         0,1          0,1           2,3
Other members of the Executive Committee (2)      11,9         0,9          3,6          16,4
Board of Directors                                   -           -          1,2           1,2
Corporate Assembly                                   -           -          0,3           0,3
----------------------------------------------------------------------------------------------
TOTAL                                             14,0         1,0          5,2          20,2
----------------------------------------------------------------------------------------------
</TABLE>

(1)  For the CEO for 2001 salary was NOK 2.3 million, pension was NOK 0.1
     million and remuneration was NOK 4.1 million.

(2)  Remuneration includes reported amounts for any bonus.

There have not been granted loan to or deposit securities for the Chief
Executive Officer, Members of the Board of Directors, members of the Corporate
Assembly, members of the Executive Committee or other employees or people close
related to them.

In compliance with authority given by the General Meeting of Nera, the Board of
Directors has issued option contracts in 2000, 2001 and 2002 to employees in the
parent company, Nera ASA and its subsidiaries. These option programmes are
further described in note 27.

CEO Bjorn Ove Skjeie was in 2000, 2001 and 2002 assigned 114,000, 99,000 and
81,000 options, respectively. In addition, a bonus agreement based on criterias
related to the Company's development was entered into with Mr. Skjeie. For the
financial year 2002, there will be no bonus disbursement to the CEO. The CEO has
a 12-month period of notice, which is extended to 24 months if his position
changes significantly or the Company merges with or is acquired by another
company or investor. Retirement age is 60, with pension limited to 80 percent of
salary at the time of retirement.

Similar bonus-agreements based on criterias related to the Company's development
and the individual responsibilities have been entered into with the other
members of the Executive Committee. With regard to the financial year 2002,
there will be bonus disbursement to some members of the Executive Committee
limited to NOK 1,5 million (excl. Nera Tel). With regard to shares and potential
shares in possession of the Members of the Executive Committee, see note 27.

                                       84

<PAGE>



In 2002 the audit fee for the Groups' auditor Ernst & Young AS, is expensed with
NOK 4.1 million, of which NOK 0.9 million for Nera ASA. Furthermore, the Group
has incurred NOK 1.2 million of additional fees for other services, of which NOK
0.4 million for Nera ASA. Services provided by Andersen Business Consulting,
related to implementation of IT-systems in the Transmission area, are expensed
with NOK 6.8 million for the year ended December 31, 2002. Fee for audit
provided from other auditor's amounts to NOK 0.1 million. All figures are
exclusive VAT.

11           Financial income and financial expenses      Amounts in NOK million

<TABLE>
<CAPTION>
                                                 Group
------------------------------------------------------------------
                                    2002           2001       2000
------------------------------------------------------------------
<S>                                 <C>          <C>         <C>
Interest income                      50.6          80.4       83.9
Other financial income               24.2          28.4       15.2
------------------------------------------------------------------
Financial income                     74.8         108.8      103.6
------------------------------------------------------------------

Interest expenses                    (4,6)        (18.4)     (26.3)
Foreign currency losses             (43.3)(1)      (6.0)         -
Write-down vendor financing             -        (106.1)         -
Other financial expenses            (20.9)        (24.7)     (15.0)
------------------------------------------------------------------
Financial expenses                  (68.8)       (155.2)     (41.3)
------------------------------------------------------------------
</TABLE>

(1) Foreign currency losses include the effect of translation of subsidiary in
country with hyperinflation to functional currency (USD) with NOK 14,0 million.

12           Restructuring and write-downs                Amounts in NOK million

Total restructuring and write-down costs during 2002 amount to NOK 11.1 million.
NOK (10.3) million are related to reversal of provisions and the remaining NOK
21.4 million to write-downs.

<TABLE>
<CAPTION>
                                       BALANCE AS    PROVISIONS/                      APPLIED/        BALANCE AS
                                       OF 31 DEC.    REVERSIONS    WRITE-DOWNS      DISBURSEMENTS     OF 31 DEC.
                                          2001         IN 2002       IN 2002           IN 2002           2002
----------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>              <C>               <C>
Restructuring Nera Ltd                    2,5            1,6           21,4              2,5              1,6
Restructuring Nera Netw orks AS             -            7,7              -                -              7,7
Closure of the Dallas office             39,2          (15,5)             -             23,7                -
Restructuring of the Boston office        0,2              -              -              0,2                -
Restructuring of Satellite                8,7           (4,1)             -              2,6              2,0
Restructuring of WBA Satellite            7,0              -              -              7,0                -
----------------------------------------------------------------------------------------------------------------
TOTAL                                    57,6          (10,3)          21,4             36,0             11,3
----------------------------------------------------------------------------------------------------------------
</TABLE>

See note 17 Other current liabilities

Restructuring of Nera Ltd: During 1998, the Nera Board of Directors and
management prepared a plan for restructuring its unit in Great Britain. The
objective was to re-establish profit within the Nera unit through a focused
strategy and changes in the range of products. This involved dismissal of
personnel, write-downs of fixed assets and inventories. Total provisions for
restructuring were NOK 71.0 million in 1998. In 1999 the restructuring plan was
extended, and another NOK 37.8 million was expensed. All planned activities were
completed in 2001. In 2002 Nera decided to discontinue all production. The
current year's costs and provisions inclusive write-down of inventory, are
related to this restructuring.

Closure of the Dallas office: In 2001, the Company decided to close down its
operations in Dallas. Provisions for severance payments, purchase commitments
and other commitments are undertaken. Fixed assets, goodwill and inventories
have been written down to net realisation value. All significant activities
started in 2001 are finished in 2002.

Restructuring of Boston office: In 2001 Nera decided to restructure the unit in
Boston. Provisions for severance payments, purchase commitments and other
commitments have been undertaken. Fixed assets, goodwill

                                       85

<PAGE>



and inventories have been written down to net realisation value. All significant
activities started in 2001 are finished in 2002.

Restructuring of Satellite/WBA Satellite: Due to market changes, parts of the
satellite unit have been reorganised. The reorganisation resulted in dismissals.
Provisions have been made for severance payments etc. Fixed assets and
inventories have been written down to net realisation value.

Restructuring Nera Networks AS: Due to changes in the market, parts of the
business have been reorganised. The reorganisation resulted in dismissals and
early retirements. Provisions have been made for severance payments, etc. All
significant activities were completed in 2002.

13           Government grants and contributions          Amounts in NOK million

During 2002, the Group have received NOK 8.1 million respectively as operating
grants. The amounts have been recorded as reduction in other operating costs.

<TABLE>
<CAPTION>
                                GROUP
---------------------------------------------
<S>                   <C>       <C>      <C>
COVERING:             2002       2001    2000
---------------------------------------------
R&D costs             8,1        13,1    13,5
---------------------------------------------
</TABLE>

Research and development contributions are related to 6 projects, of which 5
were completed by the year-end 2002. The remaining project is expected to be
completed during 2003. For an SND-project, each company is obligated to
partially refund the contribution received in proportion to the Inmarsat Aero
product turnover during the period 1 January 1998 to 31 December 2003. The
refund ranges from 5 % to 11.5 % based on the turnover in the interval ranging
from NOK 110.0 millions to NOK 325.0 millions. Accumulated income is not
expected to reach the interval releasing the obligation to partially refund the
contribution received.

                                       86

<PAGE>



14              Taxes                                     Amounts in NOK million

<TABLE>
<CAPTION>
                                                                                                   GROUP
-----------------------------------------------------------------------------------------------------------------
TAXES CONSIST OF:                                                                     2002          2001     2000
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>             <C>       <C>
Tax payable; Norway                                                                       -             -    58,6
Tax payable; outside Norway                                                            24,5          16,3     7,1
Changes in deferred tax; Norway                                                       (58,4)        (74,2)   (9,4)
Changes in deferred tax; outside Norway                                                 0,2         (23,4)    0,7
Adjustments for previous years                                                            -             -       -
-----------------------------------------------------------------------------------------------------------------
TAXES                                                                                 (33,7)        (81,3)   57,0
-----------------------------------------------------------------------------------------------------------------

RECONCILIATION OF TAX PAYABLE IN THE BALANCE SHEETS AND THE INCOME
STATEMENTS:                                                                           2002          2001
-----------------------------------------------------------------------------------------------------------------
Tax payable according to income statements                                             24,5          16,3
Tax payable before acquisition (Nera Tel) (1)                                             -          20,8
Adjustments for previous years                                                            -             -
-----------------------------------------------------------------------------------------------------------------
TAX PAYABLE                                                                            24,5          37,1
-----------------------------------------------------------------------------------------------------------------

RECONCILIATION OF NOMINAL TO ACTUAL TAX COST :                                        2002          2001
-----------------------------------------------------------------------------------------------------------------
Income before tax                                                                    (162,3)       (448,3)
EXPECTED TAXES BASED ON 28 % TAX RATE (2)                                             (45,4)       (125,5)

Items effecting actual tax cost:
Non-deductible expenses/non-taxable revenues                                          (18,0)         (3,5)
Foreign tax rate variations from Norwegian tax rate                                    (4,1)         29,0
Losses/temporary differences without net tax effect                                    18,5          15,6
Valuation allowance on previous years' deferred tax asset                               8,6          11,5
Income (loss) from investments in associated companies                                  6,7          (8,4)
Other                                                                                     -             -
-----------------------------------------------------------------------------------------------------------------
ACTUAL TAXES                                                                          (33,7)        (81,3)
-----------------------------------------------------------------------------------------------------------------

DEFERRED TAX:
Below is a specification of temporary differences between book and tax values,
including calculation of deferred tax liability/deferred tax asset at year-end.

BASIS FOR DEFERRED TAX:                                                               2002          2001
-----------------------------------------------------------------------------------------------------------------
Receivables                                                                          (105,0)         (1,4)
Inventories                                                                          (108,9)        (57,2)
Other current assets                                                                  (43,3)       (108,4)
-----------------------------------------------------------------------------------------------------------------
SUBTOTAL RELATED TO CURRENT BALANCE SHEET ITEMS                                      (257,2)       (167,0)
-----------------------------------------------------------------------------------------------------------------
Fixed assets and goodwill                                                             (13,7)          2,8
Pensions                                                                               (5,1)         (9,2)
Deferred gain                                                                         (33,8)        (47,7)
Shares and other securities                                                          (100,9)        (89,8)
Other temporary differences                                                           (33,8)          1,1
Loss carry forward                                                                   (595,0)       (416,4)
-----------------------------------------------------------------------------------------------------------------

SUBTOTAL RELATED TO NON-CURRENT BALANCE SHEET ITEMS                                  (782,3)       (559,2)
-----------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY DIFFERENCES                                                        (1 039,5)       (726,2)
-----------------------------------------------------------------------------------------------------------------
Adjustments for deferred tax asset based on temporary difference that cannot be
capitalised                                                                           427,8         186,2
-----------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX (DEFERRED TAX ASSET)                                                (170,8)       (113,0)
-----------------------------------------------------------------------------------------------------------------
Deferred tax in the balance sheet                                                       3,2           0,5
Deferred tax asset in the balance sheet                                              (174,0)       (113,5)
-----------------------------------------------------------------------------------------------------------------

TAX LOSS CARRY FORWARD MATURITY:                                                      2002
-----------------------------------------------------------------------------------------------------------------
2012                                                                                  459,0
Later than 2012                                                                       136,0
-----------------------------------------------------------------------------------------------------------------
TOTAL                                                                                 595,0
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Included tax payable for Nera Telecommunications Ltd, Singapore for January
    until November 2001.

(2) Nominal tax rate in Norway.

                                       87

<PAGE>



15                Earnings per share                      Amounts in NOK million

<TABLE>
<CAPTION>
                                            GROUP:                                             2002      2001      2000
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>       <C>       <C>
BASIC EARNINGS PER SHARE:
Net income (loss) after minority interests                                                    (145,0)   (370,7)   136,3
Weighted average shares outstanding (millions)                                                 122,1     122,8    111,6
Basic earnings per share (NOK)                                                                 (1,19)    (3,02)    1,22
-----------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Net income (loss) after minority interests                                                    (145,0)   (370,7)   136,3
Weighted average shares outstanding, after adjustments for convertible bonds and
  options (mill                                                                                122,1     122,8    111,8
Diluted earnings per share (NOK)                                                               (1,19)    (3,02)    1,22
-----------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING (MILLIONS):
Weighted average shares outstanding                                                            122,1     122,8    111,6
Adjustments for share options                                                                      -         -      0,2
Weighted average shares outstanding, after adjustments for convertible bonds and options       122,1     122,8    111,8
</TABLE>

16               Investments in associates                Amounts in NOK million

<TABLE>
<CAPTION>
                                             BEIJING NERA                                  TV MOBILE
                                              STENTOFON       NERATEK     WORLD WIDE         PTE LTD,
               GROUP:                       COM . CO. LTD.      AS      MOBILE COM . AS    SINGAPORE(1)    TOTAL
----------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>       <C>                <C>             <C>
EXCESS VALUE ANALYSIS:
----------------------------------------------------------------------------------------------------------------
Booked equity at esablishment                    1,6           0,4           33,0              29,3         64,3
Goodwill                                         0,6           0,9              -              10,0         11,5
----------------------------------------------------------------------------------------------------------------
ACQUISITION COST                                 2,2           1,3           33,0              39,3         75,8
----------------------------------------------------------------------------------------------------------------

CALCULATION OF BOOK VALUE AS OF 31 DECEMBER 2002:
----------------------------------------------------------------------------------------------------------------
Opening balance as of 1 January 2002             1,7           6,7           30,3              33,9         72,6
This year's share of profit                     (0,1)          3,3           3,9              (30,9)       (23,8)
Dividends received by Nera                         -          (2,1)         (10,4)                -        (12,5)
Translation differences, etc.                      -             -              -              (3,0)        (3,0)
----------------------------------------------------------------------------------------------------------------
CLOSING BALANCE AS OF 31 DECEMBER 2002           1,6           7,9           23,8                 -         33,3
----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  This year's share of profit from TV Mobile Ltd is negatively influenced by
     write-downs of the company's assets. The negative contribution on Nera's
     share of profit is approximately NOK 30.0 million.

(2)  The following financial statement data relate to our 20% investment in
     TVMobile Pte. Ltd., Singapore. (All figures are in NOK million).

<TABLE>
<S>                                   <C>
Current assets:                         21.0
Non-current assets:                        0
Total assets:                           21.0
Long-term liabilities:                  21.9
Share holders equity:                   -0.9
Total liabilities and equity:           21.0
Operating revenue:                       7.7
Operating income:                     -112.9
Net income:                           -113.0
</TABLE>

                                       88

<PAGE>



17                    Other current liabilities           Amounts in NOK million

<TABLE>
<CAPTION>
                                                         GROUP
-------------------------------------------------------------------
                                                     2002      2001
-------------------------------------------------------------------
<S>                                                 <C>       <C>
Accrued expenses                                     55,0      88,9
Provisions for guarantees                            36,7      51,7
Accrued interests                                       -       2,3
Accrued agent commissions                             5,2       9,2
Other current liabilities                            93,6     117,9
Provision for restructuring costs                    11,3      57,6
Provision for holiday pay, salary, etc.              69,1      60,4
-------------------------------------------------------------------
TOTAL                                               270,9     388,0
</TABLE>

(1)  Restructuring and write-downs are described in note 12.

                                       89

<PAGE>



18                          Investments in subsidiaries and associates

<TABLE>
<CAPTION>
                                       REGISTERED      THE COMPANY'S TOTAL                   VOTING      BOOK VALUE
             GROUP:                     OFFICE:      SHARE CAPITAL (MIILLION)   OWNERSHIP    RIGTHS    (NOK MILLION)
---------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN ASSOCIATES:
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>            <C>         <C>          <C>       <C>
Beijing Nera Stentofon Com. Co Ltd     China            CNY           4,2         36 %        36 %         1,6
Neratek AS                             Norway           NOK           0,3         45 %        45 %         7,9
World Wide Mobile Com. AS              Norway           NOK         165,0         20 %        20 %        23,8
TV Mobile Pte Ltd                      Singapore        SGD          40,0         20 %        20 %           -
---------------------------------------------------------------------------------------------------------------------
TOTAL                                                                                                     33,3
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
SUBISIDIARIES INDIRECTLY OWNED :
-------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>        <C>           <C>       <C>
Nera Networks Pty Ltd                           Australia      AUD            0,0        100 %     100%
Nera America Latina Ltda                        Brazil         BRL            4,0        100 %     100%
Nera Colombia                                   Colombia       COP           10,0        100 %     100%
Nera GmbH                                       Germany        EUR            1,9        100 %     100%
Nera Ltd                                        Great Britain  GBP           18,2        100 %     100%
Nera (HK) Ltd                                   Hong Kong      HKD            6,1        100 %     100%
PT Nera Indonesia                               Indonesia      IDR        1 630,0        100 %     100%
Nera (India) Ltd                                India          INR           35,0        100 %     100%
Nera Networks Srl                               Italy          EUR            0,0        100 %     100%
Nera de Mexico SA De CV                         Mexico         MXP           43,9        100 %     100%
NeraInfocom (M) Sdn Bhd                         Malaysia       MYR            0,5        100 %     100%
Nera (Maylaysia) Sdn Bhd(1)                     Malaysia       MYR            1,1         30 %      30%
Nera Mechatronics AS                            Norway         NOK            8,1        100 %     100%
Nera Broadband Satellite AS                     Norway         NOK            7,5        100 %     100%
Nera Philippines                                Philippines    PHP           25,3        100 %     100%
Nera Networks Polska Sp.z.o.o.                  Poland         PLN            0,5        100 %     100%
Nera Electronics Ltd                            Singapore      SGD           16,5       68,3 %    68,3%
Nera (Thailand) Ltd                             Thailand       THB           10,0        100 %     100%
Nera Telecommunications (Taiwan) Co. Ltd        Taiwan         TWD           21,0        100 %     100%
Nera Americas Holding Inc.                      USA            USD            0,1        100 %     100%
Nera Americas Inc.                              USA            USD            0,1        100 %     100%
Nera Networks Inc.                              USA            USD            7,0        100 %     100%
Nera Telecommunications Inc.                    USA            USD           10,0        100 %     100%
-------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
INVESTMENTS IN SHARES:
-------------------------------------------------------------------------------
<S>                               <C>        <C>    <C>   <C>     <C>       <C>
IT VEST AS                        Norway     NOK    2,6   6,4 %   6,4 %     0,6
</TABLE>

Nera (Malaysia) Sdn Bhd is consolidated based on a shareholders agreement that
results in ownership of more than 50%.

19             Cash and cash equivalents                  Amounts in NOK million

Group: Cash and cash equivalents for the Group as of 31 December 2002 consist of
NOK 795.8 million in cash and bank deposits. The Nera Group has no equivalents
in restricted bank deposits. The tax withholding liabilities as of 31 December
2002 are secured by bank guarantees totalling NOK 33.7 million. This amount is
included in Other guarantees in note 30. Unutilised credit facilities as of 31
December 2002 were NOK 71.9 million, by way of bank overdraft facility.

                                       90

<PAGE>



20             Pensions and pension liabilities           Amounts in NOK million

The parent company, Nera ASA, and its Norwegian subsidiaries have pension plans
that give the employees the right to defined pension benefits in the future. As
of 31 December 2002 there were 1 313 participants in the pension plan financed
through an insurance company, including 264 people from the parent company
(including retired persons) and 1 049 from Nera's Norwegian subsidiaries. In
addition, there were 124 participants, some of whom opted for early retirement,
included in the pension plan, that is financed solely by the Company's operating
activities. The company's governmental special early retirement plan (AFP) is a
part of the uncovered schemes. All pension plans in the Company are considered
defined benefit plans.

<TABLE>
<CAPTION>
                                                                             GROUP
-----------------------------------------------------------------------------------------------
SPECIFICATION OF THE PENSION COSTS                              2002           2001        2000
-----------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>         <C>
Costs according to the benefit plans:
Service costs                                                    18,8           14,2       12,1
Interest costs                                                   23,5           20,3       18,0
Expected return on plan assets                                  (17,4)         (15,2)     (13,9)
Net amortisation                                                  5,2            3,8        2,6
Sale of business                                                    -              -       (1,9)
Pension costs excluding employee social security tax             30,1           23,1       16,9
Social security tax                                               4,2            3,2        2,4
-----------------------------------------------------------------------------------------------

PENSION COSTS INCLUDING EMPLOYEE SOCIAL SECURITY TAX             34,3           26,3       19,3
-----------------------------------------------------------------------------------------------

BENEFIT OBLIGATIONS AND FUNDING OF THE PLAN:                    2002            2001
-----------------------------------------------------------------------------------------------
INSURANCE COVERED SCHEMES
-----------------------------------------------------------------------------------------------
Actuarial present value of accrued benefit obligation          (247,3)        (230,6)
Projected compensation increases, etc.                          (51,8)         (50,6)
PROJECTED BENEFIT OBLIGATION (PBO)                             (299,1)        (281,2)
Plan assets at fair value                                       245,1          222,0
PLAN ASSETS IN EXCESS OF (LESS THAN) PBO                        (54,0)         (59,2)
Unrecognised (gain) loss, etc.                                   85,4           83,0
TOTAL                                                            31,4           23,8
Accrued social security tax                                       4,4            3,3
-----------------------------------------------------------------------------------------------
PREPAID PENSION COSTS                                            35,8           27,1
-----------------------------------------------------------------------------------------------

UNCOVERED SCHEMES AND AFP(1)
-----------------------------------------------------------------------------------------------
Actuarial present value of accrued benefit obligation           (64,4)         (49,9)
Projected compensation increases etc.                           (11,9)         (10,0)
PROJECTED BENEFIT OBLIGATION (PBO)                              (76,3)         (59,9)
Unrecognised (gain) loss, etc.                                   40,1           28,6
TOTAL                                                           (36,2)         (31,3)
Accrued social security tax                                      (5,6)          (5,0)
-----------------------------------------------------------------------------------------------
PENSIONS LIABILITIES                                            (41,8)         (36,3)
-----------------------------------------------------------------------------------------------

ASSUMPTIONS USED:                                               2002             2001
-----------------------------------------------------------------------------------------------
Expected return on plan assets                                    7,5 %          7,5 %
Discount rate                                                     7,0 %          7,0 %
Rate of increase in compensation                                  3,5 %          3,5 %
Rate of increase in social security base level (G-regulation)     2,5 %          2,5 %
Rate of increase in pensions                                      2,5 %          2,5 %
Estimated rate of employee participation in AFP                  50,0 %         50,0 %
-----------------------------------------------------------------------------------------------
</TABLE>

(1) Governmental special pension scheme

                                       91

<PAGE>



21                Financial market risk                   Amounts in NOK million

The Group has financial instruments related to its daily operations, such as
trade receivables and trade creditors. Project funding is under certain
circumstances utilised on large sales contracts, net book value as of 31
December 2002 is NOK 89.9 million. To reduce currency risk on trade receivables
and trade creditors and to balance the amounts related to future sale and
purchases, the Company uses financial derivatives like forward exchange
contracts and currency swaps.

Currency risk

The Group has production facilities in the USA, Norway and Singapore and an
international sales and marketing organisation with offices in a number of
countries. Due to the scope of its international operations, Nera is exposed to
currency fluctuations. At year-end the main currency exchange rate exposure was
related to Norwegian kroner versus US dollars, Euro and GB pounds. The company
utilises currency swaps and currency forwards to reduce the currency risk
exposure inherent in the Company's ordinary operations. Currency sales contracts
are utilised in invitations to tenders.

The table below specifies, listed by purchase and sales contracts, the Company's
contractual commitments converted to Norwegian kroner as of 31 December 2002:

<TABLE>
<CAPTION>
                                 SALES CONTRACTS          PURCHASE CONTRACTS
                 MATURITY/    --------------------------------------------------
                SETTLEMENT    FACE      UNREALISED        FACE       UNREALISED
CURRENCY           DATE       VALUE     GAIN/(LOSS)       VALUE      GAIN/(LOSS)
--------------------------------------------------------------------------------
<S>             <C>           <C>       <C>               <C>        <C>
USD                2003       281,0        26,1           24,7         (0,5)
                   2004        69,4        14,7              -            -

EUR                2003       108,0         1,5           15,5         (0,1)

GBP                2003        87,4         2,9           42,3         (0,9)
                   2004        11,8        (0,2)             -            -

AUD                2003         6,0         0,3            2,1         (0,1)

AED                2003         0,2           -              -            -

DKK                2003           -           -            0,8            -

JPY                2003           -           -            0,4            -
--------------------------------------------------------------------------------
TOTAL                         563,8        45,3           85,8         (1,6)
--------------------------------------------------------------------------------
</TABLE>

The foreign currencies denominated contractual amounts are converted into
Norwegian kroner based on the currency exchange rates prevailing at year-end.
The financial instruments mature mainly within 12 months, and the maturity dates
coincides with the Company's best estimate for the corresponding foreign
currency denominated cash flows that are hedged. Unrealised gain/(loss) reflects
the fair value of the contractual amounts as of 31 December 2002.

Trade receivables and trade creditors are translated at closing currency
exchange rates. Unrealised gain or loss on foreign currency forwards designated
as hedging contracts is netted against gain/loss on the hedged items. Loan in
connection with project financing is mainly in US dollars and GB pounds.
Projects funding in US dollars and GB pounds are hedged through forward sale of
US dollars to GB pounds.

Interest rate risk

Interest rate risk exposure is mainly related project financing. Project
financing in GB pounds has a fixed interest rate and project financing in US
dollars has a variable interest rate with short time to maturity.

                                       92

<PAGE>



22                   Inventories                          Amounts in NOK million

NOK 330.3 million of the Group's total inventories as of 31 December 2002 are
valued using historical cost, while NOK 52.6 million are valued at net relisable
value.

<TABLE>
<CAPTION>
                                                          WIRELESS       OTHER ACTIVITIES AND
                       TRANSMISSION        SATELLITE      BROADBAND         HEADQUARTERS
GROUP :                  NETWORKS        COMMUNICATIONS    ACCESS       STAFF/ELIM INATIONS(1)          TOTAL
--------------------------------------------------------------------------------------------------------------------
                       2002     2001      2002     2001  2002   2001       2002       2001         2002        2001
--------------------------------------------------------------------------------------------------------------------
<S>                   <C>       <C>       <C>      <C>   <C>    <C>        <C>        <C>          <C>         <C>
Raw materials         114,9     193,0     24,5     36,3     -    0,7       22,2       42,4         161,6       272,4
Work in progress       71,2     102,9        -        -     -      -       17,1       39,7          88,3       142,6
Finished goods         78,8      68,4     28,8     30,0   4,7    1,8       20,7       19,5         133,0       119,7
--------------------------------------------------------------------------------------------------------------------
TOTAL                 264,9     364,3     53,3     66,3   4,7    2,5       60,0      101,6         382,9       534,7
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Other activities and headquarters staff/eliminations includes Nera Tels
     business area Contract Manufacturing and Information Technology.

23                   Trade receivables                    Amounts in NOK million

<TABLE>
<CAPTION>
                                                      GROUP
-----------------------------------------------------------------
                                                2002        2001
-----------------------------------------------------------------
<S>                                             <C>         <C>
Trade receivables gross                         549,5       821,0
Provisions for bad debts                        (32,1)      (39,8)
Trade receivables due later than 12 months        1,2         0,4
-----------------------------------------------------------------
TOTAL                                           518,6       781,6
</TABLE>

<TABLE>
<CAPTION>
                                                           At December 31,
                                                        2002         2001       2000
------------------------------------------------------------------------------------
<S>                                                     <C>          <C>        <C>
Provisions as of January 1                              39,8
Provisions as of December 31,                           32,1
Change in provisions for bad debt                       (7,7)
Other changes in provisions for bad debt                 2,5
Realized losses for the year                            20,8
Recovered amounts previously written off                   -
------------------------------------------------------------------------------------
Total bad debt                                          15,6
------------------------------------------------------------------------------------
</TABLE>

The political risk is relatively high in certain countries where Nera operates.
The international telecom industry is more and more concentrated around large
groups of companies. Based on these facts, Nera continues to be exposed to a
concentration of credit risk.

24                    Long-term contracts              Amounts in NOK million

Revenues on long-term contracts are recognised using the percentage of
completion method. The table below gives an overview for ongoing projects for
the Nera Group as of 31 December 2002 and 2001. Revenues are not recorded before
the contract reaches a certain degree of accomplishment, based on milestones in
the contract, sufficient to estimate the margin.

<TABLE>
<CAPTION>
                                                             2002         2001
-------------------------------------------------------------------------------
<S>                                                        <C>         <C>
Gross contractual amount for ongoing projects              1 536,2      2 043,2
Accumulated revenues                                       1 027,4      1 607,1
Accumulated costs                                           (812,0)    (1 148,6)
Accumulated gross profit in % of accumulated revenues         21,0 %       28,5 %
-------------------------------------------------------------------------------
</TABLE>

                                       93

<PAGE>



From 2002 the gross profit from projects is presented as opposed to previous
years where net profit was presented. The result for 2001 is reclassified to
confirm to current year presentation.

The BGAN-contract calculated with a negative margin is included with a gross
contract value of NOK 135.0 million. Accumulated revenues are NOK 30.0 million,
and accumulated costs are NOK 59.0 million, including estimated total loss for
the contract.

25                    Other current receivables           Amounts in NOK million

<TABLE>
<CAPTION>
                   NERA ASA                                        GROUP
------------------------------------------------------------------------------
                                                              2002       2001
------------------------------------------------------------------------------
<S>                                                           <C>        <C>
Short-term receivables and prepaid expenses                   58,6       142,1
Prepayments to suppliers                                       2,2         2,3
Other receivables due later than 12 months                    10,7         1,8
Other short-term receivables                                  11,0         6,3
------------------------------------------------------------------------------
TOTAL                                                         82,5       152,5
------------------------------------------------------------------------------
</TABLE>

26                   Related party transactions           Amounts in NOK million

<TABLE>
<CAPTION>
                                      OPERATING REVENUES            OPERATING COSTS           TRADE           TRADE
GROUP:                               -------------------        -----------------------    RECEIVABLES      PAYABLES
ASSOCIATED COMPANIES (20-50%):       2002    2001    2000       2002       2001    2000     31.12.02       31.12.02
-------------------------------------------------------------------------------------------------------------------
<S>                                  <C>    <C>     <C>         <C>        <C>     <C>     <C>             <C>
Neratek AS                           22,9    27,1    19,6          -          -       -        1,2              -
Nera Telecommunications Ltd             -   280,9    99,1          -       80,0    37,8          -              -
TV Mobile Pte Ltd                     6,7     1,8       -       22,1        1,7       -        7,4           21,9
NSSL Ltd                             38,3       -       -          -          -       -        6,6              -
-------------------------------------------------------------------------------------------------------------------
TOTAL                                67,9   309,8   118,7       22,1       81,7    37,8       15,2           21,9
-------------------------------------------------------------------------------------------------------------------
</TABLE>

As of 28 November 2001 Nera ASA increased its share ownerhip in Nera
Telecommunication Ltd, Singapore to more than 50%, and from that date on the
Company changed its status from an associated company to a subsidiary of Nera
ASA. Information about transactions (sales and purchases) with the Company for
the first 11 months are included in the related party transaction figures.

NSSL Ltd is a 100 % owned subsidiary of World Wide Mobile Com. AS which is owned
20 % by Nera and is included as a related party.

27                Share capital and information about shareholders

Share capital: The share capital of Nera ASA as of 31 December 2002 consists of
one single class of shares with a total of 123,529,371 shares. The face value of
NOK 2 per share gives a total share capital of NOK 247,058,742. Each share
entitles the owner to equal rights in the Company, and existing shareholders
have priority to subscribe in prospective share issues. The total share capital
and number of shares have remained unchanged during 2002.

                                       94

<PAGE>



Treasury stock: During 2002, Nera's balance of own shares has increased by
353,301 shares, to a compensation value of NOK 2,846,469. The new balance of
treasury stocks is 1,627,901. The shares are bought in accordance with authority
given by the General Meeting on 23 May 2002, where the Board of Directors was
authorised to buy up to 6,176,469 treasury stocks during a period of 18 months
starting 23 May 2002. The shares can be used in relation to acquisitions, in
transactions where compensation are rendered through treasury stock and can be
sold to employees in connection with incentive programmes/option programmes or
transactions with the stock market where Nera is listed.

Incentive programme: The current option programme includes options issued in
2000, 2001 and 2002 with a total limit of 6.3 million shares, and embraces both
key personnel and other employees. Subscription rates for these options are
fixed at the average closing price, respectively 10 days before and 10 days
after 10 February 2000, 13 February 2001 and 18 February 2002 for the Nera share
at the Oslo Stock Exchange. Until the options are exercised, the strike price
will increase by 1 % per month for the options issued in 2000 and 2001, and 0.5
% per month for the options issued in 2002. Based on this, the strike price per
share will be NOK 52.45, NOK 50.30 and NOK 19.22 for 1 March 2002, 1 March 2003
and 1 March 2004 respectively. The strike price at the expiration of the options
will be NOK 62.69, NOK 60.10 and NOK 21.36 per share for 30 March 2004, 30 March
2005, and 30 March 2006 respectively. The options can be exercised from 1 March
2002, 2003 and 2004 until 30 March 2004, 2005 and 2006, respectively.

Shareholders: The largest shareholders in Nera ASA, together with shareholders
and potential shareholding in the Company by senior management and members of
the Board of Directors, including shareholding/potential shareholding through
closely related parties, were as follows as of 31 December 2002:

<TABLE>
<CAPTION>
SHARE HOLDER                                 NO. OF SHARES   OWNERSHIP          NAME                     NO. OF SHARES   OPTIONS
---------------------------------------------------------------------------     ------------------------------------------------
<S>                                          <C>             <C>                <C>                      <C>             <C>
Folketrygdfondet                             13 122 600        10,6 %           BOARD OF DIRECTORS :
Orkla ASA                                    11 855 963         9,6 %           Johan Fr. Odfjell           410 318           -
Skandinaviska Enskilda Banken client acc.     4 220 552         3,4 %           Kari Broberg                      -           -
Verdipapirfondet Odin Norden                  3 946 700         3,2 %           Ole Petter Hakonsen               -           -
Verdipapirfondet Odin Norge                   3 742 100         3,0 %           Kjell O. Ingebro                125       1 500
Storebrand Livsforsikring AS                  3 072 741         2,5 %           Birger Magnus                     -           -
Aksjefondet Skagen Vekst                      2 401 600         2,0 %           Gregers Mogensen                  -           -
Nera ASA                                      1 627 901         1,3 %           Marcel Petie                    339       1 500
State Street Bank & Trust Co client acc.      1 117 903         0,9 %           Jan Stenberg                      -           -
Verdipapirfondet Storebrand Norge A           1 036 000         0,8 %           Jostein Soreide                 250       1 500
Sparebankenes Sikringsfond                    1 030 618         0,8 %
Verdipapirfondet Delphi Norge                 1 000 000         0,8 %           Executive Committee:
Vital Forsikring ASA                            997 438         0,8 %           Bjorn Ove Skjeie            100 225     294 000
Vicama AS                                       974 400         0,8 %           Terje Ask-Henriksen          25 900     172 478
Boston Safe Dep. & Trust                        951 372         0,8 %           Ove Bratsberg                20 125     116 166
Storebrand Norge 1 Verdipapirfond               874 000         0,7 %           John Knudsen                 30 125     124 385
Bank of New York Europe Ltd client acc.         780 000         0,6 %           Stig-Are Mogstad                125     145 385
Tine Pensjonskasse                              753 000         0,6 %           Bjorn Olafsson               10 000      41 748
Verdipapirfondet Fondsfinans Aktiv              706 500         0,6 %           Samuel Ang                   20 000           -
Verdipapirfondet Fondsfinans Aktiv II           681 400         0,6 %           Billy Cain                   10 125     124 498
---------------------------------------------------------------------------     Helge Skaar                       -     128 500
Total 20 largest shareholders                54 892 788        44,4 %           0yvind Isaksen                    -      37 478
---------------------------------------------------------------------------     Gro Hatleskog                     -      75 098

Other shareholders                           68 636 583        55,6 %
---------------------------------------------------------------------------     -----------------------------------------------
TOTAL                                        123 529 371      100,0 %           TOTAL                       627 657   1 264 236
---------------------------------------------------------------------------     -----------------------------------------------
</TABLE>

As of 31 December 2002, a total of 24,122 shares were owned by members of the
Corporate Assembly. Partners and employees in Ernst & Young AS, the Company's
auditor, do not own shares in the Company.

                                       95

<PAGE>



28     Customer advances and billings in excess of costs Amounts in NOK million

<TABLE>
<CAPTION>
GROUP:                                2002      2001
-----------------------------------------------------
<S>                                   <C>       <C>
Billing in excess of costs            147,2     204,4
Received customers advances            49,6      86,8
-----------------------------------------------------
TOTAL                                 196,8     291,1
-----------------------------------------------------
</TABLE>

29              Contingent liabilities                    Amounts in NOK million

<TABLE>
<CAPTION>
                                                   GROUP
-----------------------------------------------------------------
                                           2002             2001
-----------------------------------------------------------------
<S>                                        <C>              <C>
Guarantees for contracts                   119,0            187,1
Other guarantees                           120,5            129,8
-----------------------------------------------------------------
TOTAL                                      239,5            316,9
-----------------------------------------------------------------
</TABLE>

Companies in the the Group are jointly and severally liable for the established
group cash pooling/credit facility arrangement. The Group had a net deposit at
year-end.

30      Accounting policy differences and reconciliation between US GAAP/N G
                                      AAP

The Group's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Norway (N. GAAP), which differ in
certain respects from accounting principles generally accepted in the United
States (U.S. GAAP).

Following is a summary of the adjustments under U.S. GAAP that would affect the
Company's consolidated net income (loss) for the years ended December 31, 2000,
2001 and 2002, and shareholders' equity as of December 31, 2001 and 2002
together with a discussion of the principal differences between N. GAAP and U.S.
GAAP that are significant to the Company's consolidated financial statements.

                                       96

<PAGE>



<TABLE>
<CAPTION>
Year ended December 31                                          2002        2002       2001     2000
-----------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>        <C>      <C>
Reconciliation of net income (Group)                          USD (1)       NOK        NOK      NOK
Amounts in million NOK, except per share amounts
Net income (loss) after minority interest reported under      -20,9        -145,0     -370,7    136,3
NGAAP
-----------------------------------------------------------------------------------------------------
US GAAP adjustments
 a) Financial instruments and hedging                           0,8           5,5        0,0      0,0
 b) Pensions                                                   -1,3          -9,3       -3,2     -2,2
 c) Restructuring charges                                      -1,2          -8,7        8,7      0,0
 d) Goodwill                                                    0,7           4,8       37,0    -36,6
 e) Capital lease                                               0,0           0,0        0,0      0,2
 f) Gain on subsidiary equity transactions and                 14,1          97,9
 disposal of shares in subsidiaries
 g) Difference intercompany receivables forward                 2,0            14
 exchange rates
 i) Taxes                                                     -21,5        -149,3      -11,8     10,9
-----------------------------------------------------------------------------------------------------
Net income (loss) under US GAAP                               -27,3        -190,1     -340,0    108,6
-----------------------------------------------------------------------------------------------------
Earnings (loss) per share                                     -0,22         -1,56      -2,77     0,97
Diluted earnings (loss) per share                             -0,22         -1,56      -2,77     0,97
-----------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
As of December 31                                      2002     2002         2001
------------------------------------------------------------------------------------
<S>                                                   <C>       <C>           <C>
Reconciliation of Shareholder's equity
Amounts in million NOK
Shareholder's equity under NGAAP                      232,4     1.612,6      1 728,1
------------------------------------------------------------------------------------
Minority interest                                     -34,6      -240,2       -157.0
------------------------------------------------------------------------------------
US GAAP adjustments:
   a) Financial instruments and hedging                 0,8         5,5          0,0
   b) Pensions                                         -9,6       -66,5        -52,6
   c) Restructuring charges                             0,0         0,0          8,7
   d) Goodwill                                          0,7         4,8          0,4
   e) Capital lease                                     0,0         0,0          0,0
   f) Gain on subsidiary equity transactions and       14,1        97,9
   disposal of shares in subsidiaries
   h) Dividend                                          0,0         0,0          0,0
   i) Taxes                                           -21,5      -149,3         -1,9
------------------------------------------------------------------------------------
Shareholder's equity under US GAAP                    182,0     1 262,9      1 525,7
------------------------------------------------------------------------------------
</TABLE>

(1)      Translation of amounts from Norwegian kroner (NOK) into United States
         dollars (USD) has been made for the convenience of the reader at the
         Noon Buying Rate on December 31, 2002 of $1.00 = NOK 6,9375

a) Financial instruments and hedging: Statement of Financial Accounting
Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging
Activities", is effective for Nera from the financial year 2001. The Company
utilizes forward contracts, currency options and currency swaps in managing its
exposure in foreign currency commitments of long-term sales contracts. For
NGAAP, such foreign currency transactions are considered hedges of sales of
these long-term contracts when the foreign currency commitment is reasonably
assured and the foreign currency transaction is designated as a hedge of the
foreign currency commitment. Gains and losses on foreign currency transactions
identified as hedges are deferred until completion of the long-term contract
being hedged.

The Company follows a policy of translating the foreign currency receivables as
well as the forward contracts purchased in connection with a particular
long-term contract using the average of the exchange rates received for all
forward contracts purchased in connection with the particular long-term sales
contract to which the respective receivables and forward contracts relate.
Differences between amounts translated at the actual versus the average exchange
rates received are deferred and recorded as other assets or liabilities until
the related long-term sales contract is completed.

                                       97

<PAGE>



To qualify as a hedge under SFAS 133, Nera's use of derivatives requires the
Company to meet certain documentation requirements. Nera has not applied hedge
accounting under USGAAP, because of the additional work related to the
documentation and because the effect on net profit and equity over a long-term
period will be immaterial. The difference between N GAAP and US GAAP in 2002 is
approximately 5,5 mill NOK when all off balance and on balance items are marked
to market.

b) Pensions: In accordance with U.S. GAAP, the Company has implemented SFAS 87
as of January 1, 1989. The net differences between the Norwegian and U.S. GAAP
net income and shareholders' equity related to pension accounting have been
included in the reconciliation above.

The implementation of pension accounting is under US GAAP, SFAS 87, amortized
over the estimated remaining average service period. Under N GAAP the effect has
been charged directly to equity. In accordance with US GAAP the company has
recorded an additional minimum liability, representing the excess of unfunded
accumulated benefit obligation over the accrued pension liability. An intangible
asset has been recognized to the extent of unrecognized prior service cost. Any
additional minimum liability in excess of unrecognized prior service cost has
been charged to equity (other comprehensive income) after tax. Gross additional
minimum liability is 76,7 million NOK and the tax effect is 21,5 million NOK.

c) Restructuring charges: Nera has recognized restructuring expenses and
write-down of assets in 2001 as part of a restructuring plan. Under US GAAP,
EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring", certain criteria must be met to qualify as restructuring
expenses. Not all of these criteria are required under N GAAP, including that
the benefit information must be communicated to employees prior to the date of
the financial statements. Consequently, restructuring charges not meeting these
specific criteria have been included in the reconciliation above. All
restructuring charges in 2002 meet the criteria specified in EITF 94-3.

d) Goodwill: One of the acquisitions in 2000 did not qualify as purchase of a
business under US GAAP. The part of the purchase price not being allocated to
other identifiable assets is expensed as purchased R&D (NOK 36,6 million). The
investment was in 2001 written down as part of the restructuring program in the
N GAAP financial statements, hence the difference (NOK 36,6 million) was
reversed in 2001. Goodwill related to acquisitions (Nera Telecommunications
Ltd., Singapore, as disclosed in footnote 6 above) after June 30, 2001 is not
amortized under US GAAP in accordance with SFAS 142, "Goodwill and Other
Intangible Assets". Amortization of goodwill totaling NOK 4,8 million is in the
N GAAP income statement included in the line depreciation.

e) Capital lease: U.S. GAAP requires the capitalization of leases in which
substantially all of the risks and rewards of ownership are transferred to the
lessee. A lease is capitalized if it meets any one of the four stated criteria
in accordance with SFAS 13.

Accounting principles are similar, but less prescriptive, under Norwegian GAAP.

f) Gain from subsidiaries equity transactions, disposal of shares in a
subsidiary and minority interest: Under Norwegian GAAP, no gains from
subsidiary's equity transactions and disposal of shares in a subsidiary are
recognized. Under U.S. GAAP, the Group records gains from subsidiary equity
transactions (SAB 51 transactions) and disposal of shares in a subsidiary
through income.

Under Norwegian GAAP, the minority interest is measured at fair value of the
consideration paid from the minority. The difference between the recorded equity
in the subsidiary and value of the consideration paid by the minority will be
amortized or written down through allocating results to minority. This
allocation is not consistent with U.S. GAAP.

The following information relates to the issuance of subsidiary shares in 2002,
under U.S. GAAP: Nera ASA reduced its ownership stake in Nera Electronics Ltd
when Nera Electronics Ltd issued shares to minority shareholders for cash in
July 2002 trough an initial public offering, reducing Nera's ownership by 9.1%.
In particular, Nera Electronics Ltd issued 30 million shares in July 2002 at a
price per share of 0,33 SGD. Nera did not participate in this issue, and Nera
Telecomunications Ltd ownership was reduced from 100% to 90,9%. Imidiately

                                       98

<PAGE>


after the initial public offering Nera Telecomunications Ltd reduced its
ownership by selling additional 74,8 million shares at an average price of 0,287
SGD. Nera Telecomunications ownership was then reduced to 68,3 %. Total
consideration received from minority shareholders was NOK 134 million and
recognized gain under U.S. GAAP was NOK 97,9 million.

g) Difference intercompany receivables forward exchange rates: For US GAAP
reporting purposes, Nera follows the provisions of SFAS 52, "Foreign Currency
Translation". At December 31, 2002, Nera has entered into an intercompany loan
with its independent entity in Venezuela that is not considered of a long-term
investment nature. For US GAAP reporting, in accordance with SFAS 52, the
Company recognized a gain of NOK 14 million from the translation process. For N
GAAP this gain was not considered as foreign currency exchange exposure and
hence no profit and loss effect.

h) Dividend: Under N GAAP, dividends are provided for in the fiscal year in
which they are proposed by the Board of Directors. Under US GAAP, dividends are
not accrued until approved and declared by the shareholders.

i) Deferred taxes: For US GAAP reporting purposes, Nera follows the provisions
of SFAS 109, "Accounting for Income Taxes". In accordance with SFAS 109, Nera
has recognized deferred tax assets and liabilities to reflect the future tax
consequences of events that have already been recognized in the consolidated
financial statements or tax returns. Where it is anticipated that all or a
portion of a deferred tax asset will not be utilized, a valuation allowance has
been recorded against it.

At December 31, 2002, the Company has gross net operating loss carryforwards of
595 million NOK and other temporary differences of NOK 444,5 million. The losses
and credits generally expire within a period of 9-10 years. In accordance with
SFAS 109, a valuation allowance of NOK 269,3 million has been placed on the
deferred tax assets, as realization is not considered more likely than not under
USGAAP (due to accumulated loss position). For NGAAP the criteria for recording
a deferred tax asset is based on expectations regarding future profit and the
criteria for companies in a cumulative loss position is not the same as for
USGAAP. This results in evaluation allowance is aprox. 120,0 million NOK for N
GAAP.

Changes in valuation allowances for the year ended December 31, 2002

<TABLE>
<CAPTION>
---------------------------------------------------------------------------
                                                     NOK in millions
---------------------------------------------------------------------------
<S>                                                  <C>
Balance at the beginning of the year                       90,3
---------------------------------------------------------------------------
Changes in opening balance of valuation allowances        100,2
---------------------------------------------------------------------------
Other not recognized tax assets this year                  78,8
---------------------------------------------------------------------------
Balance at the end of the year                            269,3
---------------------------------------------------------------------------
</TABLE>

In addition, equity and net loss is adjusted for the tax effects of differences
between US GAAP and N GAAP above. Dividends have no tax effect. "Additional
minimum liability", pensions, is recorded net after tax. Gain from subsidiary
transactions is not taxable income due to the tax legislation in Singapore.
Accordingly, these items are not included in deferred taxes above.

j) Comprehensive income and reconciliation of U.S. GAAP Shareholders' Equity

The changes in shareholders' equity from December 31, 1999 through December 31,
2002 on a U.S. GAAP basis are summarized as follows:

<TABLE>
<CAPTION>
        (Amounts in NOK 1,000s)
--------------------------------------------------------
<S>                                               <C>
Shareholders' equity at December 31, 1999          983.2
                                                   -----
Issuance of shares                                 935.9
Changes in minimum pension liability                 1.4
Dividends                                          -19.6
Translation adjustments                              3.5
Costs of shares issued                             -41.8
Tax effect of shares issued                         11.7
Net income                                         108.6
Purchase of own shares                             -10.9
                                                   -----
Shareholders' equity at December 31, 2000          1,972
                                                   -----
</TABLE>

                                       99

<PAGE>


<TABLE>
<CAPTION>
<S>                                              <C>
Issuance of shares                                   5.2
Dividends                                          -27.2
Changes in minimum pension liability               -43.3
Translation adjustments                            -13.7
Purchase of own shares                             -26.8
Net income                                        -340.5
                                                 -------
Shareholders' equity at December 31, 2001        1,525.7
                                                 -------
Changes in minimum pension liability                -5.0
Translation adjustments                            -58.3
Purchase of own shares                              -2.8
Net loss                                          -190.1
                                                 -------
Change in accounting principles Singapore           -6.6
                                                 -------
Shareholders' equity at December 31, 2002        1,262.9
                                                 -------
</TABLE>

The Company's total comprehensive income (loss), in accordance with U.S. GAAP is
described in the table below:

<TABLE>
<CAPTION>
                                             December 31          December 31           December 31
                                                2002                 2001                  2000
<S>                                          <C>                  <C>                   <C>
Net income (loss)                               -190.1               -340.5                108.6
Accumulated other comprhensive income
     Additional minimum liability                 -5.0                -43.3                  1.4
     Translation adjustment                      -58.3                -13.7                  3.5
Total other comprehensive income                 -63.3                -57.0                  4.9
Comprehensive income                            -253.4               -397.5                113.5
</TABLE>

k) Stock-based compensation /options

In accordance with Norwegian GAAP, the Group did not recognize expense for stock
options with no intrinsic value that were granted to employees.

Nera has elected to follow Accounting Principles Board Opinion No. 25.
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options. In accordance with U.S. GAAP, the
measurement date for determining compensation costs for stock options is the
first date at which the number of shares the employee is entitled to receive and
the exercise price of the options are known. When Nera ASA granted the stock
options the number of shares was known at the grant date; however, the exercise
price to be paid upon exercise was not known as the strike price increases by a
percentage per month until exercised. Accordingly, variable plan accounting for
these options applies under U.S. GAAP. However, no compensation expense has been
recognized for US GAAP purposes as strike price exceeds the quoted market price
of Nera's stock.

l) New U.S. Accounting Standards

In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to
account for arrangements that involve the delivery or performance of multiple
products, services, and/or rights to use assets. Revenue arrangements with
multiple deliverables are divided into separate units of accounting if the
deliverables in the arrangement meet the following criteria: (1) the delivered
item has value to the customer on a standalone basis; (2) there is objective and
reliable evidence of the fair value of undelivered items; and (3) delivery of
any undelivered item is probable. Arrangement consideration should be allocated
among the separate units of accounting based on their relative fair values, with
the amount allocated to the delivered item being limited to the amount that is
not contingent on the delivery of additional items or meeting other specified
performance conditions. The final consensus will be applicable to agreements
entered into in fiscal periods beginning after June 15, 2003 with early adoption
permitted. Nera will adopt EITF issue 00-21 on January 1, 2004.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to

                                      100

<PAGE>


expense, (4) subsequent measurement of the liability and (5) financial statement
disclosures. SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset and
depreciated over the life of the associated fixed asset. An entity shall measure
changes in the liability for an asset retirement obligation due to passage of
time by applying an interest method of allocation to the amount of the liability
at the beginning of the period. The interest rate used to measure that change
shall be the credit-adjusted risk-free rate that existed when the liability was
initially measured. That amount shall be recognized as an increase in the
carrying amount of the liability and as an expense classified as an operating
item in the statement of income.

SFAS 143 is effective for fiscal years beginning after June 15, 2002, with early
application encouraged. We will adopt SFAS 143 effective January 1, 2003 and
have not yet evaluated the effect upon an adoption.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which is effective for financial statements
where exit or disposal activities are initiated after December 31, 2002. This
statement nullifies EITF Issue 94-3, "Liability Recognition for Certain Employee
Termination Benefits and other Costs to Exit an Activity," which allowed
recognition of a liability for exit and disposal activities upon management's
intent to exit or dispose of an activity. This statement requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred. Nera will adopt this statement for exit or
disposal activities initiated after January 1, 2003.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure." This Statement amends SFAS No. 123,
"Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
disclosure provisions of this Standard are effective for fiscal years ending
after December 15, 2002. Since Nera are en Item 17 filer no additional
disclosures are necessary.

In May 2003 the FASB issued SFAS 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", the new
accounting standard for certain types of freestanding financial instruments and
disclosure regarding possible alternatives to settling financial instruments.
The Group has not evaluated what impact, if any, adoption of the Statement will
have on the Group's consolidated financial condition and results of operation.
The Statement is effective for all financial instruments entered into or
modified after May 31, 2003 and is otherwise effective at the beginning of the
first interim period after June 15, 2003.

In November 2002, FASB issued Interpretation (FIN) 45 "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others". This Interpretation clarifies certain elements related
to measurement and disclosure of guarantees, including product warranties. The
interpretation clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the obligations it has undertaken in
issuing the guarantee, including its ongoing obligation to stand ready to
perform over the term of the guarantee in the event that the specified
triggering events or conditions occur. The recognition and measurement
provisions are applicable to guarantees issued or modified after December 31,
2002. Nera will determine the impact of (FIN) 45 during preparing the 2003 20-F
filing.

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, Consolidation of Variable Interest Entities, an interpretation of
Accounting Research Bulletin No. 51 ("FIN 46"). The Interpretation requires the
consolidation of entities in which an enterprise absorbs a majority of the
entity's expected losses, receives a majority of the entity's expected residual
returns, or both, as a result of ownership, contractual or other financial
interests in the entity. Currently, entities are generally consolidated by an
enterprise when it has a controlling financial interest through ownership of a
majority voting interest in the entity. The company does not believe that the
adoption of FIN 46 will have a material impact on the financial position,
results of operations or cash flows of the Company.

                                      101

<PAGE>

31                               Subsequent events

         Effective March 26, 2003, Nera Telecommunications Ltd signed an
agreement with Mediacorp TV Singapore Pte Ltd (MCTV) to terminate its joint
agreement and to sell its 20% share in TV Mobile to MCTV for a consideration of
SGD 1,5 mill. The gain on the disposal is equal to the transaction amount.

                                      102

<PAGE>

         ITEM 18.          NOT APPLICABLE

         ITEM 19.          EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number                                    Description of Exhibits
------                                    -----------------------
<S>               <C>
99.1              Certifications by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 302 of the Sarbanes-Oxley Act of 2002.

99.2              Certifications by Bjorn Olafsson, Executive Vice President and
                  Chief Financial Officer, required by Section 302 of the
                  Sarbanes-Oxley Act of 2002.

99.3              Certification by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 906 of the Sarbanes-Oxley Act of 2002.

99.4              Certification by Bjorn Olafsson, Executive Vice President and Chief Financial Officer, required
                  by Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

                                      103

<PAGE>

                                   SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                                NERA ASA

                                                /s/  Bjorn Ove Skjeie
                                                --------------------------------
                                                Name: Bjorn Ove Skjeie
                                                Title: President

Date: June 26, 2002

                                      104

<PAGE>


         INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number                                       Description of Exhibits
------                                       -----------------------
<S>               <C>
99.1              Certifications by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 302 of the Sarbanes-Oxley Act of 2002.

99.2              Certifications by Bjorn Olafsson, Executive Vice President and
                  Chief Financial Officer, required by Section 302 of the
                  Sarbanes-Oxley Act of 2002.

99.3              Certification by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 906 of the Sarbanes-Oxley Act of 2002.

99.4              Certification by Bjorn Olafsson, Executive Vice President and Chief Financial Officer, required
                  by Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

                                      105
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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

   [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934
            FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            ACT OF 1934
            FOR SUCH TRANSITION PERIOD FROM _______ TO _______

                         Commission file number: 0-26258

                                    NERA ASA

             (Exact name of Registrant as specified in its charter)

                                KINGDOM OF NORWAY

                 (Jurisdiction of incorporation or organization)

                          Kokstadveien 23, PO Box 7090
                              N-5020 Bergen, Norway
                                011 47 5522 5100

                    (Address of principal executive offices)

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

   Title of each class                 Name of each exchange on which registered

          None                                       Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                    Ordinary Shares, nominal value NOK 2 each

                                (Title of Class)

        American Depositary Shares, each representing one ordinary share

                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

                                      None

                                (Title of Class)

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: 123,529,371

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 [X]         No [ ]

Indicate by check mark which financial statement item the registrant has elected
to follow:

                                                  Item 17 [X]     Item 18 [ ]
TABLE OF CONTENTS
PART I     ...................................................................................................    2
        ITEM 1.      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS....................................    2
        ITEM 2.      OFFER STATISTICS AND EXPECTED TIMETABLE..................................................    2
        ITEM 3.      KEY INFORMATION..........................................................................    2
        ITEM 4.      INFORMATION ON THE COMPANY...............................................................    9
        ITEM 5.      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.............................................   31
        ITEM 6.      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...............................................   45
        ITEM 7.      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS........................................   53
        ITEM 8.      FINANCIAL INFORMATION....................................................................   53
        ITEM 9.      THE OFFER AND LISTING....................................................................   54
        ITEM 10.     ADDITIONAL INFORMATION...................................................................   55
        ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...............................   63
        ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...................................   66
PART II    ...................................................................................................   66
        ITEM 13.     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..........................................   66
        ITEM 14.     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS...........   66
        ITEM 15.     [RESERVED]...............................................................................   67
        ITEM 16.     [RESERVED]...............................................................................   66
PART III   ...................................................................................................   67
        ITEM 17.     FINANCIAL STATEMENTS.....................................................................   67
        ITEM 18.     NOT APPLICABLE...........................................................................  103
        ITEM 19.     EXHIBITS.................................................................................  103
-i-
PART I

         ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not applicable.

         ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

         ITEM 3.  KEY INFORMATION

         This document contains certain forward-looking statements with respect
to our financial condition, results of operations and business and certain of
our plans and objectives with respect to these items. In particular, this
document contains forward-looking statements with respect to:

             -    management's objectives with respect to our current focus on
                  core business areas and the related changes in the structure
                  of our company,

             -    management's objectives with respect to cash generation and
                  expansion of some of our operations,

             -    reduced market demand for the telecommunications
                  infrastructure equipment we develop, manufacture, market and
                  sell,

             -    potential recovery of the telecommunications market and the
                  anticipated timing of this recovery,

             -    the continuing global economic downturn,

             -    the shift from low capacity ranges from two to 34 megabits per
                  second, or PDH technology, to high capacity ranges from 34 to
                  155 megabits per second, or SDH technology,

             -    opportunities to supply satellite terminals and land earth
                  station equipment for new satellite communications systems,

             -    levels of future research and development expenditure and the
                  development and introduction of new products,

             -    trends in market shares and product volumes,

             -    levels of research and development expenditure,

             -    margins,

             -    overall market trends,

             -    our liquidity and capital resources,

             -    risk management,

             -    foreign currency exchange rate risk, and

             -    interest rate sensitivity.

         By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend upon circumstances that may
occur in the future. There are a number of factors that could cause our actual
results and developments to differ materially from those expressed or implied by
these forward-looking statements. These factors include, but are not limited to,
our ability to achieve our goals in connection with our current business
activities, to respond to market conditions, to continuously improve our cash
generation capability, to foresee demand for our products, to predict the
development of new satellite communications systems, to allocate the requisite
amounts of research and development expenditures, to determine the cost of
components, to be prepared to react to future exchange rates and interest rates
charges, and to conduct our manufacturing operations in an efficient manner.

                                       2
A.       SELECTED FINANCIAL DATA

         The following selected consolidated financial data have been derived
from our consolidated financial duplicative of statements, which have been
audited by PriceWaterhouseCoopers, independent accounts through December 31,
1998, and by Arthur Andersen, independent accountants, for the years ended
December 31, 1999, 2000 and 2001, and by Ernst & Young for the year ended
December 31, 2002. Effective May 1, 2002, and subsequent to completion of the
audit of our financial statements for the year ended December 31, 2001, Arthur
Andersen and Ernst & Young in Norway merged their activities. Effective as of
that date, Arthur Andersen in Norway became part of the international
organization of Ernst & Young. You should read the selected consolidated
financial data for each of the years presented in conjunction with, and they are
qualified in their entirety by reference to, the selected consolidated financial
statements, including the notes thereto, that are included in item 17 below.
Nera Telecommunications Ltd. (known as NeraTel), our Singapore subsidiary, was
not consolidated in our financial statements from July 1999 to November 2001, as
we owned less than 50% of NeraTel during that period. Prior to July 1, 1999 and
starting again on December 1, 2001 when we increased our ownership of NeraTel
above 50%, NeraTel's results have been consolidated in our financial statements.
Due to the different accounting treatment of NeraTel during the periods
presented, our results for these periods are not comparable. For more
information about the effects of consolidation of NeraTel, please see note 8 to
the consolidated financial statements in Item 17 below.

         Unless otherwise indicated, our consolidated financial data are stated
on the basis of Norwegian GAAP, which varies in certain respects from U.S. GAAP.
The differences between Norwegian GAAP and U.S. GAAP that are significant to our
consolidated financial statements for 2000, 2001 and 2002 for the
reconciliations of net income/loss and shareholders' equity from Norwegian GAAP
to U.S. GAAP for 2001 and 2002 are explained in note 30 to the consolidated
financial statements in Item 17 below.
YEAR ENDED DECEMBER 31,
                                              1998(1)        1999           2000           2001           2002             2002
                                             --------      --------        -------        -------        -------       ----------
                                               NOK           NOK             NOK            NOK            NOK            U.S.$
                                                                                                                       (UNAUDITED)
                                                                             (IN MILLIONS)
OPERATING REVENUE
Sales.................................        3,034.7       2,765.7        2,549.8        2,893.3        2,444.8           352.4
Cost of materials.....................       -1,382.7      -1,068.0         -966.6       -1,411.1       -1,285.6          -185.3
Changes of inventory of work in
      Progress and finished goods.....           -4.4         -19.3          -37.3           54.8          -24.2            -3.5
Payroll expense.......................         -747.7        -657.3         -649.6         -722.8         -679.8           -98.0
Depreciation..........................          -71.2         -58.7          -66.9          -87.9          -83.5           -12.0
Other operating expense...............         -952.0        -786.0         -724.9         -894.4         -505.0           -72.8
Operating income (loss) before
     Restructuring gain and loss......         -123.3         176.4          104.5         -168.1         -133.3           -19.2
Restructuring gain and loss...........         -171.7         112.8             --         -264.0          -11.1            -1.6
Operating income (loss)...............         -295.1         289.2          104.5         -432.1         -144.4           -20.8
Net financial items...................          -94.3           7.6           88.8          -16.2          -17.8            -2.6
Income (loss) before taxes............         -389.4         296.8          193.3         -448.3         -162.2           -23.4
Income (loss) tax expense.............           63.3         -89.2          -57.0           81.3           33.7             4.9
Net income (loss).....................         -326.1         207.6          136.3         -367.0         -128.5           -18.5

Earnings per ordinary share (basic)...          -4.49          2.16           1.22          -3.02          -1.19           -0.17
Earnings per ordinary share (fully
  diluted)............................          -4.49          2.15           1.22          -3.02          -1.19           -0.17
Cash dividends declared per
     ordinary share...................            0.0           0.0           0.22             --             --              --
3
YEAR ENDED DECEMBER 31,
                                              1998(1)        1999           2000            2001           2002            2002
                                             --------      --------        -------        -------        -------        ---------
                                               NOK           NOK             NOK            NOK            NOK             U.S.$
                                                                                                                        (UNAUDITED)
                                                                             (IN MILLIONS)
Approximate amounts in accordance
with US GAAP

Net income/loss.......................         -283.6         188.7          108.6         -340.0         -190.1           -27.3
Basic earnings per share..............          -3.90          1.96           0.97          -2.77          -1.56           -0.22
Diluted earnings per share............          -3.90          1.96           0.97          -2.77          -1.56           -0.22

SELECTED CONSOLIDATED
BALANCE SHEET DATA
Amounts in accordance with
Norwegian GAAP

Cash and cash equivalents.............          232.7         481.5        1,320.3          899.5          795.8           114.7
Short term receivables................        1,331.3       1,038.4        1,171.7        1,156.8          803.9           115.9
Short term investments................           34.4           2.3             --             --             --              --
Inventories...........................          431.7         309.3          269.1          534.7          382.9            55.2
Long term receivables and others......          192.1         271.3          396.1          219.9          161.5            23.3
Intangible assets.....................           70.3          28.8          141.4          137.2          216.6            31.2
Property, plant and equipment, net....          212.5         141.2          178.6          268.1          199.1            28.7
Total assets..........................        2,505.0       2,272.8        3,477.2        3,216.2        2,559.8           369.0

Current liabilities...................        1,092.4         968.3        1,198.8        1,386.3          855.2           123.3
Long-term liabilities.................          627.3         335.0          301.4          101.8           92.0            13.3
Shareholders equity...................          785.3         969.5        1,977.0        1,728.1        1,612.6           232.4
Total liabilities and shareholders'
  equity..............................        2,505.0       2,272.8        3,477.2        3,216.2        2,559.8           369.0

Approximate amount in accordance with
US GAAP

Shareholders' equity..................        778.372         983.2        1,972.0        1,525.7        1,262.9           182.0
--------------------
(1)      The financial statements for the year ended December 31, 1998 were
restated in 1999 as a result of the requirements of the Norwegian Accounting Act
of 1998 and include deferred tax assets that were not recognized previously.

                  We publish our consolidated financial statements in Norwegian
         krone. References herein to "U.S. dollars," "USD" and "$" are to U.S.
         dollars, and references to "Norwegian krone" and "NOK" are to the
         currency of the Kingdom of Norway. For the convenience of the reader,
         this annual report contains translations of certain Norwegian krone
         amounts into U.S. dollars at the rate of NOK 6.9375 = $1 ($0.1441 = NOK
         1), the noon buying rate in New York City for cable transfers payable
         in foreign currencies as certified for customs purposes by the Federal
         Reserve Bank of New York on December 31, 2002. On June XX, 2003, such
         rate was NOK X.XX = $1 ($0.1XX = NOK 1). These translations should not
         be construed as representations that the Norwegian krone amounts
         actually represent such U.S. dollar amounts or could be converted into
         U.S. dollars at the rate indicated or at any other rate. "Item 5.
         Operating and Financial Review and Prospects--Operating
         Results--Currency Fluctuations" and "Item 11. Quantitative and
         Qualitative Disclosures about Market Risk" include a discussion of the
         effects of fluctuations in exchange rates on our financial results.

                  The table below sets forth, for the periods and dates
         indicated, certain information concerning the exchange rate for the
         Norwegian krone against the U.S. dollar, based on the noon buying rate
         and expressed in Norwegian

                                       4
krone per U.S. dollar. The average is computed using the noon buying
         rate on the last business day of each month during the period
         indicated.
YEAR ENDED DECEMBER 31                NORWEGIAN KRONE PER U.S. DOLLAR
----------------------       ---------------------------------------------
                             PERIOD-END       AVERAGE
CALENDAR YEAR                  RATE          RATE (1)       HIGH      LOW
-------------                ----------      --------
1998                           7.58            7.55         8.32      7.31
1999                           8.01            7.81         8.10      7.11
2000                           8.80            8.81         9.56      7.93
2001                           8.97            9.00         9.45      8.54
2002                           6.95            8.00         9.14      6.97
2003(until June 26)            7.25            7.03         7.49      6.60
The table below shows the high and low noon buying rates for each month
during the six months prior to the date of this annual report.
NORWEGIAN KRONE PER U.S. DOLLAR
                                           -----------------------------------------
                                           PERIOD-END
  MONTH                                       RATE            HIGH              LOW
  ------                                      ----            ----              ---
December 2002                                 6.95            7.31              6.54
January 2003                                  6.92            7.00              6.83
February 2003                                 7.22            7.20              6.91
March 2003                                    7.28            7.46              7.06
April 2003                                    7.04            7.32              7.00
MAY 2003                                      6.65            6.82              6.60
JUNE 2003(UNTIL JUNE 26)                      7.25            7.26              6.69
On June 26, 2003, the noon buying rate of Norwegian krone per U.S.
dollar was NOK 7.234 = $1.00.

         Fluctuations in the exchange rate between the Norwegian krone and the
U.S. dollar will affect the U.S. dollar equivalent of the Norwegian krone price
of the shares traded on the Oslo Stock Exchange and, as a result, may affect the
market price, if any, of our American depositary shares in the United States
which we voluntarily delisted from Nasdaq on May 30, 2002. For more information,
please see "Item 9.C. --Markets." Such fluctuations will also affect the U.S.
dollar amounts received by holders of American depositary shares on conversion
by The Bank of New York, which is the depositary, of any cash dividends paid in
Norwegian krone on the shares represented by the American depositary shares.
Information regarding currency fluctuations is provided in "Item 5. Operating
and Financial Review and Prospects--Operating Results--Currency Fluctuations."

         B        CAPITALIZATION AND INDEBTEDNESS

         Not applicable.

         C.       REASONS FOR OFFER AND USE OF PROCEEDS

         Not applicable.

         D.       RISK FACTORS

         WE FACE STRONG COMPETITION FROM ALTERNATIVE PRODUCTS AND NEW SUPPLIERS
IN A SHRUNKEN MARKET AND OUR REVENUES WILL SUFFER SIGNIFICANTLY IF WE DO NOT
RESPOND EFFECTIVELY TO THESE COMPETITIVE PRESSURES.

         Competition is strong among providers of telecommunications equipment
and systems and is increasing as a result of the reduction of the worldwide
telecommunications market, as well as the entry into the market of new suppliers
and telecommunications equipment and systems. Our products face substantial
competition from other

                                        5
telecommunications products and alternative telecommunications transmission
media in the international market in which we operate. In addition, as a result
of rapid technological development, the prices for our products are under
constant pressure. If we do not respond effectively to these competitive
pressures, our market share will erode or fail to increase, and our revenues
will suffer significantly. Many of our competitors have significantly greater
financial, marketing and operating resources than us, and some have broader
product lines.

         THE GLOBAL ECONOMIC DOWNTURN HAD, AND IS EXPECTED TO CONTINUE TO HAVE,
A MATERIAL ADVERSE EFFECT ON THE DEMAND FOR OUR PRODUCTS, OUR BUSINESS, RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.

         Since 2001 there has been a significant downturn in economic conditions
in the world generally, exacerbated by the September 11 terrorist attacks on the
U.S., and in the telecommunications industry in particular. We have recognized
that the global economic downturn was deeper and has lasted longer than we had
previously expected and we expect that this condition will [not change] in the
next one to two years. Many telecommunications companies have not achieved their
financial and operating goals and have been unable to obtain additional
financing to run their business and to acquire equipment from us and other
providers. Accordingly, many of these companies are seeking to reduce the level
of their expenditures and some have sought bankruptcy protection. The financial
difficulties experienced by the telecommunications industry may diminish our
ability to obtain additional capital and may require us to consider undertaking
further restructurings to reduce costs in addition to the restructuring we
already carried out in 2001 and 2002.

         In addition to the effect on any new orders, the global downturn may
also affect the amount of products we deliver to some of our existing customers,
as they may be having difficulty obtaining necessary capital resources required
to fund the expansion of their businesses. The current volatility of the
financial markets and economic conditions in the U.S. and internationally may
also intensify the uncertainty experienced by some of our customers, who may
find it increasingly difficult to predict demand for their products and
services. As a result, some customers may attempt to slow or postpone the
development of new technologies and products. These factors may adversely affect
demand for our products and services, including possible suspension of contracts
with us and the reluctance of potential customers to evaluate our products or
services. Also due to the difficult financing and economic conditions, some of
our customers may not be able to pay us for products that we have already
delivered. These factors together could have a material adverse effect on our
business, results of operations and financial condition.

         DUE TO THE CURRENT VOLATILITY OF THE TELECOMMUNICATIONS EQUIPMENT
MARKET, FUTURE DEMAND FOR OUR PRODUCTS IS DIFFICULT TO PREDICT AND, THEREFORE,
WE MAY NOT RESPOND TO SUCH DEMAND ACCURATELY.

         The market for telecommunications equipment, in which we operate, is
currently very volatile. This makes it difficult for us to predict future demand
for our products. As a result of this volatility, some equipment manufacturers
may have recently experienced periods of production overcapacity, oversupply,
reduced prices or lower net sales. At the beginning of 2001, we responded to
high demand for our products and overproduced, as it turned out during the
second half of that year, which resulted in our having excess stock and
experiencing downward pressure on prices for our products. We are now awaiting
increase in the demand for our products. However, due to the market volatility
it is difficult to predict the extent of changes in future demand and,
therefore, we may be unable to respond accurately to such changes.

         OUR WORKING CAPITAL NEEDS, FUTURE CAPITAL EXPENDITURES AND POTENTIAL
ACQUISITIONS MAY REQUIRE ADDITIONAL FINANCING, WHICH MAY BE DIFFICULT TO OBTAIN.

         We may require additional capital to fund our operations, achieve our
business strategy and sustain our business. We cannot offer any assurance that
our existing and anticipated sources of capital will be sufficient for our
needs, or that we will be able to access additional capital if needed. Our
future capital requirements will depend on competitive conditions, potential
acquisitions in a consolidating market, regulatory and technological
developments and equipment costs and other costs associated with the manufacture
of our products. In particular, the actual amounts and timing of our capital
requirements may vary significantly from our estimates. We may not be able to
obtain additional capital on terms that are favorable or even acceptable to us.
Any failure by us to raise such capital would require us to delay or abandon
some or all of our plans, which could materially adversely affect our business.

                                       6
THE LOSS OF KEY TECHNICAL AND SCIENTIFIC PERSONNEL COULD HAVE A
SIGNIFICANT NEGATIVE IMPACT ON OUR ABILITY TO OPERATE OUR BUSINESS.

         We rely on being at the forefront of technological developments in our
areas of expertise. In order to maintain this position, we must attract
personnel with high levels of expertise within our core business areas. Loss of
key technical and scientific personnel, especially in Norway, the United Kingdom
and Singapore, could result in the loss of vital expertise which would have a
negative effect on the development of new products, the improvement of existing
products, customer service and other areas of our operations.

         WE ARE DEPENDENT ON THE TIMELY DEVELOPMENT OF NEW PRODUCTS IN RESPONSE
TO RAPID TECHNOLOGICAL CHANGES AND IF WE FAIL TO DELIVER NEW PRODUCTS, OUR
ABILITY TO COMPETE WILL SUFFER, SIGNIFICANTLY AFFECTING OUR RESULTS OF
OPERATIONS.

         The technology underlying our products is subject to significant and
rapid changes. Because of the significant technological changes that have taken
place in the telecommunications industry and those that may occur in the future,
our business is dependent on whether we can design, develop, manufacture and
market competitive products in a timely manner. As a result, our activities
require significant expenditure on research and development, which has accounted
for approximately 12% and 10% of our sales, not including grants from the
Norwegian government, in 2001 and 2002. Any prolonged delay, technical
impossibility of completion or substantial cost overruns in our research and
development efforts could impair our ability to introduce new products, which
could adversely affect our results of operations.

         The introduction of new technologies has resulted, and may in the
future result, in delays in the production of our products. Any prolonged delay
in our production processes could impair our ability to deliver our products in
a timely manner, which could adversely affect our results of operations.

         OUR PLANS TO EXPAND OUR BUSINESS AFTER THE END OF THE ECONOMIC DOWNTURN
MAY REQUIRE SIGNIFICANT MANAGEMENT RESOURCES THAT WOULD OTHERWISE BE USED IN OUR
OPERATIONS AND RESULT IN A DECREASE IN REVENUES.

         We plan to expand our business after the end of the economic downturn.
This expansion will require us to implement a variety of additional systems,
procedures and controls to manage higher inventory levels and working capital
requirements. We cannot assure you that any expansion that we undertake will be
successfully completed. In addition, expansion may cause a significant strain on
our management, financial and other resources. We cannot assure you that sales
will remain at, or increase above, the levels we had prior to the economic
downturn, or that our systems, procedures or controls will be adequate to
support our operations. If we are unable to manage expansion effectively, our
business and financial results could be adversely affected.

         WE ARE STILL DEPENDENT ON THE PRODUCTS WE PROVIDE TO USERS OF THE
INMARSAT SYSTEMS WHICH IS A MATURE MARKET WITH LIMITED GROWTH.

         Our mobile satellite communications products are designed to operate in
the INMARSAT systems, which currently offer the only global mobile satellite
communications network in full operation. This market is mature and offers few
opportunities for growth. We are in the process of developing user terminals for
the next generation INMARSAT service, but we do not expect that sub-market to
offer growth opportunities either. If we are unable to take advantage of the
limited growth opportunities of this segment of our business, or if we are not
successful in further development of our other business segments, our company
will not experience substantial growth.

         WE ARE DEPENDENT ON A NUMBER OF FACTORS AFFECTING OUR CUSTOMERS'
SATISFACTION WITH OUR PERFORMANCE. IF WE DO NOT MEET THEIR EXPECTATIONS, OUR
BUSINESS AND FINANCIAL RESULTS WILL SUFFER.

         Every year, we enter into a number of major contracts, each of which
has many milestone requirements we must meet. If our customers experience delays
in our performance under these contracts, they can make contractual claims
against us and our project costs would be increased. We may also be subjected to
guarantee claims with respect to repairs and upgrades relating to the high
technology products we manufacture. In addition, we are dependent on our regular
use of subcontractors for various projects. We are generally responsible for
ensuring that

                                       7
the subcontractors supply products or services timely and correctly. While we
attempt to use back-to-back contracts, as well as establish long-term
relationships with significant suppliers and identify alternative supply
sources, there is no assurance that these strategies will be successful. Our
failure or the failure of our subcontractors to deliver satisfactory performance
to the customers, as well as assertion against us of guarantee claims relating
to our products, may have a material adverse effect on our business.

         WE ARE DEPENDENT PRIMARILY ON ONE MANUFACTURER IN THE SATELLITE
COMMUNICATIONS AREA, AND POSSIBLY IN THE TRANSMISSION NETWORKS AREA, AND THE
FAILURE OF THIS MANUFACTURER TO PERFORM WOULD RESULT IN A MATERIAL LOSS OF SALES
AND CUSTOMERS.

         We outsource the manufacturing of our satellite communications
terminals pursuant to long-term agreements primarily to Flextronics in Oslo,
Norway, and also to Kitron in Risor, Norway, as an alternative supplier. We also
use the same manufacturers in our transmission networks business when we do not
have sufficient manufacturing capacity ourselves. If Flextronics and Kitron do
not perform when required, we will have trouble meeting delivery schedules,
which could result in a material loss of sales and customers. In addition, in
such event, we would be required to find an alternative source of satellite
communications terminals and possibly of equipment used in our transmission
networks business, resulting in the incurrence of additional costs.

         WE ARE DEPENDENT ON A SINGLE MANUFACTURING FACILITY FOR MICROWAVE
TRANSMISSION EQUIPMENT. ANY SIGNIFICANT INTERRUPTION MAY LEAVE US WITHOUT A
READILY AVAILABLE SOURCE FOR OUR CUSTOM-DESIGNED COMPONENTS.

         Our manufacturing activities with respect to our microwave transmission
equipment and systems currently takes place in our production facility in
Bergen, Norway. A significant interruption of production at this facility could
result in our failure to meet delivery schedules which could result in the loss
of sales and customers. In addition, because the microwave transmission
components manufactured at our production facility are custom-designed for
assembly into our products, there is no readily available alternative source for
these components.

         WE MAY FACE DELAYS IN PAYMENTS ON LARGE CONTRACTS CAUSING US TO
RESTRICT THE USE OF OUR FUNDS TO COVER OUR OPERATIONAL EXPENSES.

         From time to time, we enter into contracts with our customers that
involve large purchase prices. The number of these contracts and the total
revenue that they generate, as a percentage of our total contracts and of our
total revenue, has decreased in two of the last three years but may increase
again in the future. Any delays in payment under these contracts could adversely
affect our cash flow positions and may, at that time, result in the need for
additional borrowings to fund current operations. In addition, any delays in, or
cost overruns relating to, our performance under these contracts may have
adverse period-on-period earnings effects and result in the incurrence of
contractual penalties.

         WE ARE DEPENDENT ON OUR SIGNIFICANT INTERNATIONAL OPERATIONS, WHICH
FACE UNIQUE OBSTACLES AND COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

         Sales of products delivered to customers outside of Norway represented
approximately 88.7% of our total sales in 2002 as compared to 90.1% of total
sales in 2001. We made a substantial portion of our sales in Europe, Asia and
America. Various international risks could negatively impact our international
operations, which could have a material adverse effect on our revenues, access
to capital and market position. Our international sales and manufacturing
operations are subject to the risks normally associated with international
operations, including:

             -    currency conversion risks and currency fluctuations,

             -    political instability, civil unrest and economic instability,

             -    imposition of tariffs,

             -    limitations, including taxes, on the repatriation of earnings,

                                       8
-    greater difficulty enforcing intellectual property rights and
                  weaker laws protecting such rights,

             -    complications in complying with laws in varying jurisdictions
                  and changes in governmental policies,

             -    concentration of credit risk of customers and Nera's own
                  credit risk, which may be increasing due to the present trend
                  of concentration around major units in the international
                  telecommunications industry;

             -    natural disasters and the greater difficulty and expense in
                  recovering therefrom, and

             -    transportation delays and interruptions.

         WE ARE EXPOSED TO CURRENCY FLUCTUATIONS WHICH INFLUENCE OUR COMPETITIVE
POSITION AND OUR REVENUES REGARDLESS OF THE MARKET ACCEPTANCE OF OUR PRODUCTS
AND THE SALES EFFORTS OF OUR EMPLOYEES AND BUSINESS PARTNERS.

         As an international group, we are exposed to major exchange
fluctuations between currencies. Changes in the relative strengths of different
currencies affect our competitive positions and our revenues. Our foreign
exchange policy is based on utilizing financial instruments to balance the
difference between accounts receivable and liabilities in foreign currencies,
however, no assurance can be given that this policy will ultimately be
successful. "Item 5. Operating and Financial Review and Prospects--Operating
Results" and "--Liquidity and Capital Resources" contains a description of the
effect of currency fluctuations on our financial results.

         ITEM 4.  INFORMATION ON THE COMPANY

         A.       HISTORY AND DEVELOPMENT OF THE COMPANY

         We are a joint-stock company incorporated in the Kingdom of Norway on
September 1, 1987 under the Norwegian Companies Act. Our principal executive
offices are located at Kokstadveien 23, P.O. Box 7090 N-5020 Bergen, Norway, and
our telephone number is 011 47 5522 5100.

         While we have been in existence as a joint-stock company in Norway only
since 1987, we began producing radio-based wireless communication equipment more
than 50 years ago and have been a leader in this field for a significant portion
of our history. As the world of telecommunications equipment has changed, we
have changed as well to meet the challenges of the times. The following
description of our development over the last five years provides the latest
chapter in our history as background for the description of our current business
and our results of operations, which follow below.

         On April 1, 1998, we implemented a reorganization, pursuant to which we
became a holding company, Nera ASA, with four operating subsidiaries: Nera
Networks AS (comprising the transmission systems business area); Nera SatCom AS
(comprising the satellite communications business area); Nera Electronics AS
(comprising our production operations) and Nera Transmission Management Network
AS. Our Norwegian subsidiaries in the dedicated communications business area
(Contec, Infotema and Mobildata) remained independent subsidiaries and Datacomm,
Electrical/CATV and cables, the other businesses in this area remained in our
Southeast Asian operations. The 1998 reorganization was aimed at improving
financial controls within, and providing stronger strategic focus for, each of
those business areas. In December 1998, in line with our desire to focus on our
core business, we sold our transmission management network business, which
formerly provided integrated solutions for a wide range of telecommunications
systems, to Protek Network Management Ltd. (UK) for cash.

         During 1999, as part of our comprehensive program of corporate
improvements and increased focus on our core activities, we reduced our
ownership interest in NeraTel, our Singapore subsidiary, divested our airtime
billing business, sold a portion of our production facilities and entered into
agreements to acquire two businesses in the United States from World Access with
activities in the areas of wireless local loop infrastructure and radio-link
transmission equipment. These acquisitions were made in 2000. On June 23, 1999,
NeraTel launched an initial public offering for its Singapore dollar listing on
the Mainboard of the Stock Exchange of Singapore Limited.

                                       9
NeraTel is a solutions provider for the telecommunications and information
technology industries with a comprehensive product and service range covering
satellite communications, microwave radio transmissions, information technology
networking infrastructure and high value-added electronic contract
manufacturing. 44,400,000 ordinary shares were sold in the offering,
representing 49.3% of NeraTel's share capital. 13,000,000 shares were sold to
the public and the remaining 31,400,000 shares were privately placed, of which
4,440,000 shares were reserved for NeraTel's employees and business associates
who contributed to our success. After the initial public offering, we held 47.3%
of the shares in NeraTel. The sale resulted in proceeds to us of approximately
NOK 150 million ($17.0 million) and the gain on the sale was approximately NOK
106 million ($12.0 million). The shares of NeraTel started trading on the Stock
Exchange of Singapore on July 1, 1999. In addition, in December 1999 we sold our
airtime billing business in Merstham (United Kingdom) in return for
approximately NOK 107 million ($11.92 million) and a 20% interest in the share
capital of the acquiror (NOK 137 million ($15.27 million) in total). We sold CNH
Communications de Venezuela as well, for approximately NOK 19.4 million ($2.16
million). The financial impact of this reorganization is described in "Item 5.
Operating and Financial Review and Prospects."

         The year 2000 brought developments in our broadband operations, a
public offering in Norway and outsourcing of some of our manufacturing capacity.
In April 2000, we acquired two businesses from World Access for a total amount
of $13.6 million with the goal of giving us a basis to develop
point-to-multipoint products for wireless broadband access, strengthening our
existing transmission networks business and giving us expertise on which to
establish a presence in North America.

         In May 2000, we issued 25 million shares in a public offering in Norway
with preemptive rights for existing shareholders and raised NOK 887.5 million
($100.7 million) (including underwriting discounts and expenses). The offering
was not made available to U.S. and Canadian shareholders or investors. We intend
to continue to use the proceeds of this offering to continue our operations
during these more challenging times and grow our business once an economic
recovery is evident. In July 2000, we sold our production facilities in Oslo to
Flextronics AS for approximately NOK 101.7 million ($11.33 million) and entered
into a strategic cooperation agreement with Flextronics with respect to the
production of electronics used in our satellite communications products.

         The year 2001 saw a declining world economy in general and the near
collapse of the telecommunications industry in particular. We saw the necessity
to take restructuring measures in the middle and at the end of the year. In June
2001, we restructured the wireless broadband access operations we had acquired
in 2000. Due to the adverse changes in the worldwide economic environment which,
among other things, delayed the development of the broadband market, we have
slowed down our efforts to develop point-to-multipoint products and penetrate
the U.S. market. However, this has not affected our long-term assessment of the
potential of the broadband market, in which the system design experience and
technology development acquired by us may prove invaluable. We moved our
satellite broadband activities to a separate subsidiary, called Nera Broadband
Satellite AS. As a result, our wireless broadband access business will be
targeted only to terrestrial activities, with a more focused approach to
operations and investment.

         In November 2001, we increased our ownership interest in NeraTel, our
Singapore subsidiary, from 47.3% to 50.18%. As a result of the acquisition of a
majority interest in this subsidiary, we changed our accounting practice for
NeraTel from consolidation according to the equity method to full consolidation
as a subsidiary.

         In December 2001, we undertook a restructuring in order to address the
continuation of weaker market conditions and our strategic challenges. The
effects of the measures taken in December 2001 continue in 2002. The
restructuring included lay-offs in the United States, Latin America and Norway
and reduction of some activities. Approximately 120 employees at our
transmission business area in Bergen received notice of temporary lay-offs
effective in January 2002. During the second half of 2001, activities at
production plants in Sao Paulo, Brazil, and Boston, U.S., have been reduced, and
broadband activities by our subsidiary NeraTel Inc. in Dallas, U.S. have been
closed down. Further, in March 2002 we sold some assets related to our Velocity
2000 broadband access product line developed in Dallas to SR Telecom Inc. in
Canada. The financial impact of this reorganization, including related
extraordinary provisions and write-downs in 2001, is described in "Item 5.
Operating and Financial Review and Prospects."

                                       10
In 2002 we decided that further restructuring was necessary as the
market conditions continued to be weak. As a result, we discontinued all
production within Nera, Ltd., our unit in Great Britain. The related
restructuring cost is described in Item 5-- Operating and Financial Review and
Prospects and in Note 12 to the Financial Statements in item 17.

         In March 2003 Nera Telecommunications Ltd. (Singapore) terminated the
joint venture with TVMobile PTE Ltd. and disposed of its entire investment in
TVMobile comprising 8,000,000 ordinary shares of S$ 1.00 (NOK 4.15) each fully
paid-up capital of TVMobile. The cash consideration of S$1,500,000 represented a
capital gain of approx. NOK 6 million in the financial Statements of Nera in the
first quarter of 2003.

         Management of Nera expects to continue addressing market conditions
that remain weaker than its earlier estimates and to continue reducing product
costs during the remainder of 2003 and 2004 by entering into more favorable
purchase agreements and simplified technical solutions. Management has also
announced that it will assess the production locations, the global sales
structure and the level of development costs.

         B.       BUSINESS OVERVIEW

         INTRODUCTION

         We design, develop, manufacture, market and sell wireless
telecommunications equipment and systems. We have organized our business into
the following three segments:

             -    TRANSMISSION NETWORKS - This business area provides radio link
                  equipment and systems, antenna systems and turnkey
                  telecommunications transmission networks in the 2GHz to 38GHz
                  frequency and from the low capacity ranges (from two to 34
                  megabits per second also referred to as PDH) to the high
                  capacity (from 34 to 620 megabits per second, also referred to
                  as SDH) ranges. We sell primarily to original equipment
                  manufacturers such as Ericsson, Lucent, Nokia and Nortel
                  Networks and to public telecommunications providers and
                  private network operators. We have been in this business since
                  the early 1950s and we believe that we currently have an
                  approximate market share of 5% of the world's radio link
                  market, 1% of the PDH world market and approx. 15% of the SDH
                  world market. Transmission networks accounted for 54.5% of
                  sales in 2002, 76.8% in 2001 and 70.7% in 2000. As at December
                  31, 2002, transmission networks accounted for 48.6% of our
                  backlog. Our transmission networks backlog has been
                  substantially reduced in the course of 2002 as a result of a
                  decline in sales in all of our markets except Asia.

             -    SATELLITE COMMUNICATIONS - This business area provides
                  satellite communication equipment to professionals and
                  consumers for use on the seas as an alternative to terrestrial
                  networks where those networks do not meet the requirements of
                  the user and in remote locations where land-based wireless
                  mobile communications are not available. We have been in this
                  business since the early 1970s and are the market leader for
                  microwave radio relay systems, mobile satellite terminals, and
                  land earth stations used in the International Maritime
                  Satellite Organization's global satellite communications
                  system, generally referred to as INMARSAT. Satellite
                  communications accounted for 25.2% of sales in 2002, 20.7% in
                  2001 and 27.8% in 2000. In 2002, satellite communications
                  accounted for 24.4% of our backlog. During 2002, our satellite
                  communications backlog has been stable.

             -    WIRELESS BROADBAND ACCESS - We expanded into this business
                  area in the first quarter of 2000 by acquiring a company that
                  was developing the Velocity 2000 radio link equipment for
                  point-to-multipoint wireless transmission, referred to as a
                  local multipoint distribution systems, or LMDS. Due to current
                  slowdown in the broadband market, we restructured our
                  broadband operations by moving the satellite activities to
                  Nera Broadband Satellite AS, our subsidiary. However, our goal
                  remains to become a leading supplier of wireless terrestrial
                  broadband access using our core expertise, radio technology.
                  To date, this business area has not contributed materially to
                  our sales (2.8%), and the reduction in our wireless activities
                  resulted in restructuring charges in 2001. We expect the
                  remainder of our terrestrial wireless broadband access
                  operations to become part of our transmission networks
                  business area in the future.

                                       11
In addition to these main three business segments, we also own a 50.18%
interest in NeraTel, a public company in Singapore. NeraTel contributed 30.2% to
our sales in 2002, of which 13.1% is reported under the business areas
Transmission Networks and Satellite Communications described above. The
remaining 17.1% is reported under NeraTel's Contract Manufacturing and
IT-business as further described under "--NeraTel" below. We increased
our ownership interest in NeraTel on November 28, 2001 and, as a result,
NeraTel's sales of the month of December, 2001 were the only sales included in
our income statement for the year 2001. Following a discussion of our strategy,
we describe each of our three business areas, NeraTel, our suppliers, our
customers, product warranty and service, backlog, sales, marketing and
distribution, intellectual property, competition and the regulation we are
subject to.

         STRATEGY

         Until the end of the economic downturn, we intend to preserve and
develop our core expertise and our capital. Through our restructuring efforts we
are cutting costs and improving our operations, our marketing and our product
range. Once the economic conditions improve, our strategic objective is to
expand our operations in selected areas of the telecommunications market, for
which we anticipate increased global demand and in which we believe that our
experience and capabilities in the design, development, manufacturing and
marketing of telecommunications equipment, systems and services give us a
competitive advantage compared to existing or potential competitors. We believe
that our core area of technological expertise is the transmission and processing
of microwave signals and that our core areas of experience are in the design,
development, manufacture and marketing of wireless telecommunications equipment
and systems, areas in which we and our predecessors have operated since 1947.

         Effective March 27, 2002, we sold some assets related to our Velocity
2000 broadband access product line developed in Dallas, U.S. to SR Telecom Inc.
in Canada. This transaction follows a halting of further testing of Velocity
products in late September 2001 and the related discontinuation of activities of
our subsidiary NeraTel Inc. in Dallas as a result of continued adverse market
conditions in the broadband market in the U.S.

         In April 2002 we implemented changes to our organizational structure to
improve focus on our customers' needs and to better manage our market and
product development, production and supply. Our operations are now divided into
three regions, Europe/Middle East/Africa, Asia Pacific and Americas. The units
covering these three operations are dedicated to our specific markets and
customers, while contributing to our global activities. We also formed new
operative units for Client Management/Product Portfolio, Supply Chain Management
and Technology Management, which allows us to better coordinate our activities,
exploit market opportunities through global customers and use research and
development investments more efficiently. Nera's executive committee now
comprises the chief executive officer, regional directors, unit directors, and
directors of staff functions.

         We market our equipment and systems worldwide from our facilities in
Norway and through our network of subsidiaries, sales offices, local agents and
distributors. During 2002, we have experienced, and expect a continuation in,
reduced demand for our products as compared to 2001. In 2002, sales of products
delivered to customers outside of Norway represented approximately 88.7% of our
total sales. Our important markets outside Norway include Asia (principally
Philippines, Malaysia, Thailand and Singapore) with 35.3%, continental Europe
(principally France, Italy, Poland, Russia, Sweden and Germany) with 20.4%,
North America and South America with 22.0% and the United Kingdom, with 4.5% of
sales.

         The markets in which we operate are characterized by deregulation and
rapid technological change. The increasing convergence of information technology
and telecommunications creates attractive growth opportunities for us based on
the expertise and market knowledge we have built up over many years, provided
the general economic environment is positive. Both the pace of technical change
and the increased willingness of companies and individuals to make use of the
opportunities technology offers are creating an increase in the demand for
transmission capacity and efficient access to its use, although that increase is
not as rapid as was once expected. While the telecommunications industry has
experienced a slowdown internationally since 2001, this does not change our
long-term view of this industry and the opportunities it presents to us.

                                       12
TRANSMISSION NETWORKS

         We design, develop, manufacture, market and sell selected
telecommunications transmission equipment and systems, consisting of high and
low capacity microwave radio transmission (also known as radio link or radio
relay) equipment and systems, turnkey telecommunications transmission networks
and antenna systems, for use in public, private, military and other cellular
telecommunications networks.

[PHOTO OF TRANSMISSION NETWORKS]

         Transmission networks provides radio link equipment and systems,
turnkey telecommunications networks and antenna systems. The two main elements
that define transmission networks characteristics are their capacity and
frequency. The various combinations (high capacity-high frequency, high
capacity-low frequency, low capacity -low frequency and low capacity-high
frequency) all have specific advantages in various environments and focus on
different market segments with specific products. Capacity primarily indicates
the volume of signals the products can handle. Products in the high capacity
range have the ability to transmit and receive more signals (Mb/s) than products
in the low capacity range. Products with high capacity are therefore often used
in networks, such as those between major cities. Frequency refers to wave length
and indicates primarily how long a distance signals can travel before they must
reach the next receiver-transmitter antennae to be regenerated and be sent on to
the following antennae. Low frequency signals can travel greater distances than
high frequency signals and are therefore often used in long haul transmission
networks, such as those in desolate areas. High frequency products offer the
best solutions in urban areas, where the required distance to transmit signals
is not as long but the requirement for capacity is high.

                                       13
[PHOTO OF NERA RADIO PRODUCTS]

         As radio relay technology assumes new roles in telecommunications
networks, we have benefited from new opportunities for our transmission
equipment and systems. Deregulation has led to the implementation of new
transmission networks in a number of countries, and new geographic areas have
opened for market expansion in both developed and emerging economies. At the
same time, new network operators have been formed to meet the demand for new
services such as cellular telecommunications, paging and Internet and data
transmission. Many of these operators are choosing microwave radio as an
important part of their networks, both to extend the network coverage and to
serve as a back-up system for networks using other transmission media.

         Revenues generated from the transmission networks business area were
approximately NOK 1,343 million ($ 193 million) (54.9% of total sales) in 2002,
NOK 2,222 million ($247 million) (76.8% of total sales) in 2001 and NOK 1,803
million ($205 million) (70.7% of total sales) in 2000.

     -   MICROWAVE RADIO PRODUCTS. We develop, produce and sell high- and
low-capacity microwave radio equipment used in terrestrial telecommunications
networks carrying voice communication, facsimile, data and radar information, as
well as radio and television program transmissions. We manufacture digital radio
links incorporating devices such as modulators, demodulators, receivers,
transmitters, power supplies, branching units, signal encoders and decoders and
supervisory systems. Our microwave radio relay and access radio systems operate
at frequencies between 1.7 and 38 Ghz and have capacities of between two
megabits per second (providing 30 telephone channels) and 155 megabits per
second (providing 2,000 telephone channels).

         The most common standard for digital transmission networks is PDH. Our
traditional PDH equipment is primarily low-capacity transmission equipment
operating at eight or 34 megabits per second. We also market modular PDH
transmission equipment operating at integral multiples of two megabits per
second.

         In 1988, SDH was adopted as the new standard for digital transmission
networks by the International Telecommunications Union, known as the ITU, and
SDH products have become the predominant systems used for high capacity
transfers. We believe we are a leading supplier of radio relay equipment
worldwide for SDH transmission networks. Our STM-1 terminal, which has a
capacity of 155 megabits per second at frequencies between four and 38 GHz, can
serve as the transmission element for radio-based SDH networks. In April 2002,
we

                                       14
have entered into an agreement with Nokia, pursuant to which we can use its PDH
radio and Nokia, in turn, can use some of our products developed at our Boston
site. This enhances our existing partnership with Nokia, which had previously
encompassed only SDH products. While we expect PDH systems to maintain a
significant market share during the next few years because they are more suited
to low-capacity transmission, we expect that there will be a continued shift to
SDH systems due to their increased capacity as compared to PDH systems.

         In response to the expected shift toward SDH products, we have
developed SDH radios in frequency bands of 6, 7, 8, 11, 13, 15, 18, 23, 26 and
38 Ghz, marketed under the "CityLink" name. We have developed equipment in
accordance with FCC (North American) standards and have obtained FCC approval
for some of the frequencies used with this equipment. CityLink is now also
marketed in a SONET version, the FCC equivalent to SDH. In June 2001, we have
expanded the CityLink family of products to include products with 28 Mhz
bandwidth, and we are now working on all versions of the new product family,
third generation CityLink, expected to be completed by the second half of 2002.
The new products are used in connection with the construction and increasing
popularity in the Nordic countries and some other parts of Europe of new
networks, such as GSM, General Packet Radio Service (wireless data
communications at speeds up to 115 Kbps) and Universal Mobile Telecommunications
System (third generation mobile telephony standard in Europe, or 3-G). These
products are based on the most modern SDH/SONET microwave radio for wireless
infrastructure. The new Nera CityLink also uses multiple modulation schemes, so
that one can accommodate STM-1 or 155 Mbit in 28, 40 and 50/56 MHz channel
plans, and is designed for access systems directly linked to the LAN networks.
We plan to gradually replace the rest of the product range by new generations of
equipment. SDH technology is also expected to be used for systems, which are
currently built using PDH technology.

         Through our expertise in the area of SDH technology, we intend to
develop a competitive advantage over other suppliers of radio link products in
the coming years. We also intend to play an active role in the process of
consolidation, which is expected to take place in this market over the next few
years. In addition, as 3-G systems are further developed, we will aim to be a
preferred partner of major operators and system integrators, as we can offer
greater efficiency for developing infrastructure networks and increasing
capacity of mobile networks base stations. Finally, we are following the early
stages of development of digital broadcasting networks. We gained invaluable
experience through our recent development of a terrestrial, digital TV network
in Australia for NTL, and we hope to apply this expertise in similar projects in
the future. There can be no assurance that these developments will occur, or
that they will be positive for our business.

         To supply customers with complete telecommunications systems, we
purchase certain equipment from several other suppliers, such as Ericsson
(Sweden), Nokia (Finland), Marconi (the United Kingdom) and ECI Telecom
(Israel). Equipment obtained from outside suppliers typically includes add-drop
multiplexers, digital cross-connects, various interface equipment and other
system elements. These elements are incorporated in our microwave radio products
at our facilities in Bergen, Norway, or at the facilities of Kitron ASA, with
whom we have a long-term cooperation agreement.

         We sell our transmissions systems to telecommunications operators,
cellular network operators and, to a lesser extent, to dedicated network users
such as oil and gas companies, power utilities, railroads and military
organizations. Contracts range in value from approximately NOK one million up to
approximately NOK 250 million. Because of the project-oriented nature of many of
our radio link equipment and systems contracts, our largest customers may change
from year to year.

         Our largest customers for transmissions systems in terms of contract
amount over the past three years have been NODECA (Norway), NTL (Australia),
Globe Telecom (Philippines), ETB (Columbia), IUSACELL (Mexico), and Ericsson
(Morocco). In addition, we have an original equipment manufacturers agreement
with Lucent Technologies, Nokia and Ericsson for the supply of SDH microwave
radio transmission systems for Lucent's transmission projects worldwide. We hope
to be able to capitalize on a possible trend indicated by these system
integrators toward outsourcing the responsibility of development of larger
sections of mobile networks. The sale of radio links has roughly the same
geographical spread as our total sales, but with a somewhat larger share in
Latin America. For more information regarding our sales by geographical
destination, please see "--Sales, marketing and distribution."

                                       15
Our microwave radio transmission equipment incorporates microwave
transistors, which can only be obtained from a small number of suppliers. We
maintain substantial inventories of microwave transistors and seek to maintain
long-term contracts with our principal suppliers whenever practicable.

         Manufacturing of our transmission networks equipment mainly takes place
at one plant at Kokstad, outside of Bergen, which mainly produces high-capacity
SDH radio transmitters and receivers. In addition to high-capacity radios, our
plant produces mechanical equipment, circuit boards, antennae up to 3.5 meters
in diameter and some military products. The largest customer for this plant is
the transmission networks business area. The Kokstad facility also engages in
manufacturing for a few third-party customers. At present, there are 345
employees at the Kokstad plant. When our manufacturing needs exceed the plant's
capacity, we outsource some of the production to Flextronics in Oslo, Norway,
and also to Kitron in Risor, Norway, as an alternative supplier. In 2000, we
entered into an agreement with Flextronics for the assembly of a number of our
transmission networks products. In 2001, we have entered into a similar
agreement with Kitron relating to our transmission networks business.

         The manufacturing operations at our production facility range from
complete assembly of a particular product by one individual or a small group of
individuals to semi-automated assembly lines for volume production of certain
pieces of equipment. We make extensive use of surface-mounted devices in the
assembly of printed circuit boards. Because many of our products include
precision electronic components requiring close tolerances, we conduct test and
inspection procedures throughout the manufacturing and assembly process. Final
test procedures include quality control inspections, temperature and burn-in
tests and factory acceptance tests on assembled equipment to simulate actual
system configuration.

     -   TURNKEY TELECOMMUNICATIONS TRANSMISSION NETWORKS. We are a turnkey
supplier of telecommunications transmissions networks, which comprise varying
combinations of radio relays, antennas, feeders, towers, fiber optic terminals
and cables, multiplexers and cross-connect equipment. We design, develop,
manufacture, sell and install complete telecommunications networks and
operations, administration and maintenance management systems. For most turnkey
projects, we conduct the necessary surveying work and produce transmitters,
receivers, waveguides, racks and antenna systems, which together typically
represent approximately one-half of the value of the turnkey projects. We
acquire the remainder of the equipment and facilities, such as towers, shelters,
diesel generators, battery banks, solar cells and add-drop multiplexers, from
subcontractors.

         We supply turnkey telecommunications transmission networks, principally
to telecommunications providers and utilities in the Indian subcontinent, the
Middle East, Southeast Asia, Latin America and Africa. Our two most important
turnkey projects in 2002 were in the Philippines and Jamaica.

         When supplying turnkey transmission systems, we obtain certain
equipment and facilities, such as towers, shelters, diesel generators, battery
banks, solar cells and add-drop multiplexers, from subcontractors.

     -   ANTENNA SYSTEMS. We also design and manufacture antennas (principally
dish aerials) to meet specific demands imposed by various operating environments
and by the radio relay equipment being employed. We produce a variety of
antennas in sizes up to six meters in diameter for all recommended frequency
bands. We sell our antennas both in conjunction with our other transmission
equipment and on a stand-alone basis.

         We manufacture our antenna systems with components from our suppliers.
Power supplies, masts and installation materials are purchased from approved
suppliers, usually local regional producers, by competitive tender. In 2002, our
principal customers for antenna systems were the microwave radio products and
antenna systems divisions of our transmission networks business area, Terra.com
(Sweden) and FMV (Sweden).

         Future Prospects

         2002 was a weak year for telecom equipment vendors in general and for
Nera's Transmission business as well. Partly, this was due to weak macroeconomic
development (e.g. recession in Latin America). In addition, the large in
debtedness of many large telecom operators worldwide - Europe and US operators
in particular - contributed to a decline in telecom capital spending. The
investment tightening was justified in view of the reduction in mobile
subscriber growth that we witnessed during the year - and in view of the fact
that the technology for next-

                                       16
generation mobile systems was not yet available. The mobile market growth has
been the dominant factor behind telecom infrastructure market growth in the
recent years. Some regions were less affected by the downturn in 2002. Parts of
Eastern Europe experienced a strong growth in mobile subscribers - which
contributed to continued growth in mobile infrastructure in this region. The
same is true for parts of Asia-Pacific - primarily South East Asia.

         The liberalisation of the telecommunications market implemented in
Europe and in the US in the 1990s is now under way in other regions. The
traditional monopolists in a number of Asian and Middle Eastern countries are
now facing competition. Consequently, we anticipate continued growth in the
development of the infrastructure for telecommunications in certain areas, even
though there is little evidence of a significant growth in the overall demand
for our transmission products in the near future. We believe the transmission
market is approaching a more stable period. However, due to many factors which
influence new growth, not least macroeconomic factors, it is uncertain when
growth will come and how strong it will be.

         SATELLITE COMMUNICATIONS

         We design, develop, manufacture, market and sell mobile satellite
terminals (comprising marine and land mobile earth stations) and land earth
stations for satellite communications networks, principally INMARSAT. We supply
a full range of land earth stations and we are the supplier producing the widest
range of terminals for the INMARSAT system.

[PHOTO OF MOBILE SATELLITE COMMUNICATION]

         We also market our mobile satellite terminals and land earth stations
for various regional satellite systems. INMARSAT services include the following:

                                       17
-    the original INMARSAT A analog system, which provides maritime
                  and land mobile voice, data facsimile and telex links,

             -    the INMARSAT B system, a digital replacement for INMARSAT A
                  providing voice, data, facsimile and telex capabilities,

             -    the INMARSAT C analog system, which provides data and telex
                  links,

             -    the INMARSAT M system, a digital service providing voice,
                  facsimile and data capabilities for users of smaller
                  ship-borne and land mobile terminals,

             -    the INMARSAT Aero system, which provides global in-flight
                  telecommunications services for commercial airlines, and

             -    the INMARSAT Mini-M service, which is designed to allow the
                  operation of laptop-sized satellite terminals.

         INMARSAT's A, B, C, M and Aero systems operate through a network of
geostationary satellites owned and operated by INMARSAT since the late 1970s.
The INMARSAT Mini-M operates through a generation of geostationary satellites
launched in 1996. These satellites provide increased capacity through the use of
spot-beam technology, which concentrates signal power and provides increased
sensitivity at the earth's surface, thus enabling telecommunications
transmissions to be relayed from smaller and less powerful terminals. The
INMARSAT Mini-M system makes use of this new technology, including INMARSAT's
global area network digital service, which makes satellite communications with
laptop-sized equipment possible at ISDN-speed.

         We are also involved in continued developments within the INMARSAT
system to provide lighter and smaller terminals for high-speed data transfer via
mobile terminals. We have carried out research and a number of studies in this
area and we believe that we are well positioned to become a supplier of this
type of terminal. Our efforts in this area were recognized in April 2002, when
we entered into an agreement with INMARSAT to develop terminals for the next
generation INMARSAT satellite. The agreement contemplates our design,
development and production of light weight and advanced high data rate terminals
for the new INMARSAT Broadband Global Area Network, or BGAN. The new terminals
are expected to meet users' need for ease of use and increased data capacity at
speeds up to 422/110 kbit/s. We expect to launch the INMARSAT-4 satellites
during 2004, and we anticipate that the BGAN network to be compatible with the
earthbound UMTS/IMT-2000 (3G) networks currently being built. However, no
assurances can be given that we will be able to develop or successfully launch
these products.

         During the second half of 2001, we restructured our satellite
operations, including personnel reduction and adjustment of the rate and scope
of product developments to market conditions. We expect that this restructuring
will enable satellite communications to compete better in our markets. The
financial impact of this restructuring is described in "Item 5. Operating and
Financial Review and Prospects."

         Our sales from satellite communications amounted to approximately NOK
617 million ($77 million) (25.2% of total sales) in 2002, NOK 599 million ($66
million) (20.7% of total sales) in 2001, and NOK 709 million ($81 million)
(27.8% of total sales) in 2000. Satellite terminals and land earth stations
represented approximately 70% and 30% of satellite communications sales in 2002.

     -   Satellite Terminals. We design, develop, manufacture, market and sell
earth stations and land mobile earth stations (generally known as satellite
terminals or satellite telephones) for the INMARSAT M, Mini-M and M4 global area
network digital services. We discontinued our activities for IMMARSAT A and C
analog in 2000. Airborne satellite terminals for the INMARSAT Aero system are
not included in our delivery program in view of the specialized avionics
technology required to integrate the satellite terminals into an aircraft's
design.

                                       18
[PHOTO OF EVOLUTION OF SATELLITE TERMINIALS]

         A satellite terminal is a compact transceiver of one or a few channels
linking individual ships or land mobile users to the INMARSAT satellite
communications network. Satellite terminals may be equipped with optional
features such as voice encryption, facsimile, circuit mode data, high-speed data
and credit card operation each of which permits the user to gain access to one
of the INMARSAT systems. Size, weight and service capability are the most
important design criteria for our satellite terminals. We market our satellite
terminals in over 70 countries.

         The WorldPhone is our INMARSAT Mini-M satellite terminal. The
WorldPhone utilizes the Mini-M systems spot-beam technology to target users
operating mostly outside the range of terrestrial and cellular networks. We
began commercial production of this product in early 1997 in response to orders
for over 3,000 WorldPhones received by the end of 1996, and we sold
approximately 4,000 units in 2002. While WorldPhone is a mature product for us,
we expect it to remain part of our product offering also during 2003 and 2004.
The WorldPhone Marine offers telecommunications via the Mini-M system that uses
spot-beam technology to cover the major ocean regions. Based on INMARSAT
registration data, we are one of the market leaders in terms of sales volume for
INMARSAT Mini-M satellite terminals.

         Our INMARSAT B products include marine, fixed and portable applications
for digital voice, data, facsimile and telex capabilities, such as the Marine
Saturn Bm which powers communications between a ship and the outside world via
INMARSAT B. Our INMARSAT B terminals offer bit rates of up to 16 kilobits per
second (voice) and 64 kilobit per second (data). We commenced sales of INMARSAT
B products in 1994.

         Our World Communicator is a terminal for the INMARSAT Global Area
Network digital servicethat we have been selling since the second quarter of
2000. In 2002 we sold 2,040 units as compared to 1,770 units in 2001.

                                       19
Our INMARSAT M products include fixed applications for digital voice,
facsimile and data capabilities for users of smaller ship-borne and land mobile
terminals, such as our Marine Saturn Mm, which provides comprehensive marine
communications services for vessels not obliged to meet full International
Maritime Organization, or IMO, carriage requirements via INMARSAT M.

         In 2002, the marine market accounted for approximately 43% of our
satellite terminal sales. The owners of larger commercial vessels and navy
fleets are our principal customers, for which we also supply, assemble and
install complete ship-borne telecommunications systems.

         Land mobile and portable terminals accounted for approximately 44% of
our total satellite terminal sales in 2002, as compared to approximately 52% of
our total satellite terminal sales in 2001 and 75% in 2000. We sell land mobile
terminals primarily to distributors in Europe and North America, for use in
overseas areas with less developed telecommunications infrastructures or in
areas experiencing natural or political emergencies, and in the states of the
former Soviet Union. In the land mobile market, our principal customers are
governmental organizations, U.N. organizations, news agencies and various aid
and rescue organizations operating in developing countries.

         We outsource manufacturing of our satellite terminals to Flextronics as
described more fully under "Suppliers and Manufacturing" , see page 24.

     -   Gateways and Land Earth Stations. We design, develop, manufacture, sell
and support gateways for satellite communications networks. Gateways, or land
earth stations, form the interface between terrestrial telecom networks and the
satellite system. Gateways are typically integrated systems consisting of
antennas and RF equipment, satellite modems, traffic control computers,
telephone/data switching equipment, terrestrial interface units and
administrative systems for alarm-handling, station configuration and billing. A
large satellite gateway can handle several hundreds of circuit-switched calls
simultaneously and thousands of packet-switched connections.

         To date, most of the satellite communications products and solutions
developed by us have been designed for the INMARSAT system, currently the
leading satellite-operator for global mobile personal communications systems.
Since we delivered our first INMARSAT-A gateway in 1982, we have introduced
successive product generations for the INMARSAT C, B, M, Mini-M and Aero
systems. In 1999, we launched the INMARSAT M4 global area network gateways. Our
sales of gateways were NOK 209 million ($26 million) in 2002, NOK 174 million
($19 million) in 2001 and NOK 237.6 million ($27 million) in 2000. INMARSAT has
a total of 266 earth stations in its network globally. We sell our products to
operators of land earth stations, or LES, and believe we are the biggest vendor
of existing systems in the INMARSAT market with a global market share of
slightly more than 50%. The INMARSAT network now serves 266 ocean regions, of
which we have delivered systems for 172 ocean stations. For purposes of these
numbers, we consider INMARSAT M and INMARSAT B as one system.

         During the past few years, there has been a further consolidation among
LES operators in the INMARSAT market. Some of these operators have either moved
their traffic to other LES sites or left the business and sold their customer
base to other operators. As a consequence, several sites have been closed down.
In spite of consolidation and its effects, we have increased the number of LES
operators we do business with, and we expect a further increase for 2003.

         We have developed a generic satellite gateway architecture for which we
are continually developing and improving building blocks for use in our gateway
products. Through the last few years we have been working on adding building
blocks targeted towards the systems where we currently see a market, primarily
systems that offer fixed/mobile Internet protocol multimedia services, but also
those offering narrowband handheld voice services. The building blocks are
generic modules or subsystems, which are based on industry-standard development
platforms, using industry-standard development tools and methods. Where we find
that we can add value to our customers, state-of-the-art Satcom-specific
technology is developed and integrated into the building blocks. All the
building blocks incorporate solutions for redundancy, enabling us to design
complete gateways with "no single point of failure." All the building blocks can
be tied together by industry-standard interfaces. This approach enables us to
offer anything from a complete turnkey system to any combination of subsystems
tailored to the needs of the

                                       20
individual project. We can integrate both internally developed products and
best-of-class components from third-party vendors, or take part as a
subcontractor in somebody else's turnkey project.

         In supplying turnkey land earth stations, we obtain certain radio
frequency equipment and antennas from outside suppliers located principally in
the United States.

         Design and development of our gateways take place mainly at our
facilities in Oslo, Norway while manufacturing is currently outsourced to
Flextronics as described more fully under "Suppliers and Manufacturing" see page
24. Marketing, and distribution and sales is mostly geared towards direct sales
to customers and to a lesser extent through other business areas. However,
satellite terminals and satellite telephones are sold primarily through a
worldwide third-party distribution network. The business is co-ordinated across
our various subsidiaries and regional offices, which market and distribute the
products. For more information regarding our sales by geographical destination,
please see "--Sales, marketing and distribution."

         For information regarding our satellite broadband activities, please
see "-Broadband Access" below.

         Future prospects

         The unstable geo-politic situation in most of the world has resulted in
a better outlook for satellite communications markets especially during the last
part of 2002 and into 2003. However, it remains uncertain whether this
development will continue - and if so, for how long. Nera's recent success in
the satellite communication area are not only attributable to better market
conditions but also to sales of land-based and marine products that were
introduced in early 2002. We believe that innovations toNera's land-based and
maritime products position usfor changes in customer demand and increased
competition.

         In the longer term, an important part of our satellite business will be
to deliver terminals and upgrades of gateways within the INMARSAT market,
including the high-speed data terminal World Communicator and more updated
versions of the current INMARSAT products. We believe that the agreement we
reached with INMARSAT in April 2002 for the development of BGAN terminals, which
is described above, enhances our position as a major international supplier of
satellite based communication solutions.

         It it our ambition to maintain and strengthen our position as the
leading producer and supplier of satellite communications equipment within the
INMARSAT system. This implies further emphasis on product innovation and product
leadership within the maritime and land mobile markets, as well as the land
earth station market.

         BROADBAND ACCESS

         The broadband access business area was organized in the first quarter
of 2000 to benefit from the convergence of our experience in transmission
networks and satellite communications, with the goal of competing in the market
for fixed wireless access products. We expected that the wireless broadband
concept would offer last mile solutions because radios often offer advantages
which make them compete well with, or as supplement to, the fixed last mile
alternatives time of deployment, ease of installation, cost of deployment,
restitution of the equipment and scalable deployment. Telecommunications
providers have built fiber optic or other networks for transmission of traffic,
which are concentrated in areas where the number of connection points justifies
the expense of installing fixed network. The distance between the network and
the connection point in the customer's residence or place of business is
referred to as the "last mile" and there are many different technologies
available to make that last mile connection.

         Initially we concentrated our efforts within this area on our own
products under the name Velocity 2000, a wireless local loop infrastructure
which was acquired from Word Access in 2000, and the 40G LMDS product. Due to
changes in the market conditions, further testing of the Velocity product was
halted in September 2001 and we sold some of the Velocity assets in March 2002,
while retaining the LMDS technology pending future use.

                                       21
In late 2001, following a revision of our expectations for the wireless
broadband area, we divided our broadband activities bytransferring our satellite
broadband activities to a separate subsidiary, called Nera Broadband Satellite
AS incorporating the fixed wireless access activities into Nera Networks.

         Despite the temporary setbacks experienced in this area to date, we
intend to continue to develop our core technology, know-how and solutions in
preparation of becoming a player in the broadband access market. We aim to
become a leading supplier of wireless terrestrial broadband access using our
core expertise; radio technology. We believe we can offer cost-effective
solutions that can be installed quickly in both rural and urban areas. We
believe we can supply a competitive group of products particularly in areas
where infrastructure is limited as our broadband products do not depend on
existing infrastructure. During 2002 we have developed our core technology and
know-how through a number of projects described below.

         Since 2001, we are participatingd in an LMDS project piloted in
Svolvaer, Norway. The project's goal is to develop a quality broadband package
based on our advanced and unique radio technology. Initial LMDS pilot tests were
successful, and the project has continued in collaboration with Telenor, the
Norwegian national telephone operator until the present.

         After signing the first agreement to develop a wireless broadband
network for the municipal center Kyrksaeterora in Hemne, Norway, in the fall of
2001, we have won several contracts both nationally and internationally within
this area. In the beginning of 2002, we agreed with BaneTele, a net work
operator in Norway, to provide wireless broadband solutions to their
customer-base, mainly the utility-companies in Norway. By mid 2003 we have
delivered broadband wireless solutions to more than 50 projects in our home
market. We have also established business within this area southern Europe and
in South East Asia with installation in the Philippines, Indonesia and Malaysia,
in Latin America and the Caribbean and intend to expand into Africa.All of these
solutions are based on a combination point to multi point radio from
OEM-partners and our own point to point access radio and network management
system. We expect that about 50 per cent of our revenue within this area will
come from our foreign operation in 2003.

         Nera Broadband Satellite AS, which continues the company's activities
in the field of broadband via satellite were restructured in 2001. In 2002 we
were narrowly focused on digital video broadband return channel system, known as
DVB-RCS, technology. Within this business area we gained considerable knowledge
in 2001 through the development of a digital video broadcast products and
collaboration with Shinsat on the iPSTAR product. This product delivers data
over satellite and Nera entered the project with a firm belief on an emerging
market for this solution especially in Asia.

         At the end of 2002, Nera Broadband Satellite entered into a contract
with ShinSat for the delivery of 18 gateways for inexpensive broadband services
over the iPSTAR satellite system to Asia and the Pacific region. This is the
largest contract ever entered into by Nera Broadband Satellite. The fact that
Nera was selected for this contract consolidates our strong standing with
regards to technology for broadband over satellite. We expect that our
performance in this contract will lead to additional contracts in Asia. Nera
Broadband Satellite also won several minor contracts for DVB-RCS terminals on
the satellite market for broadcasting in 2002.

         FUTURE PROSPECTS

         In the years ahead, Nera Broadband Satellite expect to see interesting
and challenging opportunities, as the commercial market for its products has
slowly started to grow in 2003. Generally, the broadband market is becoming and
increasingly important market segment for us, and we intend to further develop
the wireless solutions to build a strong position in the wireless broadband
marketplace.

                                       22
NERATEL

         In November 2001, we purchased additional shares in our Singapore
subsidiary, NeraTel, to increase our ownership interest from 47.3% to 50.18%,
for a total purchase price of NOK 32.6 million (US$3.6 million). At that time,
NeraTel increased its involvement in our Asian business and began marketing our
products in India, China, Bangladesh, Mongolia and Sri Lanka. To date, we have
not yet seen significant results from that effort. NeraTel already served
Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, Brunei,
Laos, Cambodia, Myanmar, Taiwan and Korea for us and will continue to do so.
NeraTel is headquartered in Singapore, with its principal business address at
109 Defu Lane 10, Singapore 539225, telephone +65 281 3388.

         NeraTel's business activities are divided into the segments of
telecommunications, information technology and electronics contract
manufacturing, which are briefly described below:

     -   TELECOMMUNICATIONS -- this segment manufactures and markets microwave
         radio products which can be used as a flexible and cost-effective
         method of establishing networks. Rapid growth of cellular usage
         provides NeraTel with opportunities for further development in close
         cooperation with us. This business area of NeraTel also includes
         satellite communication through INMARSAT system and the Nera WorldPhone
         terminal used for phone calls, fax, data transmission or internet
         connection irrespective of location.

     -   INFORMATION TECHNOLOGY -- this segment recognizes the growing
         significance of internet communication and markets related products and
         services, such as security solutions and extended authentication
         services, and the internet traffic management, or ITM, consultation to
         ensure after-sale satisfaction of the customers. A separate unit
         dedicated to optical networks uses its experience as a system
         integrator to undertake technology and market research to provide
         solutions for next generation technology, such as optical wireless, or
         Infra-Red, and wired, or A-PON, technologies.

     -   CONTRACT MANUFACTURING -- this activity is operated by Nera
         Electronics, a subsidiary of Nera Tel and listed on the stock exchange.
         Nera Tel owns approximately 70 percent of Nera Electronics. The
         company's strategy is to offer customers a production capability for
         complex electronics in the low to medium-sized series. The company's
         customers include international companies within the health sector,
         telecommunications, measuring apparatus and optics. The company is in
         the process of qualification with several customers and is currently
         working on the completion of several prototypes. In 2002, the company
         established a sales office in the USA in order to expand its customer
         base, and plans similar offices in Europe and Asia in 2003.

         NERA FINANS AS

         Nera Finans AS was set up as a separate entity in March 1995 in order
to handle our operational finance activities. In May 2002, we decided to
centralize all activities performed by Nera Finans in Nera ASA treasury
department in Bergen and therefore close its existing branch in Dublin. This
change was effected through the merger of Nera Finans into Nera ASA in October
2002, with tax and accounting implications effective on January 1, 2002. This
change has resulted in reduction of costs and increased coordination between our
operations and financing activities.

         In addition to conducting our daily operational activities, Nera Finans
has historically also been responsible for our sales support financing program,
which provided some of our customers with credit through the financial markets
in Norway and abroad, provided guarantees to other credit institutions or
provided our direct participation in the form of leasing, loans, and, in some
cases, by purchasing equity. During 2002, we did not provide for any material
credit to new customers but limited our activity in this area to managing our
existing financing programs. At December 31, 2002, Nera ASA had a total of
approximately NOK 110 million ($15.9 million) in loans outstanding to customers
in connection with the financing of various projects

         One loan to customers is individually large enough to merit a separate
discussion. In October 1997, Nera Finans AS provided financing of $5.5 million
to CNH Communications de Venezuela, or CNH, in connection with

                                       23
an order for radio link equipment for the purchase of such equipment. Through
a series of transactions and events, including bankruptcy proceedings for CNH's
parent in the United States, the nomal value on the loan is currently
approximately $10 million. Nera has made provisions regarding this loan. Some
of this amount is collateralized by the equipment we delivered. CNH, however,
continues to encounter financial problems, primarily due to the political and
economical situation in Venezuela. It is highly uncertain whether we will
recover the amounts outstanding on our loan but we continue to actively monitor
CNH's efforts to improve its financial situation and are working with CNH on
alternative financing methods.

         SUPPLIERS AND MANUFACTURING

         As described in our "Transmission networks," "Satellite communications"
and "Broadband access" business segments, we obtain components and subsystems
for our products and projects from suppliers worldwide, and we seek to use
commercially available components and subsystems wherever practicable. We
attempt to increase the number of common components across all our product lines
to permit more efficient use of capital and more flexibility in logistics
control. Logistics and process control techniques have assumed greater
importance in our manufacturing activities as the relative value of our products
represented by materials has increased while that of labor has decreased. We
therefore seek to establish close cooperation with a limited number of approved
suppliers.

         Certain components and subsystems for our products can be obtained from
only a limited number of sources. A significant interruption in the delivery of
such items in a satisfactory manner could adversely affect our ability to make
timely deliveries of particular products.

         The most important components of our products are application-specific
integrated circuits known as ASICs, which are designed by us for manufacture by
third parties. Only a small number of suppliers in the United States, Japan and
Europe manufacture ASICs suitable for our needs. While this market is currently
competitive, it is possible that one supplier may come to dominate the market
for ASICs. Any change in supplier may result in production delays as a new
supplier's products are adapted to our requirements. We take measures to reduce
our reliance on any one supplier by maintaining substantial inventories of the
ASICs we require, by obtaining these components from more than one approved
supplier, to the extent practicable, and by maintaining relatively long-term
contracts with our principal suppliers.

         We outsource the manufacturing of our satellite communications
terminals to Flextronics and use Kitron as an alternative manufacturer. We use
the same suppliers for manufacturing relating to our transmission networks
business if we do not have sufficient manufacturing capacity ourselves. In
connection with the sale of our production facilities in Oslo to Flextronics in
May 2000, we entered into a number of agreements setting forth the scope of our
long-term cooperation and of manufacturing by Flextronics of various products
for our business. These agreements are generally on terms standard in the
industry, have initial terms of three years (subject to one-year renewals) and
can be terminated by either party with notice, and by us due to quality
concerns. During each year of the three-year initial term, we must use
Flextronics' Oslo facility to manufacture products with a minimum value of NOK
200 million, NOK 180 million and NOK 140 million, respectively. During the first
two years, we have met the thresholds and expect to reach the threshold during
2003 as well. Flextronics must dedicate a certain amount of resources to us. Our
relationship with Kitron is governed by two frame agreements, which are also
generally on terms standard in our industry.

         CUSTOMERS

         From 2000 through 2002, our principal customers have included the
Norwegian Defense Communications Agency (Norway), Ericsson (Poland, Mexico,
Morocco and Brazil), Telefonos de Mexico (Mexico), IUSACELL (Mexico), Promon
Electronica Ltda. (Brazil), Telenor (Norway), British Telecom PLC, Telcel
(Venezuela), Lucent Technologies (Peru, India, Czech Republic and Saudi Arabia),
NTL (Australia), Globe Telecom (Philippines), Datang (China), ITI (India),
Microcell Links (United Kingdom), National Logistics Cell (Pakistan), Telecom
Italia (Italy), Hong Kong Telecom (Hong Kong), Total Access Communications
(Thailand), and Singapore Telecommunications Ltd. (Singapore). All of the
Ericsson entities, taken together accounted for approx. 12% of all sales in
2001. No single customer accounted for 10% or more of our sales in 2002.

         PRODUCT WARRANTY AND SERVICE

                                       24
Although the terms of specific warranties vary, we typically warrant
the performance of our goods for a period of one year following acceptance of
such goods and/or two years following the shipment of such goods. We generally
agree to perform all warranty work at our own expense, including parts, labor
and miscellaneous cost, such as travel to the site of repairs, shipment of goods
to us and insurance. When carrying out our contracts, we typically post a
warranty bond, usually in the amount of 10% of the total value of a contract, at
the time of provisional acceptance of goods by the customer. Once the customer
has utilized the goods for one year, the customer takes final acceptance and the
warranty bond is canceled. We generally guarantee that we will stock spare parts
for the goods sold for periods ranging from five years through fifteen years,
depending upon the specific terms of the particular contract. At the end of
2002, our reserve for warranty claims amounted to approximately NOK 36.7 million
($5.3 million).

         In addition, we issue bid and performance bonds in connection with many
of our contracts, which may be called by customers in certain circumstances,
such as where there is a major default in our performance of a contract. As of
December 31, 2002, we had approximately NOK 119 million ($17 million) of bid and
performance bonds outstanding. We have experienced no material losses to date in
relation to any calling of performance bonds.

         BACKLOG

         The following table indicates the amount of unfilled customer orders
for our products on December 31 of each of the years presented:
1998          1999         2000        2001        2002
                   ----          ----         ----        ----        ----
                                       (NOK IN MILLIONS)
Backlog.........  1,336           998        1,158       1,023         908
These amounts reflect only those orders believed to be firm, based on
executed contracts and that portion of long-term contracts which had been
released for production but which were incomplete as of the applicable date.
Amounts contained in backlog for any contract or order may not represent the
total amount of such contractor order. Anticipated, but not yet firm, orders are
not included within backlog but are taken into account in determining our
available production capacity.

         During the first six months of 1998, the order backlog was reviewed and
individual orders were removed or reduced with a total reduction of NOK 300
million. The sales of Nera transmission management network and power network
communications also contributed to the reduction of backlog. The backlog figures
through 1998, include an estimated amount of airtime billing sales for airtime
billing services rendered, but not yet billed, as of the relevant date.
Approximately NOK 113 million of estimated airtime billing sales are included in
the backlog figure for December 31, 1998. The major reason for the decline in
order backlog in 1999 was the result of the sale of a majority of NeraTel in
Singapore and of the airtime billing business in the UK. As a consequence of
these sales, the order backlogs of these entities were no longer included in our
order backlog. The value of this order backlogs was approximately NOK350 million
at the time each of these businesses were sold. In addition to this, there were
fewer turnkey contracts registered as order backlog. The amount of our backlog
as of any date does not otherwise reflect expected sales for any period. Our
backlog increased during 2000 due to improved market conditions primarily for
our transmission networks products and to a lesser extent for satellite
communications products. Our backlog decreased during 2001 and 2002 due to the
global economic slowdown in general, and its adverse effects on the
telecommunications equipment market, in which we operate, in particular.

         We believe that approximately 85% of our backlog as of December 31,
2002 will be shipped during 2003.

                                       25
SALES, MARKETING AND DISTRIBUTION

         We have invested significant resources in order to expand our
international market presence through the establishment of our own distribution
network in regions where we have previously sold products through local agents.
We have wholly or partially owned subsidiaries in Norway, the United Kingdom,
Germany, Singapore, Hong Kong, Brazil, Colombia, Mexico, Venezuela, India, and
the United States, and market our products in over 70 countries. We have sales
offices, or representatives, in: Moscow, Russia; Warsaw, Poland; Jakarta,
Indonesia; Islamabad and Lahore, Pakistan; Johannesburg, South Africa; Beijing,
China; Hanoi, Vietnam; Madrid, Spain; Amman, Jordan; Manila, the Philippines;
Bangkok, Thailand; Kuala Lumpur, Malaysia; Dubai; United Arab Emirates, Lucca,
Italy and Buenos Aires, Argentina. In 1999 and 2000, we focused our marketing
efforts on strengthening our subsidiaries in Latin America and our sales offices
in Asia by increasing the number of sales engineers. During 2001, we opened new
offices in Prague, the Czech Republic; Sydney, Australia; and Madrid, Spain. In
2002, we did not make any changes to our international market presence.

         The figures below show the geographical distribution of our orders
received and sales in 2002.
ORDERS RECEIVED FROM GEOGRAPHICAL      SALES BY GEOGRAPHICAL
                                          DESTINATION IN 2002              DESTINATION IN 2002
                                 -------------------------------------    ---------------------
                                               (NOK IN MILLIONS, EXCEPT PERCENTAGES)
Asia......................           899                 35.7%               863          35.3%
Americas..................           545                 21.6%               538          22.0%
Rest of Europe............           442                 17.5%               498          20.4%
Norway....................           282                 11.2%               276          11.3%
United Kingdom............           197                  7.8%               110           4.5%
Oceania...................            41                  1.7%                55           2.2%
Africa....................           113                  4.5%               105           4.3%
   Total..................         2,519                  100%             2,445           100%
                                   -----                 ----              -----          ----
Transmission networks

         We distribute our transmission equipment and systems through direct
marketing from Norway and through our regional sales offices and subsidiaries,
as well as through selected agents. In recent years we have has set up a number
of sales and representative offices in various countries in order to strengthen
our local presence. Sales of equipment for radio link systems and turnkey
networks may also be made through other telecommunications network suppliers
such as Lucent Technologies, Nokia and Ericsson. Our sales force consists of
engineers and other employees involved in the sales process based in Norway and
in various regional offices. Our sales representatives work with customers and
our engineering and manufacturing personnel to configure systems to meet
specific customer requirements.

         We market our microwave radio transmission equipment and systems
throughout the world, principally in Southeast Asia, Norway, the United Kingdom,
several countries in Western Europe, selected markets in eastern Europe
(principally the Czech Republic, Poland, Romania and Russia), China, Latin
America, the Indian subcontinent and sub-Saharan Africa.

         We expect that our CityLink products, which also are available for the
SONET standard used in the United States, may present new opportunities for us
in the U.S. and Canadian markets.

                                       26
Satellite communications

         We distribute our satellite terminals primarily through our
subsidiaries in the United Kingdom, Germany and Southeast Asia, and through
independent distributors in Southeast Asia, the United States, Europe and other
regions. Management estimates that this network of subsidiaries and independent
distributors, which serves approximately 70 countries, accounts for
approximately 90% of our sales of satellite terminals.

         Because the market for land earth stations consists primarily of a
small number of large projects requiring extensive technical support, we
coordinate our sales and marketing activities for land earth station systems and
equipment from our offices in Norway and through our associated companies in
Southeast Asia.

         Broadband access

         We intend to distribute our broadband access terrestrial products
primarily though our network of subsidiaries and agents. For our broadband
access satellite products, we intend to use distributors based primarily in
Scandinavia, South-East Asia and Europe.

         INTELLECTUAL PROPERTY

         Given the rapid pace of product development and the short product life
cycles in our principal businesses, we formerly did not attempt to secure patent
protection for our products and processes. We seek patent protection for some of
our products and processes. We have applied for and have been granted patent
protection for several product and process developments within our transmission
networks and satellite communications business areas.

         We have also applied for, and have obtained, trademark protection for
our logo in 70 countries.

         COMPETITION

         Our products face substantial competition from other telecommunications
product lines and alternative telecommunications transmission media. Many of our
competitors have significantly greater financial, marketing and operating
resources than us, as well as broader product lines.

         Our principal competitors in transmission equipment, systems and
services are large telecommunications equipment suppliers that have a strong
presence in the markets for transmission and switching equipment and that can
supply all elements of telecommunications networks. Most of these suppliers have
greater resources than us. Our major competitors in the market for transmission
systems include: Alcatel Alsthom (France), NEC Corporation (Japan), Fujitsu Ltd.
(Japan), Northern Telecom Limited (Canada), Marconi (the United Kingdom) and
Siemens AG (Germany) Digital Microwave Corp. (United States) and Harris (United
States). In the market for antenna systems, our principal competitor is Andrews
(United States). In addition, we face competition from a number of niche players
in certain markets, especially in the market for low-capacity microwave radio
equipment. Competition between firms is based primarily on price and on a number
of other factors, depending on the nature of the customer. For contracts with
PTTs, competition is also generally based on technical merit, while ability to
make rapid delivery typically is more important for contracts with newly
established telecommunications providers. Competition to supply
telecommunications systems in developing countries and to new operators in any
given market is often based on the ability to arrange development aid financing.

         We believe that the market for radio link systems (radio equipment with
accompanying third-party equipment and services) amounts to around USD 30
billion. Worldwide, three suppliers are each believed to have approximately 10%
of the market (Ericsson, Alcatel and Siemens), while five to eight suppliers,
including us, are believed to have market shares of approximately 5% to 8%. The
other players in the transmission market are each believed to have market shares
of approximately 2%.

         The market for mobile satellite terminals and land earth stations is
characterized by strong competition and by an increasing number of new
suppliers. Our main competitors are: Japan Radio Corporation Ltd. (Japan), NEC
Corporation (Japan), MTI Technology Corp. (United States), Atlas (Germany),
Scientific Atlanta Inc. (United

                                       27
States), Thrane & Thrane (Denmark), SED Systems Inc. (Canada), Comsat
Corporation (United States), Toshiba (Japan), Hughes Network Systems, Inc.
(United States), Mobile Satellite Products Corp. (United States), Trimble
Navigation (United States) and Magellan (United States). Competition in the
markets for both mobile satellite terminals and land earth station systems is
based primarily on technical merit and price. Other competitive factors include
size, weight and ease of use for satellite terminals. Today the traditional
market for INMARSAT products is mature. In the future, INMARSAT will probably
face increased competition from new satellite systems if and when financing
solutions for these systems have been found. Growth prospects for the
traditional products and services for the INMARSAT market are therefore still
good. The traditional products will still be an important platform and reference
point for future growth within new systems. We believe that our broad experience
in supplying a variety of land earth stations and the operational reliability of
our stations, together with our multiprocessor technology, make us a competitive
supplier of land earth station equipment and complete land earth stations. While
we believe there will be opportunities to supply equipment for new satellite
communications systems as they become operational, we cannot assure you that we
will be able to compete effectively in these markets.

         The market for broadband access products to bridge the last mile is
very competitive. Our main competitors in the point-to-multipoint transmission
area are ECI (Israel), RadWin (Israel), AirSpan (Israel) and Alcatel (France)
and in the LMDS area are Harris (United States), BreezeCom (United States),
Alcatel (France), Spike (Israel), Floware (United States), Netro (United States)
and Adaptive Broadband (United States).

         Future prospects

         Due to the uncertainty surrounding the world economy and the
telecommunications industry and related adverse effects on financial investments
in this area, as well as overproduction in some sectors and pressure on prices
of products similar to ours, we do not forecast any overall growth for our
products in our markets during 2003. We had hoped to see a gradual increase in
investments in the telecommunications sector resulting in part from the launch
of the next generation mobile, or 3-G, designs but have not yet seen this
increase. This is partly due to a perceived lack of consumer interest in 3-G
products. We do not know when or if 3-G designs will have widespread acceptance.
However, even if 3-G designs become more popular, negative growth rates in any
of the national economies that we operate in may continue to affect us
negatively along with other wireless infrastructure providers.

         In the years ahead, an important part of our satellite business will be
to deliver terminals and upgrades of gateways within the INMARSAT market,
including the next generation service, INMARSAT-4, and later versions of the
current INMARSAT products, niche markets in which it has a strong position
today.

         Developments in the transmission market are currently being driven by
the expansion of mobile services, the Internet and the growing demand for data
transfer services. Although the traditional PDH market is still growing, with
the exception of the U.S., demand for faster and larger transmission capacity is
expected to lead to increased demand for radio link products utilizing SDH
technology.

         The constantly growing traffic is also expected to lead to a sharp rise
in high-capacity SDH systems of the CityLink type and LMDS products. An
increased volume in terms of numbers of units may compensate for price
reductions for these products.

         REGULATION

         International standards

         The telecommunications industry is to a large extent regulated by
internationally agreed standards. The common standards are set for the purpose
of linking networks and services and ensuring the interoperability of equipment
on an international basis. In addition, the use of frequency spectrum for
wireless communication is also regulated by international agreement. In
designing and developing our products, we comply with all material regulations
and standards relevant in the markets in which we operate. The main standard
setting bodies are international organizations, such as the ITU and ETSI.
Certain organizations such as INMARSAT can also operate as de facto standard
setting bodies. The standards set for the telecommunications industry by such
bodies are made

                                       28
in conjunction with feedback received from telecommunications operators and, to
a lesser extent, from producers of telecommunications products, such as us.

         Environmental matters

         Our manufacturing operation is subject to various laws governing the
protection of the environment. These laws and regulations are subject to change,
and such change may require us to improve technology or incur expenditures to
comply with such laws and regulations. We believe that we comply in all material
respects with applicable environmental laws and regulations and do not expect
that any costs incurred in connection with complying with such laws and
regulations will have a material effect on our results of operations, financial
position or liquidity.

         Our manufacturing facility is located in Norway, which has
comprehensive and stringent environmental regulatory frameworks. We use certain
materials and processes that may be hazardous to the environment. Pursuant to
Norwegian environmental regulations, we are required to carry out regular tests
for water pollutants in respect of the Bergen facility and to file an annual
pollution report with the Statens Forurensningstilsyn, the Norwegian
environmental agency, detailing the level of pollution produced by us. We
believe that we are in material compliance with acceptable pollution limits.

         Export licenses

         Our operations in Norway are subject to Norwegian export license
requirements. Export licenses are required only for our high-capacity microwave
radio transmission equipment. The Norwegian export control authorities grant
export licenses for products after scrutinizing military end-users, end user
countries where there is a war or warlike conditions or countries known for
their violations of human rights or support of international terrorism. The
Norwegian export license requirements have not materially restricted our ability
to make export sales.

         Because we are given access on an open license basis to certain
high-technology products having their origins in the United States, we are
subject to compliance with the U.S. Export Administration Regulations. Since
1986 we have maintained an internal export control program under which we have
achieved compliance with such regulations. These regulations have not materially
restricted our ability to make export sales.

         C.       ORGANISATIONAL STRUCTURE

         The following is a list of the subsidiaries we consider significant to
our business, including the country of formation and our direct and indirect
proportion of ownership interest in each subsidiary:
% OF
DIRECT SUBSIDIARIES                            COUNTRY OF FORMATION                     OWNERSHIP
Nera WBA AS                                          Norway                                100
Nera Networks AS                                     Norway                                100
Nera Satcom AS                                       Norway                                100
Nera Telecommunications Ltd                          Singapore                           50.18
Nera Telecommunicaciones Latin-America SA            Venezuela                             100
% OF
INDIRECT SUBSIDIARIES                          COUNTRY OF FORMATION                     OWNERSHIP
Nera Networks Pty Ltd                                Australia                             100
Nera America Latina Ltda                             Brazil                                100
Nera America Latina Ltda Sucursal Colombia           Colombia                              100
Nera GmbH                                            Germany                               100
Nera Ltd                                             Great Britain                         100
Nera (HK) Ltd                                        Hong Kong                             100
PT Nera Indonesia                                    Indonesia                             100
29
Nera (India) Ltd                                     India                                 100
Nera Networks Srl                                    Italy                                 100
Nera de Mexico SA de CV                              Mexico                                100
Nera Infocom (M) Sdh Bhd                             Malaysia                              100
Nera (Malaysia) Sdn Bhd(1)                           Malaysia                               30
Nera Mechatronics AS                                 Norway                                100
Nera Broadband Satellite AS                          Norway                                100
Nera (Philippines) Inc.                              Philippines                           100
Nera Networks Polska Sp.z.o.o.                       Poland                                100
Nera Electronics Ltd                                 Singapore                              68
Nera (Thailand) Ltd                                  Thailand                              100
Nera Telecommunications (Taiwan) Co, Ltd             Taiwan                                100
Nera Americas Holding Inc.                           USA                                   100
Nera Americas Inc.                                   USA                                   100
Nera Networks Inc.                                   USA                                   100
Nera Telecommunications Inc.                         USA                                   100
---------------------
(1)      Nera (Malaysia) Sdn Bhd is consolidated based on a shareholder
         agreement, that result in ownership of more than 50%.

         With respect to our operations in some countries in South America,
there may be restrictions on our subsidiaries' ability to transfer funds to us.
These restrictions may be in the form of taxation of dividends. Should these or
similar restrictions limit our ability to receive funds from our subsidiaries,
they would generally be able to extend the same funds to us in the form of
loans.

         D.       PROPERTY, PLANTS AND EQUIPMENT

         As of December 31, 2002 we had production facilities in Bergen, Norway.
This facility is leased by us and encompasses approximately 20,000 square meters
of workshops for electronic, electrical and mechanical engineering and
manufacturing. The following table gives the location and general character of
the principal plants and properties that were owned or leased by us and our
subsidiaries as of December 31, 2002:
LOCATION                    PRINCIPAL ACTIVITIES                            TITLE                          AREA
   --------                    --------------------                            -----                          ----
Bergen, Norway         Headquarters; production of microwave       Leasehold expires 2011 with option      20,000m(2)
                       transmission equipment and systems          to extend to 2026

Bergen, Norway(1)      Office space; production of satellite       Leasehold expires 2003(1)                4,000m(2)
                       terminals, land earth station equipment
                       and power systems telecommunications
                       equipment

Asker, Norway          Office space                                Leasehold expires 2008                   3,000m(2)

Luton, England         Office space                                Leasehold expires 2008                   2,800m(2)

Singapore(2)           Office space, warehouse, production         Leasehold expires 2012 with an           3,200m(2)
                       facilities                                  option for a further term of 30 years
-----------
(1)      Since our lease is expiring, we have decided to exercise our option to
purchase this 4,000 m2 building at Kokstadveien 25 for NOK 22.5 million plus an
option premium in the amount of NOK 5 million. This acquisition will be
effective on December 31, 2003.

(2)      Relates to our majority-owned subsidiary, NeraTel.

                                       30
In 2002, we paid an aggregate of NOK 42.5 million ($5.3 million) in
periodic rental payments on our principal plants and properties. We believe our
facilities are sufficient for our business activities.

         ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

         APPLICATION OF CRITICAL ACCOUNTING POLICIES

         Our consolidated financial statements are prepared in accordance with
the Norwegian Accounting Act 1998 and Norwegian generally accepted accounting
principles, and in addition are reconciled to accounting principles generally
accepted in the United States. Below is a description of accounting policies,
which we consider critical to the preparation, and understanding of our
consolidated financial statements, including the accounting principles selected
for the annual reporting of our US GAAP results. In addition, certain amounts
included in or affecting our financial statements and related disclosure must be
estimated, which requires us to make assumptions with respect to values or
conditions which cannot be known with certainty at the time the financial
statements are prepared. Actual results may differ from these estimates under
different assumptions or conditions. The selection of critical accounting
policies, the judgments and other uncertainties affecting the application of
those policies and the sensitivity of reported results to changes in conditions
and assumptions are factors to be considered when reviewing our consolidated
financial statements. We believe that the following critical accounting policies
set forth below involve the most significant judgments and estimates used in the
preparation of our consolidated financial statements. We evaluate these policies
on an ongoing basis, based upon historical results and experience, consultation
with experts, trends and other methods we consider reasonable in the particular
circumstances, as well as our forecasts as to how these might change in the
future.

         Revenue Recognition

         Approximately 20%, 25% and 25% of our revenues for the years ended
December 31, 2002, 2001 and 2000, respectively were derived from projects
involving the customization, installation and integration of complex
telecommunications equipment. Many of these contracts are for large turnkey
projects, for which we purchase a relatively high proportion of components from
third-party suppliers, and thus our sales and margins may fluctuate depending on
the proportion of our large turnkey projects. Revenues on long term contracts
are recognized using the percentage of completion method of accounting.
Additionally, income recognition on longer term contracts is deferred until
progress reaches a level of completion (generally based on established
milestones) sufficient to reasonably estimate the probable outcome. Project
revenues include direct materials, wages, and other direct costs, together with
indirect costs and portion of profit, which can be allocated to the project. For
certain contracts, where the delivery of equipment is clearly separable from
installation, training and other aspects of the contract, we segment the
contract and recognize revenue on each segmental portion individually. If
estimated total costs on a contract indicate a loss, the entire amount of the
estimated loss is provided for currently.

         Revenue from sale of goods is recognized net of discounts and recorded
when shipped and/or services are performed and the risk of loss passed to the
customer. This requires us to assess at point of delivery whether these criteria
have been met. Upon making such assessment revenue is recognized.

         Allowances for doubtful accounts and obsolete inventory

         We maintain allowances for doubtful accounts for estimated losses
resulting from the subsequent inability of our customers to make required
payments. If the financial conditions of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required. Management specifically analyses accounts
receivables and analyses historical bad debt, customer concentrations, customer
creditworthiness, current economic trends and changes in our customer payment
terms when evaluating the adequacy of the allowance for doubtful accounts. If
market and economic conditions are less favorable then those predicted by
management additional allowance may be required.

                                       31
We periodically review the lower of cost or market carrying value of
inventory. This requires management to estimate the market value based upon
assumptions about future demand and market conditions. Any difference between
the cost of inventory and the estimated market value results in a write-down of
inventory for the estimated obsolescence or unmarketable inventory. If actual
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.

         Impairment

         We have made investments in tangible assets, goodwill and other
intangible assets, and other investments. These assets and companies are tested
for impairment when circumstances trigger an impairment test. During 2001 and
2002, the market prices for telecom companies and assets have decreased
significantly. In 2001 , we made substantial write-downs of tangible assets,
goodwill and other intangible assets.

         Factors that we consider important and that could trigger an impairment
review include the following:

             -    significant fall in market values;

             -    significant underperformance relative to expected historical
                  or projected future operating results;

             -    significant changes in the use of our assets or the strategy
                  for our overall business; and

             -    significant negative industry or economic trends.

         The principles for impairment testing are described in the accounting
policies. For tangible and intangible assets, the assessment is made based on
estimated recoverable amount, which is the higher of estimated discounted future
cash flow and sales price less cost to sell. When such amounts are less than the
carrying amount of the asset, a write-down to estimated recoverable amount is
recorded.

         If quoted market prices for an asset or a company are not available, or
the quoted market prices cannot be regarded as fair market value due to low
trading liquidity, fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Estimating fair values of assets and companies must in part be based on
management evaluations, including estimates of future performance, revenue
generating capacity of the assets, assumptions of the future market conditions
and the success in marketing of new products and services. Changes in
circumstances and in management's assumptions may give rise to impairment losses
in the relevant periods.

         Goodwill is reviewed based on an estimated fair value of the reporting
unit it refers to. Fair value of the reporting unit is based on quoted market
share price (adjusted to reflect a control premium for thosesubsidiaries in
which we have effective control) or discounted cash flows of the reporting unit
where quoted market share price is not available.

         To assess impairment of property, plant and equipment and amortizing
intangible assets for purposes of U.S. GAAP, we apply the guidance outlined in
SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets as of
January 1, 2002. Prior to 2002, we applied SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", to
all long-lived assets, including goodwill. If we conclude that impairment
indicators exist, we will initially review for possible impairment by assessing
the undiscounted cash flows expected to be derived from the asset or group of
assets, comparing the lowest level of total expected undiscounted cash flow to
the carrying value. If the carrying value of the asset or the group of assets
exceeds the sum of the undiscounted cash flows, impairment is considered to
exist. An impairment charge is assessed by comparing the assets fair value to
the carrying value. Fair value can be calculated by a number of different
approaches, including discounted cash flow, comparables, market valuations or
quoted market prices. The process and steps required to assess the possible
impairments of assets, including the identification of possible impairment
indicators, assessing undiscounted cash flows, selecting the appropriate
discount rate, the calculation of

                                       32
the weighted average cost of capital and the discounts or premiums inherent in
market prices requires a substantial amount of management discretion and
judgment. If actual results differ from these estimates, or if we adjust these
estimates in future periods, operating results could be significantly affected.
This did not result in any material differences from the result in accordance
with Norwegian GAAP as December 31, 2002.

         As of January 1, 2002, for US GAAP reporting purposes, we adopted the
requirements of SFAS 142, Goodwill and Other Intangible Assets, and as a result
we have ceased amortization of goodwill and indefinite lived intangible assets
for U.S. GAAP purposes. The requirements of SFAS 142 include that goodwill be
tested for impairment at least annually (and between annual tests when certain
triggering events occur) using a two-step methodology. The first step screens
for potential impairment at the reporting unit level, while the second step
measures the impairment, if any. Under U.S. GAAP, the quoted market price of an
asset, if available, should be used. If not available, then other valuation
techniques, including discounted cash flow, comparables, etc., are acceptable.
The selection of the various assumptions that are necessary to arrive at the
fair value of a reporting unit, including the assumptions used in the underlying
business plans, require substantial management judgment and discretion. If
actual results differ from these estimates, or if we adjust these estimates in
future periods, operating results could be significantly affected. Based on our
review at January 1, 2002 upon transition and at December 31, 2002, no goodwill
impairments were noted.

         Deferred tax assets, valuation allowances for deferred tax assets, and
tax losses.

         Significant management judgment is required in determining our
provision for income taxes, deferred tax assets, deferred tax liabilities and
valuation allowances to reflect the potential inability to fully recover
deferred tax assets. We record valuation allowances to reduce our deferred tax
assets to an amount that is more likely than not to be realized. Our analysis of
realizability includes estimating taxable income in the jurisdictions in which
we operate and the period over which the deferred tax assets and liabilities
will be recoverable. If actual results differ from these estimates, or we adjust
these estimates in future periods, we may need to establish an additional
valuation allowance which could adversely affect our financial position and
results of operations. Our income taxes have been increased by valuation
allowances mainly related to our foreign operations. Furthermore, we have not
recorded deferred tax assets that may be realized upon possible future
disposalof shares in subsidiaries and associated companies only if it is
apparent that the difference will reverse in the foreseeable future.

         A.       OPERATING RESULTS

         We have restructured our operations significantly during the past six
years, including during 2002. The effects of the most recent restructuring
continue to be felt in 2002. These restructurings are described in "Item 4.A.
History and Development of the Company" as well as below in this section.

         Prior to 2001, we grew significantly in response to market trends that
increased worldwide demand for telecommunications equipment and infrastructure.
This growth imposed a significant strain on our resources, particularly our
financial resources, as we made substantial efforts and expenditures to increase
sales to meet demand. Among other things, we invested significant resources in
research and development in order to maintain our technological expertise and
renew our product lines. Our research and development expenditures, not
including grants from suppliers and governments, amounted to NOK 239.6 million,
NOK 347 million, and NOK 286.7 million in 2002, 2001 and 2000. We expect that we
will be required to maintain substantial amounts in research and development
activities, even though our business has seen a significant drop in demand, so
that we may maintain the competitiveness of our products.

         With respect to our operating results discussed below, please note that
NeraTel, our Singapore subsidiary, was not consolidated in our financial
statements from July 1999 to November 2001, as we owned less than 50% of NeraTel
during that period. Prior to July 1999 and starting again in December 2001 when
we increased our ownership of NeraTel above 50%, NeraTel's results have been
consolidated with our results. Due to the different accounting treatment of
NeraTel, our results for the above periods are not comparable. It should be
noted, however,

                                       33
that for 2001, the impact of NeraTel on our results is not material, given that
only its December 2001 results are included in our results. For 2002, Nera Tel's
results are included for the entire year. For more information about the effects
of consolidation of NeraTel, please see note 8 to the consolidated financial
statements in Item 17 below.

         The table below shows a number of income statement items as a
percentage of sales for the periods indicated:
YEAR ENDED DECEMBER 31,
                                                        ------------------------------------
                                                        2000             2001           2002
                                                        ------------------------------------
                                                         NOK             NOK            NOK
OPERATING EXPENSES AND OPERATING INCOME BEFORE
RESTRUCTURING AS A PERCENTAGE OF SALES:
Cost of materials.............................          37.9%            48.8%          52.6%
Changes in inventory of work in progress
     and finished goods.......................           1.5%            -1.9%           1.0%
Payroll expense...............................          25.5%            25.0%          27.8%
Depreciation..................................           2.6%             3.0%           3.4%
Other operating expense.......................          28.4%            30.9%          20.7%
Operating income (loss) before restructuring
     gain and loss............................           4.1%            -5.8%          -5.5%
The table below shows sales by product line for the periods indicated:
YEAR ENDED DECEMBER 31,
                                                       --------------------------------------
                                                        2000             2001           2002
                                                       -----            -----          ------
                                                                    (NOK IN MILLION)
SALES BY BUSINESS AREA:
Transmission networks..........................        1,803            2,222          1,343
Satellite communications ......................          709              599            617
Broadband access...............................           16               47             69
Production.....................................           --               --             --
Dedicated communications.......................           --               --             --
Other operations...............................           22               25            416
                                                       -----            -----          -----
         Total.................................        2,550            2,893          2,445
                                                       =====            =====          =====
The following table sets forth our sales by geographic destination for
the periods indicated:
YEAR ENDED DECEMBER 31,
                                                       --------------------------------------
                                                       2000             2001            2002
                                                      ------           ------          ------
                                                                 (NOK IN MILLION)
SALES BY GEOGRAPHIC DESTINATION:
Norway.........................................          168              288             276
United Kingdom.................................          310              202             110
Rest of Europe.................................          711              559             498
Asia...........................................          463              671             863
North and South America .......................          668              814             538
Africa ........................................          180              190             105
Other (1)......................................           49              169             55
                                                       -----            -----           -----
         Total.................................        2,550            2,893           2,445
                                                       =====            =====           =====
------------------
(1)      The category "Other" primarily includes New Zealand, Australia and
         other countries in Oceania.

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2001

                                       34
Orders and Backlog. The total value of orders received was NOK 2,519
million in 2002, compared with NOK 2,277 million in 2001. The increase is due to
the consolidation of order backlog for Nera Tel, Singapore. Orders for
transmission networks products was NOK 1,243 million in 2002 compared with NOK
1,687 million in 2001, a decrease of 26.3%. Orders for satellite communications
products was NOK 677 million in 2002, as compared to NOK 586 million in 2001, an
increase of 15.5%.

         Backlog was NOK 908 million at the end of 2002, as compared with NOK
1,023 million at the end of 2001, a decrease of 11.2%. The decrease in order
backlog in 2002 was primarily the result of the continued decline in the world
economy in general and the telecommunications sector in particular.

         Sales. Our sales decreased to NOK 2,445 million in 2002 from NOK 2,893
million in 2001, a decrease of 15.5%, for the reasons described below.

         Sales within transmission networks decreased 39.6% in 2002 primarily
due to the continued economic slowdown in general and the decline in the
telecommunications sector in particular.

         Sales within satellite communications increased 3.0% in 2002 due to a
slight decrease in the sale of WorldPhones and an increase in the sale of land
earth stations. Approximately 6,000 WorldPhones were sold during 2002. In 2002,
sales of land earth stations increased by approximately NOK 35 million mainly
due to receiving more assignments to upgrade existing sites.

         Sales within wireless broadband access area increased from NOK 47
million to NOK 69 million as a result of increased activities by Nera Satellite
Broadband, our subsidiary, and despite the closing of our operations in Dallas,
U.S., and the sale of the Velocity line of products. .

         A comparison of geographic sales is set forth in the chart below:
GEOGRAPHICAL DESTINATION                        2001                                 2002
--------------------------------        ---------------------               --------------------
                                               (AMOUNTS IN NOK MILLION, EXCEPT PERCENTAGES)
Norway..........................          288            9.9%                 276          11.3%
United Kingdom..................          202            7.0%                 110           4.5%
Rest of Europe..................          559           19.3%                 498          20.4%
Americas........................          814           28.2%                 538          22.0%
Africa..........................          190            6.6%                 105           4.3%
Asia............................          671           23.2%                 863          35.3%
Oceania.........................          169            5.8%                  55           2.2%
                                        -----           ----                -----          ----
Total...........................        2,893            100%               2,455           100%
No single customer accounted for more than 10% of our sales in 2002.
However, we work with various Ericsson companies worldwide, which are organized
as separate legal entities. All of the Ericsson entities, taken together,
accounted for approximately 12% of our sales in 2001.

         Cost of materials and changes in inventory of work in progress and
finished goods. Cost of materials and changes in inventory of work in progress
and finished goods was NOK 1,309.8 million in 2002, as compared to NOK 1,356.3
million in 2001, a decrease of 3.4%. As a percentage of sales, cost of materials
and changes in inventory of work in progress and finished goods was 53.6% in
2002 and 46.9% in 2001. This increase is due to the fact that our cost of
materials grew more significantly than our revenues in the past fiscal year,
which is consistent with a trend of lower margins and price pressure observed in
the telecommunications industry during 2002.

         Payroll expense. Payroll expense was NOK 679.6 million in 2002, as
compared to NOK 722.8 million in 2001, a decrease of 5.9%. The decrease in
payroll expense is primarily due a reduction in employees during 2002as a result
of our restructuring. As a percentage of sales, payroll expense was 27.8% in
2002 and 25% in 2001.

         Depreciation. Depreciation was NOK 83.5 million in 2002, as compared to
NOK 87.9 million in 2001, a decrease of 5.0%. This decrease was due to low new
investments in fixed assets.

                                       35
Other operating expense. Other operating expense was NOK 505.0 million
in 2002, as compared to NOK 894.4 million in 2001, a decrease of 43.5%, which is
primarily due to a decrease in our research and development expenses. As a
percentage of sales, other operating expense was 20.7% in 2002 and 30.9% in
2001.

         Operating income (loss) before restructuring gain and loss. Operating
loss was NOK 133.3 million in 2002, as compared to operating loss of NOK 168.1
million in 2001. This decrease in loss before restructuring gain and loss is
primarily due to the reasons provided above.

         Restructuring expenses and write-downs. Restructuring expenses and
write-downs were NOK 11.1 million in 2002, as compared to NOK 264 million in
2001. The restructuring expenses and write-downs in 2002 are primarily due to
our discontinuation of all production within Nera Ltd., our unit in Great
Britain.

         The table below sets forth certain additional information relating to
our restructurings, including the events that took place during 2002.
BALANCE AT                                                        BALANCE AT
                                               DECEMBER 31,   PROVISIONS IN   WRITE-DOWN IN     APPLIED/DISBURS   DECEMBER 31,
                                                  2001            2002            2002           EMENT IN 2002        2002
------------------------------------------------------------------------------------------------------------------------------
                                                                        (NOK IN MILLIONS)
------------------------------------------------------------------------------------------------------------------------------
Restructuring of Nera Ltd, UK(1)........           2.5             1.6            21.4                2.5             1.6
Restructuring of Nera Networks AS(2)....            --             7.7              --                 --             7.7
Closing of the Dallas office(3).........          39.2           (15.5)             --               23.7              --
Restructuring of the Boston office(4) ..           0.2              --              --                0.2              --
Restructuring of satellite operations(5)           8.7            (4.1)             --                2.6             2.0
Restructuring of wireless broadband
access operations(5) ...................           7.0              --              --                7.0              --
------------------------------------------
TOTAL                                             57.6           (10.3)           21.4               36.0            11.3
-----------------------------------------------------------------------------------------------------------------------------
-------------------

(1)      During 1998, our board of directors and management prepared a plan for
         restructuring of our unit in the U.K., in order to reestablish profit
         within this unit through a focused strategy and changes in the product
         range. This restructuring involved dismissal of personnel, write-downs
         of fixed assets and stock. Total provisions for this restructuring were
         NOK 71.0 million in 1998. The restructuring plan was extended in 1999,
         and another NOK 37.8 million was expensed. By the end of 2001, all
         payments relating to this restructuring were completed. In 2002, we
         decided to discontinue all production in Nera Ltd, our production unit
         in Great Britain. All of the costs and provisions inclusive write-down
         of inventory that were made in 2002 are related to this restructuring.

(2)      Due to changes in the market, parts of the business have been
         reorganized. The reorganization resulted in dismissals and early
         retirements. Provisions have been made for severance payments. All
         significant activities were completed in 2002.

(3)      In 2001, we decided to terminate our presence in Dallas, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities started in 2001 were completed in
         2002.

(4)      In 2001, we also decided to restructure our presence in Boston, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities started in 2001 were completed in
         2002.

(5)      In 2001, due to changes in the market conditions, we have reorganized
         parts of our satellite unit and our wireless broadband access
         operations. This reorganization resulted in personnel dismissals. We
         made provisions for severance payments and made all related payments
         during 2002. We wrote down fixed assets and stock to net realization
         value in 2002.

                                       36
For more information relating to above restructuring, please see "Item
4.A. -- History and Development of the Company" and note 12 of our financial
statements included in Item 17. See also note 30 to our financial statements
regarding other current liabilities.

         Net Financial Items. Net financial items increased from a loss of NOK
16.2 million to a loss of NOK 17.8 million. This decrease was primarily due to
losses taken on Nera Tel's write down of NOK 30.0 million on its joint venture
with TVMobile.

         Operating income (loss). We had an operating loss of NOK 144.4 million
in 2002, as compared to an operating loss of NOK 432.1 million in 2001, an
increase of 66.6% primarily due to the continued decline in the
telecommunications market and our ensuing restructuring and cost reduction
efforts. Operating loss as a percentage of sales was 5.9% in 2002 and 15% in
2001.

         Income tax expense. We had an income tax credit of NOK 33.7 million in
2002, as compared to an income tax credit of NOK 81.3 million in 2001. The tax
credit in 2002 is due to the fact that we had operating losses in 2002. Our
effective tax rate was -20.8% in 2002 and -18.1% in 2001.

         Net income (loss). We had a net loss of NOK 128.5 million in 2002, as
compared to a net loss of NOK 367 million in 2001, a decrease of 65% as a result
of the factors discussed above. Net loss as a percentage of sales was 5.3% in
2002 and 12.7% in 2001.

         Norwegian and U.S. GAAP reconciliation. Approximate net loss on a U.S.
GAAP basis was NOK 190.1 million for 2002, and approximate net loss was NOK 340
million for 2001, compared with net loss under Norwegian GAAP of NOK 145 million
for 2002 and net income of NOK 370.7 million for 2001. The differences in the
results under Norwegian GAAP compared with the results under U.S. GAAP were due
to a variety of factors, the most significant of which were the taxes gain on
subsidiary equity transaction and pensions. For a discussion of differences
between Norwegian GAAP and U.S. GAAP, see note 30 to the consolidated financial
statements included in Item 17 below.

         YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000

         Orders and Backlog. The total value of orders received was NOK 2,277
million in 2001, compared with NOK 2,902 million in 2000, a decrease of 21.5%,
due to the economic slowdown in general and the decline in the
telecommunications sector in particular. Orders for transmission networks
products was NOK 1,687 million in 2001 compared with 2,216 million in 2000, a
decrease of 23.9%. Orders for satellite communications products was NOK 586
million in 2001, as compared to NOK 576 million in 2000, an increase of 1.7%.

         Backlog was NOK 590 million at the end of 2001, as compared with NOK
1,158 million at the end of 2000, a decrease of 11.3%. The decrease in order
backlog in 2001 was primarily the result of the decline in the world economy in
general and the telecommunications sector in particular.

         Sales. Our sales increased to NOK 2,893 million in 2001 from NOK 2,550
million in 2000, an increase of 13.4%, for the reasons described below. The
increase in sales in 2001 compared with 2000 is primarily a result of increased
sales within the transmission networks area.

         Sales within transmission networks increased 23.2% in 2001 primarily
due to increased sales of SDH radio equipment to the providers of networks for
the cellular telephone markets in the first two quarters of 2001, which were
followed by a significant downturn. We also sold our existing substantial
backlog during 2001.

         Sales within satellite communications decreased 15.5% in 2001 due to a
decrease in the sale of WorldPhones and a decrease in the sale of land earth
station, which was slightly offset by our receiving more assignments to upgrade
our existing sites. Approximately 6,460 WorldPhones were sold during 2001. In
2001, sales of land earth stations decreased by approximately NOK 64 million due
to the mature nature of this market.

                                       37
Sales within wireless broadband access area increased from NOK 16
million to NOK 47 million as a result of increased activities by Nera Satellite
Broadband, our subsidiary, and despite the closing of our operations in Dallas,
U.S., and the sale of the Velocity line of products. We do not currently expect
to see any increase in the satellite and terrestrial broadband activities during
2002.

         A comparison of geographic sales is set forth in the chart below:
GEOGRAPHICAL DESTINATION                         2001                               2000
--------------------------------        ---------------------                -------------------
                                               (AMOUNTS IN NOK MILLION, EXCEPT PERCENTAGES)
Norway..........................          288            9.9%                  168          6.6%
United Kingdom..................          202            7.0%                  310         12.2%
Rest of Europe..................          559           19.3%                  711         27.8%
Americas........................          814           28.2%                  668         26.2%
Africa..........................          190            6.6%                  180          7.1%
Asia............................          671           23.2%                  463         18.2%
Oceania.........................          169            5.8%                   49          1.9%
                                        -----           ----                 -----         ----
Total...........................        2,893            100%                2,550          100%
No single customer accounted for more than 10% of our sales in 2001 and
2000. However, we work with various Ericsson companies worldwide, which are
organized as separate legal entities. All of the Ericsson entities, taken
together, accounted for approximately 12% of our sales in 2001.

         Cost of materials and changes in inventory of work in progress and
finished goods. Cost of materials and changes in inventory of work in progress
and finished goods was NOK 1,411.1 million in 2001, as compared to NOK 966.6
million in 2000, an increase of 46%. This increase is primarily due to a
write-down of our inventories. It is also due to an increase in overall
manufacturing costs in 2001, as compared to 2000, as we changed from
manufacturing our own products to outsourcing a significant portion of our
manufacturing to Flextronics and Kitron. We anticipate this effect on our cost
of materials to be short-term. As a percentage of sales, cost of materials and
changes in inventory of work in progress and finished goods was 48.8% in 2001
and 37.9% in 2000. This increase is due to the fact that our cost of materials
grew more significantly than our revenues in the past fiscal year, which is
consistent with a trend of lower margins and price pressure observed in the
telecommunications industry in 2001.

         Payroll expense. Payroll expense was NOK 722.8 million in 2001, as
compared to NOK 649.6 million in 2000, an increase of 11.3%. The increase in
payroll expense is primarily due to an increase in the number of employees
needed to address our significant backlog during the first two quarters of 2001,
offset by a reduction in employees during the last quarter of 2001 as a result
of our restructuring. As a percentage of sales, payroll expense was 25% in 2001
and 25.5% in 2000.

         Depreciation. Depreciation was NOK 87.9 million in 2001, as compared to
NOK 66.9 million in 2000, an increase of 31.4%. This increase was due to the
acceleration in depreciation of goodwill relating to our earlier purchase of a
business meant to become the core of our Dallas operations, based on our yearly
assessment of this asset's value.

         Other operating expense. Other operating expense was NOK 894.4 million
in 2001, as compared to NOK 724.9 million in 2000, an increase of 23.5%, which
is primarily due to an increase in our research and development expenses and
increased costs of implementation of our new logistics and computer systems. As
a percentage of sales, other operating expense was 30.9% in 2001 and 28.4% in
2000.

         Operating income (loss) before restructuring gain and loss. Operating
loss was NOK 168.1 million in 2001, as compared to operating income of NOK 104.5
million in 2000. This decrease in operating income (loss) before restructuring
gain and loss is primarily due to the reasons provided above.

         Restructuring expenses and write-downs. Restructuring expenses and
write-downs were NOK 264 million in 2001. We did not have any restructuring
gains or losses in 2000. The restructuring expenses and write-downs in 2001 are
primarily due to our reduction of activities in the United States (Dallas and
Boston) and Norway to respond to the continuing weak market conditions. The
restructuring included personnel lay-offs, decreased or closed down

                                       38
business activities, streamlining of both our terrestrial and satellite
broadband operations, as well as the halting of development and subsequent sale
of the Velocity products.

         The table below sets forth certain additional information relating to
the 2001 restructuring. The various line items refer to those business
activities that were affected by the 2001 restructuring.
BALANCE AT                                                       BALANCE AT
                                              DECEMBER 31,   PROVISIONS IN   WRITE-DOWN IN   APPLIED/DISBURS   DECEMBER 31,
                                                  2000           2001            2001         EMENT IN 2001        2001
---------------------------------------------------------------------------------------------------------------------------
                                                                        (NOK IN MILLIONS)
---------------------------------------------------------------------------------------------------------------------------
Restructuring of Nera Ltd, UK(1)...........       6.0              --              --               3.5             2.5
Nera ASA(2)................................       4.0              --              --               4.0              --
Closing of the Dallas office(3)............        --            91.2           101.2             153.2            39.2
Restructuring of the Boston office(4) .....        --            31.3             7.3              38.4             0.2
Restructuring of satellite operations(5)...        --             8.7             0.7               0.7             8.7
Restructuring of wireless broadband
access operations(5) ......................        --             2.5            21.1              16.6             7.0
--------------------------------------------
TOTAL                                            10.0           133.7           130.3             216.4            57.6
-----------------------------------------------------------------------------------------------------------------------
----------------

(1)      During 1998, our board of directors and management prepared a plan for
         restructuring of our unit in the U.K., in order to reestablish profit
         within this unit through a focused strategy and changes in the product
         range. This aspect of restructuring involved dismissal of personnel,
         write-downs of fixed assets and stock. Total provisions for
         restructuring were NOK 71.0 million in 1998. The restructuring plan was
         extended in 1999, and another NOK 37.8 million was expensed. By the end
         of 2001, all payments relating to this line item were completed.

(2)      During 1998, our board of directors and management prepared a plan for
         our restructuring, which is discussed in detail in Item 4.A. The
         restructuring plan was carried out during 1998 and 1999. By the end of
         2001 all payments related to this line item were completed.

(3)      In 2001, we decided to terminate our presence in Dallas, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities were started in 2001 and were
         completed in all material respects during the first quarter of 2002.

(4)      In 2001, we also decided to restructure our presence in Boston, U.S.
         Provisions for severance payments, purchase commitments and other
         commitments were undertaken. Fixed assets, goodwill and existing
         inventory have been written down to net realization value. All
         significant restructuring activities were started in 2001 and largely
         completed in the first quarter of 2002, existing inventory has been
         reduced significantly and sold at approximately book value. Remaining
         restructuring activities are expected to be completed by the end of
         2002 and the costs associated with this remaining restructuring
         activities are included in those provided for in 2001.

(5)      In 2001, due to changes in the market conditions, we have reorganized
         parts of our satellite unit and our wireless broadband access
         operations. This reorganization resulted in personnel dismissals.
         Provisions for severance payments have been undertaken. Fixed assets
         and stock have been written down to net realization value.

         For more information relating to above restructuring, please see "Item
4.A. -- History and Development of the Company" and note 12 of our financial
statements included in Item 17. See also note 30 to our financial statements
regarding other current liabilities.

         Net Financial Items. Net financial items decreased from a gain of NOK
88.8 million to a loss of NOK 16.2 million. This decrease was primarily due to
losses taken on our outstanding loans to CNH which are more fully described
under "Item 4. Information on the Company. B. Business Overview - Nera Finans
AS" above.

                                       39
Operating income (loss). We had operating loss of NOK 432.1 million in
2001, as compared to operating income of NOK 104.5 million in 2000 primarily due
to the continued decline in the telecommunications market and the ensuing
restructuring and cost reduction efforts. Operating loss as a percentage of
sales was 15% in 2001 and generating income as a percentage of sales was 4.1% in
2000.

         Income tax expense. We had an income tax credit of NOK 81.3 million in
2001, as compared to an income tax expense of NOK 57 million in 2000. The tax
credit in 2001 is due to the fact that we had operating losses in 2001. Our
effective tax rate was -18.1% in 2001, 29.5% in 2000 and 30.06% in 1999.

         Net income (loss). We had a net loss of NOK 367 million in 2001, as
compared to net income of NOK 136.3 million in 2000, as a result of the factors
discussed above. Net loss as a percentage of sales was 12.7% in 2001. Net income
as a percentage of sales was 5.3% in 2000.

         Norwegian and U.S. GAAP reconciliation. Approximate net loss on a U.S.
GAAP basis was NOK 340 million for 2001, and approximate net income was NOK
108.6 million for 2000, compared with net loss under Norwegian GAAP of NOK 370.7
million for 2001 and net income of NOK 136.3 million for 2000. The differences
in the results under Norwegian GAAP compared with the results under U.S. GAAP
were due to a variety of factors, the most significant of which were the
accounting for goodwill, pensions, taxes and restructuring costs. For a
discussion of differences between Norwegian GAAP and U.S. GAAP, see note 30 to
the consolidated financial statements included in Item 17 below.

         CURRENCY FLUCTUATIONS

         Our sales and operating income are affected by the impact of
fluctuations in foreign currency exchange rates on product prices and certain
operating expenses. Fluctuations in the exchange rate of certain foreign
currencies (principally, the U.S. dollar, the pound sterling and the Singapore
dollar) against the Norwegian krone may affect our sales and operating income.
The table below sets forth the average currency fluctuations of the NOK against
the U.S. dollar, the pound sterling and the Singapore dollar for the years 1996
to the present.
NOK                            NOK                           NOK
  CURRENCY                   DEPRECIATION(APPRECIATION)    DEPRECIATION(APPRECIATION)     DEPRECIATION(APPRECIATION)
FLUCTUATIONS                    AGAINST THE USD (%)         AGAINST THE EURO IELU (%)        AGAINST THE SGD (%)
--------------------------------------------------------------------------------------------------------------------
1996-1998                              16.9                           10.9                          (1.2)
--------------------------------------------------------------------------------------------------------------------
1998-1999                               3.7                           (9.0)                          2.1
--------------------------------------------------------------------------------------------------------------------
1999-2000                              12.3                            2.4                          10.2
--------------------------------------------------------------------------------------------------------------------
2000-2001                               2.5                           (3.6)                         (1.0)
--------------------------------------------------------------------------------------------------------------------
2001-2002                              (5.3)                          (8.6)                         (6.5)
--------------------------------------------------------------------------------------------------------------------
A majority of our sales in non-Norwegian currencies are made pursuant
to long-term contracts with customers and it is our policy to hedge foreign
currency sales risks associated with these contracts in order to manage our
exposure to foreign currency risks. These hedging transactions, together with
our foreign currency translation accounting policy of using average forward
rates for translating hedging transactions, minimize the short-term impact of
the exposure of this sales revenue to currency fluctuations for the duration of
the hedged long-term contracts in progress. The differential in the timing of
the impact of currency fluctuations on our Norwegian GAAP and U.S. GAAP results
is expected to continue.

         Our hedging activities are conducted on a centralized basis. We use
foreign exchange contracts to hedge firm commitments. In addition, from time to
time we purchase foreign currency option contracts to hedge expected, but not
contracted for, foreign currency sales in connection with outstanding tender
bids. The costs of currency option premiums historically have not been material
to our operating results or liquidity. Although Norwegian GAAP permits the
hedging of foreign currency sales which are reasonably assured, U.S. GAAP
permits hedge accounting treatment only for instruments which hedge firm
commitments. This accounting difference resulted in an increase of U.S. GAAP
income of NOK 5.5 million in 2002,no difference between U.S. GAAP and Norwegian

                                       40
GAAP for 2001 and no differences between U.S. GAAP and Norwegian GAAP for 2000,
in each case before tax. For a discussion of our hedging activities, see note 20
to the consolidated financial statements included in Item 17 below.

         Notwithstanding our hedging activities, we remain subject to foreign
exchange rate fluctuations as a result of a number of factors, including delays
in receiving payments from our customers, the cancellation of contracts that
have been hedged, as well as the impracticability of hedging each foreign
currency payment we receive. We believe that appreciation of the Norwegian krone
relative to other currencies (principally the U.S. dollar, the pound sterling
and the Singapore dollar) generally has an adverse effect on our sales and
operating income and on the international competitiveness of our Norwegian-based
operations. On the other hand, depreciation of the Norwegian krone against such
currencies generally has the opposite effect.

         At December 31, 2002, we had forward contracts outstanding amounting in
the aggregate NOK 649.6 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 2002 exchange rates). The amount of
forward contracts at December 31, 2002 included forward contracts to buy and
sell U.S. dollars, AUD (Australian dollars) euro and pound sterling totaling NOK
375 million, NOK 8 million, NOK 124 and NOK 141 million, respectively.

         At December 31, 2001, we had forward contracts outstanding amounting in
the aggregate NOK 806.3 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 2001 exchange rates). The amount of
forward contracts at December 31, 2001 included forward contracts to buy and
sell U.S. dollars, AUD (Australian dollars) and pound sterling totaling NOK 420
million, NOK 228 million and NOK 84 million, respectively.

         At December 31, 2000, we had forward contracts outstanding amounting in
the aggregate NOK 680.8 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 2000 exchange rates). The amount of
forward contracts at December 31, 2000 included forward contracts to buy and
sell U.S. dollars and pound sterling totaling NOK 465.5 million and NOK 51.3
million, respectively.

         At December 31, 2000 we had currency swaps outstanding in aggregate to
NOK 542.5 million (the total Norwegian krone equivalent of the buy and sell
amounts based on December 31, 2000 exchange rates). The amount of currency swaps
at December 31, 2000 included currency swaps to buy and sell U.S. dollars
totaling NOK 267.6 million.

         At December 31, 1999, we had currency swaps outstanding amounting in
aggregate to NOK 311.9 million (the total Norwegian krone equivalent of the buy
and sell amounts based on December 31, 1999 exchange rates). The amount of
currency swaps at December 31, 1999 included currency swaps to buy and sell U.S.
dollars totaling NOK 243.2 million.

         EUROPEAN ECONOMIC AND MONETARY UNION

         The single European currency known as the euro came into existence on
January 1, 1999, but Norway is not participating in the union. Our sales have
not been affected by the change of currency. Although no decision has been made
as to when, or even if, Norway will participate in the single European currency,
we believe that our commercial operations can be adapted to accommodate the euro
without a material adverse effect on operations.

         B.       LIQUIDITY AND CAPITAL RESOURCES

         During the past three years, we have funded our working capital needs
from our operating cash flows, with the exception of the $17.1 million in net
proceeds stemming from the public offering of NeraElectronics on July 15, 2002,
a $21 million loan from the Nordic Investment Bank, which we repaid in the first
quarter of 2002, as well as small loans we may take out and repay from time to
time in the ordinary course of our business. The ratio of our indebtedness to
our revenues was 0.4% at December 31, 2002, 6.9% at December 31, 2001 and 9.8%
at December 31, 2000. Other than loans we may have outstanding from time to
time, we have commitments under performance guarantees we are required to give
from time to time to our customers when we undertake big projects for them. At

                                       41
December 31, 2002, we had NOK 119.0 million in performance guarantees
outstanding, as compared to NOK 187.1 million in 2001. These performance
guarantees are standard in the industry and represent approximately 15% of the
contract's value. At the delivery date of the contract, the performance
guarantee is cancelled, unless there are disputes about our performance.
Historically, our performance guarantees have been cancelled in their totality.
In addition to performance guarantees, we have also granted other guarantees. At
December 31, 2002, we had NOK 120.5 million of other guarantees outstanding, as
compared to NOK 129.8 million in 2001. These guarantees relate mainly to our
sales support program, which is more fully described under "Item 4. B. Business
Overview--Nera Finans" above, as well as to a standby credit facility, under
which we have no borrowings.

         Our total cash was NOK 795.8 million and NOK 899.5 million as of
December 31, 2002 and 2001. The decrease in cash was primarily due to repayment
of a $ 21 million loan facility to Nordic Investment Bank in the first quarter
of 2002. We have experienced fluctuations in cash balances in the course of
2002. Generally, we believe our current cash balances (even in the event our
revenues decrease significantly in 2002 due to continued reduced levels of
demand for our products), available borrowings from financial institutions, cash
flows from operations, future share issuances, and our focus and introduction of
various strategies aimed at improving the underlying profitability and cash flow
generation of our business, both by increasing margins and cutting costs, will
be sufficient to meet our anticipated cash needs for working capital and capital
expenditures going forward.

         In addition, from time to time we may discuss with financial
institutions a possibility of establishing a credit line in an effort to ensure
that we have access to sufficient funds to meet our needs. However, we cannot
assure you that these efforts, together with items described above, will be
sufficient to fund our growth, or that external funding will be available to us
at favorable interest rates or at all. We do not have any current plans for
significant capital expenditures but we monitor acquisition opportunity in all
of our business areas and may make acquisitions in the future.

         Net cash provided by operating activities amounted to NOK 34.6 million
in 2002, as compared with net cash used in operating activities of NOK 326.5
million in 2001. The increase in cash provided by operating activities in 2002
was primarily due to decreased inventories and trade receivables partly offset
other working capital items as well as operating loss.

         Net cash provided by investing activities was NOK 57.2 million in 2002,
as compared with NOK 7.0 million provided by investing activities in 2001. Cash
used by investment activities was significantly lower in 2002 due to
significantly lower capital expenditure.

         Capital expenditures amounted to NOK 61.4 million, NOK 129.1 million
and NOK 105.8 million in 2002, 2001 and 2000, respectively.

         Of the 2002 total capital expenditures, NOK 51 million was used by
transmission networks, NOK 4 million by satellite communications, and NOK 5
million by broadband access. The 2001 capital expenditures were funded
principally by proceeds from the sale of shares in May of 2000.

         Of the 2001 total capital expenditures, NOK 82 million was used by
transmission networks, NOK 8 million by satellite communications and NOK 31
million by broadband access. The 2001 capital expenditures were funded
principally by proceeds from the sale of shares in May of 2000.

         Of the 2000 total capital expenditures, NOK 77.5 million was used by
transmission networks, NOK 19.6 million by satellite communications and NOK 8.4
million by broadband access. The 2000 capital expenditures were funded
principally by proceeds from the sale of shares in May 2000.

         On May 5, 2000, we initiated a public share issuance of 25,000,000 new
shares, which resulted in NOK 887.5 million in gross proceeds before the
deduction of costs. Our net proceeds were NOK 257 million, and NOK 50 million of
this amount was allocated to share capital, with the balance allocated to our
reserves.

         Shareholders' equity was NOK 1,612.6 million at December 31, 2002, NOK
1,728.1 million at December 31, 2001 and NOK 1,977 million at December 31, 2000.
Shareholders' equity on a U.S. GAAP basis was NOK

                                       42
1,262.9 million at December 31, 2002 and NOK 1,527.7 million at December 31,
2001. The differences between Norwegian GAAP and U.S. GAAP amounts were due to a
variety of factors, the most significant of which was taxes, gain on subsidiary
equity transactions and pensions. For a discussion of differences between
Norwegian GAAP and U.S. GAAP, see note 30 to the consolidated financial
statements included in Item 17 below.

         C.       RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

         We operate in businesses characterized by extremely rapid technological
change. As a result, we devote substantial resources to research and development
for our products and services in order to remain competitive. We conduct an
active research and development program focused on strengthening our existing
products and systems and on developing new products and systems. We seek to
identify products and systems that are, or are expected to be, needed by
substantial numbers of customers worldwide and to allocate a greater share of
our research and development resources to areas we expect to have significant
potential for future benefits to us. In addition, we engage in research and
development activities that are not specifically tied to any one of our products
but that are expected to generate benefits in the longer term throughout our
business. The most important of these projects is our ongoing research into the
miniaturization and standardization of many of the components of our products.
We also devote substantial resources to the improvement of our manufacturing
processes or those of the companies to whom we outsource some of our
manufacturing processes.

         Our research and development efforts are largely decentralized, with
each business area managing its own research and development activities. Each
business area has dedicated technical staff and facilities and manages all key
technologies relevant to it. To encourage cooperation and to stimulate joint
research and development projects, representatives of the research and
development teams from each business area form a company-wide technology board,
which provides a means by which management allocates resources to the projects
that we believe to have potential for greatest return. In addition, we have a
small centralized research and development team of approximately 20 engineers
and scientists engaged in research and develop activities not specifically tied
to any of our units. We also cooperate with a number of Norwegian research
institutes and are also a member of the European Telecommunications Standards
Institute known as ETSI.

         Our net research and development expenditures, excluding customization
of products to customer needs, production engineering related to the
introduction of new products and development of manufacturing processes, has
accounted for approximately 9.8%, 11.9% and 11.2% of our sales in 2002, 2001 and
2000, respectively. We intend to maintain research and development expenditure
of approximately 7% to 12% of our sales in order to maintain our technological
expertise. We also concentrate our research and development spending on areas
where we already possess substantial know-how and for which we believe there are
markets internationally. We have financed our research and development
activities primarily from internally generated funds, although some funding is
obtained from customers and through grants from the Norwegian government. While
grant funding, particularly from the Norwegian government, has been a
significant source of product development funds in the past, it has been
declining in the past few years amounting to NOK 8.1 million, NOK 13.1 million
and NOK 13.5 million in 2002, 2001 and 2000, and we do not expect that grants
will be a significant source of funding in the future.

         The following table sets forth our total research and development
expenditures for each of the past three years. All research and development
costs we incurred are charged as expenses as and when they are incurred and
research and development acquisition costs are capitalized. The figures below
exclude customization of products to customer needs, production engineering
related to the introduction of new products and development of manufacturing
processes.
YEAR ENDED DECEMBER 31,
                                                    2000             2001             2002
                                                   -----------------------------------------
                                                     (NOK IN MILLIONS, EXCEPT PERCENTAGES)
Gross research and development(1).........         300.3            360.1             247.7
% of sales................................          11.8%            12.4%             10.1%
Net research and development(2)...........         286.7            347.0             239.6
% of sales................................          11.2%            12.0%              9.8%
----------------------------
(1)      Includes research grants.

                                       43
(2)      Net of research grants.

         Transmission networks

         We engage in a continuous program of research and development to expand
our range of microwave products and have a number of products currently under
development. We have significantly expanded the frequency range of our
high-capacity SDH products to a current high frequency of 7, 8, 13, 15, 18, 23,
26 and 38 GHz, principally for use in urban areas. Our line of SDH products also
has an STM-1 co-channel dual polarization radio which is designed to permit
better utilization of the frequency spectrum. In addition, we are developing
STM-0 class radios, with capabilities of 51 megabits per second, that would
facilitate the integration of small spur telecommunications links into large SDH
networks. In 2001 we have developed a new "trunk" radio to replace existing
STM-1 radios with this new family of radio utilizing our CityLink technology. We
expect the new radio, Nera Interlink, to be installed in all configurations by
the middle of 2002. We are also engaged in studies relating to STM-4 radios,
which would have a capacity of 625 megabits per second (equivalent to 8,000
telephone lines).

         In 2002, total research and development expenditures in transmission
networks amounted to approximately NOK 163 million, which represents
approximately 12.1% of sales of the business area. In 2000, 2001 and 2002
substantial research and development expenditure was put into the development
and completion of CityLink and the continued development of the SDH products.

         Satellite communications

         In 2002, research and development expenditure within the satellite
communications business area focused on further development and introduction of
the Nera World Communicator, the 64KB portable ISDN terminal for INMARSAT global
area network M4 service, as well as the supply of the gateway structure, for
this service. Substantial expenditure was also made in connection with the
further development of products for the INMARSAT M4 and INMARSAT 3 systems, as
well as development of new products for our Nera Broadband Satellite business.

         Net research and development expenditures amounted to NOK 44 million in
2002, which was equivalent to 7.1% of sales of this business area. In satellite
communications there are approximately 80 people working in research and
development.

         Through a substantial investment in research and development, we have
developed what we believe are technologically leading products in the area of
satellite communications with a large degree of ownership of the technology and
thus control over our own products. Changes in the market, including reuse of
technologies from land-based communications such as GSM, require increased use
of partnerships on certain technologies combined with a big effort to maintain a
lead in selected technologies such as radio and modem technology,
miniaturization, real-time software, user interfaces and satellite systems
integration.

         Broadband access

         In 2002, net research and development expenditure amounted to NOK 35
million. During 2002, research and development expenditure within the wireless
broadband access business area focused mainly on broadband via satellite,
including digital video broadband - return channel system, or DVB-RCS. This is a
system whereby broadband signals and return signals are transmitted over
satellite. DVB-RCS is an open European Telecommunications Standard Institute, or
ETSI standard. Core competence from the satellite communications business area
has been vital in this development.

         D.       TREND INFORMATION

         It is our long-term goal to make Nera a leading company within the
wireless telecommunications business. In order to do so, we will continue to
develop our existing business and at the same time look for strategic solutions
with other infrastructure providers.

                                       44
We have pursued, and will continue to pursue, growth opportunities
through internal development of existing business.

         Telecommunications industry is presently affected by the global
economic slowdown, which has also had an adverse effect on our company. Also,
wireless infrastructure suppliers are experiencing and will probably continue to
experience downward pricing pressure on products. As a result, we have in the
past experienced, and expect to continue to experience, declining average sales
prices for our products. The market for our products is extremely competitive
and we expect that competition will increase. We believe that our ability to
compete successfully will depend on a number of factors, both within and outside
our control, including global economic environment, price, quality,
availability, customer service and support, breadth of product line, product
performance and features, rapid time-to-market delivery capabilities,
reliability, timing of new products by us, our customers and competitors and the
ability of our customers to obtain financing.

         We expect that international sales will continue to account for a large
portion of our net product sales for the foreseeable future. As a result, we are
subject to the risks of doing business internationally, including unexpected
changes in regulatory requirements, fluctuations in foreign currency exchange
rates, imposition of tariffs and other barriers and restrictions, the burdens of
complying with a variety of foreign laws and general economic and geopolitical
conditions, including inflation and trade relationships.

         For more information about specific trends applicable to our business
segments, as well as for a discussion of our backlog, please refer to "Item 4.B.
-- Business Overview."

         ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

         A.       DIRECTORS AND SENIOR MANAGEMENT

         In accordance with Norwegian law, our affairs are managed by our board
of directors, which is also vested with overall control over our policy and
management. In accordance with Norwegian law, we also have a corporate assembly
of 12 members. The general meeting of shareholders elects eight members, and our
employees in Norway elect four members. There are currently three deputy members
representing three of the eight shareholder members. The chairman of the
corporate assembly is Henrik Lisaeth.

         Our articles of association provide that the board of directors shall
have no fewer than five members or greater than nine members. Our board of
directors currently has nine members. Under Norwegian law, one-third (and not
less than two) of the directors are elected as employee representatives, if
one-third of the members of the corporate assembly so demand. Currently, the
board of directors has nine members, three of which are elected as employee
representatives. In addition to reviewing and monitoring our business, the
powers generally held by the board of directors include the preparation of our
year-end accounts, the presentation of the accounts to the shareholders and the
convening of shareholders' meetings.

         Our directors serve two-year terms. There is no limitation on the
number of terms which a director may serve. However, our articles of association
provide that no one may be elected or reelected to the board of directors when
he or she has reached the age of 70. Under Norwegian law, at least one-half of
the directors must be citizens and residents of a European Union or European
Free Trade Area country. All of our directors are currently citizens or
residents of an EU or EFTA country.

         Our corporate assembly has the responsibility under our articles of
association for electing the members of the board of directors, including the
chairman. In addition to electing members of the board of directors, the
corporate assembly:

             -    fixes the remuneration of the board of directors,

             -    decides, upon proposal from the board of directors, matters
                  concerning investments that are substantial compared with our
                  resources, or efficiency measures or alterations of the
                  operations that would entail major changes or reallocation of
                  the labor force,

                                       45
-    expresses an opinion to the general meeting of shareholders as
                  to whether the board of director's proposal for the income
                  statement and balance sheet and the consolidated income
                  statement and consolidated balance sheet should be adopted,
                  and as to the board of director's proposal for the application
                  of profit or coverage of loss, and

             -    handles all other matters which a corporate assembly is
                  entitled to handle under Norwegian law.

         Overall control over our policy and management, however, is vested in
the board of directors and not in the corporate assembly. Members of the
corporate assembly are elected for a period of two years. No one may be elected
or reelected to the corporate assembly once he or she reaches the age of 70. We
believe there are no family relationships between any of the above officers or
directors, nor are there any arrangements or understandings under which any of
these officers or directors was elected to serve.

         The table below sets forth certain information regarding our directors
and executive officers as of December 31, 2002:
NAME                              POSITION                           AGE
                 ----                              --------                           ---
Johan Fredrik Odfjell...............    Chairman of the Board                          54

Kari Broberg........................    Director                                       47

Gregers Mogensen....................    Director                                       56

Ole Petter Hakonsen.................    Director                                       63

Birger Magnus.......................    Director                                       48

Jostein Soreide.....................    Director (Employee Representative)             46

Kjell O. Ingebo.....................    Director (Employee Representative)             41

Jan Stenberg........................    Director                                       63

Marcel Petie........................    Director (Employee Representative)             46

Bjorn Ove Skjeie....................    President and Chief Executive Officer          51

Bjorn Olafsson......................    EVP Finance and Accounts                       44

Terje Ask-Henriksen.................    EVP Satellite Communications                   46

Oyvind Isaksen......................    EVP EMEA Region                                40

Samuel Ang..........................    EVP Asia Region                                48

Billy Cain..........................    EVP Americas Region                            47

Ove Bratsberg.......................    EVP Client Management and Product              42
                                        Portfolio

John Knudsen........................    EVP Supply Chain Management

Helge Skaar.........................    EVP Information and Public Affairs             47
46
NAME                             POSITION                              AGE
                ----                             --------                              ---
Stig-Are Mogstad....................    EVP Technology Management                      38

Gro Hatleskog.......................    EVP Organization and Management                47
JOHAN FREDRIK ODFJELL (1948), CHAIRMAN, BERGEN

         Odfjell is a business economics graduate of the Norwegian School of
Economics and Business Administration and holds a MBA from Harvard University.
He has held the position of chairman since June 1998. Odfjell has a broad range
of experience from senior positions in Norwegian industry to a number of board
appointments in Norwegian and international companies. Odfjell's appointments
have included managing director of AS Investa (1980-1986), managing director of
Vesta Forsikring AS and deputy managing director of Skandia Forsakring AB
(1986-1994). In addition to his appointment as chairman, Odfjell is also
chairman of Hafslund ASA and Norges Handels- og Sjofarstidene, deputy chairman
of Nycomed Amersham plc. and Den norske Veritas. He also serves on the boards of
Skandia Forsakring AB, Bergesen ASA and Kvaerner ASA.

         KARI BROBERG (1956), OSTRE TOTEN

         Broberg is a business economics graduate of the Norwegian School of
Management. She has been a member of our board since June 1998. Broberg has a
broad range of business experience and has held a number of senior positions in
the Alcatel Group from 1981 to 1997. Her positions with Alcatel included head of
purchasing for the telecommunications division and divisional director for
transmission and exchanges. Broberg was the head of logistics for Jordan AS
until 2000 and is currently employed as a corporate consultant by Hartmark
Consulting AS. In addition to her appointment as a member of our board, Broberg
holds a number of appointments in Norwegian industry, including membership on
the boards of Telenor and Norsk Regnesentral.

         GREGERS MOGENSEN (1946), DENMARK

         Mogensen received an MS degree in electronic engineering in 1971, and a
PhD degree in 1977 from the Danish Technical University. During 1977-1979 he
held positions as Senior Development Engineer and Project Manager with Marconi
Communications. During 1979-1984 he was associate professor at the Danish
Technical University. During 1984-1991 he held positions as manager of research
and development, production manager and technical manager with NKT Electronics.
During 1991-2001 he worked at Tellabs Denmark AS, including the position of
Chief Technical Officer he has held since April 2001.

         OLE PETTER HAKONSEN (1939), OSLO

         Hakonsen is an engineering graduate of the Norwegian University of
Science and Technology from where he received his Ph.D. in 1968. Hakonsen has
held a number of positions in various technical environments in Norway. These
include research manager at Televerket's Research Institute (1972-1981),
assistant technical director of the Teledirektoratet (1981-1983), technical
director of the Teledirektoratet/Televerket (1983-1991) and deputy managing
director of Televerket responsible for mobile networks and services, satellite
networks and services, research and development and information technology
(1991-1994). Hakonsen has been an Executive Vice President of Telenor AS since
1994.

         JAN STENBERG (1939), SWEDEN

         Stenberg received a law degree from the Stockholm University in 1964.
In 1967 he joined Ericsson, and in 1975 he was appointed General Counsel and
Secretary of the board of directors of Ericsson. In 1981 he became Executive
Vice President of the Ericsson Group and a member of the Group's Corporate
Executive Committee. In 1982, Stenberg was appointed President of Ericsson
Cables AB and Head of Business Area Cables. During 1985-

                                       47
1990, he was Head of Business Area Public Telecommunications. In 1994 he joined
the Scandinavian Airlines System as President and Chief Executive Officer, a
position he held until 2001, when he joined our company.

         BIRGER MAGNUS (1955), OSLO

         Magnus is an engineering graduate of the Norwegian University of
Science and Technology and holds a MBA from INSEAD (France). Magnus has been a
member of our board since June 1998. His professional background includes
experience as a systems engineer and running his own information technology
business from 1980 to 1984. From 1985 to 1995 Magnus was partner in McKinsey &
Co. and he was the managing partner of the Oslo office in the latter part of
this period as well as one of the leading partners in McKinsey's international
multimedia practice (telecomm. information technology, media). Magnus is now
executive vice president of Schibsted ASA with responsibility for the newspaper
business area.

         KJELL OLE INGEBO (1961), DRAMMEN

         Ingebo is an engineering graduate of the Kongsberg Ingeniprhoyskple and
holds a BS degree in Information Technology from the University of Strathclyde
(Scotland). He has been an employee of our group since 1983 and his professional
experience includes hardware and software development and systems work on our
earth stations. Since 1998 Ingebo has been a departmental manager for the
responsible for the development of SatCom's earth stations. Ingebo was an
employee representative on the corporate assembly from 1995-1999 and has been a
member of the board since 1999.

         MARCEL PETIE (1956), BERGEN

         Petie is an engineering graduate of the College of Advanced Technology
in Rotterdam, Holland. He has been an employee of our group's development
department in Bergen since 1981. Petie was elected as an employee representative
on the board in September 1999.

         JOSTEIN SOREIDE, (1956), BERGEN

         Spreide has been an employee of our group since 1981 and has been an
employee representative on the Board since 1997.

         BJORN OVE SKJEIE (1951) - PRESIDENT AND CHIEF EXECUTIVE OFFICER OF NERA
ASA

         Skjeie is business economics graduate of the Norwegian School of
Economics and Business Administration. From 1989-1990 Skjeie was finance
director of National Transformer. From 1991-1997, Skjeie held a number of senior
management positions with Asea Brown Boveri AS, or ABB, including managing
director of ABB Offshore Technology AS. From 1997-1998 Skjeie was responsible
for the satellite communications business area. In 1998, Skjeie was appointed
our president and chief executive officer.

         BJORN OLAFSSON (1958) - EXECUTIVE VICE PRESIDENT FINANCE AND ACCOUNTS

         Olafsson is a business economics graduate of the Norwegian School of
Management. He has many years of experience of working in executive positions in
banking and insurance fields, including various positions held within Vesta
Group, a position as a bank manager and financial director at Bergen Bank, and
group management positions at Vital Forsikring ASA. Olafsson has run businesses
he established for periods of time, and has also held a number of directorships
and executive positions.

         TERJE ASK-HENRIKSEN (1956) - EXECUTIVE VICE PRESIDENT SATELLITE
COMMUNICATION

         Ask-Henriksen is an engineering graduate of the Tinius Olsen
Ingeniprhpyskole and a business economics graduate from the Norwegian School of
Management. He also has post graduate qualifications in industrial marketing
from the Norwegian School of Management and IMD in Lausanne. His previous
employment includes Elopak AS, where he was Area Manager, Marketing Director and
the Director responsible for production and sales

                                       48
in Norway. He has also been employed by Elcon Finans (Marketing Manager) Markem
Ships, Industriservice AS and Unitor Ships Service. In October 1998,
Ask-Henriksen was appointed managing director of Nera SatCom.

         OYVIND ISAKSEN (1963) - EXECUTIVE VICE PRESIDENT REGION EMEA

         Isaksen has a Dr. Scient degree in physics with the University of
Bergen. He has earlier held positions as president in Roxar Flow Measurement and
leading positions in i.a. ABB Research and Fluenta.

         SAMUEL ANG (1955) - EXECUTIVE VICE PRESIDENT REGION ASIA PASIFIC

         Ang is the CEO and President of Nera Tel, Singapore. He joined the
company in 1979 and previously served as its managing Director, Vice President
and General Manager. He was appointed as a director of the company and Nera
Electronics Ltd., Singapore in 1996. He is responsible for the management and
business strategies of the NeraTel Group.

         BILLY CAIN (1956) - EXECUTIVE VICE PRESIDENT REGION AMERICAS

         Qualified as a Telecommunications Engineer from the Royal Signals
Military College and the University of Northumbria. Currently studying an MBA in
Business Management with the Open University Business School through distance
learning. After a ten year military career as a Telecomms Engineer, Cain joined
Marconi where he held a variety of positions in sales, sales support and
operations. Joined Nera in June 1996 as Operations Director of the Nera Ltd
facility in the UK becoming General Manager of the Telecommunications Division
one year later. Assumed responsibilities for North America in mid 2001 and
became President of the Americas Region in April 2002.

         OVE BRATSBERG (1961) - EXECUTIVE VICE PRESIDENT CLIENT MANAGEMENT AND
PRODUCT PORTFOLIO

         Ove Bratsberg is an Engineering Graduate of the Horten Ingenior
Hogskole and Business Economic Graduate of the Norwegian School of Management.
He also has a Post Graduate qualification in International Business Management
from the Norwegian School of Management. Before joining Nera in 1994 Ove
Bratsberg had various positions within ABB including sales and research &
development management. Prior to taking up today's position Ove Bratsberg served
as Vice President of Nera in Latin America.

         JOHN KNUDSEN (1961) - EXECUTIVE VICE PRESIDENT SUPPLY CHAIN MANAGEMENT

         Knudsen is an Electrical Engineer from Bergen College of Engineering
and a Business Candidate from the Norwegian School of Management. Since 1987,
Knudsen has held various and leading positions within the Nera Group, primarily
within Research and Development and Operational Management as manufacturing and
supply. Knudsen became Executive Vice President of Supply Chain Management in
2002.

         HELGE SKAAR (1955) - EXECUTIVE VICE PRESIDENT INFORMATION AND PUBLIC
AFFAIRS

         Skaar is a graduate of the University of Bergen. Prior to 1995, he
worked within corporate communications at Den norske Bank. Skaar has also worked
for the Norwegian School of Economics and Business Administration and Haukeland
Hospital. In 1995, Skaar joined us as head of corporate communications.

         STIG-ARE MOGSTAD (1964) - EXECUTIVE VICE PRESIDENT TECHNOLOGY
MANAGEMENT

         Mogstad is a computer science graduate of the University of
Strathclyde. Since 1992, Mogstad has held various positions within the Nera
group, primarily with research and development and management of various
business units. Mogstad is a member of our executive committee and is
responsible for research and development and information technology.

         GRO HATLESKOG (1956) - EXECUTIVE VICE PRESIDENT ORGANISATION AND
MANAGEMENT

                                       49
Hatleskog is a graduate of the University of Bergen. Since 1991,
Hatleskog has held various positions within Vesta Forsikring AS, including
personnel director from 1995 to 2001. Hatleskog became executive vice president
of human resources in 2001.

         B        COMPENSATION

         For the year ended December 31, 2002, the aggregate compensation
(including salary, remuneration and pension benefits) paid or accrued by us for
our directors and executive officers (20 individuals) was NOK 20.2 million.
Salary and remuneration to the president in 2002 totaled NOK 2.3 million.
Remuneration to the members of the board totaled NOK 1.2 million. Remuneration
paid to the corporate assembly totaled NOK 0.3 million. For all employees or
past employees including the three members of the board of directors nominated
by the employees, we have pension schemes, which are administered by an
independent management company, based on actuarial principles. For more
information, please see note 10 to our consolidated financial statements
included in Item 17.

         We operate a bonus scheme for executive officers providing for a
maximum bonus of up to eight months' salary for our president, and six months'
salary for other executive officers. The level of bonus actually paid is based
on the attainment of specified financial and business measures established each
year. For the fiscal year 2002, there will be bonus disbursements to some of our
executive officers limited to NOK 1.5 million (exclusive NeraTel).

         Our chief executive officer and president, Mr. Skjeie, was granted
114,000, 99,000 and 81,000 options to purchase shares in 2000, 2001 and 2002,
respectively. In addition, we entered into a bonus agreement with Mr. Skjeie,
which connects his bonus arrangements to the trend in the trading price of our
shares and other criteria relating to the development of our company. For the
fiscal year 2002, there will be no bonus disbursement to the CEO. We and Mr.
Skjeie have 12 months notice of resignation or termination, which is extended to
24 months if his position changes significantly, or if we merge with, or are
acquired by, another company or investor. Mandatory retirement age is 60, with
pension limited to 80% of Mr. Skjeie's salary at the time of retirement. We have
entered into similar bonus agreements with other members of our executive
committee, based on the individual range of responsibilities of such persons.

         Our executive officers take part in our pension scheme. As at December
31, 2002, NOK 9.3 million was accrued for future pensions of executive officers.

         On May 5, 1999 and on March 14, 2000 our shareholders approved a stock
option plan for all of our permanent employees holding active positions with us
at the time of the option exercise, including management. The plan has a total
limit of 6.3 million shares and is subject to approval of the annual general
meeting of stockholders. Options to purchase 2.4 million shares were issued in
2000 (the "2000 plan"), options to purchase 2.1 million shares were issued in
2001 (the "2001 plan"), and options to purchase 1.8 million shares were issued
in 2002 (the "2002 plan") all at an exercise price equal to fair market value at
the time of issuance. The subscription price equals the average closing price
for our shares on the Oslo Stock Exchange, respectively, ten days prior to and
ten days after February 10, 2000 for the options granted under the 2000 plan,
ten days prior to and ten days after February 13, 2001 for the options granted
under the 2001 plan and ten days prior to and ten days after February 18, 2002
for the options granted under the 2002 plan. The exercise price increases by 1%
per month until the options are exercised for options issued in 2000 and 2001,
and 0.5% per month for options issued in 2002. Thus, the exercise price for the
options under the 2000 plan is NOK 52.45 on March 1, 2002 and NOK 62.69 on March
30, 2004 (to the extent options are not exercised on an earlier date). The
exercise price for the options under the 2001 plan is NOK 50.30 on March 1, 2003
and NOK 60.10 on March 30, 2005 (to the extent options are not exercised on an
earlier date). The exercise price for the options under the 2002 plan is NOK
19.22 on March 1, 2004 and NOK 21.36 on March 30, 2006 (to the extent options
are not exercised on an earlier date). Options under the 2000 plan may be
exercised from March 1, 2002 until March 30, 2004, options under the 2001 plan
may be exercised from March 1, 2003 until March 30, 2005 and options under the
2002 plan may be exercised from March 1, 2004 until March 30, 2006.

         Under this plan, all permanent employees receive options to purchase
500 shares per year, while key personnel and management, about 40 persons in the
aggregate, received approximately 3 million options to purchase shares. We
believe that the exercise of all options provided for under this stock option
plan are covered by our repurchase of our shares. At June 25, 2003, we held
1,627,901 of our own shares.

                                       50
C.       BOARD PRACTICES

         The terms of office for which the members of our board of directors
serve are provided in subsection 6.A above.

         Our board of directors does not have any committees, as is customary in
Norway.

         D.       EMPLOYEES

         At December 31, 2002, we had 1,669 employees, as compared to 1,820
employees at December 31, 2001. Our future performance will depend in part on
our ability to attract and retain highly skilled employees.
EMPLOYEES PER BUSINESS AREA                           YEAR END
---------------------------                           --------
TRANSMISSION NETWORKS
Norway                                                    666
UK                                                         33
Brazil                                                     21
Colombia                                                   45
Venezuela                                                  36
Mexico                                                     26
Miami                                                       5
India                                                      16
Boston                                                     32
                                                       ------
TOTAL                                                     880

SATELLITE COMMUNICATIONS

Norway: Mobile SatCom                                     206
Germany                                                    22
Hong Kong                                                   3
                                                        -----
TOTAL                                                     231

BROADBAND

Norway                                                     72
Dallas                                                      0
                                                        -----
TOTAL                                                      72

NERA CORPORATE FUNCTION                                    47

NERATEL (SINGAPORE)                                       431

TOTAL                                                   1,669
E.       SHARE OWNERSHIP

         The table below sets forth certain information as to the ownership of
our ordinary shares and stock options by our directors and executive officers as
of December 31, 2002 to the extent known to us:

                                       51
NAME                                             NUMBER OF
                                        ----                                              ORDINARY
                                                                                           SHARES              PERCENT
                                                                                         ---------             -------
BOARD OF DIRECTORS
Johan Fredrik Odfjell......................................................                410,318                  *
Kari Broberg...............................................................                     --                 --
Gregers Mogensen...........................................................                     --                 --
Ole Petter Hakonsen........................................................                     --                 --
Birger Magnus..............................................................                     --                 --
Jostein Soreide(1).........................................................                  1,750                  *
Kjell O. Ingebo(2) ........................................................                  1,625                  *
Jan Stenberg...............................................................                     --                 --
Marcel Petie(3)............................................................                  1,839                  *
                                                                                          --------
TOTAL                                                                                      415,532              0.336%

EXECUTIVE COMMITTEE
Bjorn Ove Skjeie(4)........................................................                432,225                  *
Bjorn Olafsson (5).........................................................                 51,748                  *
Terje Ask-Henriksen (6)....................................................                198,378                  *
Ove Bratsberg (7)                                                                          136,291
John Knudsen (8)                                                                           154,510
Helge Skaar (9)............................................................                128,500                  *
Stig-Are Mogstad (10)......................................................                145,510                  *
Gro Hatleskog (11).........................................................                 75,098                  *
Samuel Ang                                                                                  20,000
Oyvind Isaksen (12)                                                                         37,478
Billy Cain (13)                                                                            134,623
                                                                                          --------
TOTAL                                                                                     1514,361               0.83%
------------------

*        Owns less than one percent of outstanding ordinary shares.

(1)      Includes 500 stock options granted under the 2000 plan, 500 stock
         options granted under the 2001 plan and 500 stock options granted under
         the 2002 plan. The terms of the 2000 plan, 2001 plan and the 2002 plan
         are described above.

(2)      Includes 500 stock options granted under the 2000 plan, 500 stock
         options granted under the 2001 plan and 500 stock options granted under
         the 2002 plan.

(3)      Includes 500 stock options granted under the 2000 plan, 500 stock
         options granted under the 2001 plan and 500 stock options granted under
         the 2002 plan.

(4)      Includes 114,000 stock options granted under the 2000 plan, 99,000
         stock options granted under the 2001 plan and 81,000 options granted
         under the 2002 plan.

(5)      Includes 41,748 stock options, all of which are granted under the 2002
         plan

(6)      Includes 69,000 stock options granted under the 2000 plan, 66,000 stock
         options granted under the 2001 plan and 37,478 stock optins granted
         under the 2002 plan.

(7)      Includes 42,000 stock options granted under the 2000 plan, 39,000 stock
         options granted under the 2001 plan and 35,166 stock options granted
         under the 2002 plan.

(8)      Includes 42,000 stock options granted under the 2000 plan, 45,000 stock
         options granted under the 2001 plan and 37,385 stock options granted
         under the 2002 plan.

(9)      Consists of 54,000 stock options granted under the 2000 plan, 51,000
         stock options granted under the 2001 plan and 23,500 stock options
         granted under the 2002 plan.

(10)     Includes 48,000 stock options granted under the 2000 plan, 60,000 stock
         options granted under the 2001 plan and 37,385 stock options granted
         under the 2002 plan.

(11)     Consists of 48,000 stock options granted under the 2001 plan and 27,098
         stock options granted under the 2002 plan.

(12)     Consists of stock options, all of which are granted under the 2002
         plan.

(13)     Includes 42,000 stock options granted under the 2000 plan, 45,000 stock
         options granted under the 2001 plan and 37,498 stock options granted
         under the 2002 plan.

                                       52
Currently two third of the stock options granted under the 2000 plan,
and one third of the stock options granted under the 2001 plan are
excersiseable.

         ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

         A.       MAJOR SHAREHOLDERS

         As far as is known to us, we are not directly or indirectly owned or
controlled by another corporation, any government or by any natural or legal
person(s) severally or jointly, and there are no arrangements the operation of
which may result in a change in our control.

         The following table sets forth, as of June 16, 2003, (1) the ownership
of our shares by each person or entity which, to our knowledge, owns of record
or beneficially and has sole voting and investment power with respect to more
than 5% of our shares, and (2) the beneficial ownership of all our directors and
officers as a group. To our knowledge, our major shareholders do not have
different voting rights.
NAME                                          NUMBER        PERCENT
                                        ----                                          ------        -------
SHAREHOLDERS
Folketrygdfondet...........................................................         13,122,600       10.62%
Orkla ASA..................................................................         11,455,963        9.27%
                                                                                    ----------       -----
MEMBERS OF THE BOARD OF DIRECTORS AND OFFICERS
Directors and officers as a group (20 persons) ............................          1,627,657        0.51%
                                                                                                      ----
Total......................................................................         26,206,220        20.4%
                                                                                    ----------        ----
B.       RELATED PARTY TRANSACTIONS

         There have been no material transactions during the last year nor are
there any presently proposed transactions, in which any director or officer, or
controlling shareholder, or any relative or spouse thereof had or has a direct
or indirect material interest. There is no significant indebtedness owed to us
by any director or officer or any associate of any director or officer.

         C.       INTERESTS OF EXPERTS AND COUNSEL

         Not applicable.

         ITEM 8.  FINANCIAL INFORMATION

         A.       CONSOLIDATED STATEMENT AND OTHER FINANCIAL INFORMATION

SALES BY GEOGRAPHICAL DESTINATIONS
AMOUNTS IN MILLIONS OF NOK              YEAR                           2001      FOURTH     2002      FOURTH    2001
GEOGRAPHICAL DESTINATIONS               2002                 YEAR      -----     QUARTER    -----    QUARTER    -----
-------------------------               -----     -----     -----      -----     -------    -----    -------    -----
Norway                                    276     11.3%       288       9.9%       101      16.5%       124     15.3%
United Kingdom                            110      4.5%       202       7.0%        36       5.9%        28      3.4%
Rest of Europe                            498     20.4%       559      19.3%       144      23.4%       179     22.1%
Americas                                  538     22.0%       815      28.2%       114      18.5%       183     22.6%
Africa                                    105      4.3%       190       6.6%        27       4.5%        15      1.8%
Asia                                      863     35.3%       672      23.2%       182      29.6%       266     33.0%
Oceania                                    55      2.2%       169       5.8%         9       1.6%        14      1.8%
                                        -----     ----      -----      ----        ---      ----        ---     ----
TOTAL                                   2,445      100%     2,893       100%       614       100%       807      100%
                                        =====     ====      =====      ====        ===      ====        ===     ====
53
The consolidated statements and other financial information are
provided in Item 17 below.

         LEGAL PROCEEDINGS

         There are no pending legal proceedings to which we or any of our
subsidiaries is a party or to which any of our properties is subject which,
either individually or in the aggregate, are expected by us to have a material
adverse effect on our consolidated financial position, liquidity or results of
operations.

         DIVIDEND DISTRIBUTIONS

         In 2002, we do not plan to pay any funds in dividend distributions. Our
board of directors determines, on a year to year basis, if and when dividends
will be declared and what percent of earnings will be retained.

         B.       SIGNIFICANT CHANGES

         No significant change has occurred since the date of the financial
statements provided in Item 17 below, other than the sale of TVMobile PTE Ltd.
described in item 17 disclosure 33 below.

         ITEM 9.  THE OFFER AND LISTING

         A.       OFFER AND LISTING DETAILS

         Not applicable.

         B.       PLAN OF DISTRIBUTION

         Not applicable.

         C.       MARKETS

         The principal trading market for our shares is the Oslo Stock Exchange,
where they have been listed since January 1995 under the symbol NER. American
depositary shares, or ADRs, each representing one ordinary share, traded on
Nasdaq's National Market System under the symbol NERAY from June 28, 1995 until
we voluntarily delisted the ADRs on May 30, 2002. Following that date and until
the present time, our ADRs have been trading on the Other OTC Market under the
symbol NERAY. Based on the information received from The Bank of New York, the
depositary with respect to our American depositary shares, we believe that there
are 387 U.S. holders of record who, in the aggregate, hold approximately 260,390
of our shares as of June 22, 2002. We intend to terminate the registration of
our securities under the Securities Exchange Act soon after there are less than
300 US holders of record. Upon termination, we will no longer be required to
file reports with the SEC.

         The table set forth below, for the periods indicated, shows the
reported high and low quoted prices for the ordinary shares on the Oslo Stock
Exchange, as well as for the American depositary shares on Nasdaq and/or the
Other OTC Market, as applicable.
OSLO STOCK EXCHANGE                   NASDAQ AND/OR
                                                                           THE OTHER OTC MARKET
                                                                           (AFTER MAY 30, 2002)
                                         HIGH          LOW                   HIGH        LOW
                                         -----        -----                 -----       -----
                                              (IN NOK)                          (IN USD)
1999..........................           38.00        10.50                 4.750       1.375
2000..........................           65.00        32.50                 8.500       3.625
2001..........................           44.30        16.70                 5.000       1.750
2002..........................           21.90         4.90                 2.500       0.200
54
NASDAQ AND/OR
                                                               THE OTHER OTC MARKET
                                      OSLO STOCK EXCHANGE      (AFTER MAY 30, 2002)
                                      HIGH           LOW     HIGH              LOW
                                      ----           ---     ----              ---
2001
First quarter.................       44.30          36.70    4.875            4.250
Second quarter................       36.20          30.00    4.100            3.160
Third quarter.................       29.40          20.00    3.300            2.255
Fourth quarter................       24.90          16.70    2.950            1.750

2002
First quarter.................       21.90          15.50    2.500            1.800
Second quarter................       18.00           7.20    2.240            0.250
Third quarter.................        9.80           4.90    1.300            0.200
Fourth quarter................       10.70           5.06    1.330            0.600

2003
December 2002.................       10.70           7.45    1.330            0.900
January 2003..................        8.76           7.55    1.150            0.900
February 2003.................        8.00           5.82    1.150            0.800
March 2003....................        6.84           5.40    0.820            0.750
April 2003....................        8.90           5.75    1.050            0.810
May 2003......................        9.70           7.86    1.180            1.050
June 2003 (until June 26).....       11.20           9.90    1.500            1.180
-------------

(1)      Until voluntary delisting on May 30, 2002.

         D.       SELLING SHAREHOLDERS

         Not applicable.

         E.       DILUTION

         Not applicable.

         F.       EXPENSES OF THE ISSUE

         Not applicable.

         ITEM 10.          ADDITIONAL INFORMATION

         A.       SHARE CAPITAL

         Not applicable.

         B.       MEMORANDUM AND ARTICLES OF ASSOCIATION

         Set forth below is certain information concerning our share capital and
related summary information concerning all material provisions of our articles
of association and applicable Norwegian law. Such summary information does not
purport to be complete and is qualified in its entirety by reference to our
articles of association, which have been previously filed with the Commission as
an exhibit to our annual report for the year ended December 31, 2000.

                                       55
VOTING RIGHTS

         As a general rule, decisions that shareholders are entitled to make
pursuant to Norwegian law or our articles of association may be made by a simple
majority of votes cast. Each ordinary share carries one vote. However, any
decision to amend our articles of association, including any amendment
increasing our share capital or altering the rights and preferences of any
ordinary share or class of shares, requires the approval of at least two-thirds
of the aggregate number of votes cast as well as at least two-thirds of the
share capital represented at a shareholders' meeting, whether or not holders of
such ordinary shares are otherwise entitled to vote. In certain cases, a
stricter voting requirement is applicable.

         To vote at an annual or extraordinary general meeting, a shareholder
must have registered his title to the ordinary shares to be voted in our share
register maintained at the Norwegian centralized registry of shares and other
securities, or VPS, or have given evidence that he is the holder of the ordinary
shares. Shareholders who intend to participate in a general meeting in person or
by proxy must give notice to us by the date stated in the notice convening the
meeting, which date must be not more than five business days before the date of
such meeting.

         The annual general meeting of our shareholders is held each year before
the end of June. Norwegian law requires that written notice of general meetings
be sent to shareholders whose addresses are known at least one week prior to the
date for notification of attendance stated in the notice convening the meeting.
A shareholder may vote by proxy. Although Norwegian law does not require us to
send proxy forms to our shareholders for general meetings, we will include a
proxy form with the notice of meetings.

         Apart from the annual general meeting, extraordinary general meetings
of shareholders may be held whenever considered necessary by the corporate
assembly, the chairman of the corporate assembly or the board of directors. An
extraordinary general meeting may also be convened for the consideration of
specific matters at the written request of our auditor or of shareholders
representing at least 10 percent of our share capital. Any matter that may be
raised at an annual general meeting (other than approval of the annual accounts
and distribution of cash dividends) may also be raised at an extraordinary
general meeting.

         RESTRICTIONS ON OWNERSHIP OF ORDINARY SHARES

         The articles of association contain no provisions restricting the
foreign ownership of the ordinary shares.

         There are no limitations under Norwegian law on the right of
non-resident or foreign owners to hold or vote our ordinary shares. However, in
accordance with Norwegian law, the acquisition of assets, partnership interests,
shares or other ownership interests of a company in Norway must be notified to
the Norwegian Ministry of Industry if the purchaser, regardless of nationality,
becomes the owner of either one-third, one-half or two-thirds of the assets,
partnership interests, shares or other ownership interests in such company and
the company has annual operating revenues exceeding NOK 50 million, has more
than 50 employees, or has received public support for research and development
exceeding NOK 5 million during the past eight years. For acquisitions requiring
notifications, the Norwegian Ministry of Industry may refuse to approve the
acquisition or may approve it with or without conditions.

         We meet the above-described criteria and, therefore, future holders
will be subject to these notification requirements with respect to any
qualifying acquisitions.

         THE VPS AND TRANSFER OF ORDINARY SHARES

         Norway has a paperless, centralized registry of shares and other
securities, the VPS, which began operation in 1986. For companies that are
obliged to, or elect to, register their shares in the VPS, share certificates
are no longer used. The VPS is a computerized bookkeeping system, operated by an
independent body, in which the ownership of, and all transactions relating to,
Norwegian listed shares must be recorded. Our share register is operated through
the VPS.

         All transactions relating to securities registered with the VPS are
made through computerized book entries. The VPS confirms each entry by sending a
transcript to the registered shareholder irrespective of any beneficial

                                       56
ownership. To effect such entries, the individual shareholder must establish a
share account with a Norwegian account agent. Norwegian banks, the Bank of
Norway, authorized securities brokers in Norway and Norwegian branches of credit
institutions established within the European Economic Area, are allowed to act
as such agents. If the shareholder does not establish such an account, an agent
will be appointed on the shareholder's behalf by the issuer of the shares in
question.

         The entry of a transaction in the VPS is prima facie evidence in
determining the legal rights of parties as against the issuing company or a
third party claiming an interest in the security.

         The VPS is strictly liable for any loss resulting from an error in
connection with registering, altering or cancelling a right, except in the event
of contributory negligence, in which event compensation may be reduced or
withdrawn.

         Under Norwegian law, any acquisition of shares must be registered
within one month after such acquisition. A transferee or assignee of shares may
not exercise the rights of a shareholder with respect to such shares unless such
transferee or assignee has registered such shareholding, or has reported and
shown evidence of such share acquisition, and the acquisition of shares is not
prevented by law, the articles of association or otherwise.

         DISCLOSURE OBLIGATIONS

         Under Norwegian law, any transfer of shares in a company listed on the
Oslo Stock Exchange must be registered with the VPS by the transferor within one
month of the transfer.

         A person, entity or group acting in concert that acquires or disposes
of ordinary shares resulting in its beneficial ownership, directly or
indirectly, exceeding or falling below in the aggregate thresholds of 10
percent, 25 percent, 50 percent or 75 percent of the total number of ordinary
shares outstanding has an obligation under Norwegian law to notify us and the
Oslo Stock Exchange immediately. A corresponding disclosure obligation applies
with respect to any holder of American depositary receipts, or ADRs, who is
entitled upon surrender of the ADRs to acquire directly or indirectly the
beneficial ownership of a number of ordinary shares that, together with any
ordinary shares or additional ADRs held by such holder, in the aggregate exceeds
or falls below such thresholds.

         ADDITIONAL ISSUANCES AND PREEMPTIVE RIGHTS

         All issuances of ordinary shares by us, including bonus issues (share
dividends), requires an amendment to the articles of association, which requires
the same vote as other amendments to the articles of association. Furthermore,
under Norwegian law, shareholders have a preemptive right to subscribe for and
be allotted new ordinary shares issued by us. Such preemptive rights may be
waived by a resolution in a general meeting by the same vote required to approve
amendments to our articles of association. A waiver of the shareholders'
preemptive rights in respect of bonus issues (share dividends) requires the
approval of all ordinary shares outstanding. The issuance of ordinary shares to
holders who are citizens or residents of the United States, or U.S. holders,
upon the exercise of preemptive rights may require us to file a registration
statement in the Unites States under United States securities laws. If we decide
not to file a registration statement, such U.S. holders will not be able to
exercise their preemptive rights and would be required to sell them to Norwegian
persons or other non-U.S. holders to realize the value of such rights.

         Norwegian law also provides that if a Norwegian company's capital is
increased by a subscription for shares and the preemptive rights of shareholders
have not been waived, employees of that company have preferential rights to
subscribe for such shares, to the extent such shares have not been fully
subscribed or oversubscribed through the exercise of shareholders' preemptive
rights.

         Under Norwegian law, bonus issues (share dividends) of our ordinary
shares may be distributed, subject to shareholder approval, from amounts (i)
that could otherwise be distributed as dividends, (ii) that may be created by
transferring funds from our legal reserve discussed below to share capital or
(iii) that may result from an upward revaluation of our long-term assets. Such
bonus issues (share dividends) may be effected either by issuing ordinary shares
or by increasing the par value of the shares outstanding.

                                       57
DIVIDENDS

         Under Norwegian law, dividends in cash or in kind are only payable
annually. Any proposal to pay a dividend must be recommended by the directors
and approved by the shareholders at a general meeting. The shareholders at an
annual general meeting may vote to reduce (but not to increase) dividends
proposed.

         Dividends in cash or in kind are payable only out of (1) the annual
profit according to the income statement for the last financial year, (2)
retained profit from previous years and (3) distributable reserves, after
deduction of accumulated losses and any part of the annual profit which,
according to law or the Articles of Association, must be allocated to the
reserve fund or is non-distributable. Our annual income statement and balance
sheet, including the application of profit or coverage of loss, as the case may
be, as well as the consolidated income statement and consolidated balance sheet,
must be approved by the shareholders at a general meeting. In no event may
dividends be declared in excess of an amount that is compatible with good and
careful business practice with due regard to any losses that may have occurred
after the last balance sheet date or that may be expected to occur.

         Under Norwegian law, we are required to maintain a legal reserve at
least equal to a minimum amount prescribed by law and, until such minimum amount
is reached, we must allocate to our legal reserve a proportion of our specified
profit and income prescribed by law. No dividends in cash or in kind may be paid
out of such legal reserve unless the amount of such legal reserve exceeds the
prescribed minimum level, in which case up to 20 percent of any excess may be
paid out in any year.

         Under Norwegian foreign exchange controls currently in effect,
transfers of capital to and from Norway are not subject to prior government
approval except for the physical transfer of payments in currency, which is
restricted to licensed banks. Consequently, a non-Norwegian resident may receive
dividend payments without a Norwegian exchange control consent if such payment
is made only through a licensed bank.

         RIGHTS UPON WINDING-UP

         A Norwegian company may be wound-up by a resolution of the company in a
general meeting passed by a two-thirds majority of the aggregate votes cast by
its voting shares as well as two-thirds of the aggregate share capital
represented at such meeting irrespective of class.

         MANDATORY BID REQUIREMENT

         Norwegian law requires any person, entity or group acting in concert
that acquires more than 45 percent of the voting rights of a Norwegian company
listed on the Oslo Stock Exchange to make a general offer to acquire the whole
of the outstanding share capital of that company. Such offer may be conditioned
on the offeror becoming the owner of shares representing at least two-thirds of
the voting rights. The offer is subject to approval by the Oslo Stock Exchange
before submission of the offer to the shareholders. The offering price per share
must be at least as high as the highest price paid by the offeror in the
six-month period prior to the date the 45 percent threshold was exceeded. A
shareholder who fails to make the required offer must within four weeks dispose
of sufficient shares so that the obligation ceases to apply. Otherwise, the Oslo
Stock Exchange may cause to be sold by public auction the shares exceeding the
45 percent limit. During the time the mandatory bid requirement is in force, a
shareholder failing to make the required offer may not vote or exercise any
rights of share ownership unless a majority of the remaining shareholders
approve, other than the right to receive dividends and preferential rights in
the event of a share capital increase. In addition, the Oslo Stock Exchange may
impose a daily fine upon a shareholder who fails to make the required offer.

         The depositary has qualified and been recognized as a custodian of the
Shares in Norway, as a result of which the depositary is exempt from the
mandatory bid requirement.

         C.       MATERIAL CONTRACTS

         We have not entered into material contracts outside the course of
ordinary business.

                                       58
D.       EXCHANGE CONTROLS

         Under Norwegian foreign exchange controls, transfers of capital to and
from Norway are not subject to prior government approval, except for the
physical transfer of payments in currency, which is restricted to licensed
banks. Consequently, a non-resident of Norway may only receive dividend payments
without a Norwegian exchange control consent if such payment is made through a
licensed bank.

         Under the Norwegian Acquisition of Business Act of 1994, acquisitions
of shares, whereby the acquiring person, entity or group becomes owner of more
than one-third, one-half or two-thirds of our share capital or voting rights
must be notified to the Ministry of Industry, which may impose conditions upon
the acquiring person, entity or group or us and, if public policy so mandates,
require the acquiring person, entity or group to resell the acquired shares.

         E.       TAXATION

         GENERAL

         The following is a general summary of the principal Norwegian and
United States federal income tax consequences of the ownership and disposition
of American depositary receipts evidencing American depositary shares, or ADRs,
and/or shares to a beneficial owner of ADRs or shares who is a U.S. holder. A
U.S. holder means a beneficial owner of ADRs that is an individual who is a
citizen or resident of the United States, a United States domestic corporation,
an estate the income of which is subject to United States federal income tax
without regard to its source or a trust if (1) a court within the United States
is able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust and who is not a resident of Norway or (2) it has an
election in effect to be treated as a United States person under United States
federal income tax law. This summary is based

            -     on the tax laws of the United States and Norway, the income
                  tax convention between the United States and Norway, referred
                  to in this section as the convention, and interpretations
                  thereof by the relevant tax authorities that are currently in
                  effect, all of which are subject to change possibly with
                  retroactive effect, and

            -     in part on representations made by the depositary and assuming
                  that each obligation in the deposit agreement entered into
                  between us and the depositary and any related agreement will
                  be performed in accordance with its terms.

         The summary applies only to U.S. holders who hold ADRs or shares as
capital assets and does not address certain classes of persons (such as
tax-exempt entities, certain insurance companies, dealers in securities or
currencies, traders in securities that elect to mark-to-market, investors liable
for alternative minimum tax, banks, financial institutions, persons who hold
ADRs or shares as part of hedging or conversion transactions, persons whose
functional currency is not the U.S. dollar and persons who own, directly or
indirectly, at least 10% of our outstanding voting stock) that may be subject to
special rules. The discussion below does not address the tax treatment of
partnerships or persons who hold shares or ADRs through a partnership or other
pass-through entity. It also does not address the tax treatment of the ownership
and disposition of shares or ADRs under applicable state or local tax laws, or
the laws of any jurisdiction other than Norway or the United States.

         In general, and taking into account the earlier assumptions, for United
States and Norwegian tax purposes, U.S. holders of ADRs will be treated as the
owners of the shares represented by the ADRs. Unless otherwise stated below, the
Norwegian tax consequences and the United States federal income tax consequences
discussed below should apply equally to U.S. holders of ADRs and U.S. holders of
shares.

         NORWAY

         F.       NORWAY

                                       59
Taxation of dividends

         Under Norwegian tax law, withholding tax of 25% is levied on dividends
paid by Norwegian company to non-resident companies and individuals.

         The withholding tax may be reduced pursuant to the provisions of the
tax convention between Norway and the US. Pursuant to the convention, the
maximum rate of withholding tax is 15% on dividends paid by a Norwegian
corporation to a person resident (for purposes of the convention) in the United
States, provided that such person does not have a permanent establishment in
Norway with which the dividends are effectively connected. The 15% withholding
rate will apply to dividends paid on shares held directly by U.S. holders who
properly demonstrate to us and to the Norwegian tax authorities that they are
entitled to the benefits of the convention. Additionally, the 15% withholding
tax rate will also apply to dividends paid to the depositary, but only if the
depositary has obtained consent in advance (upon fulfilment of certain
conditions) from the Norwegian Tax Directorate. If such consent is not obtained
in advance, dividends paid to the depositary will be subject to withholding at
the 25% rate. U.S. holders of ADRs who believe they are entitled to the benefits
of the convention may apply to the Norwegian tax authorities for a refund of
amounts withheld in excess of 15%. The application is to be filed with the
Norwegian Tax Directorate. However, there is some uncertainty as to whether and
when such a refund may be obtained.

         We intend to file any reports with the Norwegian authorities or
agencies necessary to obtain the benefits of the convention for those U.S.
holders who are entitled to them. We will exercise our right under the deposit
agreement to reasonably request from the depositary such information from its
records to enable us to file such reports.

         If, however, the recipient of a dividend is a U.S. holder who, it is
determined, is engaged in a business activity taxable in Norway, and the shares
or ADRs with respect to which the dividend is paid are effectively connected
with such activity, then the amount distributed to such U.S. holder will be
treated as taxable ordinary income in Norway, subject to the provisions of the
convention, where applicable. Norway has an imputation system where company
surplus, including dividend payments, is taxed at company level as ordinary
income at a rate of 28%. Dividend income is also taxed as ordinary income at
shareholder level at a rate of 28%, however, as a rule, the shareholder receives
full credit for this tax.

                           a)       Taxation of dispositions

         A U.S. holder normally is not taxed in Norway on gains from the sale or
other disposition of shares or ADRs, unless the shareholding is effectively
connected with a permanent establishment in Norway, or the U.S. holder is an
individual who (1) maintains for at least 183 days during the taxable year a
fixed base in Norway with which such gains are effectively connected or (2) is
physically present in Norway for at least 183 days during taxable year.

         The same rules apply to gains realized upon our complete liquidation or
upon redemption of shares.

         Repayment in connection with a reduction of the share capital by
reducing the nominal value of the shares is, however, subject to withholding tax
as dividend distribution, if exceeding paid-in capital.

         Deposits and withdrawals of shares in exchange for ADRs will not result
in taxable gain or loss for Norwegian tax purposes.

                           b)       Transfer tax

         There is currently no Norwegian tax on the transfers of shares.
Transfers of shares, however, may be subject to nominal registration fees.

                           c)       Inheritance tax

         When shares are transferred, either through inheritance or as a gift,
such transfer may give rise to inheritance tax in Norway if the deceased, at the
time of death, or the donor, at the time the gift is made, is a resident

                                       60
or citizen of Norway. However, if the deceased, at the time of death, is not a
resident of Norway but rather a citizen of Norway, Norwegian inheritance tax
will not be levied in the country of residence. Irrespective of residency or
citizenship, Norwegian inheritance tax may be levied if the shares are
effectively connected to a permanent establishment in Norway.

         Norway and the US have entered into a convention with the aim to
prevent double inheritance tax on inheritance or gift in Norway and the US.

                           d)       Property taxes or similar taxes

         Norway does not levy any property tax or similar tax on shares. A U.S.
holder of shares is not subject to Norwegian wealth tax with respect to such
shares, unless the U.S. holder is an individual and his shareholding is
effectively connected with a business carried out by the U.S. holder through a
permanent establishment in Norway.

         UNITED STATES

         TAXATION OF DIVIDENDS

         Subject to the discussion under "--Passive Foreign Investment Company
Rules," for United States federal income tax purposes, the gross amount of
distributions (including any withholding tax thereon) made by us out of our
current or accumulated earnings and profits (as determined for United States
federal income tax purposes) will be included in the gross income of a U.S.
holder as dividend income on the day the distribution is actually or
constructively received by the U.S. holder, in the case of shares, or by the
depositary, in the case of ADRs. These dividends will not be eligible for the
dividends-received deduction generally allowed to domestic corporations. The
amount of any dividend paid in Norwegian krone will be equal to the U.S. dollar
value of the krone on the date of receipt by the U.S. holder, in the case of
shares, or by the depositary, in the case of ADRs, regardless of whether the
payment is converted into U.S. dollars. If the krone received as a dividend is
not converted into U.S. dollars on the date of receipt, a U.S. holder will have
a basis in the krone amount equal to its U.S. dollar value on the date of
receipt. Gain or loss, if any, recognized by a U.S. holder on the subsequent
sale or disposition of the krone will generally be United States source ordinary
income or loss.

         A distribution with respect to our shares or ADRs in excess of our
current and accumulated earnings and profits will be treated as a tax-free
return of basis in the shares to the extent of the U.S. holder's adjusted basis
in such shares, with the balance of the distribution, if any, treated as gain
realized by the U.S. holder from the sale, exchange or other disposition of the
shares or ADRs.

         Subject to certain limitations, U.S. holders may elect to claim a
credit against their United States federal income tax liability for Norwegian
tax withheld in accordance with the convention from dividends, or, if they do
not elect to credit any foreign tax for the taxable year, they may deduct such
tax. Any additional withholding tax in excess of the rate applicable under the
convention generally will not be eligible for such deduction or credit. For more
information regarding the availability of a refund of such additional
withholding tax, see "Norway Taxation of Dividends," above. For foreign tax
credit purposes, dividends paid by us will generally be foreign source "passive
income" or, in the case of certain U.S. holders, "financial services income."
Any distribution in excess of our current and accumulated earnings and profits
generally will not give rise to foreign source income, and a U.S. holder will
not be able to use the foreign tax credit arising from any Norwegian withholding
tax imposed on such distribution unless such credit can be applied (subject to
applicable limitations) against U.S. federal income tax due on other foreign
source income in the appropriate category for foreign tax credit purposes.

                                       61
Taxation of dispositions

         Subject to the discussion under "--Passive Foreign Investment Company
Rules," a U.S. holder will recognize capital gain or loss for United States
federal income tax purposes on a sale or other disposition of shares or ADRs in
an amount equal to the difference between the U.S. dollar value of the amount
realized and the U.S. holder's tax basis in the shares or ADRs. Such gain or
loss will be long-term capital gain or loss if the U.S. holder's holding period
for such shares or ADRs exceeds one year. Long-term capital gain of a
non-corporate U.S. holder is generally subject to a maximum tax rate of 20%. For
corporate U.S. holders, capital gains are currently taxed at the same rate as
ordinary income. The deductibility of a capital loss, however, is subject to
limitations for both non-corporate and corporate U.S. holders.

         Any such gain or loss recognized by a U.S. holder will generally
constitute United States source income. Because capital gains will generally
constitute United States source income, any Norwegian or other foreign tax
imposed upon capital gains in respect of the shares or ADRs may not be currently
creditable unless a U.S. holder had other foreign source income for the year in
the appropriate foreign tax credit limitation basket. Capital losses will
generally be allocated against United States source income.

         Passive Foreign Investment Company Rules

         Special United States federal income tax rules apply to holders of
equity interests in a corporation classified as a passive foreign investment
company, or PFIC. We would be a PFIC for United States federal income tax
purposes if 75% or more of our gross income for a taxable year were to consist
of passive income, or 50% or more of our average assets held during a taxable
year were to consist of passive assets. Based on our current and projected
financial data, we believe that we will not currently be treated as a PFIC for
U.S. federal income tax purposes and we do not expect to become one in the
future. However, this conclusion is a factual determination made annually and
thus may be subject to change based on future operations and the composition and
valuation of our assets.

         If we were to constitute a PFIC, a U.S. holder could be subject to
materially adverse United States federal income tax consequences for certain
distributions made by us and with respect to gain realized by the holders on
disposition of shares or ADRs. Prospective U.S. holders should consult with
their own tax advisors regarding the potential application of PFIC rules.

         United States backup withholding tax and information reporting

         Payments made by a paying agent within the United States to U.S.
holders other than corporations and other exempt recipients in respect of shares
or ADRs may be subject to information reporting to the United States Internal
Revenue Service, or IRS. Backup withholding tax will also apply to those
payments if made to a non-exempt U.S. holder that fails to provide certain
information to the paying agent, including the holder's taxpayer identification
number, and to comply with certain other requirements concerning backup
withholding. Currently, this backup withholding rate is 30% for payments made in
2002 and 2003, but this rate will be reduced to 29% for payments made in 2004
and 2005, and 28% for payments made in 2006 and thereafter. Non-U.S. holders may
be required to comply with certain documentation and certification procedures to
establish that they are not U.S. holders in order to avoid the application of
such information reporting and backup withholding requirements.

         Any amounts withheld under the backup withholding rules from a payment
to a holder of shares or ADRs generally will be allowed as a refund or a credit
against such holder's U.S. federal income tax, provided that the required
information is furnished to the IRS.

         G.       DIVIDENDS AND PAYING AGENTS

         Not applicable.

         H.       STATEMENT BY EXPERTS

                                       62
Not applicable.

         I.       DOCUMENTS ON DISPLAY

         We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the Securities and Exchange Commission. These
materials, including this annual report and the exhibits thereto, may be
inspected and copied at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the Commission's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of the materials may be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The public may obtain information on the operation of
the Commission's Public Reference Room by calling the Commission in the United
States at 1-800-SEC-0330. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy statements and other information
regarding registrants that file electronically with the Commission.

         J.       SUBSIDIARY INFORMATION

         Not applicable.

         ITEM 11.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
         RISK

         MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT

         We sell our products and services internationally and we are subject to
market risks, primarily from changes in foreign exchange rates and interest
rates. We are not materially affected by commodity price fluctuations. In the
normal course of business we also face risks that are either nonfinancial or
nonquantifiable. Such risks principally include country risk and credit risk and
are not represented in the following analyses.

         Our board of directors has issued a policy that determines the maximum
level of foreign exchange rate and interest rate risks that can be assumed by
individual companies and our group as a whole. The calculations and measurement
techniques used by the treasury center are in accordance with established
banking practices.

         FOREIGN CURRENCY EXCHANGE RATE RISK

         We have manufacturing, sales and distribution facilities around the
world and thus make investments and enter into transactions denominated in
various foreign currencies. Our operating cash flows denominated in foreign
currency as a result of these international business activities are exposed to
changes in foreign exchange rates. In order to maintain strict control and
achieve the benefits of our global diversification, foreign exchange exposures
may be hedged with financial instruments. We primarily enter into forward
exchange controls and currency swaps to reduce the earnings and cash flow of
non-functional currency denominated receivables and payables. Gains and losses
resulting from hedging instruments usually offset the gains or losses on the
underlying assets, liabilities, and investments being hedged. Our forward
exchange contracts and currency swaps generally do not exceed 12 months, and the
maturities coincide with our best estimate as to the settlement dates of the
related firm and anticipated transactions.

         The currencies that we were primarily exposed to before hedging at
December 31, 2002 were the Norwegian krone versus the U. S. dollars, Euros and
the pound sterling.

         The following table provides the Norwegian krone equivalents of the net
foreign exchange contracts and currency swaps outstanding by currency and the
corresponding impact on the value of these instruments assuming both a 10%
appreciation and depreciation of the respective currencies from their levels at
December 31, 2002, with all other variables (including interest rates) held
constant. The resulting gains and losses are translated into Norwegian krone
using the appropriate exchange rate at December 31, 2002. The instruments held
by us are not leveraged and are held for purposes other than trading.

                                       63
Foreign exchange gain/(loss)
                                                                                 from
                                                                         10%             10%
                                        Foreign                    appreciation of  depreciation of
Forward contracts and currency         currency      Foreign         the foreign      the foreign
           swaps:                       bought    currency sold        currency         currency
-----------------------------          ------------------------------------------------------------
                                                        (in NOK millions)
United Arab Emirates dirham........       0.0          0.2            -0.02              0.02
Australian dollars.................       2.0          6.3             -0.4               0.4
Euro...............................      15.4        109.5             -9.3               9.3
Pounds Sterling                          41.4        101.9             -5.7               5.7
Japanese yen                              0.4          0.0             0.04             -0.04
Danish krona                              0.8          0.0             0.08             -0.08
U. S. dollar...................2004      24.2        391.2            -32.6              32.6
                                         ----        -----             ----              ----
         TOTAL                           84.2        609.1            -47.9              47.9
In addition, please see note 21 to our consolidated financial
statements included in Item 17.

         INTEREST RATE SENSITIVITY

         We are exposed to changes in interest rates primarily as a result of
liquidity invested in short-term interest bearing instruments, primarily bank
deposits with a consequently low risk to value. Some interest rate exposure is
also related til project financing. Project financing in Pound Sterling has a
fixed interest rate and project financing in US dollars has a variable interest
rate with short time to maturity. The nature and amount of our bank deposits,
long-term and short-term debt can be expected to vary as a result of future
business requirements, market conditions and other factors. Due to the variable
rates, our interest cost will fluctuate during the course of any financial year.
We do not undertake any specific actions to cover our exposure to interest risk
and we are not a party to any interest risk management transactions.

         Note 21 to the consolidated financial statements discusses the fair
value of our financial instruments.

         NEW U.S. ACCOUNTING STANDARDS

         In November 2002, the EITF reached a consensus on Issue 00-21,
addressing how to account for arrangements that involve the delivery or
performance of multiple products, services, and/or rights to use assets. Revenue
arrangements with multiple deliverables are divided into separate units of
accounting if the deliverables in the arrangement meet the following criteria:
(1) the delivered item has value to the customer on a standalone basis; (2)
there is objective and reliable evidence of the fair value of undelivered items;
and (3) delivery of any undelivered item is probable. Arrangement consideration
should be allocated among the separate units of accounting based on their
relative fair values, with the amount allocated to the delivered item being
limited to the amount that is not contingent on the delivery of additional items
or meeting other specified performance conditions. The final consensus will be
applicable to agreements entered into in fiscal periods beginning after June 15,
2003 with early adoption permitted. Nera will adopt EITF Issue 00-21on January
1, 2004.

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to expense, (4) subsequent
measurement of the liability and (5) financial statement disclosures. SFAS 143
requires

                                       64
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset and depreciated over the
life of the associated fixed asset. An entity shall measure changes in the
liability for an asset retirement obligation due to passage of time by applying
an interest method of allocation to the amount of the liability at the beginning
of the period. The interest rate used to measure that change shall be the
credit-adjusted risk-free rate that existed when the liability was initially
measured. That amount shall be recognized as an increase in the carrying amount
of the liability and as an expense classified as an operating item in the
statement of income.

         SFAS 143 is effective for fiscal years beginning after June 15, 2002,
with early application encouraged. We will adopt SFAS 143 effective January 1,
2003 and have not yet evaluated the effect upon adoption.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which is effective for financial
statements where exit or disposal activities are initiated after December 31,
2002. This statement nullifies EITF Issue 94-3, "Liability Recognition for
Certain Employee Termination Benefits and other Costs to Exit an Activity,"
which allowed recognition of a liability for exit and disposal activities upon
management's intent to exit or dispose of an activity. This statement requires
that a liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. Nera will adopt this statement for
exit or disposal activities initiated after January 1, 2003.

         In May 2003 the FASB issued SFAS 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", the new
accounting standard for certain types of freestanding financial instruments and
disclosure regarding possible alternatives to settling financial instruments.
The Group has not evaluated what impact, if any, adoption of the Statement will
have on the Group's consolidated financial condition and results of operation.
The Statement is effective for all financial instruments entered into or
modified after May 31, 2003 and is otherwise effective at the beginning of the
first interim period after June 15, 2003.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure." This Statement amends
SFAS No. 123, "Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The disclosure provisions of this Standard are effective for fiscal
years ending after December 15, 2002. Since Nera are en Item 17 filer no
additional disclosures are necessary.

         In November 2002, FASB issued Interpretation (FIN) 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". This Interpretation clarifies certain
elements related to measurement and disclosure of guarantees, including product
warranties. The interpretation clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the obligations it
has undertaken in issuing the guarantee, including its ongoing obligation to
stand ready to perform over the term of the guarantee in the event that the
specified triggering events or conditions occur. The recognition and measurement
provisions are applicable to guarantees issued or modified after December 31,
2002. Nera will determine the impact of (FIN) 45 and has reflected its findings
in this Form 20-F during preparing the 2003 20 F filing.

         In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51 ("FIN 46"). The
Interpretation requires the consolidation of entities in which an enterprise
absorbs a majority of the entity's expected losses, receives a majority of the
entity's expected residual returns, or both, as a result of ownership,
contractual or other financial interests in the entity. Currently, entities are
generally consolidated by an enterprise when it has a controlling financial
interest through ownership of a majority voting interest in the entity. The
company does not believe that the adoption of FIN 46 will have a material impact
on the financial position, results of operations or cash flows of the Company.

                                       65
ITEM 12.          DESCRIPTION OF SECURITIES OTHER THAN EQUITY
         SECURITIES

         Not applicable.

PART II

         ITEM 13.          DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         Not applicable.

         ITEM 14.          MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES
         HOLDERS AND USE OF PROCEEDS

         Not applicable.

         ITEM 15.          CONTROLS AND PROCEDURES

         As of a date within 90 days of the filing date of this annual report
(the "Evaluation Date"), an evaluation was performed under the supervision and
with the participation of our management, including the chief executive officer
and the chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)). Based on that evaluation our management,
including the chief executive officer and the chief financial officer, concluded
that our disclosure controls and procedures were effective as of the Evaluation
Date. There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent to
the Evaluation Date.

         In designing and evaluating our disclosure controls and procedures, our
management, including the chief executive officer and the chief financial
officer, recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the company have been detected.

         ITEM 16.          [RESERVED]

                                       66
PART III

         ITEM 17.          FINANCIAL STATEMENTS

Index to Consolidated Financial Statements of Nera ASA and Subsidiaries
Page
Report of Independent Auditors-
   Report of Ernst & Young AS for the fiscal year
   ended December 31, 2002, dated March 31, 2003                               F-2

   Report of Arthur Andersen & Co. for the fiscal years
   ended December 31, 2000 and 2001, dated March 20 and April 30, 2002         F-3

Consolidated Statements of Profit and Loss for the years
ended December 31, 2000, 2001 and 2002                                         F-4

Consolidated Balance Sheets as of December 31,
2001 and 2002                                                                  F-5

Consolidated Statements of Cash Flows for the
years ended December 31, 2000, 2001 and 2002                                   F-7

Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 2000, 2001 and 2002                    F-8

Notes to the Consolidated Financial Statements                          F-9 - F-34
67
REPORT OF INDEPENDENT AUDITORS

         THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NERA ASA

         We have audited the accompanying consolidated balance sheet of Nera ASA
and subsidiaries as of December 31, 2002, and the related consolidated
statements of profit and loss, shareholders' equity, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of Nera ASA and
subsidiaries as of December 31, 2001 and for the years ended December 31, 2001
and 2000, were audited by other auditors who have ceased operations as a foreign
associated firm of the Securities and Exchange Commission Practice Section of
the American Institute of Certified Public Accountants and whose report dated
March 20 and April 20, 2002, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Nera ASA and
subsidiaries at December 31, 2002, and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in Norway.

Accounting principles generally accepted in Norway vary in certain respects from
accounting principles generally accepted in the United States. The application
of the latter would have affected the determination of the consolidated net loss
of Nera ASA and subsidiaries for the year ended December 31, 2002, and of
consolidated shareholders' equity as of December 31, 2002, to the extent
summarized in Note 30 of the consolidated financial statements.

Ernst & Young AS

Bergen, Norway
March 31, 2003

                                       68
This report (i) is a copy of the accountants' report, dated March 20, and
April 20, 2002, previously issued by Arthur Andersen & Co. for the financial
statements of Nera ASA as of December 31, 1999, 2000 and 2001, and for the years
then ended, (ii) has not been reissued by Arthur Andersen & Co. and (iii) is
included herein pursuant to Rule 2.02(e) of Regulation S-X.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Nera ASA:

         We have audited the accompanying consolidated balance sheets of Nera
ASA and its subsidiaries (the "Company") as of December 31, 1999, 2000 and 2001,
and the related consolidated statements of profit and loss, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1999, 2000 and 2001, and the related consolidated statements of profit and loss,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in Norway.

Accounting practices used by the Company in preparing the accompanying financial
statements conform with generally accepted accounting principles in Norway, but
do not conform with accounting principles generally accepted in the United
States. A description of these differences and a complete reconciliation of
consolidated net income and shareholders' equity to US generally accepted
accounting principles is set forth in Note 32.

/S/ ARTHUR ANDERSEN
-------------------

ARTHUR ANDERSEN & CO
Bergen, Norway, March 20 and April 20, 2002

                                       69
NERA ASA AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF PROFIT AND LOSS
-------------------------------------------------------------------------------------------------------------
(Amounts in NOK million except share data)                        Note        2002         2001        2000
-------------------------------------------------------------------------------------------------------------
Sales revenue                                                                2 438,5      2 880,6     2 539,1
Other operating revenues                                                         6,3         12,7        10,7
-------------------------------------------------------------------------------------------------------------
Operating revenue                                                   2,4      2 444,8      2 893,3     2 549,8
-------------------------------------------------------------------------------------------------------------
Changes in work in progress and finished goods                                 (24,2)        54,8       (37,3)
Cost of materials                                                           (1 285,6)    (1 411,1)     (966,6)
Payroll expense                                                      10       (679,8)      (722,8)     (649,6)
Depreciation                                                        5,6        (83,5)       (87,9)      (66,9)
Other operating expense                                          7,9,13       (505,0)      (894,4)     (724,9)
-------------------------------------------------------------------------------------------------------------
Operating costs                                                             (2 578,1)    (3 061,4)   (2 445,3)
-------------------------------------------------------------------------------------------------------------
Operating income (loss) before restructuring and writedowns                   (133,3)      (168,1)      104,5
-------------------------------------------------------------------------------------------------------------
Restructuring expenses and writedowns                                12        (11,1)      (264,0)          -
-------------------------------------------------------------------------------------------------------------
Operating income (loss)                                                       (144,4)      (432,1)      104,5
-------------------------------------------------------------------------------------------------------------
Income (loss) from investments in associated companies               16        (23,8)        30,2        26,5
Financial income                                                     11         74,8        108,8       103,6
Financial expense                                                    11        (68,8)      (155,2)      (41,3)
-------------------------------------------------------------------------------------------------------------
Net financial items                                                            (17,8)       (16,2)       88,8
-------------------------------------------------------------------------------------------------------------
Income (loss) before tax                                                      (162,2)      (448,3)      193,3
-------------------------------------------------------------------------------------------------------------
Taxes                                                                14         33,7         81,3       (57,0)
-------------------------------------------------------------------------------------------------------------
Net income (loss)                                                             (128,5)      (367,0)      136,3
-------------------------------------------------------------------------------------------------------------
Minority interest                                                              (16,5)        (3,7)
-------------------------------------------------------------------------------------------------------------
Net income (loss) after minority interests                                    (145,0)      (370,7)      136,3
-------------------------------------------------------------------------------------------------------------
Earnings (loss) per share, primary (NOK)                             15        (1,19)       (3,02)       1,22
Earnings (loss) per share, diluted (NOK)                             15        (1,19)       (3,02)       1,22
-------------------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated financial
                                  statements.

                                       70
NERA ASA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------
(Amounts in NOK million)                                    Note       December 31,
-------------------------------------------------------------------------------------
                                                                      2002      2001
-------------------------------------------------------------------------------------
ASSETS:
Deferred tax asset                                             14     174,0     113,5
IT software                                                     6      23,7
Goodwill                                                        6      18,9      23,7
-------------------------------------------------------------------------------------
Intangible fixed assets                                               216,6     137,2
-------------------------------------------------------------------------------------
Land, buildings and other property                              5      13,0      17,3
Machinery and plant                                             5      83,0     105,7
Fixtures and fittings, tools, office machinery, etc.            5     103,1     145,1
-------------------------------------------------------------------------------------
Property, plant and equipment                                         199,1     268,1
-------------------------------------------------------------------------------------

Investments in associates                                  16, 18      33,3      72,5
Investments in other shares                                    18       0,6       0,6
Prepaid pension costs                                          20      35,8      27,1
Other long-term receivables                                    21      91,8     119,7
-------------------------------------------------------------------------------------
Financial non-current assets                                          161,5     219,9
-------------------------------------------------------------------------------------
Non-current assets                                                    577,2     625,2
-------------------------------------------------------------------------------------
Raw materials                                                  22     161,6     272,4
Work in progress                                               22      88,3     142,6
Finished goods                                                 22     133,0     119,7
-------------------------------------------------------------------------------------
Inventories                                                           382,9     534,7
-------------------------------------------------------------------------------------
Trade receivables                                              23     518,6     781,6
Cost in excess of billings                                            202,8     222,7
Other short-term receivables                                   25      82,5     152,5
-------------------------------------------------------------------------------------
Debtors                                                               803,9   1 156,8
-------------------------------------------------------------------------------------
Cash and cash equivalents                                      19     795,8     899,5
-------------------------------------------------------------------------------------
Current assets                                                      1 982,6   2 591,0
-------------------------------------------------------------------------------------
ASSETS                                                              2 559,8   3 216,2
-------------------------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated financial
                                   statements.

                                       71
NERA ASA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (continued)
--------------------------------------------------------------------------------
(Amounts in NOK million)                            Note        December 31,
--------------------------------------------------------------------------------
                                                              2002       2001
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES:
Share capital                                       27,30      247,1       247,1
Treasury stock                                      27,30       (3,3)       (2,5)
Share premium reserve                                  30    1 265,2     1 265,2
--------------------------------------------------------------------------------
Paid-in capital                                              1 509,0     1 509,8
--------------------------------------------------------------------------------
Other equity                                           30     (136,6)       61,3
--------------------------------------------------------------------------------
Retained earnings                                             (136,6)       61,3
--------------------------------------------------------------------------------
Minority interest                                      30      240,2       157,0
--------------------------------------------------------------------------------
Equity                                                       1 612,6     1 728,1
--------------------------------------------------------------------------------
Pension liabilities                                    20       41,8        36,3
Deferred tax                                           14        3,2         0,5
--------------------------------------------------------------------------------
Provisions for liabilities                                      45,0        36,8
--------------------------------------------------------------------------------
Liabilities to financial institutions                            4,3         8,4
Other non-current liabilities                           7       42,7        56,6
--------------------------------------------------------------------------------
Other non-current liabilities                                   47,0        65,0
Liabilities to financial institutions                            4,8       192,4
Trade creditors                                                313,2       427,3
Customer advances and billings in excess of cost       28      196,8       291,1
Tax payable                                            14       24,5        37,1
Public duties                                                     45        50,4
Dividends
Other short-term liabilities                        12,17      270,9       388,0
--------------------------------------------------------------------------------
Current liabilities                                            855,2     1 386,3
--------------------------------------------------------------------------------
Liabilities                                                    947,2     1 488,1
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES                                       2 559,8     3 216,2
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Contingent liabilities                                 29      239,5       316,9
--------------------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated financial
                                   statements.

                                       72
NERA ASA AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------------------
(Amounts in NOK million)                                                 2002       2001        2000
-----------------------------------------------------------------------------------------------------
Net income (loss)                                                       (128,5)    (367,0)      136,3
Ordinary depreciation                                                     83,5       87,9        66,9
Writedown of goodwill and financial non-current assets                       -      236,4           -
Gain (loss) on sales of property, plant and equipment                    (17,9)     (10,8)       12,9
Gain (loss) on sales of shares                                               -          -        (1,3)
Unrealized loss on shares                                                    -          -           -
Deferred taxes                                                           (89,9)    (102,8)       (0,1)
Provision for bad debts                                                   15,6       13,1         0,3
Net income from associated companies                                      23,8      (30,2)      (26,5)
Change in inventory                                                      151,8      (91,5)      (43,0)
Change in trade receivables                                              247,3      203,8      (193,6)
Change in costs in excess of billings                                       20      (18,3)      (89,5)
Change in customer advances and billings in excess of cost               (94,3)    (124,9)       81,9
Change in trade payable                                                 (114,0)     (46,9)       84,4
Difference in pension costs recognized and net pension payments           (3,2)      (8,2)       (8,8)
Items classified as investment or financing activities                       -          -           -
Change in other accruals                                                 (59,6)     (67,1)       57,9
-----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                       34,6     (326,5)       77,8
-----------------------------------------------------------------------------------------------------
Proceeds from sales of property, plant and equipment                       7,9        1,0        10,6
Capital expenditures                                                     (61,4)    (129,1)     (105,8)
Net proceed from sale of shares                                              -          -       155,5
Loans to third parties                                                    27,8      (15,8)      (38,0)
Investments in other shares                                                  -          -       (33,0)
Other investments                                                         82,9      150,8       (56,1)
-----------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities                       57,2        7,0       (66,9)
-----------------------------------------------------------------------------------------------------
Repayment of long-term loans                                              (4,1)    (237,6)       (2,4)
Principal payments on capital leases                                         -          -           -
Repayment of short-term loans, net                                      (188,4)     182,3         3,1
Net borrowings (repayment) of bank overdraft facilities                    0,8       (4,3)        4,6
Proceeds from issuance of shares                                          37,7        5,2       860,6
Change, own shares                                                        (2,8)     (26,8)      (10,9)
Dividends paid                                                           (26,8)     (27,1)      (19,6)
Net cash provided by (used in) financing activities                     (188,6)    (108,3)      835,5
-----------------------------------------------------------------------------------------------------
Effect of changes in current exchange rates                               11,9        7,0        (7,6)
-----------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                                 (103,7)    (420,8)      838,8
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period                         899,5    1 320,3       481,5
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                               795,8      899,5     1 320,3
-----------------------------------------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated financial
                                  statements.

                                       73
NERA ASA AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
PART II. Amounts in              Number of     Share Capital                                   other          Net
NOK 1,000s, except for            Shares        (par value      Restricted   Unrestricted   Translation     income
number of shares                Outstanding       NOK 2)         Reserves      Reserves     adjustment      (loss)     Total
Balance at Dec 31, 1999            96,093.7        192.2          569.9          211.9         -4.5             0.0     969.5

Net income                                                                                                    136.3     136.3

Translation adjustments                                             3.2                         0.3                       3.5

Issuance of shares                 27,096.6         54.2          881.7                                                 935.9

Purchase of own shares                                             -0.6          -10.3                                  -10.9

Cost of shares issued                                             -41.8                                                 -41.8

Tax effect shares issued                                           11.7                                                  11.7

Dividend                                                                                                      -27.2     -27.2

Allocation of net income and
transfers                                                          29.6           79.5                       -109.1       0.0

Balance at Dec 31, 2000           123,190.4        246.4        1,453.7          281.1         -4.2             0.0   1,977.0

Net income                                                                                                   -366.9    -366.9

Translation adjustments                                                                       -13.7                     -13.7

Issuance of shares                      339          0.7            4.5                                                   5.2

Purchase of own shares                                             -1.9          -24.9                                  -26.8

Allocation of net income and
transfers                                                        -102.9         -267.7                        366.9      -3.7

Balance at Dec 31, 2001           123,529.4        247.1        1,353.4          -11.5        -17.9             0.0   1,571.1
Net loss                                                                                                     -145.0    -145.0
Purchase of own shares                                             -0.8           -2.0                                   -2.8
Changes in other equity                                                           -6.6                                   -6.6
Translation difference                                                                        -44.3                     -44.3
Balance at Dec 31, 2002           123,529.4        247.1        1,352.6          -20.1        -62.2          -145.0   1,372.4
The accompanying notes form an integral part of these consolidated financial
                                   statements.

                                       74
NERA ASA AND SUB SIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING PRINCIPLES

The annual accounts have been prepared in accordance with the Norwegian
Accounting Act of 1998 and generally accepted accounting principles. The
financial statements are based on the established accounting principles in
accordance with the generally accepted accounting principles in Norway;
principles of transactions, accrual, matching, prudence, congruence, hedging,
best estimate and the going concern assumption. Financial statements preparation
require estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses as well as disclosures of contingencies.
Actual results may differ from estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the parent
company, Nera ASA, and each of those companies in which it owns, directly or
indirectly through subsidiaries, over 50 % of the voting rights, or has the
power to control the financial and operational policies of the company (the
"Company" or the "Group"). The accounting principles are uniform for the Group.
All significant intercompany transactions and balances are reconciled and
eliminated in the consolidated accounts. Companies acquired, have been
consolidated from the transaction date. At gradual acquisition the over/under
value are measured on every single acquisition. When subsidiaries are sold or
otherwise disposed of, the results until the date of disposal is included in the
consolidated accounts.

When subsidiaries are acquired the cost price of the shares in the parent
company is eliminated against the equity of the subsidiary at the time of the
acquisition. Value in excess of the book equity of the subsidiary is allocated
to identifiable assets and liabilities. Acquired assets and liabilities are
recorded at market value at the time of the acquisition. Any additional excess
value that cannot be allocated to assets and liabilities is recorded on the
balance sheets as goodwill or negative goodwill. Deferred taxes are taken into
account and recorded when excess value is assigned to assets and liabilities,
however, goodwill is recorded net of tax. Goodwill and excess value associated
with foreign subsidiaries are translated from the relevant currency at the
exchange rate at the time of acquisition.

The Company's share of the profit or loss from associated companies in which the
Company owns 20 - 50 % of the voting rights and has significant financial and
operational influence, is included in the consolidated financial statements
according to the equity method. Accordingly, the investments carrying amount is
periodically increased (decreased) by the investor's proportionate share of the
earnings (losses) of the investee and decreased by all dividends received by the
investor from the investee. Value in excess of book value of equity in the
associated company is amortised on a straight-line basis over the periods
estimated to be benefited. The share of profit or loss is presented as a
financial item in the statements of profit and loss and the carrying amount is
included in the balance sheets as financial non-current assets.

The Company's foreign subsidiaries are considered as independent units and are
translated from their respective functional currencies into Norwegian kroner at
the exchange rates in effect at the balance sheet date. Results of operations
are translated using average exchange rates in effect during the reporting
period. Resulting translation adjustments are accumulated as a component of
shareholders' equity.

Subsidiaries in countries with hyperinflation are translated as if functional
currency (USD) was the entities' accounting currency. The effect of the
translation to functional currency is charged to the statements of profit and
loss.

MINORITY INTERESTS

The share of the profit/loss after tax attributable to minority interests is
presented on a separate line after the Group's net income (loss) for the year.
The share of the equity attributable to minority interests is presented on a
separate line as a specification of the Group's equity.

The share of equity attributed to minority interests is calculated to fair value
of assets and liabilities at time of acquisition.

SUBSIDIARIES/ASSOCIATED COMPANIES

In the parent company's financial statements, investments in subsidiaries are
included in accordance with the cost method and associated companies in
accordance with the equity method.

                                       75
REVENUE RECOGNITION

Revenues from sale of goods are recognised net of discounts and recorded when
shipped and/or services are performed and the risk passed to the customer.
Revenues on long-term contracts are recognised using the percentage of
completion inclusive net profit method. Project revenues include direct
materials, wages, and other direct costs, together with indirect costs and
portion of profit, which can be allocated to the project.

For certain contracts, where the delivery of equipment is clearly separable from
installation, training and other aspects of the contract, the Company segments
the contract and recognises revenue on each segmental portion individually.
Income recognition on contracts is deferred until progress reaches a level of
completion (generally based on established milestones) sufficient to reasonably
estimate the probable outcome. If estimated total costs on a contract indicate a
loss, the entire amount of the estimated loss is provided for currently.

For certain long-term contracts, the Company obtains advance payments from
customers to finance necessary project investments. To present operating margins
and financial expenses as if the investments had been financed through third
parties, the Company calculates an imputed interest amount when recognising
sales under these long-term contracts (if material). The imputed interest is
added to sales and financial expense, with no impact on the Company's net
income.

FOREIGN CURRENCY

Monetary items denominated in foreign currencies are translated into Norwegian
kroner using the exchange rate in effect on the balance sheet date. Since 2001
the resulting currency gain/loss is recorded net as financial income or
expenses. The corresponding figures that previously were presented on a gross
basis have been revised. Due to its considerable international operations, the
Group is exposed to changes in exchange rates. The Group policy is to balance
the differences in debtors and liabilities through financial instruments like
bank deposits in currency, forward contracts and options. The Company does not
issue or hold financial derivatives for trading or speculative purposes. Forward
foreign exchange contracts (forward contracts), and currency swaps are used to
hedge future sales or purchases and are not recorded until the respective sale
or purchase transaction is recorded. Such foreign currency transactions are
considered hedges of sales when the foreign currency commitment is reasonably
assured and the foreign currency transaction is designated as a hedge of the
foreign currency exposure. Forward contracts are also used to hedge accounts
receivable and accounts payable. Accounts receivable/payable have been
translated using the exchange rate in effect on the balance sheet date.
Unrealised gain or loss on foreign currency forwards designated as hedging
contracts is netted against gain/loss on the hedged items.

RESTRUCTURING COSTS

Restructuring provisions and write-downs of assets are made if the Company,
within the balance sheet date, has announced or started a restructuring plan, in
which the Company clearly states what part of the Company the plan embraces,
approximately how many employees will be affected, actions to be taken and
period for implementation. Provisions only include costs, which cannot be
associated with future earnings.

CLASSIFICATION AND VALUATION OF BALANCE SHEET ITEMS

Assets intended for permanent ownership or use are classified in the balance
sheets as fixed assets. Other assets are classified as current assets.
Liabilities that fall due later than one year after the end of the financial
year are classified as long-term liabilities. Other liabilities are classified
as short-term liabilities.

Current assets are valued at the lower of cost and fair value (the lower of cost
and market). Current liabilities are stated at the nominal amount at the
transaction date. Non-current assets are stated at cost unless a permanent
deterioration in value has occurred, in which case the change in value must be
recognised as a write-down. Long-term debt is valued at the nominal amount at
the transaction date.

RESEARCH AND DEVELOPMENT COSTS (R&D)

Internal research and development costs are expensed as incurred. Purchased
technology is capitalised at acquisition cost and amortised over the lifetime of
the project.

INCOME TAXES

Income tax expense includes tax payable and changes in deferred taxes. Deferred
tax liabilities/assets are calculated in accordance with the liability method.
Deferred income taxes are provided for all temporary differences between
financial accounts and tax basis of assets and liabilities, and tax loss carry
forwards. Deferred tax liabilities are not discounted. An allowance is made, if
deemed necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realised through future earnings.

                                       76
FIXED ASSETS AND LEASING AGREEMENTS

Property, plant and equipment (fixed assets) are stated at cost, less
accumulated depreciation and write-downs. Depreciation is recorded on a
straight-line basis over the expected economic life of the assets. Expenditures
for additions, significant renewals and betterments are capitalised, whereas
expenditures for maintenance and repairs are charged to profit and loss as
incurred. When assets are sold or retired, any gain or loss is included in other
operating revenues and other operating expenses, respectively. Leases, which
provide Nera with substantially all rights and obligations of ownership, are
accounted for as capital leases and recorded as assets under property, plant and
equipment. Present value of lease payments is recorded as interest bearing under
long-term debt. The assets are depreciated and the related liabilities are
reduced by the amount of the lease payments less the effective interest expense.
Other leases are accounted for as operating leases with lease payments
recognised as an expense over the lease term. Fixed and intangible assets are
reviewed for impairment whenever events or changes in circumstances indicate
loss in value. Calculations are undertaken based on discounted future cash flow
for assets still being used within the Company, and based on estimated sales
price net of sales cost for assets for sale. If calculated value is lower then
recorded, write-downs will be undertaken and the assets will be recorded to fair
value or sales price net of cost of sales for assets for sale.

SHARES

Short-term shareholdings are stated at the lower of cost and market value.
Investments in other shares are stated at cost. Write-downs are undertaken
individually if fair value is understood to be lower than cost and if it is not
considered temporary. Gain and loss from short-term shareholdings and
investments in other shares are recorded as financial items.

PENSION ACCOUNTING

According to the Norwegian accounting standard for pensions, the projected
benefit obligation (funded and unfunded defined benefit pension plans) is the
actuarial present value of benefits based upon the pension benefit formula,
taking into consideration the years of service rendered and assumptions about
future compensation and pension benefit level. Pension plan assets are measured
at market value. Net periodic pension costs (gross pension costs less estimated
return on plan assets) are included in payroll expenses. The gross pension cost
includes service cost, interest costs on the projected benefit obligation, and
amortisation of unrecognised gain and loss.

Changes in estimates and deviations between actual and expected return on plan
assets are amortised over the remaining average service period. The aggregate
net asset or net obligation is recorded as a financial non-current asset or as a
long-term liability, respectively. One pension scheme is over-funded (plan
assets exceed projected benefits). Due to known future obligations and
expansions in the Group, the assets in the over-funded pension plans are
expected to be utilised to satisfy future obligations. Provisions for social
security tax are based on the net-recorded liability/asset and presented as part
of the pension liabilities/assets.

EMPLOYEE OPTIONS CONTRACT

Stock options for employees defined as fixed plans are recognised as
compensation costs if the quoted market price of the stock at the grant date is
higher than the strike price. Social security tax is calculated based on the
difference between the quoted stock price and the strike price at any time.
Social security taxes are recorded as compensation cost over the remaining
vesting period.

INVENTORIES

Inventories are stated at the lower of cost, using the first-in, first-out
(FIFO) method, and net realisable value. Company manufactured products are
valued to full production cost. Provisions are made for obsolete inventories.

RECEIVABLES

Trade receivables and other receivables are recorded at their nominal value less
provisions for any expected losses. Provision for expected loss on trade
receivables are made on a concrete assessment of both single items and the
total.

COMPLETED, BUT NOT BILLED PRODUCTION/CUSTOMER ADVANCES

Earned, but not billed revenues on long-term contracts under the percentage of
completion method, represent completed but not billed productions, and are
classified as current receivables. Billings in excess of project revenues
represent advances received on contracts. The net billings in access of project
revenues are classified as current liabilities.

                                       77
CASH AND CASH EQUIVALENTS

The Company considers cash, bank deposits and all highly liquid investments
having an original maturity of three months or less at the date of purchase as
cash equivalents.

CONTINGENT LIABILITIES

Provisions are recognised if the probability of occurrence is more then 50 %.
Best estimate is used to calculate the settlement value.

GOVERNMENTAL CONTRIBUTIONS AND GRANTS

Subsidies from governmental agencies are received as operational or investment
contributions. Operational subsidies are matched to the relevant income and
expense. Investment subsidies are recognised gross and amortised over the life
of the investment as an adjustment to the investment deprecations.

SEGMENTS

The segment information is based on the Group's management- and reporting
structure. Segment revenues and costs are the portion of the Company's total
revenues and operating costs that could be directly allocated to the activities
in the segments. Segment assets and liabilities are balance sheet items directly
connected to the activity in the segments.

STATEMENTS OF CASH FLOWS

The cash flow statement illustrates the overall cash flow broken down by
operation, investment and financing activities. The statements illustrates the
effect of the activities on cash and cash equivalents.

EARNINGS PER SHARE (EPS)

Earnings per share are the majority share of profit, in the period, divided by a
weighted average of numbers of ordinary share in the same period. When
calculating diluted earnings per share, adjustments are made for all options
(from date of assignment). Potential shares in periods with a net loss are not
included.

                                       78
2            Segment information                          Amounts in NOK million

In 2002 Nera reported within the following three business segments: Transmission
Networks, Satellite Communications and Wireless Broadband Access. Nera
Telecommunications Ltd, Singapore has been consolidated since 1 December 2001.
The activities within Telecommunications are divided into the Group's business
segments, while Contract Manufacturing and Information Technology are reported
under Other activities and headquarters staff/eliminations.
BUSINESS AREAS:                     TRANSMISSION NETWORKS     SATELLITE COMMUNICATIONS  WIRELESS BROADBAND ACCESS
----------------------------------------------------------------------------------------------------------------------------
        INCOME STATEMENTS                      2002      2001    2000    2002    2001       2000     2002     2001      2000
----------------------------------------------------------------------------------------------------------------------------
Third party orders received                   1 243     1 687    2 216    677     586        576      215        4        72
Third party operating revenues                1 343     2 222    1 803    617     599        709       69       47        16
Operating costs (excl. R&D & Depreciation)   (1 297)   (1 890)  (1 476)  (494)   (482)      (512)     (80)    (134)      (57)
Depreciation                                    (48)      (41)     (31)   (10)    (11)       (12)      (6)     (32)      (19)
Income (loss) before R&D expenses                (2)      291      295    113     106        185      (17)    (119)      (61)
Net R&D expenses (5)                           (163)     (166)    (135)   (44)    (47)       (88)     (35)    (139)      (63)
Income (loss) before special charges (4)       (165)      161      160     69      65         98      (52)    (258)     (123)
Operat. inc. before restr. and write-downs     (165)      125      160     69      59         98      (52)    (258)     (123)
Restructuring costs and write-downs (1)         (31)      (39)       -      4       -          -       15     (225)        -

Operating income (loss)                        (196)       86      160     73      59         98      (37)    (483)     (123)
----------------------------------------------------------------------------------------------------------------------------
KEY FIGURES
----------------------------------------------------------------------------------------------------------------------------
Assets                                          966     1 376    1 223    174     223        214       53       48       171
Liabilities                                     368       553      591     97     100        121       28       31        44
Investments (2)                                  51        82       70      4       8         24        5       31       157
Number of man-years (average) (3)             1 021       972      906    251     301        300       79      100        47
Number of man-years as of 31 Dec                961     1 066      925    257     315        291       77       60        89
----------------------------------------------------------------------------------------------------------------------------
OTHER ACTIVITIES AND
                                                   HEADQUARTERS
           BUSINESS AREAS:                      STAFF/ELIMINATIONS                GROUP
--------------------------------------------------------------------------------------------------
           INCOME STATEMENTS                    2002     2001    2000     2002      2001     2000
--------------------------------------------------------------------------------------------------
Third party orders received                      384       -       37      2519      2277     2902
Third party operating revenues                   417       25      22      2445      2893     2550
Operating costs (excl. R&D)                     (384)    (120)    (46)    (2254)    (2626)   (2092
Depreciation                                     (19)      (4)     (4)      (84)      (88)     (67)
Income (loss) before R&D expenses                 14      (99)    (29)      107       179      391
Net R&D expenses(5)                                2        5      (1)     (240)     (347)    (287)
Income (loss) before special charges(4)           16      (59)    (30)     (133)      (91)     104
Operat. inc. before restr. and write-downs        16      (94)    (30)     (133)     (168)     104
Restructuring costs and write-downs(1)             -        -       -       (11)     (264)       -
Operating income (loss)                           16      (94)    (30)     (144)     (432)     104
--------------------------------------------------------------------------------------------------
KEY FIGURES
--------------------------------------------------------------------------------------------------
Assets                                          1367     1569    1868      2560      3216     3477
Liabilities                                      454      804     744       947      1488     1500
Investments (2)                                    2        8       -        61       129      252
Number of man-years (average) (3)                371       70     103      1722      1443     1356
Number of man-years 31 Dec                       374      379      35      1669      1820     1340
--------------------------------------------------------------------------------------------------
79
1. Restructuring and write-downs in 2002 are described in note 12.

2. Capital expenditures on fixed assets, IT software, goodwill, capitalised R&D
(purchased technology).

3. Man-years, monthly average.

4. Operating costs include special charges of NOK 77,0 million in 4th Quarter
2001.

5. In order to get comparable figures net R&D costs are reclassified between
Satellite Communication and Wireless Broadband Access for 2001. The effect is
increased R&D cost and decreased operating costs for Wireless Broadband Access
with NOK 18 million and a corresponding reduction and increase for Satellite
Communications.

The segment information is based on the Group's management reporting and is in
all material respects presented in accordance with the Group's accounting
policies.

3            Order intake per geographical destination    Amounts in NOK million
GROUP :               2002                2001                 2000
-----------------------------------------------------------------------------
Norway                281,5   11,2%      291,2     12,8%      192,4      6,6%
Great Britain         196,6    7,8%       95,8      4,2%      276,2      9,5%
Rest of Europe        441,7   17,5%      547,5     24,0%      702,8     24,2%
America               544,5   21,6%      673,7     29,6%      802,2     27,7%
Africa                113,5    4,5%       55,6      2,4%      292,3     10,1%
Asia                  899,3   35,7%      590,2     26,0%      438,3     15,1%
Oceania                41,5    1,7%       23,4      1,0%      197,8      6,8%
-----------------------------------------------------------------------------
TOTAL                2518,6  100,0%     2277,4    100,0%     2902,0    100,0%
-----------------------------------------------------------------------------
Order intake for Nera Telecommunications Ltd, Singapore for 2001 and 2000 is not
included.

4            Sales per geographical destination           Amounts in NOK million
GROUP :                2002                2001                 2000
-------------------------------------------------------------------------------
Norway                276,4    11,3%      287,6       9,9%     168,5       6,6%
Great Britain         110,3     4,5%      202,1       7,0%     310,2      12,2%
Rest of Europe        497,7    20,4%      558,5      19,3%     710,9      27,9%
America               538,4    22,0%      814,5      28,2%     667,7      26,1%
Africa                104,6     4,3%      189,8       6,6%     180,1       7,1%
Asia                  862,7    35,3%      671,5      23,2%     463,0      18,2%
Oceania                54,7     2,2%      169,2       5,8%      49,5       1,9%
-------------------------------------------------------------------------------
TOTAL                2444,8   100,0%     2893,3     100,0%    2549,8     100,0%
-------------------------------------------------------------------------------
80
5            Property, plant and equipment                Amounts in NOK million
LAND AND      MACHINERY   FIXTURE AND
                   GROUP :                        BUILDINGS     AND PLANT    FITTINGS       TOTAL
---------------------------------------------------------------------------------------------------
Purchase cost as of 1 January 2002                 28,8          221,0        366,9          616,7
Acquisitions during the year                          -           13,4         22,7           36,1
Disposals during the year                             -          (53,8)       (47,0)        (100,8)
Translation differences                            (5,0)         (19,2)       (33,8)         (58,0)
--------------------------------------------------------------------------------------------------
PURCHASE COST AS OF 31 DECEMBER 2002               23,8          161,4        308,8          494,0
--------------------------------------------------------------------------------------------------
Depreciation as of 1 January 2002                 (11,5)        (115,3)      (192,7)        (319,5)
Depreciation this year                             (1,4)         (29,2)       (45,3)         (75,9)
Disposal of depreciations during the year             -           53,9         15,8           69,7
Translation differences                             2,1           12,2         16,5           30,8
--------------------------------------------------------------------------------------------------
DEPRECIATION AS OF 31 DECEMBER 2002               (10,8)         (78,4)      (205,7)        (294,9)
--------------------------------------------------------------------------------------------------
Write-downs as of 31 December 2002                    -              -        (29,1)         (29,1)
Disposal of write-downs during the year               -              -         26,2           26,2
Translation differences                                              -          2,9            2,9
--------------------------------------------------------------------------------------------------
WRITE-DOWNS AS OF 31 DECEMBER 2002                    -              -            -              -
--------------------------------------------------------------------------------------------------
BOOK VALUE AS OF 31 DECEMBER 2002                  13,0           83,0        103,1          199,1
--------------------------------------------------------------------------------------------------
RATE OF DEPRECIATION                                  2 %        10-33%       10-33%
--------------------------------------------------------------------------------------------------
6            Goodwill/IT software                         Amounts in NOK million
IT
               Group:                             Goodwill    software
------------------------------------------------------------------------
Purchase cost as of 1 January 2002                  24,1            -
Acquisitions during the year                           -         26,5
------------------------------------------------------------------------
Purchase cost as of 31 December 2002                24,1         26,5
------------------------------------------------------------------------
Depreciation as of 1 January 2002                   (0,4)           -
Depresiation this year                              (4,8)        (2,8)
Depreciation as of 31 December 2002                 (5,2)        (2,8)
------------------------------------------------------------------------
Book value as of 31 December 2002                   18,9         23,7
------------------------------------------------------------------------
Rate of depreciation                                  20%       20-33%
------------------------------------------------------------------------
GOODWILL RELATES TO THE FOLLOWING INVESTMENTS AS OF 31 DECEMBER 2002:
-----------------------------------------------------------------------------------------------------------------
                                  TIME OF     PURCHASE       BOOK      DEPRECIATION       BOOK       DEPRECIATION
            COMPANY:            ACQUISITION     COST     VALUE 1 JAN    THIS YEAR     VALUE 31 DEC      PERIOD
-----------------------------------------------------------------------------------------------------------------
Nera Telecommunications Ltd,
Singapore                       28 Nov 2001     24,1         23,7          4,8            18,9         5 years
-----------------------------------------------------------------------------------------------------------------
TOTAL                                           24,1         23,7          4,8            18,9
-----------------------------------------------------------------------------------------------------------------
81
7            Rental agreements                            Amounts in NOK million

The following amounts have been charged as an expense for rental agreements of
operating equipment not capitalised in the balance sheet:
GROUP
---------------------------------------------------------------------------
                                                         2002   2001   2000
---------------------------------------------------------------------------
Buildings                                                58,1   60,4   43,4
Machinery and plant                                       0,6    0,3    0,5
Fixtures and fittings, tools, office machinery, etc.      6,4   14,1   21,4
---------------------------------------------------------------------------
TOTAL                                                    65,1   74,8   65,3
In 1996, the production and office buildings at Kokstadveien 23 and 27, Bergen
were sold. The premises were leased back from 1 October 1996. Supplementary
offices are leased in Kokstadveien 25. This year's rental costs were NOK 21.1
million, compared to NOK 21.4 million in 2001, and include Kokstadveien 23, 25
and 27. Nera is responsible for the maintenance of the leased premises. The
lease agreement is for 15 years, with a renewal option for an additional 15
years.

In accordance with Norwegian generally accepted accounting principles, the gain
wich resulted from the sale-leaseback of the buildings at Kokstadveien, was
deffered. The amortisation period has been changed to comply with the lease term
of 15 years, as compared to the previous amortisation period of 30 years, which
included the renewal option period. The effect from the adjustment of the
amortisation period amounts to NOK 12.0 million, which is accounted for as cost
reduction in this year's accounts. The deferred gain at year-end of NOK 33.8
million (NOK 47.7 million as of 31 December 2001) is included in Other
non-current liabilities.

Nera has a pre-emptive right to buy the premises at Kokstadveien 23 and 27 at
market value. Nera has exercised an option to buy Kokstadveien 25 at a fixed
price (NOK 22.5 mullion plus option premium), and the acquisition will be
effective 31 December 2003.

The Company has also entered into a lease agreement for office, warehouse and
production facilities at Bergerveien 12, Asker from 1 July 1998 to 30 June 2008
with a 10-year renewal option. The rental cost for 2002 is NOK 18.2 million (NOK
17.4 million in 2001).

8       Significant transactions and pro forma figures    Amounts in NOK million

Nera Electronics Ltd, Singapore, which was a 100 % owned subsidiary of Nera
Telecommunications Ltd (Nera Tel), was listed on the Singapore Stock Exchange on
15 July 2002. The price per share was fixed at SGD 0.33, corresponding to a
total market value for Nera Electronics of SGD 110 million.

Nera Electronics issued 30,000,000 shares in this initial public offering and
Nera Tel sold an additional 74,764,000 shares in this offering. In addition,
Nera Electronics issued an extraordinary dividend of SGD 11.2 (NOK 48.0) As a
result of these transactions, Nera Group earned NOK 94 million in cash and
continues to hold 68.18% of Nera Electronics through Nera Tel.

Until 1 July 1999 Nera Tel was a 100 % owned subsidiary of Nera ASA and
consequently fully consolidated. At 1 July 1999 Nera Tel was listed on the
Singapore Stock Exchange. Through issue of shares and second-hand sale, Nera
reduced its shareholder position to 47,34 %. Since 1 July 1999 Nera Tel has been
considered an associated company.

                                       82
On 28 November 2001 Nera ASA bought 10 million shares in Nera Tel for NOK 32.6
million and increased its ownership to 50,2 %. Based on this transaction, Nera
Tel's financial statements have been fully consolidated since 1 December 2001.
Some of Nera Tel's employees have options to purchase shares of Nera. These
options will not significantly affect Nera's ownership and control of the
company.

Pro forma accounting figures: We have prepared pro forma financial information
to provide a basis for comparing Nera Group's performance in 2001 with that of
2000 as if NeraTel had been included in, and its financial statements had been
fully consolidated with, Nera Group since 1 January 2000. There is a greater
degree of uncertainty associated with pro forma financial information than with
a comparison of actual financial information, Pro forma financial information
does not necessarily reflect the results that would have been achieved if the
acquisitions of Nera Tel were made at any time earlier than its acquisition on 1
December 2001. The pro forma financial information below has been prepared as if
we had increased our ownership in Nera Tel on 1 January 2000.

Excess value and amortisation of excess values: The amortisation of excess
values and goodwill in the pro forma figures are based on the excess value
analysis made at the time of the acquisition. Goodwill is amortised over the
expected earning period of 5 years.

(a) Accounting principles: No accounting principles have been identified that
make a material effect on the proforma figures.

(b) Translation of the result: The profit and loss accounts for Nera Tel have
been translated through the use of the average exchange rates for 2000 and 2001.

(c) Intercompany transactions and gains: In the pro forma figures transactions
between group companies have been eliminated according to the current structure
of the Group. An intercompany gain of NOK 105,9 million (3rd Quarter 1999)
related to equity issue and second-hand sale in Nera Tel, is eliminated in the
pro forma figures.
2001         2000
-----------------------------------------------------------
Operating revenues                      3635,5       3204,2
Operating result                        (361,0)       168,1
Net profit (loss) for the year          (340,2)       157,0
Minority interest share                   35,5         30,1
Earnings per share (NOK)                 (3,06)        1,14
Diluted earnings per share (NOK)         (3,06)        1,13
-----------------------------------------------------------
(d) Merger between Nera ASA and Nera Finans AS: Nera ASA and Nera Finans AS were
merged with effects on taxes and the accounts as of 1 January 2002. The merger
was carried out in accordance with the group concept of consistency. The parent
company's Financial Statements from 2001 are used as corresponding figures.

9            Research and development                    Amounts in NOK million

The Company expenses all research and development (R&D) when incurred. Purchased
research and development (R&D, purchased technology) is capitalised. The table
below outlines expensed R&D:
GROUP
-----------------------------------------------------------
                                 2002       2001      2000
-----------------------------------------------------------
Expensed R&D                     239,6      346,9     286,7
-----------------------------------------------------------
TOTAL                            239,6      346,9     286,7
-----------------------------------------------------------
83
Future earnings related to R&D in progress are presumed to be at least
equivalent to costs.

Throughout 2002, Transmission Networks' R&D activities continued to be related
to the completion of the new SDH long-haul radio InterLink (NL2000). To satisfy
the developing market for the new 3G mobile network, new configuration and
frequencies were also developed to complement the CityLink family.

Mobile Satellite Communication has carried out major, continous R&D activities
in connection with the development of mobile broadband terminals, and has also
introduced its new maritime Fleet family of products. Broadband Satellite
continued its development of DVB-RCS and regional systems for both earth
stations and terminals.

10           Payroll expenses, number of employees, etc   Amounts in NOK million
-------------------------------------------------------------------
                                                 GROUP
-------------------------------------------------------------------
                                       2002        2001        2000
-------------------------------------------------------------------
Salaries, wages and holiday pay       518,5       565,8       505,6
Other compensations, etc               53,6        45,6        44,7
Payroll tax                            77,6        88,3        82,4
Pension costs                          30,1        23,1        16,9
-------------------------------------------------------------------
TOTAL                                 679,8       722,8       649,6
-------------------------------------------------------------------
Average number of man-years           1 722       1 443       1 356
Total salary and remuneration, including pensions, to the Chief Executive
Officer and the other members of the Executive Committee and Members of the
Board of Directors and Corporate Assembly was as follows in 2002:
SALARY     PENSION    REMUNERATION     TOTAL
----------------------------------------------------------------------------------------------
President and CEO (1)                              2,1         0,1          0,1           2,3
Other members of the Executive Committee (2)      11,9         0,9          3,6          16,4
Board of Directors                                   -           -          1,2           1,2
Corporate Assembly                                   -           -          0,3           0,3
----------------------------------------------------------------------------------------------
TOTAL                                             14,0         1,0          5,2          20,2
----------------------------------------------------------------------------------------------
(1)  For the CEO for 2001 salary was NOK 2.3 million, pension was NOK 0.1
     million and remuneration was NOK 4.1 million.

(2)  Remuneration includes reported amounts for any bonus.

There have not been granted loan to or deposit securities for the Chief
Executive Officer, Members of the Board of Directors, members of the Corporate
Assembly, members of the Executive Committee or other employees or people close
related to them.

In compliance with authority given by the General Meeting of Nera, the Board of
Directors has issued option contracts in 2000, 2001 and 2002 to employees in the
parent company, Nera ASA and its subsidiaries. These option programmes are
further described in note 27.

CEO Bjorn Ove Skjeie was in 2000, 2001 and 2002 assigned 114,000, 99,000 and
81,000 options, respectively. In addition, a bonus agreement based on criterias
related to the Company's development was entered into with Mr. Skjeie. For the
financial year 2002, there will be no bonus disbursement to the CEO. The CEO has
a 12-month period of notice, which is extended to 24 months if his position
changes significantly or the Company merges with or is acquired by another
company or investor. Retirement age is 60, with pension limited to 80 percent of
salary at the time of retirement.

Similar bonus-agreements based on criterias related to the Company's development
and the individual responsibilities have been entered into with the other
members of the Executive Committee. With regard to the financial year 2002,
there will be bonus disbursement to some members of the Executive Committee
limited to NOK 1,5 million (excl. Nera Tel). With regard to shares and potential
shares in possession of the Members of the Executive Committee, see note 27.

                                       84
In 2002 the audit fee for the Groups' auditor Ernst & Young AS, is expensed with
NOK 4.1 million, of which NOK 0.9 million for Nera ASA. Furthermore, the Group
has incurred NOK 1.2 million of additional fees for other services, of which NOK
0.4 million for Nera ASA. Services provided by Andersen Business Consulting,
related to implementation of IT-systems in the Transmission area, are expensed
with NOK 6.8 million for the year ended December 31, 2002. Fee for audit
provided from other auditor's amounts to NOK 0.1 million. All figures are
exclusive VAT.

11           Financial income and financial expenses      Amounts in NOK million
Group
------------------------------------------------------------------
                                    2002           2001       2000
------------------------------------------------------------------
Interest income                      50.6          80.4       83.9
Other financial income               24.2          28.4       15.2
------------------------------------------------------------------
Financial income                     74.8         108.8      103.6
------------------------------------------------------------------

Interest expenses                    (4,6)        (18.4)     (26.3)
Foreign currency losses             (43.3)(1)      (6.0)         -
Write-down vendor financing             -        (106.1)         -
Other financial expenses            (20.9)        (24.7)     (15.0)
------------------------------------------------------------------
Financial expenses                  (68.8)       (155.2)     (41.3)
------------------------------------------------------------------
(1) Foreign currency losses include the effect of translation of subsidiary in
country with hyperinflation to functional currency (USD) with NOK 14,0 million.

12           Restructuring and write-downs                Amounts in NOK million

Total restructuring and write-down costs during 2002 amount to NOK 11.1 million.
NOK (10.3) million are related to reversal of provisions and the remaining NOK
21.4 million to write-downs.
BALANCE AS    PROVISIONS/                      APPLIED/        BALANCE AS
                                       OF 31 DEC.    REVERSIONS    WRITE-DOWNS      DISBURSEMENTS     OF 31 DEC.
                                          2001         IN 2002       IN 2002           IN 2002           2002
----------------------------------------------------------------------------------------------------------------
Restructuring Nera Ltd                    2,5            1,6           21,4              2,5              1,6
Restructuring Nera Netw orks AS             -            7,7              -                -              7,7
Closure of the Dallas office             39,2          (15,5)             -             23,7                -
Restructuring of the Boston office        0,2              -              -              0,2                -
Restructuring of Satellite                8,7           (4,1)             -              2,6              2,0
Restructuring of WBA Satellite            7,0              -              -              7,0                -
----------------------------------------------------------------------------------------------------------------
TOTAL                                    57,6          (10,3)          21,4             36,0             11,3
----------------------------------------------------------------------------------------------------------------
See note 17 Other current liabilities

Restructuring of Nera Ltd: During 1998, the Nera Board of Directors and
management prepared a plan for restructuring its unit in Great Britain. The
objective was to re-establish profit within the Nera unit through a focused
strategy and changes in the range of products. This involved dismissal of
personnel, write-downs of fixed assets and inventories. Total provisions for
restructuring were NOK 71.0 million in 1998. In 1999 the restructuring plan was
extended, and another NOK 37.8 million was expensed. All planned activities were
completed in 2001. In 2002 Nera decided to discontinue all production. The
current year's costs and provisions inclusive write-down of inventory, are
related to this restructuring.

Closure of the Dallas office: In 2001, the Company decided to close down its
operations in Dallas. Provisions for severance payments, purchase commitments
and other commitments are undertaken. Fixed assets, goodwill and inventories
have been written down to net realisation value. All significant activities
started in 2001 are finished in 2002.

Restructuring of Boston office: In 2001 Nera decided to restructure the unit in
Boston. Provisions for severance payments, purchase commitments and other
commitments have been undertaken. Fixed assets, goodwill

                                       85
and inventories have been written down to net realisation value. All significant
activities started in 2001 are finished in 2002.

Restructuring of Satellite/WBA Satellite: Due to market changes, parts of the
satellite unit have been reorganised. The reorganisation resulted in dismissals.
Provisions have been made for severance payments etc. Fixed assets and
inventories have been written down to net realisation value.

Restructuring Nera Networks AS: Due to changes in the market, parts of the
business have been reorganised. The reorganisation resulted in dismissals and
early retirements. Provisions have been made for severance payments, etc. All
significant activities were completed in 2002.

13           Government grants and contributions          Amounts in NOK million

During 2002, the Group have received NOK 8.1 million respectively as operating
grants. The amounts have been recorded as reduction in other operating costs.
GROUP
---------------------------------------------
COVERING:             2002       2001    2000
---------------------------------------------
R&D costs             8,1        13,1    13,5
---------------------------------------------
Research and development contributions are related to 6 projects, of which 5
were completed by the year-end 2002. The remaining project is expected to be
completed during 2003. For an SND-project, each company is obligated to
partially refund the contribution received in proportion to the Inmarsat Aero
product turnover during the period 1 January 1998 to 31 December 2003. The
refund ranges from 5 % to 11.5 % based on the turnover in the interval ranging
from NOK 110.0 millions to NOK 325.0 millions. Accumulated income is not
expected to reach the interval releasing the obligation to partially refund the
contribution received.

                                       86
14              Taxes                                     Amounts in NOK million
GROUP
-----------------------------------------------------------------------------------------------------------------
TAXES CONSIST OF:                                                                     2002          2001     2000
-----------------------------------------------------------------------------------------------------------------
Tax payable; Norway                                                                       -             -    58,6
Tax payable; outside Norway                                                            24,5          16,3     7,1
Changes in deferred tax; Norway                                                       (58,4)        (74,2)   (9,4)
Changes in deferred tax; outside Norway                                                 0,2         (23,4)    0,7
Adjustments for previous years                                                            -             -       -
-----------------------------------------------------------------------------------------------------------------
TAXES                                                                                 (33,7)        (81,3)   57,0
-----------------------------------------------------------------------------------------------------------------

RECONCILIATION OF TAX PAYABLE IN THE BALANCE SHEETS AND THE INCOME
STATEMENTS:                                                                           2002          2001
-----------------------------------------------------------------------------------------------------------------
Tax payable according to income statements                                             24,5          16,3
Tax payable before acquisition (Nera Tel) (1)                                             -          20,8
Adjustments for previous years                                                            -             -
-----------------------------------------------------------------------------------------------------------------
TAX PAYABLE                                                                            24,5          37,1
-----------------------------------------------------------------------------------------------------------------

RECONCILIATION OF NOMINAL TO ACTUAL TAX COST :                                        2002          2001
-----------------------------------------------------------------------------------------------------------------
Income before tax                                                                    (162,3)       (448,3)
EXPECTED TAXES BASED ON 28 % TAX RATE (2)                                             (45,4)       (125,5)

Items effecting actual tax cost:
Non-deductible expenses/non-taxable revenues                                          (18,0)         (3,5)
Foreign tax rate variations from Norwegian tax rate                                    (4,1)         29,0
Losses/temporary differences without net tax effect                                    18,5          15,6
Valuation allowance on previous years' deferred tax asset                               8,6          11,5
Income (loss) from investments in associated companies                                  6,7          (8,4)
Other                                                                                     -             -
-----------------------------------------------------------------------------------------------------------------
ACTUAL TAXES                                                                          (33,7)        (81,3)
-----------------------------------------------------------------------------------------------------------------

DEFERRED TAX:
Below is a specification of temporary differences between book and tax values,
including calculation of deferred tax liability/deferred tax asset at year-end.

BASIS FOR DEFERRED TAX:                                                               2002          2001
-----------------------------------------------------------------------------------------------------------------
Receivables                                                                          (105,0)         (1,4)
Inventories                                                                          (108,9)        (57,2)
Other current assets                                                                  (43,3)       (108,4)
-----------------------------------------------------------------------------------------------------------------
SUBTOTAL RELATED TO CURRENT BALANCE SHEET ITEMS                                      (257,2)       (167,0)
-----------------------------------------------------------------------------------------------------------------
Fixed assets and goodwill                                                             (13,7)          2,8
Pensions                                                                               (5,1)         (9,2)
Deferred gain                                                                         (33,8)        (47,7)
Shares and other securities                                                          (100,9)        (89,8)
Other temporary differences                                                           (33,8)          1,1
Loss carry forward                                                                   (595,0)       (416,4)
-----------------------------------------------------------------------------------------------------------------

SUBTOTAL RELATED TO NON-CURRENT BALANCE SHEET ITEMS                                  (782,3)       (559,2)
-----------------------------------------------------------------------------------------------------------------
TOTAL TEMPORARY DIFFERENCES                                                        (1 039,5)       (726,2)
-----------------------------------------------------------------------------------------------------------------
Adjustments for deferred tax asset based on temporary difference that cannot be
capitalised                                                                           427,8         186,2
-----------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX (DEFERRED TAX ASSET)                                                (170,8)       (113,0)
-----------------------------------------------------------------------------------------------------------------
Deferred tax in the balance sheet                                                       3,2           0,5
Deferred tax asset in the balance sheet                                              (174,0)       (113,5)
-----------------------------------------------------------------------------------------------------------------

TAX LOSS CARRY FORWARD MATURITY:                                                      2002
-----------------------------------------------------------------------------------------------------------------
2012                                                                                  459,0
Later than 2012                                                                       136,0
-----------------------------------------------------------------------------------------------------------------
TOTAL                                                                                 595,0
-----------------------------------------------------------------------------------------------------------------
(1) Included tax payable for Nera Telecommunications Ltd, Singapore for January
    until November 2001.

(2) Nominal tax rate in Norway.

                                       87
15                Earnings per share                      Amounts in NOK million
GROUP:                                             2002      2001      2000
-----------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Net income (loss) after minority interests                                                    (145,0)   (370,7)   136,3
Weighted average shares outstanding (millions)                                                 122,1     122,8    111,6
Basic earnings per share (NOK)                                                                 (1,19)    (3,02)    1,22
-----------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Net income (loss) after minority interests                                                    (145,0)   (370,7)   136,3
Weighted average shares outstanding, after adjustments for convertible bonds and
  options (mill                                                                                122,1     122,8    111,8
Diluted earnings per share (NOK)                                                               (1,19)    (3,02)    1,22
-----------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING (MILLIONS):
Weighted average shares outstanding                                                            122,1     122,8    111,6
Adjustments for share options                                                                      -         -      0,2
Weighted average shares outstanding, after adjustments for convertible bonds and options       122,1     122,8    111,8
16               Investments in associates                Amounts in NOK million
BEIJING NERA                                  TV MOBILE
                                              STENTOFON       NERATEK     WORLD WIDE         PTE LTD,
               GROUP:                       COM . CO. LTD.      AS      MOBILE COM . AS    SINGAPORE(1)    TOTAL
----------------------------------------------------------------------------------------------------------------
EXCESS VALUE ANALYSIS:
----------------------------------------------------------------------------------------------------------------
Booked equity at esablishment                    1,6           0,4           33,0              29,3         64,3
Goodwill                                         0,6           0,9              -              10,0         11,5
----------------------------------------------------------------------------------------------------------------
ACQUISITION COST                                 2,2           1,3           33,0              39,3         75,8
----------------------------------------------------------------------------------------------------------------

CALCULATION OF BOOK VALUE AS OF 31 DECEMBER 2002:
----------------------------------------------------------------------------------------------------------------
Opening balance as of 1 January 2002             1,7           6,7           30,3              33,9         72,6
This year's share of profit                     (0,1)          3,3           3,9              (30,9)       (23,8)
Dividends received by Nera                         -          (2,1)         (10,4)                -        (12,5)
Translation differences, etc.                      -             -              -              (3,0)        (3,0)
----------------------------------------------------------------------------------------------------------------
CLOSING BALANCE AS OF 31 DECEMBER 2002           1,6           7,9           23,8                 -         33,3
----------------------------------------------------------------------------------------------------------------
(1)  This year's share of profit from TV Mobile Ltd is negatively influenced by
     write-downs of the company's assets. The negative contribution on Nera's
     share of profit is approximately NOK 30.0 million.

(2)  The following financial statement data relate to our 20% investment in
     TVMobile Pte. Ltd., Singapore. (All figures are in NOK million).
Current assets:                         21.0
Non-current assets:                        0
Total assets:                           21.0
Long-term liabilities:                  21.9
Share holders equity:                   -0.9
Total liabilities and equity:           21.0
Operating revenue:                       7.7
Operating income:                     -112.9
Net income:                           -113.0
88
17                    Other current liabilities           Amounts in NOK million
GROUP
-------------------------------------------------------------------
                                                     2002      2001
-------------------------------------------------------------------
Accrued expenses                                     55,0      88,9
Provisions for guarantees                            36,7      51,7
Accrued interests                                       -       2,3
Accrued agent commissions                             5,2       9,2
Other current liabilities                            93,6     117,9
Provision for restructuring costs                    11,3      57,6
Provision for holiday pay, salary, etc.              69,1      60,4
-------------------------------------------------------------------
TOTAL                                               270,9     388,0
(1)  Restructuring and write-downs are described in note 12.

                                       89
18                          Investments in subsidiaries and associates
REGISTERED      THE COMPANY'S TOTAL                   VOTING      BOOK VALUE
             GROUP:                     OFFICE:      SHARE CAPITAL (MIILLION)   OWNERSHIP    RIGTHS    (NOK MILLION)
---------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN ASSOCIATES:
---------------------------------------------------------------------------------------------------------------------
Beijing Nera Stentofon Com. Co Ltd     China            CNY           4,2         36 %        36 %         1,6
Neratek AS                             Norway           NOK           0,3         45 %        45 %         7,9
World Wide Mobile Com. AS              Norway           NOK         165,0         20 %        20 %        23,8
TV Mobile Pte Ltd                      Singapore        SGD          40,0         20 %        20 %           -
---------------------------------------------------------------------------------------------------------------------
TOTAL                                                                                                     33,3
---------------------------------------------------------------------------------------------------------------------
SUBISIDIARIES INDIRECTLY OWNED :
-------------------------------------------------------------------------------------------------------
Nera Networks Pty Ltd                           Australia      AUD            0,0        100 %     100%
Nera America Latina Ltda                        Brazil         BRL            4,0        100 %     100%
Nera Colombia                                   Colombia       COP           10,0        100 %     100%
Nera GmbH                                       Germany        EUR            1,9        100 %     100%
Nera Ltd                                        Great Britain  GBP           18,2        100 %     100%
Nera (HK) Ltd                                   Hong Kong      HKD            6,1        100 %     100%
PT Nera Indonesia                               Indonesia      IDR        1 630,0        100 %     100%
Nera (India) Ltd                                India          INR           35,0        100 %     100%
Nera Networks Srl                               Italy          EUR            0,0        100 %     100%
Nera de Mexico SA De CV                         Mexico         MXP           43,9        100 %     100%
NeraInfocom (M) Sdn Bhd                         Malaysia       MYR            0,5        100 %     100%
Nera (Maylaysia) Sdn Bhd(1)                     Malaysia       MYR            1,1         30 %      30%
Nera Mechatronics AS                            Norway         NOK            8,1        100 %     100%
Nera Broadband Satellite AS                     Norway         NOK            7,5        100 %     100%
Nera Philippines                                Philippines    PHP           25,3        100 %     100%
Nera Networks Polska Sp.z.o.o.                  Poland         PLN            0,5        100 %     100%
Nera Electronics Ltd                            Singapore      SGD           16,5       68,3 %    68,3%
Nera (Thailand) Ltd                             Thailand       THB           10,0        100 %     100%
Nera Telecommunications (Taiwan) Co. Ltd        Taiwan         TWD           21,0        100 %     100%
Nera Americas Holding Inc.                      USA            USD            0,1        100 %     100%
Nera Americas Inc.                              USA            USD            0,1        100 %     100%
Nera Networks Inc.                              USA            USD            7,0        100 %     100%
Nera Telecommunications Inc.                    USA            USD           10,0        100 %     100%
-------------------------------------------------------------------------------------------------------
INVESTMENTS IN SHARES:
-------------------------------------------------------------------------------
IT VEST AS                        Norway     NOK    2,6   6,4 %   6,4 %     0,6
Nera (Malaysia) Sdn Bhd is consolidated based on a shareholders agreement that
results in ownership of more than 50%.

19             Cash and cash equivalents                  Amounts in NOK million

Group: Cash and cash equivalents for the Group as of 31 December 2002 consist of
NOK 795.8 million in cash and bank deposits. The Nera Group has no equivalents
in restricted bank deposits. The tax withholding liabilities as of 31 December
2002 are secured by bank guarantees totalling NOK 33.7 million. This amount is
included in Other guarantees in note 30. Unutilised credit facilities as of 31
December 2002 were NOK 71.9 million, by way of bank overdraft facility.

                                       90
20             Pensions and pension liabilities           Amounts in NOK million

The parent company, Nera ASA, and its Norwegian subsidiaries have pension plans
that give the employees the right to defined pension benefits in the future. As
of 31 December 2002 there were 1 313 participants in the pension plan financed
through an insurance company, including 264 people from the parent company
(including retired persons) and 1 049 from Nera's Norwegian subsidiaries. In
addition, there were 124 participants, some of whom opted for early retirement,
included in the pension plan, that is financed solely by the Company's operating
activities. The company's governmental special early retirement plan (AFP) is a
part of the uncovered schemes. All pension plans in the Company are considered
defined benefit plans.
GROUP
-----------------------------------------------------------------------------------------------
SPECIFICATION OF THE PENSION COSTS                              2002           2001        2000
-----------------------------------------------------------------------------------------------
Costs according to the benefit plans:
Service costs                                                    18,8           14,2       12,1
Interest costs                                                   23,5           20,3       18,0
Expected return on plan assets                                  (17,4)         (15,2)     (13,9)
Net amortisation                                                  5,2            3,8        2,6
Sale of business                                                    -              -       (1,9)
Pension costs excluding employee social security tax             30,1           23,1       16,9
Social security tax                                               4,2            3,2        2,4
-----------------------------------------------------------------------------------------------

PENSION COSTS INCLUDING EMPLOYEE SOCIAL SECURITY TAX             34,3           26,3       19,3
-----------------------------------------------------------------------------------------------

BENEFIT OBLIGATIONS AND FUNDING OF THE PLAN:                    2002            2001
-----------------------------------------------------------------------------------------------
INSURANCE COVERED SCHEMES
-----------------------------------------------------------------------------------------------
Actuarial present value of accrued benefit obligation          (247,3)        (230,6)
Projected compensation increases, etc.                          (51,8)         (50,6)
PROJECTED BENEFIT OBLIGATION (PBO)                             (299,1)        (281,2)
Plan assets at fair value                                       245,1          222,0
PLAN ASSETS IN EXCESS OF (LESS THAN) PBO                        (54,0)         (59,2)
Unrecognised (gain) loss, etc.                                   85,4           83,0
TOTAL                                                            31,4           23,8
Accrued social security tax                                       4,4            3,3
-----------------------------------------------------------------------------------------------
PREPAID PENSION COSTS                                            35,8           27,1
-----------------------------------------------------------------------------------------------

UNCOVERED SCHEMES AND AFP(1)
-----------------------------------------------------------------------------------------------
Actuarial present value of accrued benefit obligation           (64,4)         (49,9)
Projected compensation increases etc.                           (11,9)         (10,0)
PROJECTED BENEFIT OBLIGATION (PBO)                              (76,3)         (59,9)
Unrecognised (gain) loss, etc.                                   40,1           28,6
TOTAL                                                           (36,2)         (31,3)
Accrued social security tax                                      (5,6)          (5,0)
-----------------------------------------------------------------------------------------------
PENSIONS LIABILITIES                                            (41,8)         (36,3)
-----------------------------------------------------------------------------------------------

ASSUMPTIONS USED:                                               2002             2001
-----------------------------------------------------------------------------------------------
Expected return on plan assets                                    7,5 %          7,5 %
Discount rate                                                     7,0 %          7,0 %
Rate of increase in compensation                                  3,5 %          3,5 %
Rate of increase in social security base level (G-regulation)     2,5 %          2,5 %
Rate of increase in pensions                                      2,5 %          2,5 %
Estimated rate of employee participation in AFP                  50,0 %         50,0 %
-----------------------------------------------------------------------------------------------
(1) Governmental special pension scheme

                                       91
21                Financial market risk                   Amounts in NOK million

The Group has financial instruments related to its daily operations, such as
trade receivables and trade creditors. Project funding is under certain
circumstances utilised on large sales contracts, net book value as of 31
December 2002 is NOK 89.9 million. To reduce currency risk on trade receivables
and trade creditors and to balance the amounts related to future sale and
purchases, the Company uses financial derivatives like forward exchange
contracts and currency swaps.

Currency risk

The Group has production facilities in the USA, Norway and Singapore and an
international sales and marketing organisation with offices in a number of
countries. Due to the scope of its international operations, Nera is exposed to
currency fluctuations. At year-end the main currency exchange rate exposure was
related to Norwegian kroner versus US dollars, Euro and GB pounds. The company
utilises currency swaps and currency forwards to reduce the currency risk
exposure inherent in the Company's ordinary operations. Currency sales contracts
are utilised in invitations to tenders.

The table below specifies, listed by purchase and sales contracts, the Company's
contractual commitments converted to Norwegian kroner as of 31 December 2002:
SALES CONTRACTS          PURCHASE CONTRACTS
                 MATURITY/    --------------------------------------------------
                SETTLEMENT    FACE      UNREALISED        FACE       UNREALISED
CURRENCY           DATE       VALUE     GAIN/(LOSS)       VALUE      GAIN/(LOSS)
--------------------------------------------------------------------------------
USD                2003       281,0        26,1           24,7         (0,5)
                   2004        69,4        14,7              -            -

EUR                2003       108,0         1,5           15,5         (0,1)

GBP                2003        87,4         2,9           42,3         (0,9)
                   2004        11,8        (0,2)             -            -

AUD                2003         6,0         0,3            2,1         (0,1)

AED                2003         0,2           -              -            -

DKK                2003           -           -            0,8            -

JPY                2003           -           -            0,4            -
--------------------------------------------------------------------------------
TOTAL                         563,8        45,3           85,8         (1,6)
--------------------------------------------------------------------------------
The foreign currencies denominated contractual amounts are converted into
Norwegian kroner based on the currency exchange rates prevailing at year-end.
The financial instruments mature mainly within 12 months, and the maturity dates
coincides with the Company's best estimate for the corresponding foreign
currency denominated cash flows that are hedged. Unrealised gain/(loss) reflects
the fair value of the contractual amounts as of 31 December 2002.

Trade receivables and trade creditors are translated at closing currency
exchange rates. Unrealised gain or loss on foreign currency forwards designated
as hedging contracts is netted against gain/loss on the hedged items. Loan in
connection with project financing is mainly in US dollars and GB pounds.
Projects funding in US dollars and GB pounds are hedged through forward sale of
US dollars to GB pounds.

Interest rate risk

Interest rate risk exposure is mainly related project financing. Project
financing in GB pounds has a fixed interest rate and project financing in US
dollars has a variable interest rate with short time to maturity.

                                       92
22                   Inventories                          Amounts in NOK million

NOK 330.3 million of the Group's total inventories as of 31 December 2002 are
valued using historical cost, while NOK 52.6 million are valued at net relisable
value.
WIRELESS       OTHER ACTIVITIES AND
                       TRANSMISSION        SATELLITE      BROADBAND         HEADQUARTERS
GROUP :                  NETWORKS        COMMUNICATIONS    ACCESS       STAFF/ELIM INATIONS(1)          TOTAL
--------------------------------------------------------------------------------------------------------------------
                       2002     2001      2002     2001  2002   2001       2002       2001         2002        2001
--------------------------------------------------------------------------------------------------------------------
Raw materials         114,9     193,0     24,5     36,3     -    0,7       22,2       42,4         161,6       272,4
Work in progress       71,2     102,9        -        -     -      -       17,1       39,7          88,3       142,6
Finished goods         78,8      68,4     28,8     30,0   4,7    1,8       20,7       19,5         133,0       119,7
--------------------------------------------------------------------------------------------------------------------
TOTAL                 264,9     364,3     53,3     66,3   4,7    2,5       60,0      101,6         382,9       534,7
--------------------------------------------------------------------------------------------------------------------
(1)  Other activities and headquarters staff/eliminations includes Nera Tels
     business area Contract Manufacturing and Information Technology.

23                   Trade receivables                    Amounts in NOK million
GROUP
-----------------------------------------------------------------
                                                2002        2001
-----------------------------------------------------------------
Trade receivables gross                         549,5       821,0
Provisions for bad debts                        (32,1)      (39,8)
Trade receivables due later than 12 months        1,2         0,4
-----------------------------------------------------------------
TOTAL                                           518,6       781,6
At December 31,
                                                        2002         2001       2000
------------------------------------------------------------------------------------
Provisions as of January 1                              39,8
Provisions as of December 31,                           32,1
Change in provisions for bad debt                       (7,7)
Other changes in provisions for bad debt                 2,5
Realized losses for the year                            20,8
Recovered amounts previously written off                   -
------------------------------------------------------------------------------------
Total bad debt                                          15,6
------------------------------------------------------------------------------------
The political risk is relatively high in certain countries where Nera operates.
The international telecom industry is more and more concentrated around large
groups of companies. Based on these facts, Nera continues to be exposed to a
concentration of credit risk.

24                    Long-term contracts              Amounts in NOK million

Revenues on long-term contracts are recognised using the percentage of
completion method. The table below gives an overview for ongoing projects for
the Nera Group as of 31 December 2002 and 2001. Revenues are not recorded before
the contract reaches a certain degree of accomplishment, based on milestones in
the contract, sufficient to estimate the margin.
2002         2001
-------------------------------------------------------------------------------
Gross contractual amount for ongoing projects              1 536,2      2 043,2
Accumulated revenues                                       1 027,4      1 607,1
Accumulated costs                                           (812,0)    (1 148,6)
Accumulated gross profit in % of accumulated revenues         21,0 %       28,5 %
-------------------------------------------------------------------------------
93
From 2002 the gross profit from projects is presented as opposed to previous
years where net profit was presented. The result for 2001 is reclassified to
confirm to current year presentation.

The BGAN-contract calculated with a negative margin is included with a gross
contract value of NOK 135.0 million. Accumulated revenues are NOK 30.0 million,
and accumulated costs are NOK 59.0 million, including estimated total loss for
the contract.

25                    Other current receivables           Amounts in NOK million
NERA ASA                                        GROUP
------------------------------------------------------------------------------
                                                              2002       2001
------------------------------------------------------------------------------
Short-term receivables and prepaid expenses                   58,6       142,1
Prepayments to suppliers                                       2,2         2,3
Other receivables due later than 12 months                    10,7         1,8
Other short-term receivables                                  11,0         6,3
------------------------------------------------------------------------------
TOTAL                                                         82,5       152,5
------------------------------------------------------------------------------
26                   Related party transactions           Amounts in NOK million
OPERATING REVENUES            OPERATING COSTS           TRADE           TRADE
GROUP:                               -------------------        -----------------------    RECEIVABLES      PAYABLES
ASSOCIATED COMPANIES (20-50%):       2002    2001    2000       2002       2001    2000     31.12.02       31.12.02
-------------------------------------------------------------------------------------------------------------------
Neratek AS                           22,9    27,1    19,6          -          -       -        1,2              -
Nera Telecommunications Ltd             -   280,9    99,1          -       80,0    37,8          -              -
TV Mobile Pte Ltd                     6,7     1,8       -       22,1        1,7       -        7,4           21,9
NSSL Ltd                             38,3       -       -          -          -       -        6,6              -
-------------------------------------------------------------------------------------------------------------------
TOTAL                                67,9   309,8   118,7       22,1       81,7    37,8       15,2           21,9
-------------------------------------------------------------------------------------------------------------------
As of 28 November 2001 Nera ASA increased its share ownerhip in Nera
Telecommunication Ltd, Singapore to more than 50%, and from that date on the
Company changed its status from an associated company to a subsidiary of Nera
ASA. Information about transactions (sales and purchases) with the Company for
the first 11 months are included in the related party transaction figures.

NSSL Ltd is a 100 % owned subsidiary of World Wide Mobile Com. AS which is owned
20 % by Nera and is included as a related party.

27                Share capital and information about shareholders

Share capital: The share capital of Nera ASA as of 31 December 2002 consists of
one single class of shares with a total of 123,529,371 shares. The face value of
NOK 2 per share gives a total share capital of NOK 247,058,742. Each share
entitles the owner to equal rights in the Company, and existing shareholders
have priority to subscribe in prospective share issues. The total share capital
and number of shares have remained unchanged during 2002.

                                       94
Treasury stock: During 2002, Nera's balance of own shares has increased by
353,301 shares, to a compensation value of NOK 2,846,469. The new balance of
treasury stocks is 1,627,901. The shares are bought in accordance with authority
given by the General Meeting on 23 May 2002, where the Board of Directors was
authorised to buy up to 6,176,469 treasury stocks during a period of 18 months
starting 23 May 2002. The shares can be used in relation to acquisitions, in
transactions where compensation are rendered through treasury stock and can be
sold to employees in connection with incentive programmes/option programmes or
transactions with the stock market where Nera is listed.

Incentive programme: The current option programme includes options issued in
2000, 2001 and 2002 with a total limit of 6.3 million shares, and embraces both
key personnel and other employees. Subscription rates for these options are
fixed at the average closing price, respectively 10 days before and 10 days
after 10 February 2000, 13 February 2001 and 18 February 2002 for the Nera share
at the Oslo Stock Exchange. Until the options are exercised, the strike price
will increase by 1 % per month for the options issued in 2000 and 2001, and 0.5
% per month for the options issued in 2002. Based on this, the strike price per
share will be NOK 52.45, NOK 50.30 and NOK 19.22 for 1 March 2002, 1 March 2003
and 1 March 2004 respectively. The strike price at the expiration of the options
will be NOK 62.69, NOK 60.10 and NOK 21.36 per share for 30 March 2004, 30 March
2005, and 30 March 2006 respectively. The options can be exercised from 1 March
2002, 2003 and 2004 until 30 March 2004, 2005 and 2006, respectively.

Shareholders: The largest shareholders in Nera ASA, together with shareholders
and potential shareholding in the Company by senior management and members of
the Board of Directors, including shareholding/potential shareholding through
closely related parties, were as follows as of 31 December 2002:
SHARE HOLDER                                 NO. OF SHARES   OWNERSHIP          NAME                     NO. OF SHARES   OPTIONS
---------------------------------------------------------------------------     ------------------------------------------------
Folketrygdfondet                             13 122 600        10,6 %           BOARD OF DIRECTORS :
Orkla ASA                                    11 855 963         9,6 %           Johan Fr. Odfjell           410 318           -
Skandinaviska Enskilda Banken client acc.     4 220 552         3,4 %           Kari Broberg                      -           -
Verdipapirfondet Odin Norden                  3 946 700         3,2 %           Ole Petter Hakonsen               -           -
Verdipapirfondet Odin Norge                   3 742 100         3,0 %           Kjell O. Ingebro                125       1 500
Storebrand Livsforsikring AS                  3 072 741         2,5 %           Birger Magnus                     -           -
Aksjefondet Skagen Vekst                      2 401 600         2,0 %           Gregers Mogensen                  -           -
Nera ASA                                      1 627 901         1,3 %           Marcel Petie                    339       1 500
State Street Bank & Trust Co client acc.      1 117 903         0,9 %           Jan Stenberg                      -           -
Verdipapirfondet Storebrand Norge A           1 036 000         0,8 %           Jostein Soreide                 250       1 500
Sparebankenes Sikringsfond                    1 030 618         0,8 %
Verdipapirfondet Delphi Norge                 1 000 000         0,8 %           Executive Committee:
Vital Forsikring ASA                            997 438         0,8 %           Bjorn Ove Skjeie            100 225     294 000
Vicama AS                                       974 400         0,8 %           Terje Ask-Henriksen          25 900     172 478
Boston Safe Dep. & Trust                        951 372         0,8 %           Ove Bratsberg                20 125     116 166
Storebrand Norge 1 Verdipapirfond               874 000         0,7 %           John Knudsen                 30 125     124 385
Bank of New York Europe Ltd client acc.         780 000         0,6 %           Stig-Are Mogstad                125     145 385
Tine Pensjonskasse                              753 000         0,6 %           Bjorn Olafsson               10 000      41 748
Verdipapirfondet Fondsfinans Aktiv              706 500         0,6 %           Samuel Ang                   20 000           -
Verdipapirfondet Fondsfinans Aktiv II           681 400         0,6 %           Billy Cain                   10 125     124 498
---------------------------------------------------------------------------     Helge Skaar                       -     128 500
Total 20 largest shareholders                54 892 788        44,4 %           0yvind Isaksen                    -      37 478
---------------------------------------------------------------------------     Gro Hatleskog                     -      75 098

Other shareholders                           68 636 583        55,6 %
---------------------------------------------------------------------------     -----------------------------------------------
TOTAL                                        123 529 371      100,0 %           TOTAL                       627 657   1 264 236
---------------------------------------------------------------------------     -----------------------------------------------
As of 31 December 2002, a total of 24,122 shares were owned by members of the
Corporate Assembly. Partners and employees in Ernst & Young AS, the Company's
auditor, do not own shares in the Company.

                                       95
28     Customer advances and billings in excess of costs Amounts in NOK million
GROUP:                                2002      2001
-----------------------------------------------------
Billing in excess of costs            147,2     204,4
Received customers advances            49,6      86,8
-----------------------------------------------------
TOTAL                                 196,8     291,1
-----------------------------------------------------
29              Contingent liabilities                    Amounts in NOK million
GROUP
-----------------------------------------------------------------
                                           2002             2001
-----------------------------------------------------------------
Guarantees for contracts                   119,0            187,1
Other guarantees                           120,5            129,8
-----------------------------------------------------------------
TOTAL                                      239,5            316,9
-----------------------------------------------------------------
Companies in the the Group are jointly and severally liable for the established
group cash pooling/credit facility arrangement. The Group had a net deposit at
year-end.

30      Accounting policy differences and reconciliation between US GAAP/N G
                                      AAP

The Group's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Norway (N. GAAP), which differ in
certain respects from accounting principles generally accepted in the United
States (U.S. GAAP).

Following is a summary of the adjustments under U.S. GAAP that would affect the
Company's consolidated net income (loss) for the years ended December 31, 2000,
2001 and 2002, and shareholders' equity as of December 31, 2001 and 2002
together with a discussion of the principal differences between N. GAAP and U.S.
GAAP that are significant to the Company's consolidated financial statements.

                                       96
Year ended December 31                                          2002        2002       2001     2000
-----------------------------------------------------------------------------------------------------
Reconciliation of net income (Group)                          USD (1)       NOK        NOK      NOK
Amounts in million NOK, except per share amounts
Net income (loss) after minority interest reported under      -20,9        -145,0     -370,7    136,3
NGAAP
-----------------------------------------------------------------------------------------------------
US GAAP adjustments
 a) Financial instruments and hedging                           0,8           5,5        0,0      0,0
 b) Pensions                                                   -1,3          -9,3       -3,2     -2,2
 c) Restructuring charges                                      -1,2          -8,7        8,7      0,0
 d) Goodwill                                                    0,7           4,8       37,0    -36,6
 e) Capital lease                                               0,0           0,0        0,0      0,2
 f) Gain on subsidiary equity transactions and                 14,1          97,9
 disposal of shares in subsidiaries
 g) Difference intercompany receivables forward                 2,0            14
 exchange rates
 i) Taxes                                                     -21,5        -149,3      -11,8     10,9
-----------------------------------------------------------------------------------------------------
Net income (loss) under US GAAP                               -27,3        -190,1     -340,0    108,6
-----------------------------------------------------------------------------------------------------
Earnings (loss) per share                                     -0,22         -1,56      -2,77     0,97
Diluted earnings (loss) per share                             -0,22         -1,56      -2,77     0,97
-----------------------------------------------------------------------------------------------------
As of December 31                                      2002     2002         2001
------------------------------------------------------------------------------------
Reconciliation of Shareholder's equity
Amounts in million NOK
Shareholder's equity under NGAAP                      232,4     1.612,6      1 728,1
------------------------------------------------------------------------------------
Minority interest                                     -34,6      -240,2       -157.0
------------------------------------------------------------------------------------
US GAAP adjustments:
   a) Financial instruments and hedging                 0,8         5,5          0,0
   b) Pensions                                         -9,6       -66,5        -52,6
   c) Restructuring charges                             0,0         0,0          8,7
   d) Goodwill                                          0,7         4,8          0,4
   e) Capital lease                                     0,0         0,0          0,0
   f) Gain on subsidiary equity transactions and       14,1        97,9
   disposal of shares in subsidiaries
   h) Dividend                                          0,0         0,0          0,0
   i) Taxes                                           -21,5      -149,3         -1,9
------------------------------------------------------------------------------------
Shareholder's equity under US GAAP                    182,0     1 262,9      1 525,7
------------------------------------------------------------------------------------
(1)      Translation of amounts from Norwegian kroner (NOK) into United States
         dollars (USD) has been made for the convenience of the reader at the
         Noon Buying Rate on December 31, 2002 of $1.00 = NOK 6,9375

a) Financial instruments and hedging: Statement of Financial Accounting
Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging
Activities", is effective for Nera from the financial year 2001. The Company
utilizes forward contracts, currency options and currency swaps in managing its
exposure in foreign currency commitments of long-term sales contracts. For
NGAAP, such foreign currency transactions are considered hedges of sales of
these long-term contracts when the foreign currency commitment is reasonably
assured and the foreign currency transaction is designated as a hedge of the
foreign currency commitment. Gains and losses on foreign currency transactions
identified as hedges are deferred until completion of the long-term contract
being hedged.

The Company follows a policy of translating the foreign currency receivables as
well as the forward contracts purchased in connection with a particular
long-term contract using the average of the exchange rates received for all
forward contracts purchased in connection with the particular long-term sales
contract to which the respective receivables and forward contracts relate.
Differences between amounts translated at the actual versus the average exchange
rates received are deferred and recorded as other assets or liabilities until
the related long-term sales contract is completed.

                                       97
To qualify as a hedge under SFAS 133, Nera's use of derivatives requires the
Company to meet certain documentation requirements. Nera has not applied hedge
accounting under USGAAP, because of the additional work related to the
documentation and because the effect on net profit and equity over a long-term
period will be immaterial. The difference between N GAAP and US GAAP in 2002 is
approximately 5,5 mill NOK when all off balance and on balance items are marked
to market.

b) Pensions: In accordance with U.S. GAAP, the Company has implemented SFAS 87
as of January 1, 1989. The net differences between the Norwegian and U.S. GAAP
net income and shareholders' equity related to pension accounting have been
included in the reconciliation above.

The implementation of pension accounting is under US GAAP, SFAS 87, amortized
over the estimated remaining average service period. Under N GAAP the effect has
been charged directly to equity. In accordance with US GAAP the company has
recorded an additional minimum liability, representing the excess of unfunded
accumulated benefit obligation over the accrued pension liability. An intangible
asset has been recognized to the extent of unrecognized prior service cost. Any
additional minimum liability in excess of unrecognized prior service cost has
been charged to equity (other comprehensive income) after tax. Gross additional
minimum liability is 76,7 million NOK and the tax effect is 21,5 million NOK.

c) Restructuring charges: Nera has recognized restructuring expenses and
write-down of assets in 2001 as part of a restructuring plan. Under US GAAP,
EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring", certain criteria must be met to qualify as restructuring
expenses. Not all of these criteria are required under N GAAP, including that
the benefit information must be communicated to employees prior to the date of
the financial statements. Consequently, restructuring charges not meeting these
specific criteria have been included in the reconciliation above. All
restructuring charges in 2002 meet the criteria specified in EITF 94-3.

d) Goodwill: One of the acquisitions in 2000 did not qualify as purchase of a
business under US GAAP. The part of the purchase price not being allocated to
other identifiable assets is expensed as purchased R&D (NOK 36,6 million). The
investment was in 2001 written down as part of the restructuring program in the
N GAAP financial statements, hence the difference (NOK 36,6 million) was
reversed in 2001. Goodwill related to acquisitions (Nera Telecommunications
Ltd., Singapore, as disclosed in footnote 6 above) after June 30, 2001 is not
amortized under US GAAP in accordance with SFAS 142, "Goodwill and Other
Intangible Assets". Amortization of goodwill totaling NOK 4,8 million is in the
N GAAP income statement included in the line depreciation.

e) Capital lease: U.S. GAAP requires the capitalization of leases in which
substantially all of the risks and rewards of ownership are transferred to the
lessee. A lease is capitalized if it meets any one of the four stated criteria
in accordance with SFAS 13.

Accounting principles are similar, but less prescriptive, under Norwegian GAAP.

f) Gain from subsidiaries equity transactions, disposal of shares in a
subsidiary and minority interest: Under Norwegian GAAP, no gains from
subsidiary's equity transactions and disposal of shares in a subsidiary are
recognized. Under U.S. GAAP, the Group records gains from subsidiary equity
transactions (SAB 51 transactions) and disposal of shares in a subsidiary
through income.

Under Norwegian GAAP, the minority interest is measured at fair value of the
consideration paid from the minority. The difference between the recorded equity
in the subsidiary and value of the consideration paid by the minority will be
amortized or written down through allocating results to minority. This
allocation is not consistent with U.S. GAAP.

The following information relates to the issuance of subsidiary shares in 2002,
under U.S. GAAP: Nera ASA reduced its ownership stake in Nera Electronics Ltd
when Nera Electronics Ltd issued shares to minority shareholders for cash in
July 2002 trough an initial public offering, reducing Nera's ownership by 9.1%.
In particular, Nera Electronics Ltd issued 30 million shares in July 2002 at a
price per share of 0,33 SGD. Nera did not participate in this issue, and Nera
Telecomunications Ltd ownership was reduced from 100% to 90,9%. Imidiately

                                       98
after the initial public offering Nera Telecomunications Ltd reduced its
ownership by selling additional 74,8 million shares at an average price of 0,287
SGD. Nera Telecomunications ownership was then reduced to 68,3 %. Total
consideration received from minority shareholders was NOK 134 million and
recognized gain under U.S. GAAP was NOK 97,9 million.

g) Difference intercompany receivables forward exchange rates: For US GAAP
reporting purposes, Nera follows the provisions of SFAS 52, "Foreign Currency
Translation". At December 31, 2002, Nera has entered into an intercompany loan
with its independent entity in Venezuela that is not considered of a long-term
investment nature. For US GAAP reporting, in accordance with SFAS 52, the
Company recognized a gain of NOK 14 million from the translation process. For N
GAAP this gain was not considered as foreign currency exchange exposure and
hence no profit and loss effect.

h) Dividend: Under N GAAP, dividends are provided for in the fiscal year in
which they are proposed by the Board of Directors. Under US GAAP, dividends are
not accrued until approved and declared by the shareholders.

i) Deferred taxes: For US GAAP reporting purposes, Nera follows the provisions
of SFAS 109, "Accounting for Income Taxes". In accordance with SFAS 109, Nera
has recognized deferred tax assets and liabilities to reflect the future tax
consequences of events that have already been recognized in the consolidated
financial statements or tax returns. Where it is anticipated that all or a
portion of a deferred tax asset will not be utilized, a valuation allowance has
been recorded against it.

At December 31, 2002, the Company has gross net operating loss carryforwards of
595 million NOK and other temporary differences of NOK 444,5 million. The losses
and credits generally expire within a period of 9-10 years. In accordance with
SFAS 109, a valuation allowance of NOK 269,3 million has been placed on the
deferred tax assets, as realization is not considered more likely than not under
USGAAP (due to accumulated loss position). For NGAAP the criteria for recording
a deferred tax asset is based on expectations regarding future profit and the
criteria for companies in a cumulative loss position is not the same as for
USGAAP. This results in evaluation allowance is aprox. 120,0 million NOK for N
GAAP.

Changes in valuation allowances for the year ended December 31, 2002
---------------------------------------------------------------------------
                                                     NOK in millions
---------------------------------------------------------------------------
Balance at the beginning of the year                       90,3
---------------------------------------------------------------------------
Changes in opening balance of valuation allowances        100,2
---------------------------------------------------------------------------
Other not recognized tax assets this year                  78,8
---------------------------------------------------------------------------
Balance at the end of the year                            269,3
---------------------------------------------------------------------------
In addition, equity and net loss is adjusted for the tax effects of differences
between US GAAP and N GAAP above. Dividends have no tax effect. "Additional
minimum liability", pensions, is recorded net after tax. Gain from subsidiary
transactions is not taxable income due to the tax legislation in Singapore.
Accordingly, these items are not included in deferred taxes above.

j) Comprehensive income and reconciliation of U.S. GAAP Shareholders' Equity

The changes in shareholders' equity from December 31, 1999 through December 31,
2002 on a U.S. GAAP basis are summarized as follows:
(Amounts in NOK 1,000s)
--------------------------------------------------------
Shareholders' equity at December 31, 1999          983.2
                                                   -----
Issuance of shares                                 935.9
Changes in minimum pension liability                 1.4
Dividends                                          -19.6
Translation adjustments                              3.5
Costs of shares issued                             -41.8
Tax effect of shares issued                         11.7
Net income                                         108.6
Purchase of own shares                             -10.9
                                                   -----
Shareholders' equity at December 31, 2000          1,972
                                                   -----
99
Issuance of shares                                   5.2
Dividends                                          -27.2
Changes in minimum pension liability               -43.3
Translation adjustments                            -13.7
Purchase of own shares                             -26.8
Net income                                        -340.5
                                                 -------
Shareholders' equity at December 31, 2001        1,525.7
                                                 -------
Changes in minimum pension liability                -5.0
Translation adjustments                            -58.3
Purchase of own shares                              -2.8
Net loss                                          -190.1
                                                 -------
Change in accounting principles Singapore           -6.6
                                                 -------
Shareholders' equity at December 31, 2002        1,262.9
                                                 -------
The Company's total comprehensive income (loss), in accordance with U.S. GAAP is
described in the table below:
December 31          December 31           December 31
                                                2002                 2001                  2000
Net income (loss)                               -190.1               -340.5                108.6
Accumulated other comprhensive income
     Additional minimum liability                 -5.0                -43.3                  1.4
     Translation adjustment                      -58.3                -13.7                  3.5
Total other comprehensive income                 -63.3                -57.0                  4.9
Comprehensive income                            -253.4               -397.5                113.5
k) Stock-based compensation /options

In accordance with Norwegian GAAP, the Group did not recognize expense for stock
options with no intrinsic value that were granted to employees.

Nera has elected to follow Accounting Principles Board Opinion No. 25.
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options. In accordance with U.S. GAAP, the
measurement date for determining compensation costs for stock options is the
first date at which the number of shares the employee is entitled to receive and
the exercise price of the options are known. When Nera ASA granted the stock
options the number of shares was known at the grant date; however, the exercise
price to be paid upon exercise was not known as the strike price increases by a
percentage per month until exercised. Accordingly, variable plan accounting for
these options applies under U.S. GAAP. However, no compensation expense has been
recognized for US GAAP purposes as strike price exceeds the quoted market price
of Nera's stock.

l) New U.S. Accounting Standards

In November 2002, the EITF reached a consensus on Issue 00-21, addressing how to
account for arrangements that involve the delivery or performance of multiple
products, services, and/or rights to use assets. Revenue arrangements with
multiple deliverables are divided into separate units of accounting if the
deliverables in the arrangement meet the following criteria: (1) the delivered
item has value to the customer on a standalone basis; (2) there is objective and
reliable evidence of the fair value of undelivered items; and (3) delivery of
any undelivered item is probable. Arrangement consideration should be allocated
among the separate units of accounting based on their relative fair values, with
the amount allocated to the delivered item being limited to the amount that is
not contingent on the delivery of additional items or meeting other specified
performance conditions. The final consensus will be applicable to agreements
entered into in fiscal periods beginning after June 15, 2003 with early adoption
permitted. Nera will adopt EITF issue 00-21 on January 1, 2004.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). SFAS 143 establishes accounting requirements for
retirement obligations associated with tangible long-lived assets, including (1)
the timing of the liability recognition, (2) initial measurement of the
liability, (3) allocation of asset retirement cost to

                                      100
expense, (4) subsequent measurement of the liability and (5) financial statement
disclosures. SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset and
depreciated over the life of the associated fixed asset. An entity shall measure
changes in the liability for an asset retirement obligation due to passage of
time by applying an interest method of allocation to the amount of the liability
at the beginning of the period. The interest rate used to measure that change
shall be the credit-adjusted risk-free rate that existed when the liability was
initially measured. That amount shall be recognized as an increase in the
carrying amount of the liability and as an expense classified as an operating
item in the statement of income.

SFAS 143 is effective for fiscal years beginning after June 15, 2002, with early
application encouraged. We will adopt SFAS 143 effective January 1, 2003 and
have not yet evaluated the effect upon an adoption.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which is effective for financial statements
where exit or disposal activities are initiated after December 31, 2002. This
statement nullifies EITF Issue 94-3, "Liability Recognition for Certain Employee
Termination Benefits and other Costs to Exit an Activity," which allowed
recognition of a liability for exit and disposal activities upon management's
intent to exit or dispose of an activity. This statement requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred. Nera will adopt this statement for exit or
disposal activities initiated after January 1, 2003.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure." This Statement amends SFAS No. 123,
"Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
disclosure provisions of this Standard are effective for fiscal years ending
after December 15, 2002. Since Nera are en Item 17 filer no additional
disclosures are necessary.

In May 2003 the FASB issued SFAS 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", the new
accounting standard for certain types of freestanding financial instruments and
disclosure regarding possible alternatives to settling financial instruments.
The Group has not evaluated what impact, if any, adoption of the Statement will
have on the Group's consolidated financial condition and results of operation.
The Statement is effective for all financial instruments entered into or
modified after May 31, 2003 and is otherwise effective at the beginning of the
first interim period after June 15, 2003.

In November 2002, FASB issued Interpretation (FIN) 45 "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others". This Interpretation clarifies certain elements related
to measurement and disclosure of guarantees, including product warranties. The
interpretation clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the obligations it has undertaken in
issuing the guarantee, including its ongoing obligation to stand ready to
perform over the term of the guarantee in the event that the specified
triggering events or conditions occur. The recognition and measurement
provisions are applicable to guarantees issued or modified after December 31,
2002. Nera will determine the impact of (FIN) 45 during preparing the 2003 20-F
filing.

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, Consolidation of Variable Interest Entities, an interpretation of
Accounting Research Bulletin No. 51 ("FIN 46"). The Interpretation requires the
consolidation of entities in which an enterprise absorbs a majority of the
entity's expected losses, receives a majority of the entity's expected residual
returns, or both, as a result of ownership, contractual or other financial
interests in the entity. Currently, entities are generally consolidated by an
enterprise when it has a controlling financial interest through ownership of a
majority voting interest in the entity. The company does not believe that the
adoption of FIN 46 will have a material impact on the financial position,
results of operations or cash flows of the Company.

                                      101
31                               Subsequent events

         Effective March 26, 2003, Nera Telecommunications Ltd signed an
agreement with Mediacorp TV Singapore Pte Ltd (MCTV) to terminate its joint
agreement and to sell its 20% share in TV Mobile to MCTV for a consideration of
SGD 1,5 mill. The gain on the disposal is equal to the transaction amount.

                                      102
ITEM 18.          NOT APPLICABLE

         ITEM 19.          EXHIBITS
Exhibit
Number                                    Description of Exhibits
------                                    -----------------------
99.1              Certifications by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 302 of the Sarbanes-Oxley Act of 2002.

99.2              Certifications by Bjorn Olafsson, Executive Vice President and
                  Chief Financial Officer, required by Section 302 of the
                  Sarbanes-Oxley Act of 2002.

99.3              Certification by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 906 of the Sarbanes-Oxley Act of 2002.

99.4              Certification by Bjorn Olafsson, Executive Vice President and Chief Financial Officer, required
                  by Section 906 of the Sarbanes-Oxley Act of 2002.
103
SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

                                                NERA ASA

                                                /s/  Bjorn Ove Skjeie
                                                --------------------------------
                                                Name: Bjorn Ove Skjeie
                                                Title: President

Date: June 26, 2002

                                      104
INDEX TO EXHIBITS
Exhibit
Number                                       Description of Exhibits
------                                       -----------------------
99.1              Certifications by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 302 of the Sarbanes-Oxley Act of 2002.

99.2              Certifications by Bjorn Olafsson, Executive Vice President and
                  Chief Financial Officer, required by Section 302 of the
                  Sarbanes-Oxley Act of 2002.

99.3              Certification by Bjorn Ove Skjeie, President and Chief Executive Officer, required by
                  Section 906 of the Sarbanes-Oxley Act of 2002.

99.4              Certification by Bjorn Olafsson, Executive Vice President and Chief Financial Officer, required
                  by Section 906 of the Sarbanes-Oxley Act of 2002.
105