UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 (Mark
One)
 
 xANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
fiscal year ended December 31,
2008
 or
 
 oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
transition period from ________________________ to
__________________________
 
 Commission
File Number:  0-11676
 
 BEL FUSE
INC.
 (Exact
name of registrant as specified in its charter)
 
 NEW JERSEY
                      
                      22-1463699(State
      of other jurisdiction of incorporation or organization)
                      
                      (I.R.S.
      Employer Identification
No.)
 206 Van Vorst Street
                    
                    Jersey City, New Jersey
                    
                    07302(Address
      of principal executive offices)
                    
                    
                    
                    (Zip
      Code)
  (201)
432-0463
 (Registrant's
telephone number, including area code)
 
 Securities
registered pursuant to Section 12(b) of the Act:
 None
 
 Securities
registered pursuant to Section 12(g) of the Act:
 Class A
Common Stock, $0.10 par value; Class B Common Stock, $0.10 par
value
 
 Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the
 Securities
Act.         o Yes  x No
 
 Indicate
by checkmark if the registrant is not required to file reports to Section 13 or
15(d)
 of the
Act.              
 o
Yes  x
No
 
 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. x  Yes    o  No
  
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
 
 Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
accelerated filer o           Accelerated
filer x            Non-accelerated
filer o           Smaller
reporting company o
 (Do
not check if a smaller
 reporting
company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). o Yes x No
 
 The
aggregate market value of the voting and non-voting common equity of the
registrant held by non-affiliates (for this purpose, persons and entities other
than executive officers and directors) of the registrant, as of the last
business day of the registrant's most recently completed second fiscal quarter
(June 30, 2008), was $276.3 million.
 
 Number
of shares of Common Stock outstanding as of March 10, 2009: 2,174,912 Class A
Common Stock; 9,359,693 Class B Common Stock
 
 Documents
incorporated by reference:
 
 Bel
Fuse Inc.'s Definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders is incorporated by reference into Part III.
 
 
 
 BEL
      FUSE INC.INDEX
 Forward
      Looking Information
                PagePart IItem
      1.
                Business
                1Item
      1A.
                Risk
      Factors
                9Item
      1B.
                Unresolved
      Staff Comments
                15Item
      2.
                Properties
                15Item
      3.
                Legal
      Proceedings
                16Item
      4.
                Submission
      of Matters to a Vote of Security Holders..
                18Part IIItem
      5.
                Market
      for Registrant's Common Equity,Related
      Stockholder Matters and IssuerPurchases
      of Equity Securities
                19Item
      6.
                Selected
      Financial Data
                22Item
      7.
                Management's
      Discussion and Analysis of FinancialCondition
      and Results of Operations
                24Item
      7A.
                Quantitative
      and Qualitative Disclosures AboutMarket
      Risk
                46Item
      8.
                Financial
      Statements and Supplementary Data
                47Item
      9.
                Changes
      in and Disagreements With Accountantson
      Accounting and Financial Disclosure
                48Item
      9A.
                Controls
      and Procedures
                48Item
      9B.
                Other
      Information
                49Part IIIItem
      10.
                Directors,
      Executive Officers and CorporateGovernance
                49Item
      11.
                Executive
      Compensation
                49Item
      12.
                Security
      Ownership of Certain Beneficial Ownersand
      Management and Related Stockholder Matters
                49
 
 
 BEL
      FUSE INC.INDEX
 PagePart III (Con't)Item
      13.
                Certain
      Relationships and Related Transactions,and
      Director Independence
                49Item
      14.
                Principal
      Accountant Fees and Services
                49Part IVItem
      15.
                Exhibits,
      Financial Statement Schedule
                50Signatures
                53*Page
      F-1 follows page 47
  
 
 FORWARD
LOOKING INFORMATION
 
 The
Company’s quarterly and annual operating results are affected by a wide variety
of factors that could materially and adversely affect revenues and
profitability, including the risk factors described in Item 1A of the Company's
Annual Report on Form 10-K. As a result of these and other factors, the Company
may experience material fluctuations in future operating results on a quarterly
or annual basis, which could materially and adversely affect its business,
financial condition, operating results, and stock
prices.  Furthermore, this document and other documents filed by the
Company with the Securities and Exchange Commission (the “SEC”) contain certain
forward-looking statements under the Private Securities Litigation Reform Act of
1995 (“Forward-Looking Statements”) with respect to the business of the
Company.  These Forward-Looking Statements are subject to certain
risks and uncertainties, including those mentioned above, and those detailed in
Item 1A of this Annual Report on Form 10-K, which could cause actual results to
differ materially from these Forward-Looking Statements.  The Company
undertakes no obligation to publicly release the results of any revisions to
these Forward-Looking Statements which may be necessary to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.  An investment in the Company involves various
risks, including those mentioned above and those which are detailed from time to
time in the Company’s SEC filings.
  
 PART
I
 
 Item
1.   Business
 
 General
 
 Bel Fuse
Inc. ("Bel" or the "Company") is a leading producer of electronic products that
help make global connectivity a reality. The Company is primarily engaged in the
design, manufacture and sale of products used in networking, telecommunications,
high speed data transmission and consumer electronics.  Products
include magnetics (discrete components, power transformers and MagJack®s),
modules (power conversion and integrated modules), circuit protection
(miniature, micro and surface mount fuses) and interconnect devices (passive
jacks, plugs and cable assemblies).  While these products are deployed
primarily in the computer, networking and telecommunication industries,
Bel’s  portfolio of products also finds application in the automotive,
medical and consumer electronics markets.   These products are
designed to protect, regulate, connect, isolate or manage a variety of
electronic circuits.
 
 With over
60 years in the electronics industry, Bel has reliably demonstrated the ability
to succeed in a variety of product areas across multiple
industries.  The Company has a strong track record of technical
innovation working with the engineering communities of market
leaders.  Bel has consistently proven itself a valuable supplier to
the foremost companies in its chosen industries by developing cost-effective
solutions for the challenges of new product development.  By combining
our strength in product design with our own specially-designed manufacturing
facilities, Bel has established itself as a formidable competitor on a global
basis.
  -1-
  The
Company, which is organized under New Jersey law, operates in one industry with
three geographic reporting segments as defined in Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information". Bel’s principal executive offices are located at 206 Van
Vorst Street, Jersey City, New Jersey 07302; (201) 432-0463. The Company
operates other facilities in North America, Europe and Asia and trades on the
NASDAQ Global Select Market (BELFA and BELFB).  For information
regarding Bel's three geographic reporting units, see Note 11 of the Notes to
Consolidated Financial Statements.
 
 The
terms “Company” and “Bel” as used in this Annual Report on Form 10-K refer to
Bel Fuse Inc. and its consolidated subsidiaries unless otherwise
specified.
 
 Product
Groups
 
 Magnetics
 ·
              Discrete
      components
 ·
              Diplexer
      and triplexer filters
 ·
              Power
      transformers
 ·
              MagJack®
      integrated connector modules
 
 The
Company, a leading producer of magnetics, markets an extensive line of discrete
components including transformers and common mode chokes used in networking,
telecommunications, and broadband applications. These magnetic devices
condition, filter, and isolate the signal as it travels through network
equipment, helping to ensure accurate data/voice/video
transmission.
 
 Bel’s
diplexer and triplexer filters are used in high speed, home networking
applications that utilize excess bandwidth available on existing coax cabling.
Developed in compliance with the Multimedia over Coax Alliance (MoCA), the
Company’s diplexers and triplexers help distribute high bandwidth video
throughout the home by supporting the high speed, high quality, encrypted
transmission required for DVD-quality video and triple play (data/voice/video)
applications.
 
 Power
transformer products include standard and custom designs produced by the
Company’s Signal Transformer division. Manufactured for use in alarm, security,
and medical products, these devices are designed to comply with the
international safety standards governing transformers including UL, CSA, IEC,
TUV, and VDE.
 
 Marketed
under the MagJack® brand,
Bel’s connectors with integrated magnetics provide the signal conditioning,
electromagnetic interference suppression, and signal isolation previously
performed by multiple discrete magnetics.
 
 Modules
 ·
              Power
      conversion modules
 ·
              Integrated
      modules
 
 Bel’s
Power conversion products include standard and custom isolated and non-isolated
DC-DC converters designed specifically to power low voltage silicon devices. The
need for converting one DC voltage to another is growing rapidly as developers
of integrated circuits commonly adjust the supply voltage as a means of
optimizing device performance. The DC-DC converters are used in data networking
equipment, distributed power architecture, and telecommunication devices, as
well as computers and peripherals.
  -2-
  The
Company has expanded its line of modules designed to support data transmission
over existing power lines including next generation HomePlug® AV
powerline applications. Typically deployed in home-based
communication/entertainment devices such as Set Top Boxes (STBs), DSL modems,
home theaters, HDTVs motherboards, and IPTV equipment, Bel’s modules incorporate
the silicon required to enable powerline functionality, supporting a lower cost
of ownership within a reduced footprint.
 
 The
Company continues to pursue market opportunities where it can supply customized,
value-added modules that capitalize on the Company’s manufacturing capabilities
in surface mount assembly, automatic winding, hybrid fabrication, and component
encapsulation.
 
 
 Circuit
Protection
 ·
              Miniature
      fuses
 ·
              Surface
      mount PTC devices and fuses
 ·
              Radial
      PTC devices and micro fuses
 
 The
Company's circuit protection products include board level fuses (miniature,
micro and surface mount), and Polymeric PTC (Positive Temperature Coefficient)
devices, designed for the global electronic and telecommunication markets. Fuses
and PTC devices prevent currents in an electrical circuit from exceeding certain
predetermined levels, acting as a safety valve to protect expensive components
from damage by cutting off high currents before they can generate enough heat to
cause smoke or fire. Additionally, PTC devices are resettable and do not have to
be replaced before normal operation of the end product can resume.
 
 While the
Company continues to manufacture traditional fuse types, its surface mount chip
fuses are used in space-critical applications such as mobile phones and
computers. Like all of Bel's fuse products, the chip fuses comply with RoHS6
standards for the elimination of lead and other hazardous
materials.
 
 The
Company's circuit protection devices are used extensively in products such as
televisions, consumer electronics, power supplies, computers, telephones, and
networking equipment.
 
 Interconnect
 ·
              Passive
      jacks
 ·
              Plugs
 ·
              Cable
      assemblies
 
 The
Company has a comprehensive line of modular connectors including RJ45 and RJ11
passive jacks, plugs, and cable assemblies. Passive jacks serve primarily as the
connectivity device in networking equipment such as routers, hubs, switches, and
patch panels. Modular plugs and cable assemblies are utilized within the
structured cabling system, often referred to as premise wiring. The Company’s
connector products are designed to meet all major performance standards for
Category 5e, 6, 6a, and Category 7a compliant devices used within Gigabit
Ethernet and 10Gigabit Ethernet networks.
  -3-
  The
following table describes, for each of Bel's product groups, the principal
functions and applications associated with such product groups.
 
 Product
      Group
                Function
                ApplicationsMagneticsDiscrete
      Components
                Condition,
      filter, and isolate the electronic signal to ensure accurate
      data/voice/video transmission.
                Network
      switches, routers, hubs, and PCs used in 10/100/1000 Gigabit Ethernet and
      Power over Ethernet (PoE).Diplexer
      and Triplexer Filters
                Condition,
      filter, and isolate the electronic signal to ensure accurate
      data/voice/video transmission with maximum throughput.
                Home
      networking, set top box, and cable modem applications including high
      bandwidth video transmission and triple play
  applications.Power
      Transformers
                Safety
      isolation and distribution.
                Power
      supplies, alarm, fire detection, and security systems, HVAC, lighting and
      medical equipment.MagJack®
      Integrated Connectors
                Condition,
      filter, and isolate the electronic signal to ensure accurate
      data/voice/video transmission and provide RJ45 and USB
      connectivity.
                Network
      switches, routers, hubs, and PCs used in 10/100/1000 Gigabit Ethernet,
      Power over Ethernet (PoE), home networking, and cable modem
      applications.ModulesPower
      Conversion Modules (DC-DC Converters)
                Convert
      DC voltage level to other DC level as required to meet the power needs of
      low voltage silicon devices.
                Networking
      equipment, distributed power architecture, telecom devices, computers, and
      peripherals.Integrated
      Modules
                Condition,
      filter, and isolate the electronic signal to ensure accurate
      data/voice/video transmission within a highly integrated, reduced
      footprint
                Broadband,
      home networking, set top boxes, HDTV, and telecom equipment supporting
      ISDN, T1/E1 and DSL technologies.Circuit
      ProtectionMiniature
      Fuses
                Protects
      devices by preventing current in an electrical circuit from exceeding
      acceptable levels.
                Power
      supplies, electronic ballasts, and consumer
electronics.Surface
      mount PTC devices and fuses
                Protects
      devices by preventing current in an electrical circuit from exceeding
      acceptable levels. PTC devices can be reset to resume
      functionality.
                Cell
      phone chargers, consumer electronics, power supplies, and set top
      boxes.Radial
      PTC devices and micro fuses
                Protects
      devices by preventing current in an electrical circuit from exceeding
      acceptable levels. PTC devices can be reset to resume
      functionality.
                Cell
      phones, mobile computers, IC and battery protection, power supplies, and
      telecom line cards.InterconnectPassive
      Jacks
                RJ45
      and RJ11 connectivity for data/voice/video transmission.
                Network
      routers, hubs, switches, and patch panels deployed in Category 5e, 6, 6a,
      and 7a cable systems.Plugs
                RJ45
      and RJ11 connectivity for data/voice/video transmission.
                Network
      routers, hubs, switches, and patch panels deployed in Category 5e, 6, 6a,
      and 7a cable systems.Cable
      Assemblies
                RJ45
      and RJ11 connectivity for data/voice/video transmission.
                Structured
      Category 5e, 6, 6a, and 7a cable systems (premise
  wiring).
  -4-
  Acquisitions
 
 Acquisitions
have played a critical role in the growth of Bel and the expansion of both its
product portfolio and its customer base.  Furthermore, acquisitions
continue to be a key element in the Company’s growth strategy. As part of the
Company’s acquisition strategy, it may, from time to time, purchase equity
positions in companies that are potential merger candidates.  The
Company frequently evaluates possible merger candidates that would provide an
expanded product and technology base that will allow the Company to further
penetrate its strategic customers and/or an opportunity to reduce overall
operating expense as a percentage of revenue.  Bel also looks at
whether the merger candidates are positioned to take advantage of the Company's
low cost manufacturing facilities; and whether a cultural fit will allow the
acquired company to be integrated smoothly and efficiently.
 
 As of
December 31, 2008, the Company owned a total of 1,840,919 shares, or
approximately 1.9% of the outstanding shares, of the common stock of Toko, Inc.
(“Toko”).  The Company’s original cost of these shares was $5.6
million ($3.07 per share).  Toko develops, manufactures and sells
power supply related components and radio frequency related components primarily
in Japan.  Toko had a market capitalization of approximately $111.2
million as of December 31, 2008.   These shares are reflected on
the Company’s consolidated balance sheets as marketable
securities.  These marketable securities are considered to be
available for sale under SFAS No. 115, “Accounting for Certain Investments in
Debt and Equity Securities”.  In accordance with FASB Staff Position
(“FSP”) 115-1, the Company periodically reviews its marketable securities and
determines whether the investments are other-than-temporarily
impaired.  The Company reviewed various factors in determining whether
an other-than-temporary impairment existed on its investment in Toko,including
volatility of the Toko share price, Toko’s recent financial results and the
Company’s intention and ability to hold the investment.  During the
second and third quarters of 2008, the Company deemed this investment to be
other-than-temporarily impaired and recorded pre-tax impairment charges totaling
$3.6 million to write this investment to its then current fair
value.  At December 31, 2008, the Company’s adjusted basis for the
Toko stock was $1.10 per share and the fair market value was $1.14 per
share.  As the fair market value of the Toko stock is above the
Company’s adjusted basis, no impairment exists at December 31,
2008.  The pre-tax unrealized gain of $0.1 million as of December 31,
2008 is included, net of tax, in accumulated other comprehensive income
(loss).
 
 During
April 2007, the Company sold 4,034,000 shares of common stock of Toko on the
open market which resulted in a gain of approximately $2.5 million, net of
investment banker fees and other expenses in the amount of $0.8
million.  The Company accrued bonuses of $0.5 million in connection
with this gain which were paid in 2008.  For financial statement
purposes, in 2007, approximately $0.4 million and $0.1 million of such bonuses
has been classified within cost of sales and selling, general and administrative
expenses, respectively.
 
 During
2004, the Company acquired a total of 2,037,500 shares of the common stock of
Artesyn Technologies, Inc. (“Artesyn”) at a total purchase price of $16.3
million.  On April 28, 2006, Artesyn was acquired by Emerson Network
Power for $11.00 per share in cash.  During the second quarter of
2006, in connection with the Company's sale of its Artesyn common stock, the
Company recognized a gain of approximately $5.2 million, net of investment
banker advisory fees of $0.9 million.   The Company accrued
bonuses of $1.0 million in connection with the gain.  For financial
statement purposes approximately $0.3 million and $0.7 million was classified
within cost of sales and selling, general and administrative expenses,
respectively, and was paid to key employees in January 2007.
  -5-
  On
February 25, 2008, the Company announced that it had acquired 4,370,052 shares
of Power-One, Inc. (“Power-One”) common stock representing, to the Company’s
knowledge, 5% of Power-One’s outstanding common stock, at a total purchase price
of $10.1 million ($2.32 per share).  During October 2008, the Company
purchased an additional 2,968,946 shares of Power-One common stock representing,
to the Company’s knowledge, an additional 3.4% of Power-One’s outstanding common
stock, at a purchase price of $3.9 million.  As of December 31, 2008,
the Company owns a total of 7,338,998 share of Power-One common stock at an
aggregate cost of $14.1 million ($1.92 per share).  Power-One’s common
stock is quoted on the NASDAQ Global Market.  Power-One is a designer
and manufacturer of power conversion and power management
products.  As of December 31, 2008, the fair market value of the
Power-One stock owned by the Company was $1.19 per share, or $8.7 million in the
aggregate.   The Company reviewed various factors in determining
whether an other-than-temporary impairment existed on its investment in
Power-One at December 31, 2008.  These factors included volatility of
the Power-One share price, Power-One’s recent financial results and recent
changes made to its executive management, as well as the Company’s intention and
ability to hold the investment.  The Power-One share price has been
extremely volatile since the Company’s purchase of this stock, ranging from
$0.90 - $3.70, with an average closing price of $2.08 during the ownership
period.  During the fourth quarter of 2008, the stock price ranged
from $0.90 - $1.44, with an average closing price of $1.16 for the
quarter.  While the Company has the ability and intent to hold this
investment until the market improves, the weakening economic conditions
impacting the technology industry are not expected to rebound in the near
term.  Based on these factors, along with the severity of the decline
in the market price, the Company deemed this investment to be
other-than-temporarily impaired and recorded a pre-tax impairment charge of $5.3
million to write this investment to its fair value at December 31, 2008 ($1.19
per share).
 
 Sales and
Marketing
 
 The
Company sells its products to customers throughout North America, Western Europe
and Asia. Sales are made through one of three channels: direct strategic account
managers, regional sales managers working with independent sales representative
organizations or authorized distributors. Bel's strategic account managers are
assigned to handle major accounts requiring global coordination.
 
 Independent
sales representatives and authorized distributors are overseen by the Company's
sales management personnel located throughout the world. As of December 31,
2008, the Company had a sales and support staff of 50 persons that supported a
network of 82 sales representative organizations and non-exclusive distributors.
The Company has written agreements with all of its sales representative
organizations and major distributors. These written agreements, terminable on
short notice by either party, are standard in the industry.
 
 Sales
support functions have also been established and located in Bel international
facilities to provide timely, efficient support for customers. This supplemental
level of service, in addition to first-line sales support, enables the Company
to be more responsive to customers’ needs on a global level. The Company’s
marketing capabilities include product management which drives new product
development, application engineering for technical support and marketing
communications.  Product marketing managers facilitate technical
partnerships for engineering development of IC-compatible components and
modules.
  -6-
  Research and
Development
 
 The
Company’s engineering groups are strategically located around the world to
facilitate communication with and access to customers’ engineering personnel.
This collaborative approach enables partnerships with customers for technical
development efforts. On occasion, Bel executes non-disclosure agreements with
customers to help develop proprietary, next generation products destined for
rapid deployment.
 
 The
Company also sponsors membership in technical organizations that allow Bel’s
engineers to participate in developing standards for emerging technologies. It
is management’s opinion that this participation is critical in establishing
credibility and a reputable level of expertise in the marketplace, as well as
positioning the Company as an industry leader in new product
development.
 
 Research
and development costs are expensed as incurred, and are included in cost of
sales. Generally, research and development is performed internally for the
benefit of the Company. Research and development costs include salaries,
building maintenance and utilities, rents, materials, administration costs and
miscellaneous other items. Research and development expenses for the years ended
December 31, 2008, 2007 and 2006 amounted to $7.4 million, $7.2 million and $6.6
million, respectively. The increase in 2007 compared to 2006 was attributable to
various factors including an increase in headcount at the Hangzhou research and
development facility related to the DC-DC power products, an unfavorable change
in associated exchange rates for research and development expenses in the People
Republic of China (“PRC”) and United Kingdom, and general wage increases at the
various research and development facilities.
 
 Competition
 
 The
Company operates in a variety of markets all of which are highly competitive.
There are numerous independent companies and divisions of major companies that
manufacture products that are competitive with one or more of Bel’s
products.
 
 The
Company's ability to compete is dependent upon several factors including product
performance, quality, reliability, depth of product line, customer service,
technological innovation, design, delivery time and price. Overall financial
stability and global presence also play a role and give Bel a favorable position
in relation to many of its competitors. Management intends to maintain a strong
competitive posture in the Company's markets by continued expansion of the
Company’s product lines and ongoing investment in research, development and
manufacturing resources.
 
 Associates
 
 As of
December 31, 2008, the Company had 2,135 full-time associates. The Company
employed 642 people at its North American facilities, 1,422 people at its Asian
facilities and 71 people at its European facilities, excluding workers supplied
by independent contractors. The Company's manufacturing facility in New York is
represented by a labor union and all factory workers in the PRC are represented
by unions. At December 31, 2008, 36 of our workers in the New York facility were
covered by a collective bargaining agreement, which expires on March 31,
2009.  The Company believes that its relations with its associates are
satisfactory.
  -7-
  Suppliers
 
 The
Company has multiple suppliers for most of the raw materials that it
purchases.  Where possible, the Company has contractual agreements
with suppliers to assure a continuing supply of critical
components.
 
 With
respect to those items which are purchased from single sources, the Company
believes that comparable items would be available in the event that there was a
termination of the Company's existing business relationships with any such
supplier.  While such a termination could produce a disruption in
production, the Company believes that the termination of business with any one
of its suppliers would not have a material adverse effect on its long-term
operations. Actual experience could differ materially from this belief as a
result of a number of factors, including the time required to locate an
alternative supplier, and the nature of the demand for the Company’s
products.  In the past, the Company has experienced shortages in
certain raw materials, such as capacitors, ferrites and integrated circuits
(“IC’s”), when these materials were in great demand.  Even though the
Company may have more than one supplier for certain materials, it is possible
that these materials may not be available to the Company in sufficient
quantities or at the times desired by the Company.  In addition, the
Company believes that several of its suppliers, particularly those located in
Asia, are seeking to shorten established credit terms or eliminate credit
entirely. In the event that the current economic conditions have a negative
impact on the financial condition of our suppliers, this may impact the
availability and cost of our raw materials.
 
 Backlog
 
 The
Company typically manufactures products against firm orders and projected usage
by customers. Cancellation and return arrangements are either negotiated by the
Company on a transactional basis or contractually determined.  The
Company's backlog of orders as of February 28, 2009 was approximately $35.5
million, as compared with a backlog of $73.7 million as of February 29,
2008.  Management expects that all of the Company's backlog as of
February 28, 2009 will be shipped by December 31, 2009. Such expectation
constitutes a Forward-Looking Statement.  Factors that could cause the
Company to fail to ship all such orders by year-end include unanticipated supply
difficulties, changes in customer demand and new customer
designs.  The Company's major customers have negotiated reduced lead
times on purchase orders with the goal of reducing their
inventories.  Accordingly, backlog may not be a reliable indicator of
the timing of future sales.  See Item 1A of this Annual Report- "Risk
Factors - Our backlog figures may not be reliable indicators."
 
 Intellectual
Property
 
 The
Company has been granted a number of patents in the U.S., Europe and Asia and
has additional patent applications pending relating to its products. While the
Company believes that the issued patents are defendable and that the pending
patent applications relate to patentable inventions, there can be no assurance
that a patent will be obtained from the applications or that its existing
patents can be successfully defended.  It is management's opinion that
the successful continuation and operation of the Company's business does not
depend upon the ownership of patents or the granting of pending patent
applications, but upon the innovative skills, technical competence and marketing
and managerial abilities of its personnel.  The patents have a life of
seventeen years from the date of issue or twenty years from filing of patent
applications.  The Company's existing patents expire on various dates
from August 25, 2009 to March 28, 2025.
 
 The
Company utilizes registered trademarks in the U.S., Europe and Asia to identify
various products that it manufactures.  The trademarks survive as long
as they are in use and the registrations of these trademarks are
renewed.
  -8-
  Available
Information
 
 The
Company maintains a website at www.belfuse.com where
it makes available the proxy statements, press releases and reports on Form 4,
8-K, 10-K and 10-Q that it and its insiders file with the SEC. These forms are
made available as soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC. Press releases are also
issued via electronic transmission to provide access to the Company’s financial
and product news. In addition, the Company provides notification of and access
to voice and Internet broadcasts of its quarterly and annual
results.  The Company’s website also includes investor presentations
and corporate governance materials.
 
 Item 1A.  Risk
Factors
 
 An
investment in our common stock involves a high degree of
risk.  Investors should carefully consider the risks described below,
together with all other information contained in this Annual Report before
making investment decisions with respect to our common
stock.  Additional risks and uncertainties not presently known to us
or that we currently believe to be immaterial may also materially adversely
affect our business in the future.
 
 We
do business in a highly competitive industry
 
 Our
business is highly competitive worldwide, with relatively low barriers to
competitive entry. We compete principally on the basis of product performance,
quality, reliability, depth of product line, customer service, technological
innovation, design, delivery time and price. The electronic components industry
has become increasingly concentrated and globalized in recent years and our
major competitors, some of which are larger than us, have significant financial
resources and technological capabilities.
 
 Our
backlog figures may not be reliable indicators.
 
 Many of
the orders that comprise our backlog may be delayed, accelerated or canceled by
customers without penalty. Customers may on occasion double order from multiple
sources to ensure timely delivery when backlog is particularly long. Customers
often cancel orders when business is weak and inventories are
excessive.  Therefore, we cannot be certain that the amount of our
backlog equals or exceeds the level of orders that will ultimately be delivered.
Our results of operations could be adversely impacted if customers cancel a
material portion of orders in our backlog.
 
 There
are several factors which can cause us to lower our prices.
 
 a)           The
average selling prices for our products tend to decrease rapidly over their life
cycle, and customers are increasingly putting pressure on suppliers to lower
prices. Our profits suffer if we are not able to reduce our costs of production
or induce technological innovations as sales prices decline.
 
 b)           Any
drop in demand or increase in supply of our products due to the overcapacity of
our competitors could cause a dramatic drop in our average sales prices which in
turn could result in a decrease in our gross margins.
  -9-
  c)           Increased
competition from low cost suppliers around the world has put further pressures
on pricing.    We continually strive to lower our costs,
negotiate better pricing for components and raw materials and improve our
operating efficiencies.  Profit margins will be materially and
adversely impacted if we are not able to reduce our costs of production or
introduce technological innovations as sales prices decline.
  The
global financial crisis has materially adversely impacted our business and a
continuation of that crisis may have further material adverse effects on our
business and financial condition to an extent that we currently cannot
predict.
 
 The
current market conditions materially adversely impacted Bel during
2008.  While our 2008 revenues remained steady from 2007, various
asset impairment charges, including those related to the closure of our
Westborough, Massachusetts facility, and a decline in the stock prices of
companies associated with Bel’s investments, resulted in a substantial net loss
for 2008. The continued credit crisis and related turmoil in the global
financial system may have a further material adverse impact on our business and
our financial condition, and we are likely to face significantchallenges
if conditions in the financial markets do not improve. Changes in economic
conditions can result in reductions in capital expenditures by end-user
customers for our products, the deferral or delay of purchase commitments for
our products and increased competition. Continuation or worsening of the current
economic conditions, a prolonged global, national or regional economic recession
or other events that could produce major changes in demand patterns, could have
a material adverse effect on our sales, margins and profitability. The economic
situation could have an impact on our lenders or customers, causing them to fail
to meet their obligations to us.  In addition, the Company believes
that several of its vendors, particularly those located in Asia, are seeking to
shorten established credit terms or eliminate credit entirely. In the event that
the current economic conditions have a negative impact on the financial
condition of our vendors, this may impact the availability and cost of our raw
materials.  Our ability to access the capital markets may be
restricted at a time when we would like, or need, to raise additional financing,
which could have an impact on our flexibility to react to changing economic and
business conditions.  Given the extent of the global financial and
credit crisis and the ramifications for our customers, vendors, lenders and
competitors, we are not able to predict the impact the current global financial
and credit crisis will have on our operations and on our industry in general
going forward.
 
 We are dependent on our ability to
develop new products.
 
 Our
future operating results are dependent, in part, on our ability to develop,
produce and market new and more technologically advanced products. There are
numerous risks inherent in this process, including the risks that we will be
unable to anticipate the direction of technological change or that we will be
unable to timely develop and bring to market new products and applications to
meet customers’ changing needs.
 
 Our
acquisitions may not produce the anticipated results.
 
 A
significant portion of our growth is from acquisitions. We cannot assure you
that we will identify or successfully complete transactions with suitable
acquisition candidates in the future. If an acquired business fails to operate
as anticipated or cannot be successfully integrated with our other businesses,
our results of operations, enterprise value, market value and prospects could
all be materially and adversely affected.  Integration of new
acquisitions into our consolidated operations may result in lower average
operating results for the group as a whole.
  -10-
  If our
acquisitions fail to perform up to our expectations, or as the value of goodwill
decreases, we could be required to record a loss from the impairment of
assets.  The Company recorded a charge of $14.1 million related to the
impairment of goodwill during the fourth quarter of 2008.  In
addition, a total of $0.7 million of fixed asset impairments was recorded during
the fourth quarter of 2008.
 
 Our
strategy also focuses on the reduction of selling, general and administrative
expenses through the integration or elimination of redundant sales facilities
and administrative functions at acquired companies. Our inability to achieve
these goals could have a material and adverse effect on our results of
operations.
 
 If we
were to undertake a substantial acquisition for cash, the acquisition would
likely need to be financed in part through bank borrowings or the issuance of
public or private debt or equity. If we borrow money to finance acquisitions,
this would likely decrease our ratio of earnings to fixed charges and adversely
affect other leverage criteria and could result in the imposition of material
restrictive covenants.  Under our existing credit facility, we are
required to obtain our lenders’ consent for certain additional debt financing
and to comply with other covenants, including the application of specific
financial ratios, and we may be restricted from paying cash dividends on our
capital stock. We cannot assure you that the necessary acquisition financing
would be available to us on acceptable terms, or at all, when required. If we
issue a substantial amount of stock either as consideration in an acquisition or
to finance an acquisition, such issuance may dilute existing stockholders and
may take the form of capital stock having preferences over our existing common
stock.
 
 We
are exposed to weaknesses in international markets and other risks inherent in
foreign trade.
 
 We have
operations in six countries around the world outside the United States, and
approximately 74% of our revenues during 2008 were derived from sales to
customers outside the United States. Some of the countries in which we operate
have in the past experienced and may continue to experience political, economic,
medical epidemic and military instability or unrest.  These conditions
could have a material and adverse impact on our ability to operate in these
regions and, depending on the extent and severity of these conditions, could
materially and adversely affect our overall financial condition and operating
results.
 
 Although
our operations have traditionally been largely transacted in U.S. dollars or
U.S. dollar linked currencies, recent world financial instability may cause
additional foreign currency risks in the countries we operate in.  The
decoupling of the Chinese Yuan from the U.S. dollar has and will continue to
increase financial risk.
 
 Other
risks inherent in doing trade internationally include: expropriation and
nationalization, trade restrictions, transportation delays, and changes in
United States laws that may inhibit or restrict our ability to manufacture in or
sell to any particular country.  For information regarding risks
associated with our presence in Hong Kong, see "Item 2 - Properties" of this
Annual Report on Form 10-K.
 
 While we
have benefited from favorable tax treatment in many of the countries where we
operate, the benefits we currently enjoy could change if laws or rules in the
United States or those foreign jurisdictions change, incentives are changed or
revoked, or we are unable to renew current incentives.
  -11-
  We may experience labor
unrest.
 
 As we
implement transfers of certain of our operations, we may experience strikes or
other types of labor unrest as a result of lay-offs or termination of employees
in higher labor cost countries.  Our manufacturing facility in New
York is represented by a labor union and all factory workers in the PRC are
represented by unions.
 
 We may experience labor
shortages.
 
 Government
economic, social and labor policies in the PRC may cause shortages of factory
labor in areas where we have our products manufactured.  If we are
required to manufacture more products outside of the PRC as a result of such
shortages, our margins will likely be materially adversely
affected.
 
 Our results of operations may be
materially and adversely impacted by environmental and other
regulations.
 
 Our
manufacturing operations, products and/or product packaging are subject to
environmental laws and regulations governing air emissions, wastewater
discharges, the handling, disposal and remediation of hazardous substances,
wastes and certain chemicals used or generated in our manufacturing processes,
employee health and safety labeling or other notifications with respect to the
content or other aspects of our processes, products or packaging, restrictions
on the use of certain materials in or on design aspects of our products or
product packaging and responsibility for disposal of products or product
packaging. More stringent environmental regulations may be enacted in the
future, and we cannot presently determine the modifications, if any, in our
operations that any such future regulations might require, or the cost of
compliance with these regulations.
 
 Our results may vary substantially
from period to period.
 
 Our
revenues and expenses may vary significantly from one accounting period to
another accounting period due to a variety of factors, including customers'
buying decisions, our product mix and general market and economic
conditions.  Such variations could significantly impact our stock
price.
 
 A
shortage of availability or an increase in the cost of raw materials and
components may adversely impact our ability to procure high quality raw
materials at cost effective prices and thus may negatively impact profit
margins.
 
 Our
results of operations may be adversely impacted by difficulties in obtaining raw
materials, supplies, power, labor, natural resources and any other items needed
for the production of our products, as well as by the effects of quality
deviations in raw materials and the effects of significant fluctuations in the
prices on existing inventories and purchase commitments for these
materials.  Many of these materials and components are produced by a
limited number of suppliers and may be constrained by supplier
capacity.
 
 As
product life cycles shorten and during periods of market slowdowns, the risk of
materialsobsolescence increases
and this maymaterially and adversely
impact our financial results.
  -12-
  Rapid
shifts in demand for various products may cause some of our inventory of raw
materials, components or finished goods to become obsolete.
 
 The life
cycles and demand for our products are directly linked to the life cycles and
demand for the end products into which they are designed.  Rapid
shifts in the life cycles or demand for these end products due to technological
shifts, economic conditions or other market trends may result in material
amounts of inventory of either raw materials or finished goods becoming
obsolete.   While the Company works diligently to manage
inventory levels, rapid shifts in demand may result in obsolete or excess
inventory andmaterially impact
financial results.
 
 A
loss of the services of the Company’s executive officers or other skilled
associates could negatively impact our operations and results.
 
 The
success of the Company’s operations is largely dependent upon the performance of
its executive officers, managers, engineers and sales people.  Many of
these individuals have a significant number of years of experience within the
Company and/or the industry in which we compete and would be extremely difficult
to replace.  The loss of the services of any of these associates may
materially and adversely impact our results of operations if we are unable to
replace them in a timely manner.
 
 Our
stock price, like that of many technology companies, has been and may continue
to be volatile.
 
 The
market price of our common stock may fluctuate as a result of variations in our
quarterly operating results and other factors beyond our
control.  These fluctuations may be exaggerated if the trading volume
of our common stock is low.  In addition, the market price of our
common stock may rise and fall in response to a variety of factors,
including:
 
 ·
              announcements
      of technological or competitive
developments;
 ·
              general
      market or economic conditions;
 ·
              acquisitions
      or strategic alliances by us or our
competitors;
 ·
              the
      gain or loss of a significant customer or order;
  or
 ·
              changes
      in estimates of our financial performance or changes in recommendations by
      securities analysts regarding us or our
industry
 
 In
addition, equity securities of many technology companies have experienced
significant price and volume fluctuations even in periods when the capital
markets generally are not distressed.  These price and volume
fluctuations often have been unrelated to the operating performance of the
affected companies.
 
 Our
intellectual property rights may not be adequately protected under the current
state of the law.
 
 We cannot
assure you we will be successful in protecting our intellectual property through
patent or other laws.  As a result, other companies may be able to
develop and market similar products which could materiallyandadversely affect our
business.
  -13-
  We
may be sued by third parties for alleged infringement of their proprietary
rights and we may incur defense costs and possibly royalty obligations or lose
the right to use technology important to our business.
 
 From time
to time, we receive claims by third parties asserting that our products violate
their intellectual property rights.  Any intellectual property claims,
with or without merit, could be time consuming and expensive to litigate or
settle and could divert management attention from administering our
business.  A third party asserting infringement claims against us or
our customers with respect to our current or future products may materiallyand adversely affect us
by, for example, causing us to enter into costly royalty arrangements or forcing
us to incur settlement or litigation costs.
 
 Our
investments in marketable securities could have a negative impact on our
profitability.
 
 As part
of our acquisition strategy, we have, from time to time, acquired equity
positions in companies that could be attractive acquisition candidates or could
otherwise be potential co-venturers in potential business transactions with
us.  As a result of market declines occurring subsequent to our
investments, we recorded other-than-temporary impairment charges and realized
losses of $10.4 million during the year ended December 31, 2008 related to
our investments in Toko Inc., Power-One, Inc. and in the Columbia Strategic Cash
Portfolio as a result of recent market declines.  We will continue to
monitor these investments as future market declines may result in additional
impairment charges on these investments.  See Item 7A – “Quantitative
and Qualitative Disclosures About Market Risk”.
 
 As
a result of protective provisions in the Company’s certificate of incorporation,
the voting power of certain officers, directors and principal shareholders may
be increased at future meetings of the Company’s shareholders.
 
 The
Company's certificate of incorporation provides that if a shareholder, other
than shareholders subject to specific exceptions, acquires (after the date of
the Company’s 1998 recapitalization) 10% or more of the outstanding Class A
common stock and does not own an equal or greater percentage of all then
outstanding shares of both Class A and Class B common stock (all of which common
stock must have been acquired after the date of the 1998
recapitalization), such shareholder must, within 90 days of the trigger
date, purchase Class B common shares, in an amount and at a price determined in
accordance with a formula described in the Company's certificate of
incorporation, or forfeit its right to vote its Class A common shares. As of
February 28, 2009, to the Company’s knowledge, there were two shareholders of
the Company's common stock with ownership in excess of 10% of Class A
outstanding shares with no ownership of the Company's Class B common stock and
with no basis for exception from the operation of the above-mentioned
provisions. In order to vote their respective shares at Bel's next shareholders'
meeting, these shareholders must either purchase the required number of Class B
common shares or sell or otherwise transfer Class A common shares until their
Class A holdings are under 10%. As of February 28, 2009, to the Company's
knowledge, these shareholders owned 17.0% and 12.1%, respectively, of the
Company's Class A common stock and had not taken steps to either purchase the
required number of Class B common shares or sell or otherwise transfer Class A
common shares until their Class A holdings fall below 10%.  The
Company identified a third shareholder of the Company’s common stock with
ownership in excess of 10% of Class A outstanding shares with no ownership of
the Company’s Class B common stock; however, in that case, the Company’s
repurchases of Class A common stock during the latter part of 2008 resulted in
this shareholder’s owning more than 10%.  In accordance with the
Company’s certificate of incorporation, the above-mentioned provisions do not
apply to any increase in percentage of beneficial ownership resulting solely
from a change in the total number of shares of Class A common stock
outstanding.  As a result, this shareholder’s voting rights have not
been impacted by the increase in its beneficial ownership
percentage.
  -14-
  To the
extent that the voting rights of particular holders of Class A common stock are
suspended as of times when the Company's shareholders vote due to the
above-mentioned provisions, such suspension will have the effect of increasing
the voting power of those holders of Class A common shares whose voting rights
are not suspended.  As of February 28, 2009, Daniel Bernstein, the
Company's chief executive officer, beneficially owned 93,555 Class A common
shares (or 6.0%) of the outstanding Class A common shares whose voting rights
were not suspended, the Estate of Elliot Bernstein beneficially owned 251,132
Class A common shares (or 16.3%) of the outstanding Class A common shares whose
voting rights were not suspended and all directors and executive officers as a
group (including Daniel Bernstein) beneficially owned 243,484 Class A common
shares (or 15.6%) of the outstanding Class A common shares whose voting rights
were not suspended.
 
 
 
 Item
1B.          Unresolved Staff
Comments
 
 Not
applicable.
 
 
 Item
2.                        Properties
 
 The
Company is headquartered in Jersey City, New Jersey, where it currently owns
19,000 square feet of office and warehouse space.  During May
2007, the Company sold a parcel of land located in Jersey City, New Jersey for
$6.0 million.  In December 2007, the Tidelands Resource Council voted
to approve the Bureau of Tideland’s Management’s recommendation for a Statement
of No Interest.  On March 14, 2008, the Commissioner of the Department
of Environmental Protection signed a letter to approve the Statement of No
Interest.  As final approval of the Statement of No Interest was still
pending as of December 31, 2008, the Company continued to defer the estimated
gain on sale of the land, in the amount of $4.6 million.  Of the $6.0
million sales price, the Company received cash of $1.5 million before closing
costs, and $4.6 million (including interest) was being held in escrow pending
final resolution of the State of New Jersey tideland claim and certain
environmental costs.  During 2007, the Company paid $0.4 million
related to environmental costs, which approximated the maximum amount of
environmental costs for which the Company is liable.  During May 2008, the
title company released $2.3 million of the escrow and as such, $2.3 remains in
escrow and has been classified as restricted cash as of December 31,
2008.  On February 27, 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  The Company
anticipates release of the remaining escrow and corresponding guarantees and
recognition of the gain during the first quarter of 2009. Additionally, the
Company realized a $5.5 million pre-tax gain from the sale of property, plant
and equipment in Hong Kong and Macao during the year ended December 31,
2007.
  -15-
  The Company operated 10 manufacturing
facilities in 6 countries as of December 31, 2008.    The
following is a list of the locations of the Company's principal manufacturing
facilities at December 31, 2008.
 Location
                                          
                                          Approximate
                                            Square
      Feet
                                          
                                          Owned/
                                            Leased
                                          
                                          Percentage
                                            Used
      for
                                            ManufacturingDongguan,
      People'sRepublic
      of China
                                          
                                          
                                          346,000
                                          
                                          Leased
                                          
                                          
                                          61
                                          %Zhongshan,
      People'sRepublic
      of China
                                          
                                          
                                          386,000
                                          
                                          Leased
                                          
                                          
                                          70
                                          %Zhongshan,
      People'sRepublic
      of China
                                          
                                          
                                          117,000
                                          
                                          Owned
                                          
                                          
                                          100
                                          %Zhongshan,
      People'sRepublic
      of China
                                          
                                          
                                          78,000
                                          
                                          Owned
                                          
                                          
                                          100
                                          %Hong
      Kong
                                          
                                          
                                          43,000
                                          
                                          Owned
                                          
                                          
                                          7
                                          %Louny,
      Czech Republic
                                          
                                          
                                          11,000
                                          
                                          Owned
                                          
                                          
                                          75
                                          %Dominican
      Republic
                                          
                                          
                                          41,000
                                          
                                          Leased
                                          
                                          
                                          85
                                          %Cananea,
      Mexico
                                          
                                          
                                          39,000
                                          
                                          Leased
                                          
                                          
                                          60
                                          %Inwood,
      New York
                                          
                                          
                                          39,000
                                          
                                          Owned
                                          
                                          
                                          40
                                          %Glen
      Rock, Pennsylvania
                                          
                                          
                                          74,000
                                          
                                          Owned
                                          
                                          
                                          60
                                          %1,174,000
 
 Of
the space described above, 121,000 square feet is used for engineering,
warehousing, sales and administrative support functions at various locations and
247,000 square feet is used for dormitories, canteen and other employee related
facilities in the PRC.  Manufacturing operations at the Westborough,
Massachusetts facility ceased at the end of 2008 and as a result, 14,430 square
feet at this facility was unoccupied as of December 31, 2008 and is excluded
from the table above.
 
 The
Territory of Hong Kong became a Special Administrative Region (“SAR”) of the PRC
during 1997.  The territory of Macao became a SAR of the PRC at the
end of 1999. Management cannot presently predict what future impact, if any,
this will have on the Company or how the political climate in the PRC and the
Dominican Republic will affect its contractual arrangements in the PRC or labor
relationships in the Dominican Republic.  A significant portion of the
Company's manufacturing operations and approximately 48% of its identifiable
assets are located in Asia.
 
 Approximately
31% of the 1.3 million square feet the Company occupies is owned while the
remainder is leased.    See Note 15 of the Notes to
Consolidated Financial Statements for additional information pertaining to
leases.
 
 
 Item
3.                      Legal
Proceedings
 
 The
Company is a defendant in a lawsuit captioned Synqor, Inc. v. Artesyn
Technologies, Inc., Astec America, Inc., Emerson Network Power, Inc., Emerson
Electric Co., Bel Fuse Inc., Cherokee International Corp., Delta Electronics,
Inc., Delta Products Corp., Murata Electronics North America, Inc., Murata
Manufacturing Co., Ltd., Power-One, Inc., Tyco Electronics Corp. and Tyco
Electronics Ltd. brought in the United States District Court, Eastern District
of Texas in November 2007.  With respect to the Company, plaintiff
claims that the Company infringed its patents covering certain power products.
Synqor is seeking an unspecified amount of damages.  The Company filed
an Answer to Synqor’s complaint, denying the allegations of infringement and
asserting invalidity of Synqor’s patents.
  -16-
  The
Company was a defendant in a lawsuit captioned Halo Electronics, Inc. (“Halo”)
v. Bel Fuse Inc., Pulse Engineering, Inc. and Technitrol, Inc. brought in Nevada
Federal District Court.  Plaintiff claimed that the Company had
infringed its patents covering certain surface mount discrete magnetic products
made by the Company.  Halo was seeking unspecified damages, which it
claims should be trebled.  In December 2007, this case was dismissed
by the Nevada Federal District Court for lack of personal jurisdiction. Halo
then re-filed this suit, with similar claims against the Company, in the
Northern California Federal District Court, captioned Halo Electronics, Inc. v.
Bel Fuse Inc., Elec & Eltek (USA) Corporation, Wurth Electronics Midcom,
Inc., and Xfmrs, Inc.
 
 The
Company is a plaintiff in a lawsuit captioned Bel Fuse Inc.  v. Halo
Electronics, Inc. brought in the United States District Court of New Jersey
during May 2007.  The Company claims that Halo has infringed a patent
covering certain integrated connector modules made by Halo.  The
Company is seeking an unspecified amount of damages plus interest, costs and
attorney fees.
 
 The
Company was a plaintiff in a lawsuit captioned Bel Fuse Inc. and Bel Power, Inc.
v. Andrew Ferencz, Gregory Zvonar, Bernhard Schroter, EE2GO, Inc., Howard E.
Kaepplein and William Ng, brought in the Superior Court of the Commonwealth of
Massachusetts.  The Company was granted injunctive relief and was seeking
damages against the former stockholders of Galaxy Power, Inc., key employees of
Galaxy and a corporation formed by some or all of the individual defendants. The
Company hadalleged
that the defendants violated their written non-competition, non-disclosure and
non-solicitation agreements, diverted business and usurped substantial business
opportunities with key customers, misappropriated confidential information and
trade secrets, and harmed the Company's business.
  In a
related matter, the Company was a defendant in a lawsuit captioned Robert
Chimielnski, P.C. on behalf of the stockholder representatives and the former
stockholders of Galaxy Power, Inc. v. Bel Fuse Inc. et al. brought in the
Superior Court of the Commonwealth of Massachusetts.  This complaint for
damages and injunctive relief was based on an alleged breach of contract and
other allegedly illegal acts in a corporate context arising out of the Company's
objection to the release of nearly $2.0 million held in escrow under the terms
of the stock purchase agreement between Galaxy and the
Company.
  The
parties came to a mutual agreement to end these lawsuits, and the matters have
been resolved. On December 18, 2008 the Suffolk Superior Court of the
Commonwealth of Massachusetts entered a judgment that terminated all the
litigation pursuant to the Stipulation of Dismissal that was filed December 17,
2008.
 
 The
Company is a defendant in a lawsuit captioned Murata Manufacturing Company, Ltd.
v. Bel Fuse Inc. et al, brought in Illinois Federal District Court. Plaintiff
claims that its patent covers all of the Company's modular jack products. That
party had previously advised the Company that it was willing to grant a
non-exclusive license to the Company under the patent for a 3% royalty on all
future gross sales of ICM products; payment of a lump sum of 3% of past sales
including sales of applicable Insilco products; an annual minimum royalty of
$.05 million; payment of all attorney fees; and marking of all licensed ICM's
with the third party's patent number. The Company expects this case to proceed
to trial.  The Company was also a defendant in a lawsuit, captioned
Regal Electronics, Inc. v. Bel Fuse Inc., brought in California Federal District
Court. Plaintiff claimed that its patent covered certain of the Company's
modular jack products. That party had previously advised the Company that it was
willing to grant a non-transferable license to the Company for an up front fee
of $0.5 million plus a 6% royalty on future sales. The District Court has
granted summary judgment in the Company's favor dismissing Regal Electronics'
infringement claims, while at the same time dismissing the Company's invalidity
counterclaim against Regal Electronics.  Regal has appealed the
Court's rejection of its infringement claims to the U.S. Court of
Appeals.  The case was heard on February 6, 2007 and the U.S. Court of
Appeals upheld the District Court’s ruling in favor of the Company.
  -17-
  The
Company cannot predict the outcome of its unresolved legal proceedings; however,
management believes that the ultimate resolution of these matters will not have
a material impact on the Company's consolidated financial condition or results
of operations.  As of December 31, 2008, no amounts have been accrued
in connection with these lawsuits, as the amounts are not
determinable.
 
 The
Company is not a party to any other legal proceeding, the adverse outcome of
which is likely to have a material adverse effect on the Company's consolidated
financial condition or results of operations.
 
 
 Item
4.                                    Submission of Matters to a
Vote of Security Holders
 
 No
matters were submitted to a vote of the Company's shareholders during the fourth
quarter of 2008.
  -18-
  PART II
 
 Item
5.     Market for Registrant's Common Equity and
Related
 Stockholder Matters and
Issuer Purchases of Equity Securities
 
 (a)
Market
Information
 
 The
Company’s voting Class A Common Stock, par value $0.10 per share,
and  non-voting Class B Common Stock, par value $0.10 per share
("Class A" and "Class B," respectively),  are traded on the NASDAQ
Global Select Market.  The following table sets forth the high and low
closing sales price range (as reported by The Nasdaq Stock Market Inc.) for the
Common Stock on NASDAQ for each quarter during the past two years.
 
 Class
      A
                  
                  
                  Class
      A
                  
                  
                  Class
      B
                  
                  
                  Class
      BHigh
                  
                  
                  Low
                  
                  
                  High
                  
                  
                  LowYear
      Ended December 31, 2007First
      Quarter
                  
                  $
                  38.11
                  
                  
                  $
                  27.36
                  
                  
                  $
                  38.71
                  
                  
                  $
                  31.22Second
      Quarter
                  
                  
                  39.47
                  
                  
                  
                  34.10
                  
                  
                  
                  39.88
                  
                  
                  
                  33.42Third
      Quarter
                  
                  
                  38.17
                  
                  
                  
                  32.60
                  
                  
                  
                  36.59
                  
                  
                  
                  29.55Fourth
      Quarter
                  
                  
                  38.08
                  
                  
                  
                  31.81
                  
                  
                  
                  36.19
                  
                  
                  
                  27.19Year
      Ended December 31, 2008First
      Quarter
                  
                  
                  33.50
                  
                  
                  
                  24.73
                  
                  
                  
                  29.15
                  
                  
                  
                  26.21Second
      Quarter
                  
                  
                  32.00
                  
                  
                  
                  27.22
                  
                  
                  
                  30.00
                  
                  
                  
                  24.47Third
      Quarter
                  
                  
                  30.97
                  
                  
                  
                  25.71
                  
                  
                  
                  31.06
                  
                  
                  
                  23.78Fourth
      Quarter
                  
                  
                  25.91
                  
                  
                  
                  13.13
                  
                  
                  
                  28.96
                  
                  
                  
                  13.03
 
 The
Common Stock is reported under the symbols BELFA and BELFB in the NASDAQ Global
Select Market.
 
 -19-
  (b)     Holders
 
 As
of February 28, 2009 there were 75 registered shareholders of the Company's
Class A Common Stock and 169 registered shareholders of the Company’s Class B
Common Stock.  The Company estimates that there were 843 beneficial
shareholders of the Company’s Class A Common Stock and 2,417 beneficial
shareholders of  the Company’s Class B Common Stock as of February 28,
2009.
 
 (c)     Dividends
 
 There
are no contractual restrictions on the Company's ability to pay dividends
provided the Company is not in default under its credit agreements immediately
before such payment and after giving effect to such
payment.  Dividends paid during the years ended December 31, 2007 and
2008 were as follows:
 
 Dividend
      per Share
                
                
                Total
      Dividend Payment (in 000’s)Class
      A
                
                
                Class
      B
                
                
                Class
      A
                
                
                Class
      BYear
      Ended December 31, 2007February
      1, 2007
                
                $
                0.04
                
                
                $
                0.05
                
                
                $
                108
                
                
                $
                451May
      1, 2007
                
                
                0.04
                
                
                
                0.05
                
                
                
                108
                
                
                
                452August
      1, 2007
                
                
                0.04
                
                
                
                0.05
                
                
                
                107
                
                
                
                453November
      1, 2007 (a)
                
                
                0.06
                
                
                
                0.07
                
                
                
                157
                
                
                
                637Year
      Ended December 31, 2008February
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                153
                
                
                
                638May
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                152
                
                
                
                638August
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                151
                
                
                
                640November
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                131
                
                
                
                689
 
 (a)
                During
      July 2007 the Board of Directors of the Company authorized an increase in
      the dividends by $.02 per share per quarter for both Class A and B common
      shares effective with the November 2007 dividend
  payment
 
 On
February 1, 2009 the Company paid a $0.06 and $0.07 per share dividend to all
shareholders of record at January 15, 2009 of Class A and Class B Common
Stock, respectively, in the total amount of $0.1 million and $0.6 million,
respectively.  The Company currently anticipates paying these
dividends in the future.
 
 -20-
  (d)
              Securities authorized
      for issuance under the Equity Compensation
  Plans
 
 Equity
Compensation Plan Information
  Plan
      Category
                    
                    Number
      of Securities to be
                      Issued
      Upon Exercise of
                      Outstanding
      Options,
                      Warrants
      and Rights
                      (a)
                    
                    
                    Weighted
      Average Exercise
                      Price
      of Outstanding Options,
                      Warrants
      and Rights
                      (b)
                    
                    
                    Number
      of Securities Remaining
                      Available
      for Future Issuance
                      Under
      Equity Compensation
                      Plans
      (Excluding Securities
                      Reflected
      in Column (a))
                      (c)Equity
      compensation plans approved
                      by
      security holders
                    
                    
                    53,000
                    
                    
                    $
                    31.48
                    
                    
                    
                    816,785Equity
      compensation plans not
                      approved
      by security holders
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Totals
                    
                    
                    53,000
                    
                    
                    $
                    31.48
                    
                    
                    
                    816,785
 
 (e)
              Issuer Purchases of
      Equity Securities
 
 The
following table sets forth certain information regarding the Company's purchase
of shares of its Class A Common Stock during each calendar month in the quarter
ended December 31, 2008:
  Period
                    
                    Total
      Number of Shares Purchased
                    
                    
                    Average
      Price Paid per Share
                    
                    
                    Total
      Number of Shares Purchased as Part of Publicly Announced Plans or Programs
      (a)
                    
                    
                    Maximum
      Number of Shares that May Yet Be Purchased Under the Plans or
      ProgramsOctober
      1, 2008 - October 31, 2008
                    
                    
                    8,255
                    
                    
                    $
                    20.88
                    
                    
                    
                    8,255
                    
                    
                    
                    612,639November
      1, 2008 - November 30, 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    612,639December
      1, 2008 - December 31, 2008
                    
                    
                    2,567
                    
                    
                    
                    17.21
                    
                    
                    
                    2,567
                    
                    
                    
                    609,741Totals
                    
                    
                    10,822
                    
                    
                    $
                    20.01
                    
                    
                    
                    10,822
                    
                    
                    
                    609,741
  (a)  These
      share repurchases were made as part of a plan authorized by the Board of
      Directors during 2000whereby
      the Company is authorized to purchase up to 10% of the Company's
      outstanding common shares.
  As of
December 31, 2008, the Company had cumulatively purchased and retired 521,747
shares of the Company’s Class A Common Stock and 23,600 shares of the Company’s
Class B Common Stock.  No shares of Class B common stock were
repurchased during the year ended December 31, 2008.  A total of
361,714 shares of Class A common stock were repurchased during the year ended
December 31, 2008.
 
 -21-
 
 Item
6.  Selected Financial Data
  Years
      Ended December 31,2008
                                                                  
                                                                  
                                                                  2007
                                                                  
                                                                  
                                                                  2006
                                                                  
                                                                  
                                                                  2005 (a)
                                                                  
                                                                  
                                                                  2004(In
      thousands of dollars, except per share data)Selected
      Statements of Operations Data:Net
      sales
                                                                  
                                                                  $
                                                                  258,350
                                                                  
                                                                  
                                                                  $
                                                                  259,137
                                                                  
                                                                  
                                                                  $
                                                                  254,933
                                                                  
                                                                  
                                                                  $
                                                                  215,916
                                                                  
                                                                  
                                                                  $
                                                                  190,022Cost
      of sales
                                                                  
                                                                  
                                                                  217,079
                                                                  
                                                                  
                                                                  
                                                                  203,007
                                                                  
                                                                  
                                                                  
                                                                  192,985
                                                                  
                                                                  
                                                                  
                                                                  156,147
                                                                  
                                                                  
                                                                  
                                                                  132,776Selling,
      general andadministrative
      expenses
                                                                  
                                                                  
                                                                  36,093
                                                                  
                                                                  
                                                                  
                                                                  36,117
                                                                  
                                                                  
                                                                  
                                                                  37,800
                                                                  
                                                                  
                                                                  
                                                                  33,152
                                                                  
                                                                  
                                                                  
                                                                  31,302Impairment
      of assets (d) (e) (g)
                                                                  
                                                                  
                                                                  14,805
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  1,033Restructuring
      charges (f)
                                                                  
                                                                  
                                                                  1,122
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Gain
      on sale of property, plant and equipment
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (5,499
                                                                  )
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Casualty
      loss (c)
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  1,030
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Interest
      income - net
                                                                  
                                                                  
                                                                  2,454
                                                                  
                                                                  
                                                                  
                                                                  4,046
                                                                  
                                                                  
                                                                  
                                                                  2,780
                                                                  
                                                                  
                                                                  
                                                                  1,098
                                                                  
                                                                  
                                                                  
                                                                  525(Impairment
      charge)/gain on sale of investment (h)
                                                                  
                                                                  
                                                                  (10,358
                                                                  )
                                                                  
                                                                  
                                                                  2,146
                                                                  
                                                                  
                                                                  
                                                                  5,150
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Lawsuit
      proceeds (b)
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  2,935(Loss)
      earnings before provisionfor
      income taxes
                                                                  
                                                                  
                                                                  (18,653
                                                                  )
                                                                  
                                                                  
                                                                  31,704
                                                                  
                                                                  
                                                                  
                                                                  31,048
                                                                  
                                                                  
                                                                  
                                                                  27,715
                                                                  
                                                                  
                                                                  
                                                                  28,371Income
      tax (benefit) provision
                                                                  
                                                                  
                                                                  (3,724
                                                                  )
                                                                  
                                                                  
                                                                  5,368
                                                                  
                                                                  
                                                                  
                                                                  5,845
                                                                  
                                                                  
                                                                  
                                                                  7,482
                                                                  
                                                                  
                                                                  
                                                                  3,649Net
      (loss) earnings
                                                                  
                                                                  
                                                                  (14,929
                                                                  )
                                                                  
                                                                  
                                                                  26,336
                                                                  
                                                                  
                                                                  
                                                                  25,203
                                                                  
                                                                  
                                                                  
                                                                  20,233
                                                                  
                                                                  
                                                                  
                                                                  24,722(Loss)
      earnings per Class A commonshare
      - basic
                                                                  
                                                                  
                                                                  (1.28
                                                                  )
                                                                  
                                                                  
                                                                  2.11
                                                                  
                                                                  
                                                                  
                                                                  2.03
                                                                  
                                                                  
                                                                  
                                                                  1.67
                                                                  
                                                                  
                                                                  
                                                                  2.10(Loss)
      earnings per Class A commonshare
      - diluted
                                                                  
                                                                  
                                                                  (1.28
                                                                  )
                                                                  
                                                                  
                                                                  2.11
                                                                  
                                                                  
                                                                  
                                                                  2.03
                                                                  
                                                                  
                                                                  
                                                                  1.67
                                                                  
                                                                  
                                                                  
                                                                  2.10(Loss)
      earnings per Class B commonshare
      - basic
                                                                  
                                                                  
                                                                  (1.30
                                                                  )
                                                                  
                                                                  
                                                                  2.25
                                                                  
                                                                  
                                                                  
                                                                  2.16
                                                                  
                                                                  
                                                                  
                                                                  1.79
                                                                  
                                                                  
                                                                  
                                                                  2.22(Loss)
      earnings per Class B commonshare
      - diluted
                                                                  
                                                                  
                                                                  (1.30
                                                                  )
                                                                  
                                                                  
                                                                  2.24
                                                                  
                                                                  
                                                                  
                                                                  2.15
                                                                  
                                                                  
                                                                  
                                                                  1.77
                                                                  
                                                                  
                                                                  
                                                                  2.16Cash
      dividends declared perClass
      A common share
                                                                  
                                                                  
                                                                  0.24
                                                                  
                                                                  
                                                                  
                                                                  0.20
                                                                  
                                                                  
                                                                  
                                                                  0.16
                                                                  
                                                                  
                                                                  
                                                                  0.16
                                                                  
                                                                  
                                                                  
                                                                  0.16Cash
      dividends declared perClass
      B common share
                                                                  
                                                                  
                                                                  0.28
                                                                  
                                                                  
                                                                  
                                                                  0.24
                                                                  
                                                                  
                                                                  
                                                                  0.20
                                                                  
                                                                  
                                                                  
                                                                  0.20
                                                                  
                                                                  
                                                                  
                                                                  0.20
  As
      of December 31,2008
                                                      
                                                      
                                                      2007
                                                      
                                                      
                                                      2006
                                                      
                                                      
                                                      2005
                                                      
                                                      
                                                      2004(In
      thousands of dollars, except percentages)Selected
      Balance Sheet Data and Ratios:Working
      capital
                                                      
                                                      $
                                                      163,985
                                                      
                                                      
                                                      $
                                                      173,171
                                                      
                                                      
                                                      $
                                                      144,677
                                                      
                                                      
                                                      $
                                                      128,203
                                                      
                                                      
                                                      $
                                                      127,624Total
      assets
                                                      
                                                      
                                                      261,784
                                                      
                                                      
                                                      
                                                      293,860
                                                      
                                                      
                                                      
                                                      268,497
                                                      
                                                      
                                                      
                                                      242,056
                                                      
                                                      
                                                      
                                                      217,777Long
      term debt
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      6,500Stockholders'
      equity
                                                      
                                                      
                                                      217,773
                                                      
                                                      
                                                      
                                                      244,527
                                                      
                                                      
                                                      
                                                      222,150
                                                      
                                                      
                                                      
                                                      201,577
                                                      
                                                      
                                                      
                                                      178,461Return
      on averagetotal
      assets (i)
                                                      
                                                      
                                                      -5.17
                                                      %
                                                      
                                                      
                                                      9.34
                                                      %
                                                      
                                                      
                                                      9.65
                                                      %
                                                      
                                                      
                                                      8.83
                                                      %
                                                      
                                                      
                                                      12.37
                                                      %Return
      on averagestockholders'equity
      (i)
                                                      
                                                      
                                                      -6.23
                                                      %
                                                      
                                                      
                                                      11.30
                                                      %
                                                      
                                                      
                                                      11.81
                                                      %
                                                      
                                                      
                                                      10.75
                                                      %
                                                      
                                                      
                                                      15.20
                                                      %
  -22-
 
 (a)
              During
      2005, the Company acquired Galaxy Power, Inc. and Netwatch
      s.r.o.  These transactions were accounted for using the purchase
      method of accounting and, accordingly, the results of operations of Galaxy
      and Netwatch have been included in the Company's financial statements
      since their respective dates of
acquisition.
 
 (b)
              The
      Company was a party to an arbitration proceeding related to the
      acquisition of its Telecom Components business in 1998. The Company
      asserted that the seller breached the terms of a related Global
      Procurement Agreement dated October 2, 1998 and sought damages related
      thereto. During December 2004, the Company and the seller settled this
      matter. The settlement resulted in a payment to the Company and an
      unconditional release by the seller of all counterclaims against the
      Company. The net gain of $2.9 million from the settlement is included in
      the Company’s consolidated statement of operations for the year ended
      December 31, 2004.
 
 (c)
              During
      2006, the Company incurred a loss of $1.0 million as a result of a fire at
      its leased manufacturing facility in the Dominican
      Republic.  The loss was for raw materials and equipment in
      excess of estimated insurance proceeds.  The production at this
      facility was substantially restored during
2006.
 
 (d)
              During
      2004, the Company wrote down fixed assets, principally machinery and
      equipment, with a net book value of $1.0 million, at its Asia
      manufacturing facilities.  The Company considered these fixed
      assets to be surplus equipment which was replaced by equipment with more
      advanced technology.
 
 (e)
              During
      the fourth quarter of 2008, the Company conducted its annual valuation
      test related to the Company's goodwill by operating segment.  As a
      result of the reduction in the fair value of the North America operating
      segment, the Company recorded charges of $14.1 million related to the
      impairment of goodwill of its North America operating
    segment.
 
 (f)
                During
      2008, the Company ceased its manufacturing operations in its Westborough,
      Massachusetts facility.  In connection with this closure, the
      Company incurred severance costs during 2008 of $0.6 million and lease
      termination costs of $0.5
million.
 
 (g)
                During
      2008, the Company incurred fixed asset impairments of $0.7 million related
      to assets located at the Westborough, Massachusetts facility which ceased
      operations as of December 31, 2008.  This charge is included in
      Impairment of Assets in the Company’s Statement of Operations for the year
      ended December 31, 2008.
 
 (h)
                During
      2008, the Company recorded other-than-temporary impairment charges and
      realized lossesof $10.4 million related to its investments in
      Toko, Inc., Power-One, Inc. and the Columbia Strategic Cash
      Portfolio.  During 2007, the Company realized a gain from the
      sale of Toko, Inc. common stock in the amount of $2.5 million, offset by
      an other-than-temporary impairment charge and realized losses of $0.3
      million related to its investment in the Columbia Strategic Cash
      Portfolio.  During 2006, the Company realized a gain principally
      from the sale of Artesyn common stock in the amount of $5.2
      million.
 
 (i)
                Returns
      on average total assets and stockholders’ equity are computed for each
      year by dividing net (loss) income for such year by the average balances
      of total assets or stockholders’ equity, as applicable, on the last day of
      each quarter during such year and on the last day of the immediately
      preceding year.
 
 -23-
 
 Item
7.  Management’s Discussion and Analysis of Financial Condition
and
 Results
of Operations
 
 The
following discussion and analysis should be read in conjunction with the
Company’s consolidated financial statements and the notes related
thereto.  The discussion of results, causes and trends should not be
construed to imply any conclusion that such results, causes or trends will
necessarily continue in the future.
 
 Critical Accounting
Policies
 
 The
Company’s discussion and analysis of its financial condition and results of
operations are based upon the Company’s consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to product returns, bad debts,
inventories, intangible assets, investments, SERP expense, income taxes and
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
 
 The
Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
 
 Allowance for Doubtful
Accounts
 
 The
Company maintains allowances for doubtful accounts for estimated losses from the
inability of its customers to make required payments.  The Company
determines its reserves by both specific identification of customer accounts
where appropriate and the application of historical loss experience to
non-specific accounts.  As of December 31, 2008 and 2007, the Company
had an allowance for doubtful accounts of $0.7 million and $1.0 million,
respectively.  While historical loss experience is utilized in
determining the Company’s allowance for doubtful accounts, the Company believes
this factor may not provide an accurate depiction of future losses, given the
current economic conditions. If the financial condition of the Company's
customers were to deteriorate, to the extent that their ability to make payments
is impaired, additional allowances may be required.
 
 Inventory
 
 The
Company makes purchasing and manufacturing decisions principally based upon firm
sales orders from customers, projected customer requirements and the
availability and pricing of raw materials. Future events that could adversely
affect these decisions and result in significant charges to the Company’s
operations include miscalculating customer requirements, technology changes
which render certain raw materials and finished goods obsolete, loss of
customers and/or cancellation of sales orders, stock rotation with distributors
and termination of distribution agreements. The Company writes down its
inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based
upon the aforementioned assumptions. During the fourth quarter of 2008, the
Company recorded $0.3 million related to the writedown of inventory associated
with the closure of the Westborough, Massachusetts facility.  This
charge is included in cost of sales in the accompanying statement of operations
for the year ended December 31, 2008.  As of December 31, 2008 and
2007, the Company had reserves for excess or obsolete inventory of $4.1 million
and $3.3 million, respectively.  If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.
  -24-
  When
inventory is written-off, it is never written back up; the cost remains at zero
or the level to which it has been written-down. When inventory that has been
written-off is subsequently used in the manufacturing process, the lower
adjusted cost of the material is charged to cost of sales.  Should any
of this inventory be used in the manufacturing process for customer orders, the
improved gross profit will be recognized at the time the completed product is
shipped and the sale is recorded.
 
 Goodwill and Intangible
Assets
 
 The assets and liabilities of acquired
businesses are recorded under the purchase method of accounting at their
estimated fair values at the dates of acquisition.  Goodwill
represents costs in excess of fair values assigned to the underlying net assets
of acquired businesses.
 
 Goodwill and intangible assets deemed
to have indefinite lives are not amortized, but are subject to annual impairment
testing.  We have reviewed the carrying value of our goodwill and
other indefinite-lived intangible assets as required by Statement of Financial
Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible
Assets”.  The identification and measurement of goodwill impairment
involves the estimation of the fair value of geographic reporting
units.  The estimates of fair value of geographic reporting units are
based on the best information available as of the date of the assessment, which
primarily incorporate management assumptions about expected future cash flows
and contemplate other valuation techniques.  Future cash flows can be
affected by changes in industry or market conditions or the rate and extent to
which anticipated synergies or cost savings are realized with newly acquired
entities.  As of December 31, 2008, the Company had the following
reporting units that had goodwill assigned to them (there were no changes
in the reporting units between December 31, 2007 and December 31,
2008):
 
 ·
              North
      America
 ·
              Asia
 ·
              Europe
 
 For the annual goodwill impairment
assessment performed in 2008, the Company’s fair value analysis was supported by
a weighting of two generally accepted valuation approaches, including the income
approach and the market approach, as further described below.  These
approaches include numerous assumptions with respect to future circumstances,
such as industry and/or local market conditions that might directly impact
each of the operating segment’s operations in the future, and are therefore
uncertain.  These approaches are utilized to develop a range of fair
values and a weighted average of these approaches is utilized to determine the
best fair value estimate within that range.
 
 Income Approach–Discounted Cash
Flows.  This valuation approach derives a present value of the
operating segment’s future annual cash flows over the next four years and the
present value of the residual value of the operating segment.  The
Company uses a variety of underlying assumptions to estimate these future cash
flows, including assumptions relating to future economic market conditions,
product pricing, sales volumes, cost and expenses and capital
expenditures.  These assumptions may vary by each reporting unit
depending on regional market conditions, including competitive position, supply
and demand for raw materials, labor costs and other industry
conditions.
  -25-
  Market Approach - Multiples ofEBIT, EBITDA, DFNI and DFCF (as
defined in the chart below).This valuation approach
first identifies public companies in the electronic component manufacturing and
distribution industries that are similar to Bel.  A grouping of
applicable value measures was then selected and the appropriate market multiples
were calculated based on the fundamental value measures of the selected
guideline companies.  The last step involved selecting the multiple to
apply to Bel’s various value measures, which was used to calculate the indicated
value of each operating segment.
 
 Detailed
below is a table of key underlying assumptions utilized in the fair value
estimate calculation for the years ended December 31, 2008 and December 31,
2007.  Assumptions may vary by operating segment.  The table
below shows the range of assumptions utilized across the various operating
segments.
  Goodwill
      Impairment AnalysisKey
      Assumptions2008
                          
                          
                          2007Income
      Approach - Discounted Cash Flows:Revenue
      growth rates
                          
                          
                          (8.9%)
      - 10.3%
                          
                          
                          
                          5.0%Cost
      of equity capital
                          
                          
                          13.0%
      - 13.6%
                          
                          
                          
                          13.2%
      - 16.1%Cost
      of debt capital
                          
                          
                          4.9%
      - 7.7%
                          
                          
                          
                          3.5%
      - 5.5%Weighted
      average cost of capital
                          
                          
                          11.0%
      - 13.3%
                          
                          
                          
                          11.2%
      - 15.0%Market
      Approach - Multiples of Guideline Companies (a):EBIT
      multiples used
                          
                          
                          6.0
      - 10.7
                          
                          
                          
                          9.7
      - 14.3EBITDA
      multiples used
                          
                          
                          5.0
      - 7.5
                          
                          
                          
                          8.7
      - 10.0DFNI
      multiples used
                          
                          
                          9.3
      - 13.5
                          
                          
                          not utilizedDFCF
      multiples used
                          
                          
                          6.4
      - 7.4
                          
                          
                          
                          11.4
      - 14.4Control
      premium (b)
                          
                          
                          27.5%
      - 31.7%
                          
                          
                          
                          20.0%Weighting
      of Valuation Methods:Income
      Approach - Discounted Cash Flows (c)
                          
                          
                          75%
                          
                          
                          
                          50%Market
      Approach - Multiples of Guideline Companies (c)
                          
                          
                          25%
                          
                          
                          
                          50%
  Definitions:EBIT
      - Earnings before interest and taxesEBITDA
      - Earnings before interest, taxes, depreciation and
      amortizationDFNI
      - Debt-free net incomeDFCF
      - Debt-free cash
flow
  (a)
      Multiple range reflects multiples used throughout the North America, Asia
      and Europe operating segments(b)
      Determined based on the industry mean control premium as published each
      year in MergerStat Review(c)
      The weighting of valuation methods was changed in 2008, as management's
      projections provided for thediscounted
      cash flow analysis are believed to be more indicative of Bel's future
      performance.  The guidelinecompany
      approach relies on the market and given the present state of the economy
      with significant marketfluctuations,
      management believes the discounted cash flow projections are a more
      reliable base.
  -26-
  During
the fourth quarter of 2008, we conducted our annual impairment test related to
the Company's goodwill by operating segment. The valuation test, which
heavily weights future cash flow projections, indicated that the goodwill
associated with our North America operating segment was fully impaired as of the
valuation date.  The reduced expected future cash flows in North America
was related to a combination of the ending of a certain product’s life cycle and
an overall reduction in sales anticipated during 2009 given the current economic
conditions.  Sales are projected to return to 2008 levels in 2010, with
moderate growth in subsequent years.  This statement reflects a
Forward Looking Statement.  Actual results may differ, depending in
part on the timing associated with the current economic recession and the impact
of that recession on Bel’s customers.  As a result, the Company
recorded a goodwill impairment charge of $14.1 million during the fourth quarter
of 2008.
 
 No
impairment existed at the assessment date for our Asia or Europe operating
segments; however, there can be no assurances that goodwill impairments will not
occur in the future.  Our valuation model utilizes assumptions which
represent our best estimate of future events, but would be sensitive to positive
or negative changes in each of the underlying assumptions as well as to an
alternative weighting of valuation methods which would result in a potentially
higher or lower goodwill impairment expense.  Specifically, a
continued decline in demand for Bel’s products and corresponding revenues
declining at rates greater than management’s expectations, may lead to
additional goodwill impairment charges, especially in the Company’s Asia
operating segment, where the carrying value closely approximates its estimated
fair value.  Furthermore, a continued decline in the guideline company
multiples may also lead to additional goodwill impairment
charges.  Our goodwill balance was $14.3 million and $28.4 million at
December 31, 2008 and 2007, respectively.  See Note 2 to the
Consolidated Financial Statements for further information on the Company’s
goodwill.
 
 Income
Taxes
 
 Income
taxes are accounted for under Statement of Financial Accounting Standards
(“SFAS”) No. 109, “Accounting for Income Taxes.”  In accordance with
SFAS No. 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as measured by enacted tax rates that are expected to be in effect in the
periods when the deferred tax assets and liabilities are expected to be settled
or realized.  Significant judgment is required in determining the
worldwide provisions for income taxes.  Valuation allowances are
provided for deferred tax assets where it is considered more likely than not
that the Company will not realize the benefit of such asset.  In the
ordinary course of a global business, the ultimate tax outcome is uncertain for
many transactions.  Effective January 1, 2007, uncertain tax positions
are accounted for in accordance with FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”).  It is the Company’s policy
to establish provisions for taxes that may become payable in future years as a
result of an examination by tax authorities.  The Company establishes
the provisions based upon management’s assessment of exposure associated with
permanent tax differences and tax credits applied to temporary difference
adjustments.  The tax provisions are analyzed periodically (at least
quarterly) and adjustments are made as events occur that warrant adjustments to
those provisions.  FIN 48 requires significant judgment in determining
what constitutes an individual tax position as well as assessing the outcome of
each tax position.  Changes in judgment as to recognition or
measurement of tax positions can materially affect the estimate of the effective
tax rate and, consequently, affect our operating results.
  -27-
  Revenue
Recognition
 
 The
Company recognizes revenue in accordance with the guidance contained in SEC
Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”
and other relevant accounting literature.  Revenue is recognized when
the product has been delivered and title and risk of loss have passed to the
customer, collection of the resulting receivable is deemed reasonably assured by
management, persuasive evidence of an arrangement exists and the sale price is
fixed and determinable.
 
 Historically
the Company has been successful in mitigating the risks associated with its
revenue.  Some issues relate to product warranty, credit worthiness of
its customers and concentration of sales among a few major
customers.
 
 The
Company is not contractually obligated to accept returns from non-distributor
customers except for defective product or in instances where the product does
not meet the Company’s quality specifications.  If these conditions
existed, the Company would be obligated to repair or replace the defective
product or make a cash settlement with the customer.  Distributors
generally have the right to return up to 5% of their purchases over the
previous three to six months and are obligated to purchase an amount at least
equal to the return.  If the Company terminates a distributor, the
Company is obligated to accept as a return all of the distributor’s inventory
from the Company.  The Company accrues an estimate for anticipated
returns based on historical experience at the time revenue is recognized and
adjusts such estimate as specific anticipated returns are
identified.  If a distributor terminates its relationship with the
Company, the Company is not obligated to accept any inventory
returns.
 
 The Company has a significant amount of
sales with several customers, including two major customers with sales of $34.7
million and $28.1 million in 2008, representing 13.4% and 10.9%, respectively,
of the Company’s total sales during the year ended December 31,
2008.  The loss of one or both customers could have a material adverse
effect on the Company’s results of operations, financial position and cash
flows.
 
 
 Overview
 
 Our
Company
 
 Bel is a
leading producer of electronic products that help make global connectivity a
reality. The Company designs, manufactures and markets a broad array of
magnetics, modules (including power conversion and integrated modules), circuit
protection devices and interconnect products.  While these products
are deployed primarily in the computer, networking and telecommunication
industries, Bel’s expanding portfolio of products also finds application in the
automotive, medical and consumer electronics markets.   Bel's
products are designed to protect, regulate, connect, isolate or manage a variety
of electronic circuits.
 
 Bel’s
business is operated through three geographic segments:  North
America, Asia and Europe.  During 2008, 64% of the Company’s revenues
were derived from Asia, 26% from North America and 10% from its Europe operating
segment.  The Company’s revenues are primarily driven by working
closely with its customers’ engineering staffs and aligning them with industry
standards committees and various integrated circuit (IC)
manufacturers.  Sales of the Company’s magnetic products represented
approximately 46% of our total net sales for 2008.  The remaining 2008
revenues related to sales of the Company’s modules products (30%), interconnect
products (18%) and circuit protection products (6%).
  -28-
  The Company’s expenses are driven
principally by the cost of labor where Bel’s factories are located and the cost
of the materials that it uses.  As labor and material costs vary by
product line, any significant shift in product mix has an associated impact on
the Company’s costs of sales.  Bel generally enters into processing
arrangements with several independent third party contractors in
Asia.  Costs are recorded as incurred for all products manufactured
either at third party facilities or at the Company's own manufacturing
facilities.  Such amounts are determined based upon the estimated
stage of production and include labor cost and fringes and related allocations
of factory overhead. The Company manufactures finished goods at its own
manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York, the
Dominican Republic, Mexico, the Czech Republic and through December 31, 2008, in
its Westborough, Massachusetts facility.
 
 Trends
Affecting our Business
 
 The
Company believes the key factors affecting Bel’s 2008 and future results include
the following:
 
 ·
              Increasing
      pressures in the U.S. and global economy related to the global economic
      downturn, the credit crisis, volatility in interest rates, investment
      returns, energy prices and other elements that impact
      commercial  and end-user consumer spending, are creating a
      highly challenging environment for Bel and its
  customers.
 
 ·
              These
      weakening economic conditions have resulted in reductions in capital
      expenditures by end-user consumers of our products, resulting in decreased
      backlog of orders in 2009.
 
 ·
              With
      the overall reduction in demand in our industry, competition will continue
      to increase. As a result, Bel is being faced with pricing pressures, which
      will impact our future profit
margins.
 
 ·
              Commodity
      prices, especially those pertaining to gold and copper, have been highly
      volatile during 2008.  Fluctuations in these prices and other
      commodity prices associated with our raw materials, will have a
      corresponding impact on our profit
margins.
 
 ·
              The
      costs of labor, particularly in the People’s Republic of China where
      several of our factories are located, have risen significantly during 2008
      as a result of government mandates for new minimum wage and overtime
      requirements.  These rising labor costs will continue to have a
      negative impact on our profit
margins.
 
 ·
              The
      global nature of our business exposes us to earnings volatility resulting
      from exchange rate fluctuations.
 
 These
factors are expected to continue into the foreseeable future.  With
reduced demand for our products, coupled with maintaining competitive pricing
and the challenge of curbing internal costs, the Company anticipates that its
results of operations for 2009 will be materially adversely affected by the
continuing economic crisis.
 
 -29-
 
 Our
2008 Results
 
 The current market conditions have
impacted the Company considerably during the year ended December 31,
2008.  While our 2008 revenues remained steady from 2007, various
asset impairment charges, including those related to the closure of our
Westborough, Massachusetts facility, and a decline in the stock prices of
companies associated with Bel’s investments, have lead to an unprecedented net
loss for Bel for 2008.
 
 ·
              Net
      Sales.The Company’s sales decreased by $0.8 million or
      0.3% during the year ended December 31, 2008 as compared to 2007,
      primarily due to a decrease in magnetic sales of $7.0 million and a
      decrease in circuit protection sales of $4.0 million during the year ended
      December 31, 2008, as compared to 2007.  The decrease in
      magnetic sales primarily resulted from the production inefficiencies in
      the People’s Republic of China (“PRC”) referred to below, which inhibited
      the Company’s ability to increase product shipments through the second
      quarter of 2008.  The decrease in 2008 magnetic and circuit
      protection sales was largely offset by an increase in module sales of $7.1
      million for the year ended December 31, 2008, as compared to 2007. This
      increase was principally due to the introduction of new
      products.  In addition, the Company’s interconnect sales
      increased by $3.1 million for the year ended December 31, 2008, as
      compared to 2007.
 
 ·
              (Loss) Income from
      Operations.  The Company’s income from operations
      decreased significantly from income of $25.5 million during the year ended
      December 31, 2007 to a loss of $10.7 million for the year ended December
      31, 2008.  This reduction was primarily attributable to the
      following factors:
 
 §
              Impairment
      of Assets.  In connection with its annual valuation of the
      Company’s goodwill, it was determined that an impairment existed in the
      Company’s North America operating segment, due to a reduction in estimated
      future cash flows.  As a result, the Company recorded a $14.1
      million charge related to the impairment of its goodwill from its North
      America operation segment.  The Company also recorded a $0.7
      million charge related to the impairment of its fixed assets in connection
      with the closure of its Westborough, Massachusetts
    facility.
 
 §
              Production
      Inefficiencies.  Bel experienced an unusually high increase in
      backlog at its manufacturing facilities in the People’s Republic of China
      (“PRC”) after the Lunar New Year holiday in February 2008.  Bel
      contracted for approximately 5,300 factory workers (net of turnover),
      resulting in production inefficiencies and curtailed output through the
      second quarter 2008.
 
 §
              Rising
      Labor Costs.  Effective April 1, 2008, PRC officials implemented
      an increase in social benefits and wage rates in the areas where our
      products are manufactured, plus double-time rates for Saturdays and
      Sundays.
 
 §
              Unfavorable
      Exchange Rate Fluctuations.  During 2008, the U.S. dollar
      continued to fall in value against the PRC yuan, the currency in which all
      of Bel’s PRC factory workers and subcontractors are paid.  In
      addition, the U.S. dollar increased in value versus other currencies,
      particularly the Euro, causing foreign exchange losses of $0.6 million
      during the year ended December 31,
2008.
  -30-
  §
              Restructuring
      Charges.  The Company ceased manufacturing at its Bel Power
      manufacturing facility in Westborough, Massachusetts as of December 31,
      2008.  Related to this closure, the Company incurred severance
      costs of $0.6 million and costs associated with its facility lease
      obligation of $0.5 million during the year ended December 31,
      2008.
 
 
 
 ·
              Net
      Loss.  The Company’s net (loss) income also decreased
      significantly from a net income of $26.3 million in 2007 to a net loss of
      $14.9 million in 2008.  In addition to the factors impacting
      income from operations discussed above, the following non-operating
      factors impacted the 2008 net loss:
 
 §
              Impairment
      Charges on Investments.  During the year ended December 31,
      2008, the Company recorded $10.4 million in other-than-temporary
      impairment charges and realized losses related to the Company’s
      investments in Toko, Inc. and Power-One, Inc. and the Columbia Strategic
      Cash Portfolio, as compared to a gain on sale of investment of $2.1
      million in 2007.
 
 §
              Reduced
      Interest Rates.  Interest income decreased from $4.2 million in
      2007 to $2.5 million in 2008 primarily as a result of significantly lower
      interest rates earned on invested balances in
  2008.
 
 §
              Reversal
      of Tax Liability.  During the year ended December 31, 2008,
      certain statute of limitations expired which resulted in a reversal of a
      previously recognized liability for uncertain tax positions in the amount
      of $2.3 million.
  -31-
 
 Results of
Operations
 
 The
following table sets forth, for the past three years, the percentage
relationship to net sales of certain items included in the Company’s
consolidated statements of operations.
 Percentage
      of Net SalesYears
      Ended December 31,2008
                                              
                                              
                                              2007
                                              
                                              
                                              2006Net
      sales
                                              
                                              
                                              100.0
                                              %
                                              
                                              
                                              100.0
                                              %
                                              
                                              
                                              100.0
                                              %Cost
      of sales
                                              
                                              
                                              84.0
                                              
                                              
                                              
                                              78.3
                                              
                                              
                                              
                                              75.7Selling,
      general andadministrative
      expenses
                                              
                                              
                                              14.0
                                              
                                              
                                              
                                              13.9
                                              
                                              
                                              
                                              14.8Impairment
      of assets
                                              
                                              
                                              5.7
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Restructuring
      charges
                                              
                                              
                                              0.4
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Gain
      on sale of property, plantand
      equipment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2.1
                                              
                                              
                                              
                                              -(Impairment
      charge)/gain on saleof
      investment
                                              
                                              
                                              (4.0
                                              )
                                              
                                              
                                              0.8
                                              
                                              
                                              
                                              2.0Casualty
      loss
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              0.4Interest
      income, net of interestand
      financing expense
                                              
                                              
                                              1.0
                                              
                                              
                                              
                                              1.6
                                              
                                              
                                              
                                              1.1(Loss)
      earnings before (benefit) provisionfor
      income taxes
                                              
                                              
                                              (7.2
                                              )
                                              
                                              
                                              12.2
                                              
                                              
                                              
                                              12.2Income
      tax (benefit) provision
                                              
                                              
                                              (1.4
                                              )
                                              
                                              
                                              2.1
                                              
                                              
                                              
                                              2.3Net
      (loss) earnings
                                              
                                              
                                              (5.8
                                              )
                                              
                                              
                                              10.2
                                              
                                              
                                              
                                              9.9
  The
following table sets forth the year over year percentage increases or decreases
of certain items included in the Company's consolidated statements of
operations.
 Increase
      (Decrease) fromPrior
      Period2008
      compared
                                      
                                      
                                      2007
      comparedwith
      2007
                                      
                                      
                                      with
      2006Net
      sales
                                      
                                      
                                      (0.3
                                      )
       %
                                      
                                      
                                      1.6
                                      %Cost
      of sales
                                      
                                      
                                      6.9
                                      
                                      
                                      
                                      5.2Selling,
      general and administrative expenses
                                      
                                      
                                      (0.1
                                      )
                                      
                                      
                                      (4.5
                                      )Net
      (loss) earnings
                                      
                                      
                                      (156.7
                                      )
                                      
                                      
                                      4.5
 
 Sales
 
 Net
sales decreased by $0.8 million or 0.3% from $259.1 million during 2007 to
$258.3 million during 2008. The Company attributes the decrease to a reduction
in magnetic sales of $7.0 million and a decrease in circuit protection sales of
$4.0 million, offset in part by growth in module sales of $7.1 million and
interconnect sales of $3.1 million.  Contributing to the $7.0 million
decrease in magnetic sales was a decrease in the Company’s MagJack®sales
of $5.0 million during the year ended December 31, 2008 as compared to
2007, which resulted primarily from the production inefficiencies
during early 2008 in the PRC referred to above.
  -32-
  The significant components of the
Company's revenues for 2008 were magnetic products of $118.5 million (as
compared with $125.5 million during 2007), interconnect products of $47.4
million (as compared with $44.3 million during 2007), module products of $77.3
million (as compared with $70.2 million during 2007), and circuit protection
products of $15.1 million (as compared with $19.1 million during
2007.)
 
 The Company continues to have limited
visibility as to future customer requirements and as such, the Company cannot
predict with any degree of certainty sales revenue for 2009.  The
Company had two customers with sales in excess of 10%, with customer sales for
2008 amounting to $34.7 million and $28.1 million, representing 13.4% and 10.9%,
respectively, of total sales during the year ended December 31,
2008.  The loss of one or both customers could have a material adverse
effect on the Company's results of operations, financial position and cash
flows.
 
 The Company cannot quantify the extent
of sales growth arising from unit sales mix and/or price
changes.  Product demand and sales volume will affect how we price our
products.  Through the Company's engineering and research effort, the
Company has been successful in adding additional value to existing product
lines, which tends to increase sales prices initially until that generation of
products becomes mature and sales prices experience price
degradation.  In general, as products become mature, average selling
prices decrease.
 
 Net sales increased by $4.2 million or
1.6% from $254.9 million during 2006 to $259.1 million during 2007. The increase
in sales was primarily due to an increase in the Company’s power products
revenue by $16.3 million from 2006 to 2007.  The Company’s power
products used mainly in data storage and super computer applications that had
been in the design phase for the past two years went into production at large
OEM customers in 2007, driving this increase in sales from 2006. This was
offset by a decrease in ICM sales of $12.3 million from 2006 to 2007 as a result
of the Company’s de-emphasizing certain lower margin business.
 
 The significant components of the
Company's revenues for 2007 were magnetic products of $125.5 million (as
compared with $141.5 million during 2006), interconnect products of $44.3
million (as compared with $44.5 million during 2006), module products of $70.2
million (as compared with $49.5 million during 2006), and circuit protection
products of $19.1 million (as compared with $19.4 million during
2006.)
 
 Cost of
Sales
 
 Cost
of sales as a percentage of net sales increased from 78.3% during the year ended
December 31, 2007 to 84.0% during the year ended December 31, 2008. During 2007,
the Company established a $1.2 million warranty accrual for a defective part,
including a $0.4 million inventory write-off of materials on hand related to
this matter which were deemed to be unusable.  Excluding this anomaly,
cost of sales as a percentage of net sales increased 6.1% during the year ended
December 31, 2008 as compared to 2007. The increase in the cost of sales
percentage is primarily attributable to the following:
 
  ̈
              The
      Company experienced a significant increase in labor costs, including
      social benefits, during the year ended December 31, 2008 (15.0% of sales
      as compared to 9.7% of sales for the year ended December 31,
      2007).  This increase was due to a variety of factors, including
      increased training costs and production inefficiencies resulting from the
      hiring of 5,300 net new hires since the Lunar New Year, significantly
      higher wage rates effective April 1, 2008 as mandated by PRC officials and
      an increase in overtime hours worked to reduce our backlog, with many of
      these hours being worked on Saturdays and Sundays at the new double-time
      rates.  In addition, the PRC yuan, in which all PRC workers are
      paid, has appreciated, as compared to the dollar, on average by 9.5%
      during the year ended December 31, 2008 from 2007.  Labor costs
      began to stabilize in the fourth quarter of 2008, due to a substantial
      reduction in overtime worked during that
  quarter.
  -33-
   ̈
              Sales
      of a particular product line within the modules group have increased by
      $11.3 million in 2008 compared to 2007.  While these products
      are strategic to Bel’s growth and important to total earnings, they return
      lower gross profit margins as a larger percentage of the final product is
      comprised of purchased components.  As these sales continue to
      increase, the Company’s average gross profit percentage will likely
      decrease.
 
  ̈
              Included
      in cost of sales are research and development expenses of $7.4 million and
      $7.2 million for the years ended December 31, 2008 and 2007,
      respectively.   The increase in research and development
      expenses during 2008 was primarily related to Bel’s power products and new
      integrated connector modules.
 
 Cost of sales as a percentage of net
sales increased from 75.7% during the year ended December 31, 2006 to 78.3%
during the year ended December 31, 2007. The increase in the cost of sales
percentage was primarily attributable to the following:
 
  ̈
              The
      Company established a $1.2 million warranty accrual for a defective part,
      including a $0.4 million inventory write-off of materials on hand related
      to this matter which are deemed to be
unusable.
 
  ̈
              The
      Company incurred a 4.5% increase in material costs as a percentage of net
      sales.  The increase in raw material costs was principally
      related to increased manufacturing of module products, which have a higher
      raw material content than the Company’s other products, increased costs
      for raw materials such as copper, gold and plastic resin and increased
      transportation costs.  Since the majority of the manufacturing
      is conducted in Asia, the increased material costs negatively impacted the
      Company’s operating profits in
Asia.
 
  ̈
              The
      Company paid higher wage rates and benefits to its production workers in
      the PRC in 2007 than it paid in prior periods.  These higher
      rates and benefits are reflected in the Company’s cost of sales and
      resulted from new labor regulations and a continuing tightening of the
      labor market.
 
  ̈
              Sales
      of the Company’s DC-DC power products increased by $16.3 million in 2007
      compared to 2006. While these products are strategic to Bel’s growth and
      important to total earnings, they return lower gross profit percentage
      margins as a larger percentage of their bills of materials are purchased
      components.
 
  ̈
              Included
      in cost of sales are research and development expenses of $7.2 million and
      $6.6 million for the years ended December 31, 2007 and 2006,
      respectively.  The increase in 2007 compared to 2006 was
      attributable to various factors, including an increase in headcount at the
      Hangzhou research and development facility related to the DC-DC power
      products, an unfavorable change in associated exchange rates for research
      and development expenses in the PRC and the United Kingdom, and general
      wage increases at Bel’s research and development
    facilities.
 
 -34-
 
 Selling, General and
Administrative Expenses
 
 The
percentage relationship of selling, general and administrative expenses to net
sales increased slightly from 13.9% during the year ended December 31, 2007 to
14.0% during the year ended December 31, 2008.  The selling, general
and administrative expense for the year ended December 31, 2008 remained
consistent with that of 2007 at $36.1 million.  While the expense in
total remained flat, the following factors within selling, general and
administrative expenses fluctuated from 2007:
 
  ̈
              Legal
      and professional fees increased by $0.2 million from 2007 principally due
      to $0.4 million of legal activity related to the Galaxy lawsuit during
      2008 and an increase in audit and accounting fees of $0.6 million during
      2008 as compared to 2007.  These additional legal and
      professional fees were partially offset by the high level of patent
      litigation costs totaling $0.9 million during 2007 which did not recur at
      that level in 2008.
 
  ̈
              Other
      general and administrative costs decreased by $0.7 million during 2008 as
      compared to 2007.  The Company reduced its discretionary bonus
      expense during 2008 as a result of lower profitability in
      2008.  In addition, the Company recorded a $0.2 million
      reduction of stock-based compensation expense related to forfeitures of
      restricted stock awards.  There were additional reductions in
      other general and administrative costs that were not individually
      significant.
 
  ̈
              Primarily
      as a result of the strengthening of the U.S. dollar versus certain
      European currencies during the latter half of 2008, the Company’s currency
      exchange losses increased by $0.5 million.  Payables related to
      certain of the Company’s European purchases are denominated in U.S.
      dollars, and receivables related to certain of the Company’s sales are
      denominated in European currencies.
 
 The percentage relationship of selling,
general and administrative expenses to net sales decreased from 14.8% during the
year ended December 31, 2006 to 13.9% during the year ended December 31,
2007.  The decrease in selling, general and administrative expense for
the year ended December 31, 2007 compared to the year ended December 31, 2006
was approximately $1.7 million.  The decrease was principally
attributed to the following:
 
  ̈
              Legal
      and professional fees decreased by $1.0 million from 2006, principally due
      to the implementation of an internal audit and Sarbanes-Oxley function
      which reduced audit and external consultant fees
      significantly.
 
  ̈
              A
      reduction in depreciation and amortization expense of $0.7 million was
      primarily due to lower amortization of intangibles due to certain
      intangibles becoming fully
amortized.
 
  ̈
              Sales
      commissions decreased by $0.3 million during 2007, due to higher sales
      volume handled by Bel’s direct sales associates during 2007 as compared to
      2006.  In addition, there was a $0.2 million reduction in travel
      and tradeshow expenses in 2007.
 
  ̈
              Offsetting
      these factors in part, administrative salaries and related benefits
      increased by $0.5 million as a result of increased bonus expense in
      2007.  During the fourth quarter of 2007, the Company modified
      its bonus structure for 2008 such that bonuses are now earned based on
      performance and service during the fourth quarter of the previous calendar
      year and the first three quarters of the current calendar year, as opposed
      to the prior structure whereby it was based on performance and service for
      the four calendar quarters of the current year.  This resulted
      in the Company’s recording bonus expense in 2007 for the 2007 calendar
      year, plus an additional accrual for the first quarter of the 2008 bonus
      period.  Such additional accrual amounted to approximately $0.5
      million in the fourth quarter of
2007.
  -35-
  Impairment of
Assets
 
 During the fourth quarter of 2008, the
Company conducted its annual valuation test related to the Company's goodwill by
operating segment.  The valuation test, which heavily weights future cash
flow projections, indicated that the goodwill associated with our North America
operating segment was fully impaired as of the valuation date.  The
reduction in estimated future cash flows in North America was related to a
combination of the ending of a certain product’s life cycle and an overall
reduction in sales anticipated during 2009, given current economic
conditions.  Sales are projected to return to 2008 levels in 2010, with
moderate growth in subsequent years.  This statement reflects a
Forward Looking Statement.  Actual results may differ, depending in
part on the timing associated with the current economic recession and the impact
of that recession on Bel’s customers.  As a result, the Company
recorded a charge of $14.1 million related to the impairment of goodwill during
the fourth quarter of 2008.
 
 Also during the fourth quarter of 2008,
the Company finalized its plans for the transfer, sale or ultimate disposition
of its fixed assets located in the Westborough facility.  Of the
Westborough fixed assets, approximately $0.7 million were sold to a local vendor
in January 2009.  As such, these assets were reclassified as assets
held for sale as of December 31, 2008 and the assets were written down to their
net realizable value of $0.2 million.  As a result of this sale of
assets, in addition to a $0.2 million reserve on the remaining Westborough fixed
assets, a total of $0.7 million of fixed asset impairments was recorded during
the fourth quarter 2008.
 
 Restructuring
Charges
 
 In connection with the termination of
its manufacturing operations at the Company's DC-DC manufacturing facility
in Westborough, the Company incurred restructuring charges of $1.1 million
during the year ended December 31, 2008.  The restructuring charges
consisted of $0.6 million of severance and other termination benefits associated
with the layoff of approximately 50 employees in the Westborough facility and
$0.5 million related to the Company's facility lease obligation.  See
Note 18 of the Notes to Consolidated Financial Statements for additional
information on these restructuring charges.
 
 Gain onSaleof Property, Plant and
Equipment
 
 During the year ended December 31,
2007, the Company realized gains from the sale of property, plant and equipment
in Hong Kong and Macao in the amount of $5.5 million.  The sale of the
Company's real estate in Macao reflected the Company's decision to cease
manufacturing in Macao and to consolidate manufacturing in larger more efficient
facilities.  During the fourth quarter of 2007, the Company ceased
manufacturing in a small plant in the PRC.
  -36-
  Casualty
Loss
 
 During 2006, the Company incurred a
$1.0 million pre-tax casualty loss as a result of a fire at its leased
manufacturing facility in the Dominican Republic.  The loss was for
raw materials and equipment in excess of estimated insurance
proceeds.  The production at this facility was substantially restored
during 2006.
 
 Interest Expense and Other
Costs
 
 Interest expense and other costs
amounted to $0.1 million during the year ended December 31, 2007 related
primarily to the write off of financing expenses incurred in connection with the
Company’s credit facility. During the year ended December 31, 2006, interest
expense amounted to $0.1 million, representing financing expenses related to the
Company's credit facility in the United States.
 
 Impairment Charge/Gain on
Sale of Investments
 
 During the year ended December 31,
2008, the Company recorded pre-tax charges related to other-than-temporary
impairments of Bel's holdings in Toko Inc. (TSE: 6801) of $3.6 million,
Power-One, Inc. of $5.3 million and the Columbia Strategic Cash Portfolio
(“Columbia Portfolio”) of $1.4 million. See the Liquidity and Capital
Resources section of this Item 7.  During the year ended December 31,
2007, the Company realized gains from the sale of Toko common stock in the
amount of $2.5 million, offset by an other-than-temporary impairment charge of
$0.3 million related to its investment in the Columbia
Portfolio.  During the year ended December 31, 2006, the Company
realized a gain principally from the sale of Artesyn common stock in the amount
of $5.2 million.
 
 Interest
Income
 
 Interest income earned on cash and cash
equivalents decreased by approximately $1.7 million during the year ended
December 31, 2008, as compared to the year ended December 31, 2007. Interest
income earned on cash and cash equivalents increased by approximately $1.3
million during the year ended December 31, 2007, as compared to the year ended
December 31, 2006.  The decrease in interest income during 2008 is due
primarily to significantly lower interest rates on invested balances during 2008
as compared to 2007. The increase in 2007 was due primarily to increased cash
and cash equivalent balances and marketable securities and increased yields on
such balances.
 
 (Benefit) Provision forIncome
Taxes
 
 The (benefit) for income taxes for the
year ended December 31, 2008 was $(3.7) million compared to a $5.4 million
provision for the year ended December 31, 2007.  The Company's loss
before income taxes for the year ended December 31, 2008 was approximately
$(18.7) million compared to earnings before income taxes of $31.7 million for
the year ended December 31, 2007 or a decrease in earnings between December 31,
2008 and December 31, 2007 of $50.4 million.  The Company’s effective
tax rate, the income tax (benefit) provision as a percentage of earnings before
(benefit) provision for income taxes, was (20.0)% and 16.9% for the years ended
December 31, 2008 and December 31, 2007, respectively.  The Company’s
effective tax rate will fluctuate based on the geographic segment the pretax
profits are earned in.  Of the geographic segments in which the
Company operates, the U.S. has the highest tax rates; Europe’s tax rates are
generally lower than U.S. tax rates; and the Far East has the lowest tax
rates.  The decrease in the Company’s (benefit) provision for income
tax as a percentage of earnings before (benefit) provision for income taxes is
principally attributed to tax benefits in the U.S. of $2.3 million resulting
from the reversal of an accrual for uncertain tax positions resulting from the
expiration of certain statute of limitations; this was offset in part by a
goodwill impairment loss in the U.S. segment in the amount of $12.5 million for
which no tax benefit is available.  Additionally, there were certain
changes in estimates for prior year taxes, upon finalization of 2007 tax
returns.
  -37-
  The provision for income taxes for the
year ended December 31, 2007 was $5.4 million compared to a $5.8 million
provision for the year ended December 31, 2006.  The Company's
earnings before income taxes for the year ended December 31, 2007 were
approximately $0.7 million higher than in 2006.  The Company’s
effective tax rate was 16.9% and 18.8% for the years ended December 31, 2007 and
December 31, 2006, respectively.  During 2007 certain statutes of
limitations expired, which resulted in a reversal of certain liabilities for
uncertain tax positions in the amount of $1.4 million.  During 2007 a
tax assessment was paid to the Inland Revenue Department (“IRD”) in Hong Kong in
the amount of $3.8 million, which resulted in a reduction in the Company’s
liability for uncertain tax positions in the amount of $3.8
million.  The payment of this Hong Kong IRD assessment resulted in
higher foreign tax credits being available for U.S. tax
purposes.  This resulted in a $0.7 million reduction in the Company’s
liability for uncertain tax positions during the year ended December 31,
2007.  Additionally, there were certain changes in estimates for prior
year taxes, upon finalization of 2006 tax returns.
 
 The
Company has the majority of its products manufactured on the mainland of the
People’s Republic of China (“PRC”), and Bel is not subject to corporate income
tax on manufacturing services provided by third parties in the
PRC.  The Company no longer conducts manufacturing activities in Hong
Kong or Macau. Hong Kong imposes corporate income tax at a rate of 16.5 percent
solely on income sourced to Hong Kong.  That is, its tax system is a
territorial one which only seeks to tax activities conducted in Hong
Kong.
 
 Macao
currently has a statutory maximum corporate income tax rate of 12
percent.  Since most of the Company's operations are conducted in
Asia, the majority of its profits are sourced in three jurisdictions in
Asia.  Accordingly, the profits earned in the U.S. are comparatively
small in relation to its profits earned in Asia.  Therefore, there is
generally a significant difference between the statutory U.S. tax rate and the
Company's effective tax rate.
  During
2005, the Company was granted an offshore operating license from the government
of Macao.  An MCO named Bel Fuse (Macao Commercial Offshore) Limited
was set up to handle all of the Company’s sales to third party customers in
Asia.  Sales to third party customers commenced during the first
quarter of 2006.  Sales consist of products manufactured in the
PRC.  The MCO is not subject to Macao corporate income
taxes.
 
 The Company has historically followed a
practice of reinvesting a portion of the earnings of foreign subsidiaries in the
expansion of its foreign operations.  If the unrepatriated earnings
were distributed to the parent corporation rather than reinvested in Asia, such
funds would be subject to United States Federal income taxes.  During
the year ended December 31, 2008, the Company repatriated previously taxed
foreign earnings of approximately $0.3 million.
 
 The Company’s policy is to recognize
interest and penalties related to uncertain tax positions as a component of the
current provision for income taxes.  During the years ended December
31, 2008 and 2007, the Company recognized approximately $0.1 million and $0.5
million in interest and penalties in the Consolidated Statement of
Operations.  The Company has approximately $1.6 million and $1.8
million accrued for the payment of interest and penalties at December 31, 2008
and 2007, respectively, which is included in both income taxes payable and
liability for uncertain tax positions in the consolidated balance
sheet.
  -38-
  The Internal Revenue Service (“IRS”)
commenced an examination of the Company’s U.S. income tax returns for 2004 and
reviewed 2003 and 2005 during the fourth quarter of 2006, which resulted in no
additional assessment.  The 2004 statute of limitations expired on
September 15, 2008.
 
 During 2008, the Company was audited by
the State of New Jersey, Department of the Treasury, Division of Taxation (“New
Jersey”) for the years ended December 31, 2003 through 2006, which resulted in a
minimal assessment.
 
 During February 2008, the Company
received correspondence from the State of California Franchise Tax
Board.  They requested copies of U.S. federal income tax returns for
the years 2005 and 2006 for further analysis to determine if the tax returns
will be selected for audit.  On July 3, 2008 the Company received
correspondence from the State of California that the tax returns for the years
2005 and 2006 will not be audited at this time.
 
 
 Inflation and Foreign
Currency Exchange
 
 During
the past three years, the effect of inflation on the Company's profitability was
not material.  Historically, fluctuations of the U.S. Dollar against
other major currencies have not significantly affected the Company's foreign
operations as most sales have been denominated in U.S. Dollars or currencies
directly or indirectly linked to the U.S. Dollar.  Most significant
expenses, including raw materials, labor and manufacturing expenses, are either
incurred in U.S. Dollars or the currencies of the Hong Kong Dollar, the Macao
Pataca or the Chinese Renminbi.  However, the Chinese Renminbi
appreciated in value significantly (approximately 9.5%) during the year ended
December 31, 2008 as compared with 2007.  Further appreciation of the
Renminbi would result in the Company’s incurring higher costs for all expenses
incurred in the PRC.  The Company's European entities, whose
functional currencies are Euros, Czech Korunas, and U.S. dollars, enter into
transactions which include sales which are denominated principally in Euros,
British Pounds and various other European currencies, and purchases that are
denominated principally in U.S. dollars.    Settlement of
such transactions resulted in net realized and unrealized currency exchange
losses of $0.6 million and $0.2 million for the years ended December 31, 2008
and 2006, respectively, which were charged to expense.  Translation of
subsidiaries’ foreign currency financial statements into U.S. dollars resulted
in translation (losses) gains of ($0.4) million, $1.0 million and $0.4 million
for the years ended December 31, 2008, 2007 and 2006, respectively, which are
included in accumulated other comprehensive (loss) income.  Realized
currency gains (losses) during the year ended December 31, 2007 were not
material.  Any change in the linkage of the U.S. Dollar and the Hong
Kong Dollar could have a material effect on the Company's consolidated financial
position or results of operations.
 
 Liquidity and Capital
Resources
 
 Historically,
the Company has financed its capital expenditures primarily through cash flows
from operating activities and has financed acquisitions both through cash flows
from operating activities and borrowings.  Management believes that
the cash flow from operations after payments of dividends combined with its
existing capital base and the Company's available lines of credit, will be
sufficient to fund its operations for at least the next twelve
months.  Such statement constitutes a Forward Looking
Statement.  Factors which could cause the Company to require
additional capital include, among other things, a further softening in the
demand for the Company’s existing products, an inability to respond to customer
demand for new products, potential acquisitions requiring substantial capital,
future expansion of the Company's operations and net losses that would result in
net cash being used in operating, investing and/or financing activities which
result in net decreases in cash and cash equivalents.  Net losses may
result in the loss of domestic and foreign credit facilities and preclude the
Company from raising debt or equity financing in the capital markets on
affordable terms or otherwise.
  -39-
  On April 30, 2008, the Company
renewed its unsecured credit agreement in the amount of $20 million, which
expires on June 30, 2011.  There was no balance outstanding as of
December 31, 2008.  At that date, the entire $20 million line of
credit was available to the Company to borrow.    The loan
bears interest at LIBOR plus 0.75% to 1.25% based on certain financial statement
ratios maintained by the Company.   Under the terms of the credit
agreement, the Company is required to maintain certain financial ratios and
comply with other financial conditions.  At December 31, 2008, the
Company did not comply with the Fixed Charge Coverage Test covenant, as
defined.  The Company is currently in the process of obtaining a
waiver from its lender for the covenant violation.
 
 The Company's Hong Kong subsidiary
had an unsecured line of credit of approximately $2 million, which was unused at
December 31, 2008.  The line of credit expired on January 31, 2009
and  was subsequently renewed on February 10, 2009. Borrowing on the
line of credit was guaranteed by the U.S. parent.  The line of credit
bears interest at a rate determined by the lender as the financing is
extended.
 
 The
Company recorded minimal interest expense during the year ended December 31,
2008.  For the years ended December 31, 2007 and 2006, the
Company recorded interest expense of approximately $0.1 million and $0.1
million, respectively.
 
 For
information regarding further commitments under the Company’s operating leases,
see Note 15 of the Notes to the Company’s consolidated financial
statements.
  During
May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
for $6.0 million.  In December 2007, the Tidelands Resource Council
voted to approve the Bureau of Tideland’s Management’s recommendation for a
Statement of No Interest.  On March 14, 2008, the Commissioner of the
Department of Environmental Protection signed a letter to approve the Statement
of No Interest.  As final approval of the Statement of No Interest was
still pending as of December 31, 2008, the Company continued to defer the
estimated gain on sale of the land, in the amount of $4.6 million.  Of
the $6.0 million sales price, the Company received cash of $1.5 million before
closing costs, and $4.6 million (including interest) was being held in escrow
pending final resolution of the State of New Jersey tideland claim and
certain environmental costs.  During 2007, the Company paid $0.4
million related to environmental costs, which approximated the maximum amount of
environmental costs for which the Company is liable.  During May 2008, the
title company released $2.3 million of the escrow and as such, $2.3 remains in
escrow and has been classified as restricted cash as of December 31,
2008.  On February 27, 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  The Company
anticipates release of the remaining escrow and corresponding guarantees and
recognition of the gain during the first quarter of 2009.
 
 ColumbiaPortfolio:
 
 At
December 31, 2008, the Company’s investment securities included privately placed
units of beneficial interests in the Columbia Portfolio, which is an enhanced
cash fund sold as an alternative to money-market funds.  During the
latter half of 2007, the Company invested a portion of its cash balances on hand
in this fund.  In December 2007, due to adverse market conditions, the
fund was overwhelmed with withdrawal requests from investors and it was closed
with a restriction placed upon the cash redemption ability of its
holders.  As a result, the Company redesignated the Columbia Portfolio
units from cash equivalents (as previously classified during the second and
third quarters of 2007) to short-term investments or long-term investments based
upon the liquidation schedule provided by the fund.   At the time
the liquidation was announced, the Company held 25.7 million units of the
Columbia Portfolio at a book value of $25.7 million.
  -40-
  As of
December 31, 2008, the Company has received total cash redemptions to date of
$18.9 million (including $16.6 million during the year ended December 31,
2008) at a weighted-average net asset value of $.9661 per unit.  As the net
asset value has continued to decline, the Company has been recording impairment
charges on this investment.  During the years ended December 31, 2008
and 2007, the Company recorded $1.2 million and $0.3 million in impairment
charges, respectively.  In addition to the impairment charges in 2008,
the Company has also recorded realized losses of $0.2 million during the year
ended December 31, 2008, as the Company’s adjusted basis exceeded the net asset
value on the dates of redemption.  As of December 31, 2008, the
Company holds 6.1 million units at a book value of $5.1 million.  On
January 29, 2009, the Company received an additional cash redemption of $0.9
million at a net asset value of $.8301 per share.  Information and the
markets relating to these investments remain dynamic, and there may be further
declines in the value of these investments, the value of the collateral held by
these entities, and the liquidity of the Company’s investments.  To
the extent that the Company determines that there is a further decline in fair
value, the Company may recognize additional impairment charges in future periods
up to the aggregate amount of these investments.
 
 Toko:
 
 As of
December 31, 2008, the Company owned a total of 1,840,919 shares, or
approximately 1.9%, of the outstanding shares, of the common stock of Toko, Inc.
(“Toko”).  The Company’s original cost of these shares was $5.6
million ($3.07 per share).  Toko develops, manufactures and sells
power supply related components and radio frequency related components primarily
in Japan.  Toko had a market capitalization of approximately $111.2
million as of December 31, 2008.   These shares are reflected on
the Company’s consolidated balance sheets as marketable
securities.  These marketable securities are considered to be
available for sale under SFAS No. 115, “Accounting for Certain Investments in
Debt and Equity Securities”.  In accordance with FASB Staff Position
(“FSP”) 115-1, the Company periodically reviews its marketable securities and
determines whether the investments are other-than-temporarily
impaired.  The Company reviewed various factors in determining whether
an other-than-temporary impairment exists on its investment in Toko, including
volatility of the Toko share price, Toko’s recent financial results and the
Company’s intention and ability to hold the investment.  During the
second and third quarters of 2008, the Company deemed this investment to be
other-than-temporarily impaired and recorded pre-tax impairment charges totaling
$3.6 million to write this investment to its then current fair
value.  At December 31, 2008, the Company’s adjusted basis for the
Toko stock was $1.10 per share and the fair market value was $1.14 per
share.  As the fair market value of the Toko stock is above the
Company’s adjusted basis, no impairment exists at December 31,
2008.  The pre-tax unrealized gain of $0.1 million as of December 31,
2008 is included, net of tax, in accumulated other comprehensive income
(loss).
 
 During
April 2007, the Company sold 4,034,000 shares of common stock of Toko on the
open market which resulted in a gain of approximately $2.5 million, net of
investment banker fees and other expenses in the amount of $0.8
million.  The Company accrued bonuses of $0.5 million in connection
with this gain which were paid in 2008.  For financial statement
purposes, in 2007, approximately $0.4 million and $0.1 million of such bonuses
has been classified within cost of sales and selling, general and administrative
expenses, respectively.
 
 -41-
 Power-One,
Inc.:
 
 On
February 25, 2008, the Company announced that it had acquired 4,370,052 shares
of Power-One, Inc. (“Power-One”) common stock representing, to the Company’s
knowledge, 5% of Power-One’s outstanding common stock, at a total purchase price
of $10.1 million ($2.32 per share).  During October 2008, the Company
purchased an additional 2,968,946 shares of Power-One common stock representing,
to the Company’s knowledge, an additional 3.4% of Power-One’s outstanding common
stock, at a purchase price of $3.9 million.  As of December 31, 2008,
the Company owns a total of 7,338,998 share of Power-One common stock at an
aggregate cost of $14.1 million ($1.92 per share).  Power-One’s common
stock is quoted on the NASDAQ Global Market.  Power-One is a designer
and manufacturer of power conversion and power management
products.  As of December 31, 2008, the fair market value of the
Power-One stock owned by the Company was $1.19 per share, or $8.7 million in the
aggregate.   The Company reviewed various factors in determining
whether an other-than-temporary impairment exists on its investment in Power-One
at December 31, 2008.  These factors included volatility of the
Power-One share price, Power-One’s recent financial results and recent changes
made to its executive management, as well as the Company’s intention and ability
to hold the investment.  The Power-One share price has been extremely
volatile since the Company’s purchase of this stock, ranging from $0.90 - $3.70,
with an average closing price of $2.08 during the ownership
period.  During the fourth quarter of 2008, the stock price ranged
from $0.90 - $1.44, with an average closing price of $1.16 for the
quarter.  While the Company has the ability and intent to hold this
investment until the market improves, the weakening economic conditions
impacting the technology industry are not expected to rebound in the near
term.  Based on these factors, along with the severity of the decline
in the market price, the Company deemed this investment to be
other-than-temporarily impaired and recorded a pre-tax impairment charge of $5.3
million to write this investment to its fair value at December 31, 2008 ($1.19
per share).
 
 CDARS:
 
 During
June 2008, the Company invested $2.4 million in certificates of deposit (CDs)
through Stephens, Inc., with whom the Company has an investment banking
relationship.  During October 2008, the Company invested an additional
$2.5 million in CDs through Stephens, Inc.  These investments are part
of the Certificate of Deposit Account Registry Service (CDARS) program whereby
the funds are invested with various banks in order to achieve FDIC insurance on
the full invested amount.  The CDs have an initial maturity of
26-weeks and an early redemption feature with a 30-day interest
penalty.  During December 2008, $2.0 million of the CD’s matured and
were temporarily renewed for a period of 29 days.  This amount was
redesignated as a cash equivalent as of December 31, 2008, due to the short-term
nature of the investment.  These CDs were subsequently renewed in
January 2009 for a period of 13 weeks.
 
 Artesyn Technologies,
Inc.:
 
 During
2004, the Company acquired a total of 2,037,500 shares of the common stock of
Artesyn Technologies, Inc. (“Artesyn”) at a total purchase price of $16.3
million.  On April 28, 2006, Artesyn was acquired by Emerson Network
Power for $11.00 per share in cash.  During the second quarter of
2006, in connection with the sale of Artesyn, the Company recognized a gain of
approximately $5.2 million, net of investment banker advisory fees of $0.9
million.   The Company accrued bonuses of $1.0 million in
connection with the gain.  For financial statement purposes,
approximately $0.3 million and $0.7 million was classified within cost of sales
and selling, general and administrative expenses, respectively, and was paid to
key employees in January 2007.
 
 -42-
 Stock
Repurchases
 
 During
2000, the Board of Directors of the Company authorized the purchase of up to ten
percent of the Company’s outstanding common shares. As of December 31, 2008, the
Company had purchased and retired 23,600 Class B common shares at a cost of
approximately $0.8 million and had purchased and retired 521,747 Class A common
shares at a cost of approximately $16.7 million.  No shares of Class B
common stock were repurchased during the year ended December 31, 2008 and
361,714 Class A shares were repurchased principally from a related party during
the year ended December 31, 2008 at a cost of $11.0 million.  During
January and February 2009, the Company purchased an additional 6,070 Class A
common shares at a cost of $0.1 million.
 
 Cash
Flows
 
 During
the year ended December 31, 2008, the Company's cash and cash equivalents
decreased by $8.9 million, reflecting approximately $10.3 million provided by
operating activities, $16.6 million from the partial redemption of the Columbia
Portfolio, $2.0 million of marketable securities redesignated as cash
equivalents and $2.3 million from the partial release of escrow related to the
sale of the Jersey City property, offset, in part, by $19.0 million used for
purchases of marketable securities, $6.9 million for the purchase of property,
plant and equipment, $11.0 million for the repurchase of the Company’s common
stock and $3.2 million for payments of dividends.
 
 During the year ended December 31,
2007, the Company's cash and cash equivalents increased by $7.1 million,
reflecting approximately $19.8 million provided by operating activities, offset
by approximately $6.5 million used in investing activities (primarily as a
result of the redesignation of the Columbia Portfolio funds of $25.7 million
from a cash equivalent to an investment, $11.8 million used for purchases of
marketable securities and $9.2 million used for the purchase of property, plant
and equipment offset, in part, by $26.7 million from the sale of marketable
securities and $11.3 million from the sale of property, plant and equipment) and
approximately $6.6 million used in financing activities (principally reflecting
$5.7 million for the repurchase of the Company’s common stock and $2.5 million
for payments of dividends, partially offset by $1.5 million provided by the
exercise of stock options).
 
 During the year ended December 31,
2006, the Company's cash and cash equivalents increased by approximately $24.8
million, reflecting approximately $19.0 million provided by operating
activities, proceeds of $24.5 million from the sale of marketable securities and
proceeds of $3.2 million from the exercise of stock options, offset in part
byexpenditures
of $9.4 million for the purchase of property, plant and equipment, $7.0
million used principally for acquisitions, $3.6 million for the purchase of
marketable securities and $2.2 million for payments of dividends.
 
 Cash and cash equivalents, marketable
securities, short-term investments and accounts receivable comprised
approximately 53.0% and 54.4% of the Company's total assets at December 31, 2008
and December 31, 2007, respectively. The Company's current ratio (i.e., the
ratio of current assets to current liabilities) was 6.5 to 1 and 6.2 to 1 at
December 31, 2008 and December 31, 2007, respectively.
 
 Accounts receivable, net of allowances,
were $46.0 million at December 31, 2008, as compared with $52.2 million at
December 31, 2007.  The decrease in accounts receivable is primarily
due to a 16.3% decrease in fourth quarter sales for 2008 as compared to 2007,
partially offset by an increase in the Company’s days sales outstanding (DSO)
from 68 days at December 31, 2007 to 73 days at December 31,
2008.  Marketable securities increased by $10.5 million as a result of
Bel’s purchasing $19.0 million of marketable securities (primarily related to
Power-One), partially offset by a reduction in the fair market value of the
marketable securities during the year ended December 31, 2008 of $6.5 million
and $2.0 million redesignated as cash equivalents.  Short-term
investments were $16.5 million lower at December 31, 2008 as compared to 2007,
due to redemptions from the Columbia Portfolio of $16.6 million during 2008.
Inventories were $46.5 million at December 31, 2008, as compared with $39.0
million at December 31, 2007 as a result of an overall reduction in product
demand during the fourth quarter of 2008.   Bel not only
experienced a lower volume of new orders prior to year-end but also received
requests by its customers to delay delivery of previous orders into
2009.  Accounts payable was $14.3 million at December 31, 2008 as
compared to $16.1 million at December 31, 2007, as the cost and volume
associated with raw material purchases have decreased in the fourth quarter of
2008.
 
 -43-
 The following table sets forth at
December 31, 2008 the amounts of payments due under specific types of
contractual obligations, aggregated by category of contractual obligation, for
the time periods described below.  This table excludes liabilities
recorded relative to uncertain income tax positions under FIN 48, amounting to
$3.9 million included in income taxes payable and $3.4 million included in
liability for uncertain tax positions, as of December 31, 2008, due to the
uncertain timing of the resolution of such matters.
 
 Payments
      due by periodContractual Obligations
                                    
                                    Total
                                    
                                    
                                    Less than 1 year
                                    
                                    
                                    1-3
                                      years
                                    
                                    
                                    3-5
                                      years
                                    
                                    
                                    More than
                                      5 yearsCapital
      expenditure obligations
                                    
                                    $
                                    1,982
                                    
                                    
                                    $
                                    1,982
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -Operating
      leases
                                    
                                    
                                    5,550
                                    
                                    
                                    
                                    2,001
                                    
                                    
                                    
                                    2,279
                                    
                                    
                                    
                                    1,226
                                    
                                    
                                    
                                    44Raw
      material purchase obligations
                                    
                                    
                                    9,243
                                    
                                    
                                    
                                    9,243
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Total
                                    
                                    $
                                    16,775
                                    
                                    
                                    $
                                    13,226
                                    
                                    
                                    $
                                    2,279
                                    
                                    
                                    $
                                    1,226
                                    
                                    
                                    $
                                    44
  The
Company is required to pay SERP obligations at the occurrence of certain events.
As of December 31, 2008, $5.9 million is included in long-term liabilities as an
unfunded pension obligation on the Company’s consolidated balance
sheet.  Included in other assets at December 31, 2008 is the cash
surrender value of company-owned life insurance with a value of $3.8 million,
which has been designated by the Company to be utilized to fund the Company’s
SERP obligations.
 
 Other
Matters
 
 The
Company believes that it has sufficient cash reserves to fund its foreseeable
working capital needs.  It may, however, seek to expand such resources
through bank borrowings, at favorable lending rates, from time to time. If the
Company were to undertake a substantial acquisition for cash, the acquisition
would likely need to be financed in part through bank borrowings or the issuance
of public or private debt or equity. If the Company borrows money to finance
acquisitions, this would likely decrease the Company’s ratio of earnings to
fixed charges and adversely affect other leverage criteria and could result in
the imposition of material restrictive covenants. Under its existing credit
facility, the Company is required to obtain its lender’s consent for certain
additional debt financing, to comply with other covenants including the
application of specific financial ratios, and may be restricted from paying cash
dividends on its common stock. The Company cannot assure that the necessary
acquisition financing would be available to it on acceptable terms, or at all,
when required. If the Company issues a substantial amount of stock either as
consideration in an acquisition or to finance an acquisition, such issuance may
dilute existing stockholders and may take the form of capital stock having
preferences over its existing common stock.
 
 -44-
 
 New Financial Accounting
Standards
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
enhances existing guidance for measuring assets and liabilities using fair
value.  This Standard provides a single definition of fair value,
together with a framework for measuring it, and requires additional disclosure
about the use of fair value to measure assets and
liabilities.    In February 2008, the FASB issued FASB
Staff Position SFAS 157-1, “Application of SFAS No. 157 to SFAS No. 13 and Its
Related Interpretative Accounting Pronouncements that Address Leasing
Transactions” (“FSP SFAS 157-1”) and FASB Staff Position SFAS 157-2, “Effective
Date of SFAS No. 157” (“FSP SFAS 157-2”). FSP SFAS 157-1 excludes SFAS No.
13 and its related interpretive accounting pronouncements that address leasing
transactions from the requirements of SFAS No. 157, with the exception of fair
value measurements of assets and liabilities recorded as a result of a lease
transaction but measured pursuant to other pronouncements within the scope of
SFAS No. 157. FSP SFAS 157-2 delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). FSP SFAS 157-1 and FSP SFAS 157-2 became effective
for the Company upon adoption of SFAS No. 157 on January 1, 2008. See Note 3 of
Notes to Consolidated Financial Statements for disclosures related to the
Company’s financial assets accounted for at fair value on a recurring or
nonrecurring basis.  The Company will provide the additional
disclosures required relating to the fair value measurement of nonfinancial
assets and nonfinancial liabilities when it completes its implementation of SFAS
No. 157 on January 1, 2009, as required, and does not believe they will have a
significant impact on its financial statements.
 
 In February 2007, the FASB issued SFAS
No. 159 (“SFAS 159”) “The Fair Value Option for Financial Assets and Financial
Liabilities”, providing companies with an option to report selected financial
assets and liabilities at fair value.  The Standard’s objective is to
reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities
differently.  It also requires entities to display the fair value of
those assets and liabilities for which the Company has chosen to use fair value
on the face of the balance sheet.  SFAS 159 is effective for fiscal
years beginning after November 15, 2007.  SFAS No. 159 did not have a
material impact on its financial statements.
 
 In June 2007, the Emerging Issues Task
Force of the FASB issued EITF Issue No. 07-3, "Accounting for Nonrefundable
Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities," which is effective for calendar year companies on
January 1, 2008.  The Task Force concluded that nonrefundable advance
payments for goods or services that will be used or rendered for future research
and development activities should be deferred and capitalized.  Such
amounts should be recognized as an expense as the related goods are delivered or
the services are performed, or when the goods or services are no longer expected
to be provided.  EITF Issue No. 07-3 did not impact the Company’s
financial statements.
 
 In December 2007, the FASB issued SFAS
141(R), which replaces SFAS 141 “Business Combinations”.  This
Statement is intended to improve the relevance, completeness and
representational faithfulness of the information provided in financial reports
about the assets acquired and the liabilities assumed in a business
combination.  This Statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the Statement.  Under SFAS
141(R), acquisition-related costs, including restructuring
costs,  must be recognized separately from the acquisition and will
generally be expensed as incurred.  That replaces SFAS 141’s
cost-allocation process, which required the cost of an acquisition to be
allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values.  SFAS 141(R) shall be applied
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual report period beginning on or after
December 15, 2008.  The Company will adopt SFAS No. 141(R) on January
1, 2009, as required, and does not believe it will have a material impact on its
financial statements.
 
 -45-
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”).  SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States.  This Statement is effective
sixty days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.”  The
Company is currently evaluating the potential impact, if any, of the adoption of
SFAS No. 162 on its financial statements.
 
 
 Item
7A.  Quantitative and Qualitative
Disclosures About Market Risk
 
 Fair
Value of Financial Instruments — The estimated fair values of financial
instruments have been determined by the Company using available market
information and appropriate valuation methodologies.
  The
Company has not entered into, and does not expect to enter into, financial
instruments for trading or hedging purposes. The Company does not currently
anticipate entering into interest rate swaps and/or similar
instruments.
 
 The
Company's carrying values of cash, marketable securities, accounts receivable,
accounts payable and accrued expenses are a reasonable approximation of their
fair value.  At December 31, 2008, three of the Company’s investments
– the Company’s investments in Toko, Inc., Power-One, Inc. and the Columbia
Strategic Cash Portfolio (the “Columbia Portfolio”) – have been subject to
recent market declines, triggering impairment charges recorded during the year
ended December 31, 2008.
 
 As of
December 31, 2008, the Company owns 1,840,919 shares of Toko common stock with
an adjusted cost basis of $2.0 million ($1.10 per share) and a fair market value
of $2.1 million ($1.14 per share).  During the second and third
quarters of 2008, the Company deemed this investment to be
other-than-temporarily impaired and recorded pre-tax impairment charges totaling
$3.6 million to write this investment to its then current fair value, bringing
the Company’s adjusted cost basis down to $1.10 per share.  While the
Company has the intent and ability to hold this investment until it is in a gain
position, the future value of this stock price is uncertain.  If the
per share fair market value of the Toko stock were to decrease by $0.11 per
share (10% of the December 31, 2008 Toko stock price), this would result in an
additional unrealized loss of $0.2 million.
 
 The
Company’s investment in Power-One, Inc. has also been subject to recent market
declines.  As of December 31, 2008, the Company owns a total of
7,338,998 shares of Power-One common stock with an aggregate cost of $14.1
million ($1.92 per share) and a fair market value of $8.7 million ($1.19 per
share).  Based on the Company’s impairment analysis at December 31,
2008, the Company deemed this investment other-than-temporarily impaired and
recorded a pre-tax impairment charge of $5.3 million to write this investment to
its fair value at December 31, 2008 ($1.19 per share).  While the
Company has the ability and intent to hold this investment until the market
improves, the weakening economic conditions impacting the technology industry
are not expected to rebound in the near term.  As of
March 11, 2009, the Power-One stock price was $0.39 per share, resulting in an
unrealized loss of $5.9 million before tax.  This unrealized loss
represents the additional decline in fair market value as of March 11, 2009 from
the Company's adjusted basis of this investment as of December 31,
2008.  If the per share fair market value of the Power-One stock were
to decrease by an additional $0.04 per share (10% of the March 11, 2009
Power-One stock price), this would result in an additional unrealized loss of
$0.3 million.
  -46-
 The
Company’s investment in the Columbia Portfolio has also been sensitive to the
recent market decline.  In December 2007, the Company was notified
that its $25.7 million investment in the Columbia Portfolio was being liquidated
and that the fund was converting from a fixed net asset value (“NAV”) to a
floating NAV, which resulted in the Company’s recording a $0.3 million
impairment charge during the year ended December 31, 2007 and additional
impairment charges of $1.2 million were recorded during the year ended
December 31, 2008. See Note 3 of the Notes to the Company’s Consolidated
Financial Statements.  As of December 31, 2008, the Company has a
total of $5.1 million invested in the Columbia Portfolio.  If the NAV
were to decline by $0.08 per unit (10% of the NAV of $0.8266 at December 31,
2008), the net impact to the Company’s results of operations and cash flows
would be a decrease of income before provision for income taxes and cash flows
from operating activities of approximately $0.5 million.
 
 The
Company enters into transactions denominated in U.S. Dollars, Hong Kong Dollars,
the Chinese Renminbi, Euros, British Pounds and the Czech
Koruna.  Fluctuations in the U.S. dollar exchange rate against these
currencies could significantly impact the Company's consolidated results of
operations.
 
 The
Company believes that a change in interest rates of 1% or 2% would not have a
material effect on the Company's consolidated statement of operations or balance
sheet.
 
 Item
8.     Financial Statements and
Supplementary Data
 
 See
the consolidated financial statements listed in the accompanying Index to
Consolidated Financial Statements for the information required by this
item.
 
 -47-
  BEL
      FUSE INC.INDEX
 Financial Statements
                                      
                                      PageReport
      of Independent RegisteredPublic
      Accounting Firm
                                      
                                      F-1
      - F-2Consolidated
      Balance Sheets as ofDecember
      31, 2008 and 2007
                                      
                                      F-3
      - F-4Consolidated
      Statements of Operations for Eachof
      the Three Years in the Period EndedDecember
      31, 2008
                                      
                                      F-5Consolidated
      Statements of Stockholders' Equityfor
      Each of the Three Years in the Period EndedDecember
      31, 2008
                                      
                                      F-6
      - F-7Consolidated
      Statements of Cash Flows forEach
      of the Three Years in the Period EndedDecember
      31, 2008
                                      
                                      F-8
      - F-10Notes
      to Consolidated Financial Statements
                                      
                                      F-11
      - F-45Condensed
      Selected Quarterly Financial Data -Years
      Ended December 31, 2008 and 2007(Unaudited)
                                      
                                      F-46
  
  REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Stockholders of Bel Fuse Inc.
 Jersey
City, New Jersey
  We have
audited the accompanying consolidated balance sheets of Bel Fuse Inc. and
subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2008.  Our
audits also included the financial statement schedule listed in the Index at
Item 15.  We also have audited the Company’s internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.The Company's management is responsible for these financial statements
and financial statement schedule, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
management’s report on internal control over financial reporting.  Our
responsibility is to express an opinion on these financial statements and
financial statement schedule and an opinion on the Company's internal control
over financial reporting based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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 and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.Our
audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audits also included performing such other procedures as we considered necessary
in the circumstances.  We believe that our audits provide a reasonable
basis for our opinions.
  A
company's internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  A company's internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordancewith authorizations of
management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the
financial statements.
  Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  F-1
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Bel Fuse Inc. and
subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2008, in conformity with accounting principles generally accepted
in the United States of America.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.  Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.
  As
discussed in Note 1 and Note 8 to the consolidated financial statements, the
Company adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income
Taxes” effective January 1, 2007.
   DELOITTE
& TOUCHE LLP
  New York,
New York
 March 13,
2009
  F-2
 
 BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(dollars
      in
thousands)
 December
      31,
                      
                      
                      December
      31,2008
                      
                      
                      2007ASSETSCurrent
      Assets:Cash
      and cash equivalents
                      
                      $
                      74,955
                      
                      
                      $
                      83,875Marketable
      securities
                      
                      
                      13,735
                      
                      
                      
                      3,273Short-term
      investments
                      
                      
                      4,013
                      
                      
                      
                      20,542Accounts
      receivable - less allowance for doubtfulaccounts
      of $660 and $977 at December 31,2008
      and December 31, 2007, respectively
                      
                      
                      46,047
                      
                      
                      
                      52,217Inventories
                      
                      
                      46,524
                      
                      
                      
                      39,049Prepaid
      expenses and other current assets
                      
                      
                      859
                      
                      
                      
                      1,446Refundable
      income taxes
                      
                      
                      2,498
                      
                      
                      
                      3,168Assets
      held for sale
                      
                      
                      236
                      
                      
                      
                      -Deferred
      income taxes
                      
                      
                      4,752
                      
                      
                      
                      2,661Total
      Current Assets
                      
                      
                      193,619
                      
                      
                      
                      206,231Property,
      plant and equipment - net
                      
                      
                      39,936
                      
                      
                      
                      41,113Restricted
      cash
                      
                      
                      2,309
                      
                      
                      
                      4,553Long-term
      investments
                      
                      
                      1,062
                      
                      
                      
                      2,536Deferred
      income taxes
                      
                      
                      5,205
                      
                      
                      
                      4,364Intangible
      assets - net
                      
                      
                      926
                      
                      
                      
                      1,181Goodwill
                      
                      
                      14,334
                      
                      
                      
                      28,447Other
      assets
                      
                      
                      4,393
                      
                      
                      
                      5,435TOTAL
      ASSETS
                      
                      $
                      261,784
                      
                      
                      $
                      293,860
 See notes
to consolidated financial statements.
  F-3
  BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS - CONTINUED(dollars
      in thousands, except per share
data)
  December
      31,
                                          
                                          
                                          December
      31,2008
                                          
                                          
                                          2007LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                                          
                                          $
                                          14,285
                                          
                                          
                                          $
                                          16,145Accrued
      expenses
                                          
                                          
                                          9,953
                                          
                                          
                                          
                                          12,113Accrued
      restructuring
                                          
                                          
                                          555
                                          
                                          
                                          
                                          -Income
      taxes payable
                                          
                                          
                                          4,054
                                          
                                          
                                          
                                          4,007Dividends
      payable
                                          
                                          
                                          787
                                          
                                          
                                          
                                          795Total
      Current Liabilities
                                          
                                          
                                          29,634
                                          
                                          
                                          
                                          33,060Long-term
      Liabilities:Accrued
      restructuring
                                          
                                          
                                          406
                                          
                                          
                                          
                                          -Deferred
      gain on sale of property
                                          
                                          
                                          4,616
                                          
                                          
                                          
                                          4,645Liability
      for uncertain tax positions
                                          
                                          
                                          3,445
                                          
                                          
                                          
                                          6,930Minimum
      pension obligation andunfunded
      pension liability
                                          
                                          
                                          5,910
                                          
                                          
                                          
                                          4,698Total
      Long-term Liabilities
                                          
                                          
                                          14,377
                                          
                                          
                                          
                                          16,273Total
      Liabilities
                                          
                                          
                                          44,011
                                          
                                          
                                          
                                          49,333Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value, authorized 1,000,000shares;
      none issued
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Class
      A common stock, par value $.10 per share -authorized
      10,000,000 shares; outstanding2,180,982
      and 2,545,644 shares, respectively(net
      of 1,072,770 treasury shares)
                                          
                                          
                                          218
                                          
                                          
                                          
                                          255Class
      B common stock, par value $.10 per share -authorized
      30,000,000 shares; outstanding9,369,893
      and 9,286,627 shares, respectively(net
      of 3,218,310 treasury shares)
                                          
                                          
                                          937
                                          
                                          
                                          
                                          929Additional
      paid-in capital
                                          
                                          
                                          19,963
                                          
                                          
                                          
                                          29,107Retained
      earnings
                                          
                                          
                                          196,467
                                          
                                          
                                          
                                          214,580Accumulated
      other comprehensive income (loss)
                                          
                                          
                                          188
                                          
                                          
                                          
                                          (344
                                          )Total
      Stockholders' Equity
                                          
                                          
                                          217,773
                                          
                                          
                                          
                                          244,527TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EQUITY
                                          
                                          $
                                          261,784
                                          
                                          
                                          $
                                          293,860
 See notes
to consolidated financial statements.
  F-4
 
 BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(dollars
      in thousands, except per share
data)
  Years
      Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006Net
      Sales
                    
                    $
                    258,350
                    
                    
                    $
                    259,137
                    
                    
                    $
                    254,933Costs
      and expenses:Cost
      of sales
                    
                    
                    217,079
                    
                    
                    
                    203,007
                    
                    
                    
                    192,985Selling,
      general and administrative
                    
                    
                    36,093
                    
                    
                    
                    36,117
                    
                    
                    
                    37,800Impairment
      of assets
                    
                    
                    14,805
                    
                    
                    
                    -
                    
                    
                    
                    -Restructuring
      charges
                    
                    
                    1,122
                    
                    
                    
                    -
                    
                    
                    
                    -Gain
      on sale of property, plant and equipment
                    
                    
                    -
                    
                    
                    
                    (5,499
                    )
                    
                    
                    -Casualty
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,030269,099
                    
                    
                    
                    233,625
                    
                    
                    
                    231,815(Loss)
      income from operations
                    
                    
                    (10,749
                    )
                    
                    
                    25,512
                    
                    
                    
                    23,118Interest
      expense and other costs
                    
                    
                    (4
                    )
                    
                    
                    (123
                    )
                    
                    
                    (71
                    )(Impairment
      charge)/gain on sale of investment
                    
                    
                    (10,358
                    )
                    
                    
                    2,146
                    
                    
                    
                    5,150Interest
      income
                    
                    
                    2,458
                    
                    
                    
                    4,169
                    
                    
                    
                    2,851(Loss)
      earnings before (benefit) provision for income taxes
                    
                    
                    (18,653
                    )
                    
                    
                    31,704
                    
                    
                    
                    31,048Income
      tax (benefit) provision
                    
                    
                    (3,724
                    )
                    
                    
                    5,368
                    
                    
                    
                    5,845Net
      (loss) earnings
                    
                    $
                    (14,929
                    )
                    
                    $
                    26,336
                    
                    
                    $
                    25,203(Loss)
      earnings per Class A common shareBasic
                    
                    $
                    (1.28
                    )
                    
                    $
                    2.11
                    
                    
                    $
                    2.03Diluted
                    
                    $
                    (1.28
                    )
                    
                    $
                    2.11
                    
                    
                    $
                    2.03Weighted
      average Class A common shares outstandingBasic
                    
                    
                    2,391,088
                    
                    
                    
                    2,637,409
                    
                    
                    
                    2,702,677Diluted
                    
                    
                    2,391,088
                    
                    
                    
                    2,637,409
                    
                    
                    
                    2,702,677(Loss)
      earnings per Class B common shareBasic
                    
                    $
                    (1.30
                    )
                    
                    $
                    2.25
                    
                    
                    $
                    2.16Diluted
                    
                    $
                    (1.30
                    )
                    
                    $
                    2.24
                    
                    
                    $
                    2.15Weighted
      average Class B common shares outstandingBasic
                    
                    
                    9,135,986
                    
                    
                    
                    9,244,198
                    
                    
                    
                    9,104,897Diluted
                    
                    
                    9,135,986
                    
                    
                    
                    9,266,016
                    
                    
                    
                    9,149,445
 See notes
to consolidated financial statements.
  F-5
  BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY(dollars
      in thousands)
  AccumulatedCompre-
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    Other
                                                                                                    
                                                                                                    
                                                                                                    Class
      A
                                                                                                    
                                                                                                    
                                                                                                    Class
      B
                                                                                                    
                                                                                                    
                                                                                                    Additional
                                                                                                    
                                                                                                    
                                                                                                    Stock-hensive
                                                                                                    
                                                                                                    
                                                                                                    Retained
                                                                                                    
                                                                                                    
                                                                                                    Comprehensive
                                                                                                    
                                                                                                    
                                                                                                    Common
                                                                                                    
                                                                                                    
                                                                                                    Common
                                                                                                    
                                                                                                    
                                                                                                    Paid-In
                                                                                                    
                                                                                                    
                                                                                                    BasedTotal
                                                                                                    
                                                                                                    
                                                                                                    Income
                                                                                                    
                                                                                                    
                                                                                                    Earnings
                                                                                                    
                                                                                                    
                                                                                                    Income
      (loss)
                                                                                                    
                                                                                                    
                                                                                                    Stock
                                                                                                    
                                                                                                    
                                                                                                    Stock
                                                                                                    
                                                                                                    
                                                                                                    Capital
                                                                                                    
                                                                                                    
                                                                                                    CompensationBalance,
      January 1, 2006
                                                                                                    
                                                                                                    
                                                                                                    201,577
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    167,991
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    4,264
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    270
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    901
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    31,714
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (3,563
                                                                                                    )Exercise
      of stock options
                                                                                                    
                                                                                                    
                                                                                                    3,187
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    14
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    3,173Tax
      benefits arising from the disposition of non-qualified incentive
      stock options
                                                                                                    
                                                                                                    
                                                                                                    336
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    336
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    -Cash
      dividends declared on Class Acommon
      stock
                                                                                                    
                                                                                                    
                                                                                                    (431
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (431
                                                                                                    )Cash
      dividends declared on Class Bcommon stock
                                                                                                    
                                                                                                    
                                                                                                    (1,810
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (1,810
                                                                                                    )Issuance
      of restricted common stock
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    2
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (2
                                                                                                    )Deferred
      stock-based compensation
                                                                                                    
                                                                                                    
                                                                                                    (1,403
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (1,403
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    -Currency
      translation adjustment
                                                                                                    
                                                                                                    
                                                                                                    387
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    387
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    387Change
      in unrealized gain or loss onmarketable
      securities - net of taxes
                                                                                                    
                                                                                                    
                                                                                                    (4,820
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (4,820
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (4,820
                                                                                                    )Stock-based
      compensation expense
                                                                                                    
                                                                                                    
                                                                                                    1,571
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    1,571
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    -Adoption
      of SFAS No. 123 (R)
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (3,563
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    3,563Unfunded
      SERP liability-net of taxes upon adoption of SFAS No.
    158
                                                                                                    
                                                                                                    
                                                                                                    (1,647
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (1,647
                                                                                                    )Net
      earnings
                                                                                                    
                                                                                                    
                                                                                                    25,203
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    25,203
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    25,203Comprehensive
      income
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    20,770Balance,
      December 31, 2006
                                                                                                    
                                                                                                    
                                                                                                    222,150
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    190,953
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (1,816
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    270
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    917
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    31,826
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    -Exercise
      of stock options
                                                                                                    
                                                                                                    
                                                                                                    1,452
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    6
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    1,446Tax
      benefits arising from the dispositionof
      non-qualified incentive stock options
                                                                                                    
                                                                                                    
                                                                                                    149
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    149Cash
      dividends declared on Class Acommon
      stock
                                                                                                    
                                                                                                    
                                                                                                    (534
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (534
                                                                                                    )Cash
      dividends declared on Class Bcommon
      stock
                                                                                                    
                                                                                                    
                                                                                                    (2,175
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (2,175
                                                                                                    )Issuance
      of restricted common stock
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    7
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (7
                                                                                                    )Termination
      of restricted common stock
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (1
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    1Repurchase/retirement
      of Class Acommon
      stock
                                                                                                    
                                                                                                    
                                                                                                    (5,733
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (15
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (5,718
                                                                                                    )Currency
      translation adjustment
                                                                                                    
                                                                                                    
                                                                                                    960
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    960
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    960Unrealized
      holding gains on marketablesecurities
      arising during the year, net of taxes
                                                                                                    
                                                                                                    
                                                                                                    2,077
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    2,077
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    2,077Reclassification
      adjustment for gainsincluded
      in net earnings, net of taxes
                                                                                                    
                                                                                                    
                                                                                                    (2,058
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (2,058
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    (2,058
                                                                                                    )Stock-based
      compensation expense
                                                                                                    
                                                                                                    
                                                                                                    1,410
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    1,410Change
      in unfunded SERP liability,net
      of taxes
                                                                                                    
                                                                                                    
                                                                                                    493
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    493
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    493Net
      earnings
                                                                                                    
                                                                                                    
                                                                                                    26,336
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    26,336
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    26,336Comprehensive
      income
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    27,808Balance,
      December 31, 2007
                                                                                                    
                                                                                                    $
                                                                                                    244,527
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    214,580
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    (344
                                                                                                    )
                                                                                                    
                                                                                                    $
                                                                                                    255
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    929
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    29,107
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    -
  See notes
to consolidated financial statements.
  F-6
  BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY(dollars
      in
thousands)
  AccumulatedCompre-
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        Other
                                                        
                                                        
                                                        Class
      A
                                                        
                                                        
                                                        Class
      B
                                                        
                                                        
                                                        Additionalhensive
                                                        
                                                        
                                                        Retained
                                                        
                                                        
                                                        Comprehensive
                                                        
                                                        
                                                        Common
                                                        
                                                        
                                                        Common
                                                        
                                                        
                                                        Paid-InTotal
                                                        
                                                        
                                                        Income
                                                        
                                                        
                                                        Earnings
                                                        
                                                        
                                                        Income
      (loss)
                                                        
                                                        
                                                        Stock
                                                        
                                                        
                                                        Stock
                                                        
                                                        
                                                        CapitalBalance,
      December 31, 2007
                                                        
                                                        $
                                                        244,527
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        $
                                                        214,580
                                                        
                                                        
                                                        $
                                                        (344
                                                        )
                                                        
                                                        $
                                                        255
                                                        
                                                        
                                                        $
                                                        929
                                                        
                                                        
                                                        $
                                                        29,107Exercise
      of stock options
                                                        
                                                        
                                                        312
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        3
                                                        
                                                        
                                                        
                                                        309Tax
      benefits arising from the dispositionof
      non-qualified incentive stock options
                                                        
                                                        
                                                        39
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        39Cash
      dividends declared on Class Acommon
      stock
                                                        
                                                        
                                                        (565
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (565
                                                        )Cash
      dividends declared on Class Bcommon
      stock
                                                        
                                                        
                                                        (2,619
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (2,619
                                                        )Issuance
      of restricted common stock
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        6
                                                        
                                                        
                                                        
                                                        (6
                                                        )Termination
      of restricted common stock
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (1
                                                        )
                                                        
                                                        
                                                        1Repurchase/retirement
      of Class A  common stock
                                                        
                                                        
                                                        (11,002
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (37
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (10,965
                                                        )Currency
      translation adjustment
                                                        
                                                        
                                                        (355
                                                        )
                                                        
                                                        
                                                        (355
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (355
                                                        )Unrealized
      holding losses on marketable securities arising during the
      year, net of taxes
                                                        
                                                        
                                                        (4,230
                                                        )
                                                        
                                                        
                                                        (4,230
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (4,230
                                                        )Reclassification adjustment
      of unrealized holdinglosses
      for impairment charge included in net earnings, net of
    taxes
                                                        
                                                        
                                                        5,551
                                                        
                                                        
                                                        
                                                        5,551
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        5,551Stock-based
      compensation expense
                                                        
                                                        
                                                        1,478
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        1,478Change
      in unfunded SERP liability, net of taxes
                                                        
                                                        
                                                        (434
                                                        )
                                                        
                                                        
                                                        (434
                                                        )
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        (434
                                                        )Net
      loss
                                                        
                                                        
                                                        (14,929
                                                        )
                                                        
                                                        
                                                        (14,929
                                                        )
                                                        
                                                        
                                                        (14,929
                                                        )Comprehensive
      loss
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        $
                                                        (14,397
                                                        )Balance,
      December 31, 2008
                                                        
                                                        $
                                                        217,773
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        $
                                                        196,467
                                                        
                                                        
                                                        $
                                                        188
                                                        
                                                        
                                                        $
                                                        218
                                                        
                                                        
                                                        $
                                                        937
                                                        
                                                        
                                                        $
                                                        19,963
  See notes
to consolidated financial statements.
  F-7
 
  BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(dollars
      in thousands)
 Year
      Ended December 31,2008
                            
                            
                            2007
                            
                            
                            2006Cash
      flows from operating activities:Net
      (loss) earnings
                            
                            $
                            (14,929
                            )
                            
                            $
                            26,336
                            
                            
                            $
                            25,203Adjustments
      to reconcile net (loss) earnings to netcash
      provided by operating activities:Depreciation
      and amortization
                            
                            
                            7,443
                            
                            
                            
                            7,921
                            
                            
                            
                            9,027Casualty
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,030Stock-based
      compensation
                            
                            
                            1,478
                            
                            
                            
                            1,465
                            
                            
                            
                            1,571Restructuring
      charges, net of cash payments
                            
                            
                            961
                            
                            
                            
                            -
                            
                            
                            
                            -Excess
      tax benefits from share-basedpayment
      arrangements
                            
                            
                            (39
                            )
                            
                            
                            (149
                            )
                            
                            
                            (336
                            )Gain
      on sale of property, plant and equipment
                            
                            
                            -
                            
                            
                            
                            (5,499
                            )
                            
                            
                            -Impairment
      charge (gain on sale) on investment
                            
                            
                            10,358
                            
                            
                            
                            (2,146
                            )
                            
                            
                            (5,150
                            )Impairment
      of assets
                            
                            
                            14,805
                            
                            
                            
                            -
                            
                            
                            
                            -Other,
      net
                            
                            
                            1,565
                            
                            
                            
                            207
                            
                            
                            
                            678Deferred
      income taxes
                            
                            
                            (3,616
                            )
                            
                            
                            (2,039
                            )
                            
                            
                            (988
                            )Changes
      in operating assets and liabilities (see below)
                            
                            
                            (7,737
                            )
                            
                            
                            (6,250
                            )
                            
                            
                            (12,003
                            )Net
      Cash Provided by Operating Activities
                            
                            
                            10,289
                            
                            
                            
                            19,846
                            
                            
                            
                            19,032Cash
      flows from investing activities:Purchase
      of property, plant and equipment
                            
                            
                            (6,887
                            )
                            
                            
                            (9,169
                            )
                            
                            
                            (9,364
                            )Purchase
      of intangible asset
                            
                            
                            (300
                            )
                            
                            
                            (100
                            )
                            
                            
                            -Purchase
      of marketable securities
                            
                            
                            (18,970
                            )
                            
                            
                            (11,801
                            )
                            
                            
                            (3,634
                            )Redesignation
      of marketable security to cashequivalent
      (Note 3)
                            
                            
                            2,000
                            
                            
                            
                            -
                            
                            
                            
                            -Redesignation
      of cash equivalent to investment (Note 3)
                            
                            
                            -
                            
                            
                            
                            (25,684
                            )
                            
                            
                            -Proceeds
      from sale of marketable securities
                            
                            
                            -
                            
                            
                            
                            26,647
                            
                            
                            
                            24,490Proceeds
      from sale of property, plant and equipment
                            
                            
                            2,272
                            
                            
                            
                            11,332
                            
                            
                            
                            -Redemption
      of investment
                            
                            
                            16,600
                            
                            
                            
                            2,284
                            
                            
                            
                            -Payment
      of investment banking advisory fee
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (300
                            )Payment
      for acquisitions - net of cash acquired
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (6,961
                            )Net
      Cash (Used In) Provided by Investing Activities
                            
                            
                            (5,285
                            )
                            
                            
                            (6,491
                            )
                            
                            
                            4,231
  See notes
to consolidated financial statements.
  F-8
 BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)(dollars
      in thousands)
  Year
      Ended December 31,2008
                                
                                
                                2007
                                
                                
                                2006Cash
      flows from financing activities:Proceeds
      from exercise of stock options
                                
                                
                                312
                                
                                
                                
                                1,452
                                
                                
                                
                                3,187Dividends
      paid to common shareholders
                                
                                
                                (3,192
                                )
                                
                                
                                (2,473
                                )
                                
                                
                                (2,223
                                )Purchase
      and retirement of Class Acommon
      stock
                                
                                
                                (11,002
                                )
                                
                                
                                (5,733
                                )
                                
                                
                                -Excess
      tax benefits from share-basedpayment
      arrangements
                                
                                
                                39
                                
                                
                                
                                149
                                
                                
                                
                                336Net
      Cash (Used In) Provided by Financing Activities
                                
                                
                                (13,843
                                )
                                
                                
                                (6,605
                                )
                                
                                
                                1,300Effect
      of exchange rate changes on cash
                                
                                
                                (81
                                )
                                
                                
                                364
                                
                                
                                
                                200Net
      (Decrease) Increase in Cash and Cash Equivalents
                                
                                
                                (8,920
                                )
                                
                                
                                7,114
                                
                                
                                
                                24,763Cash
      and Cash Equivalents - beginning of period
                                
                                
                                83,875
                                
                                
                                
                                76,761
                                
                                
                                
                                51,998Cash
      and Cash Equivalents - end of period
                                
                                $
                                74,955
                                
                                
                                $
                                83,875
                                
                                
                                $
                                76,761Changes
      in operating assetsand
      liabilities consist of:Decrease
      (increase) in accounts receivable
                                
                                $
                                6,010
                                
                                
                                $
                                (7,934
                                )
                                
                                $
                                (4,280
                                )(Increase)
      decrease in inventories
                                
                                
                                (7,585
                                )
                                
                                
                                7,482
                                
                                
                                
                                (13,501
                                )Decrease
      (increase) in prepaid expensesand
      other current assets
                                
                                
                                579
                                
                                
                                
                                (1
                                )
                                
                                
                                288Increase
      in other assets
                                
                                
                                (20
                                )
                                
                                
                                (1,135
                                )
                                
                                
                                (499
                                )(Decrease)
      increase in accounts payable
                                
                                
                                (1,842
                                )
                                
                                
                                (1,184
                                )
                                
                                
                                2,658(Decrease)
      increase in income taxes
                                
                                
                                (2,743
                                )
                                
                                
                                (3,194
                                )
                                
                                
                                1,590(Decrease)
      increase in accrued expenses
                                
                                
                                (2,136
                                )
                                
                                
                                (284
                                )
                                
                                
                                1,741$
                                (7,737
                                )
                                
                                $
                                (6,250
                                )
                                
                                $
                                (12,003
                                )
  See notes
to consolidated financial statements.
  F-9
  BEL
      FUSE INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS (Concluded)(dollars
      in thousands)
  Year
      Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2006Supplementary
      information:Cash
      paid during the year for:Income
      taxes
                    
                    $
                    2,606
                    
                    
                    $
                    10,809
                    
                    
                    $
                    4,451Interest
                    
                    $
                    4
                    
                    
                    
                    -
                    
                    
                    
                    71Details
      of acquisitions:Intangibles
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    447Goodwill
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    6,000-
                    
                    
                    
                    -
                    
                    
                    
                    6,447Amount
      paid on prior year acquisition
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    514Cash
      paid for acquisitions
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    6,961
  See notes
to consolidated financial statements.
  F-10
  BEL FUSE
INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  AS OF AND
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 and 2006
   1.           DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
 Bel Fuse
Inc. and subsidiaries operate in one industry with three geographic reporting
segments and are engaged in the design, manufacture and sale of products used in
local area networking, telecommunication, business equipment and consumer
electronic applications. The Company manages its operations geographically
through its three reporting units: North America, Asia and
Europe.  Sales are predominantly in North America, Europe and
Asia.
 
 PRINCIPLES OF
CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, including businesses
acquired since their respective dates of acquisition.  All
intercompany transactions and balances have been eliminated.
 
 USE OF ESTIMATES -
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
 CASH EQUIVALENTS -
Cash equivalents include short-term investments in money market funds and
certificates of deposit with an original maturity of three months or less when
purchased. At December 31, 2008 and December 31, 2007, cash equivalents
approximated $34.8 million and $33.4 million, respectively.
 
 MARKETABLE SECURITIES
- The Company generally classifies its equity securities as "available for
sale", and accordingly, reflects unrealized gains and losses, net of deferred
income taxes, as a component of accumulated other comprehensive
income.  In accordance with Financial Accounting Standards Board
(“FASB”) Staff Position Nos. FAS 115-1 and FAS 124-1 “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments”
(“FSP 115-1”), the Company periodically reviews its marketable securities and
determines whether the investments are other-than-temporarily
impaired.  If the investments are deemed to be other-than-temporarily
impaired, the investments are written down to their then current fair market
value.  During the years ended December 31, 2008 and 2007, the Company
recorded impairment charges and realized losses of $10.4 million and $0.3
million, respectively, related to certain of its investments.  See
Note 3 for further discussion regarding these impairment charges.
 
 The fair
values of marketable securities are based on quoted market
prices.  Realized gains or losses from the sale of marketable
securities are based on the specific identification method.
 
 F-11
  ACQUISITION EXPENSES
- The Company currently capitalizes all direct costs associated with proposed
acquisitions.  If the proposed acquisition is consummated, such costs
will be included as a component of the overall cost of the
acquisition.  Such costs are expensed at such time as the Company
deems the consummation of a proposed acquisition to be unsuccessful. Effective
January 1, 2009, acquisition-related costs, including restructuring
costs,  will be recognized separately from the acquisition and will
generally be expensed as incurred in accordance with Statement of Financial
Accounting Standards (“SFAS”)  No. 141(R), “Business
Combinations”.
 
 FOREIGN CURRENCY
TRANSLATION - The functional currency for some foreign operations is the
local currency. Assets and liabilities of foreign operations are translated at
exchange rates as of the balance sheet date, and income, expense and cash flow
items are translated at the average exchange rate for the applicable
period.  Translation adjustments are recorded in Other Comprehensive
(Loss) Income.  The U.S. Dollar is used as the functional currency for
certain foreign operations that conduct their business in U.S.
Dollars.  Realized and unrealized foreign currency losses were $0.6
million and $0.2 million for the years ended December 31, 2008 and 2006,
respectively, and have been expensed as a component of cost of sales or selling,
general and administrative expense, as applicable, in the consolidated statement
of operations.  Realized foreign currency gains (losses) for the year
ended December 31, 2007 were not material.
 
 CONCENTRATION OF CREDIT
RISK - Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable and
temporary cash investments.  The Company grants credit to customers
that are primarily original equipment manufacturers and to subcontractors of
original equipment manufacturers based on an evaluation of the customer's
financial condition, without requiring collateral.  Exposure to losses
on receivables is principally dependent on each customer's financial
condition.  The Company controls its exposure to credit risk through
credit approvals, credit limits and monitoring procedures and establishes
allowances for anticipated losses.
 
 The
Company places its temporary cash investments with quality financial
institutions and commercial issuers of short-term paper and, by policy, limits
the amount of credit exposure in any one financial instrument.  In
December 2007, the Company was notified that a $25.7 million investment in the
Columbia Strategic Cash Portfolio was being liquidated and the fund was
converting from a fixed net asset value (NAV) to a floating NAV.  As a
result, the Company has recorded impairment charges of $1.2 million and $0.3
million related to this investment during the years ended December 31, 2008 and
2007, respectively.  See Note 3 for additional information regarding
this investment.
 
 INVENTORIES -
Inventories are stated at the lower of weighted average cost or
market.
 
 F-12
  REVENUE RECOGNITION –
The Company recognizes revenue in accordance with the guidance contained in SEC
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
Statements". Revenue is recognized when the product has been delivered and title
and risk of loss has passed to the customer, collection of the resulting
receivable is deemed reasonably assured by management, persuasive evidence of an
arrangement exists and the sales price is fixed and
determinable.  Substantially all of the Company's shipments are FCA
(free carrier) which provides for title to pass upon delivery to the customer's
freight carrier.  Some product is shipped DDP/DDU with title passing
when the product arrives at the customer's dock.  DDP is defined as
Delivered Duty Paid by the Company and DDU is Delivered Duty Unpaid by the
Company.
 
 For
certain customers, the Company provides consigned inventory, either at the
customer’s facility or at a third party warehouse. Sales of consigned inventory
are recorded when the customer withdraws inventory from consignment.During all
periods in 2008, 2007 and 2006, inventory on consignment was
immaterial.
 
 The
Company typically has a twelve-month warranty policy for workmanship
defects.  In June 2007, the Company established a warranty accrual
related to certain defective parts sold to a customer primarily within the same
quarter, which the Company is replacing, in the amount of approximately $1.2
million, which included a $0.4 million inventory write off of inventory on
hand.  Such accrual has been classified within cost of
sales.  As of December 31, 2008, the Company has a remaining warranty
accrual related to these defective parts in the amount of $0.3
million.  The Company believes that this liability will be utilized in
2009.  As the Company has not historically had significant warranty
claims, no general reserves for warranties have been established.
 
 The
Company is not contractually obligated to accept returns except for defective
product or in instances where the product does not meet the customer's quality
specifications.  However, the Company may permit its customers to
return product for other reasons.  In these instances, the Company
would generally require a significant cancellation penalty payment by the
customer.  The Company estimates such returns, where applicable, based
upon management's evaluation of historical experience, market acceptance of
products produced and known negotiations with customers.  Such
estimates are deducted from sales and provided for at the time revenue is
recognized.
 
 GOODWILL – The
Company tests goodwill for impairment annually during the fourth quarter, using
a fair value approach at the reporting unit level. A reporting unit is an
operating segment or one level below an operating segment for which discrete
financial information is available and reviewed regularly by management. Assets
and liabilities of the Company have been assigned to the reporting units to the
extent that they are employed in or are considered a liability related to the
operations of the reporting unit and were considered in determining the fair
value of the reporting unit. The impairment analysis conducted in the fourth
quarter of 2008 indicated that the goodwill associated with the North America
operating segment was fully impaired as of the assessment date.  As a
result, the Company recorded an impairment charge of $14.1 million within the
North America operating segment during the fourth quarter of
2008.  See Note 2 of Notes to Consolidated Financial Statements for
detailed information regarding the valuation methods and key assumptions used in
coming to this determination.
 
 F-13
 DEPRECIATION -
Property, plant and equipment are stated at cost less accumulated depreciation
and amortization.  Depreciation and amortization are calculated
primarily using the declining-balance method for machinery and equipment and the
straight-line method for buildings and improvements over their estimated useful
lives.
 
 INCOME TAXES - The
Company accounts for income taxes using an asset and liability approach under
which deferred income taxes are recognized by applying enacted tax rates
applicable to future years to the differences between the financial statement
carrying amounts and the tax bases of reported assets and
liabilities.
 
 For that
portion of foreign earnings that have not been repatriated, an income tax
provision has not been recorded for U.S. federal income taxes on the
undistributed earnings of foreign subsidiaries as such earnings are intended to
be permanently reinvested in those operations.  Such earnings would
become taxable upon the sale or liquidation of these foreign subsidiaries or
upon the repatriation of earnings. See Note 8 of Notes to Consolidated
Financial Statements.
 
 The
principal items giving rise to deferred taxes are deferred gains on property
sales, unrealized gains/losses on marketable securities available for sale,
foreign tax credits, the use of accelerated depreciation methods for machinery
and equipment, timing differences between book and tax amortization of
intangible assets and goodwill and certain expenses including noncash
restructuring charges and the SERP which have been deducted for financial
reporting purposes but which are not currently deductible for income tax
purposes.
 
 Effective
January 1, 2007, uncertain tax positions are accounted for in accordance with
FASB Interpretation No. 48 “Accounting for Uncertainty in Income
Taxes.”  See Note 8 for further discussion.
 
 (LOSS) EARNINGS PER
SHARE  – The Company utilizes the two-class method to report
its (loss) earnings per share.  The two-class method is a (loss)
earnings allocation formula that determines (loss) earnings per share for each
class of common stock according to dividends declared and participation rights
in undistributed (loss) earnings.  The Company’s Certificate of
Incorporation, as amended, states that Class B common shares are entitled to
dividends at least 5% greater than dividends paid to Class A common shares,
resulting in the two-class method of computing (loss) earnings per
share.  In computing (loss) earnings per share, the Company has
allocated dividends declared to Class A and Class B based on amounts actually
declared for each class of stock and 5% more of the undistributed (loss)
earnings have been allocated to Class B shares than to the Class A shares on a
per share basis.  Basic (loss) earnings per common share are computed
by dividing net (loss) earnings by the weighted average number of common shares
outstanding during the period.  Diluted earnings per common share, for
each class of common stock, are computed by dividing net (loss) earnings by the
weighted average number of common shares and potential common shares outstanding
during the period. As the Company experienced a loss during the year ended
December 31, 2008, all potential common shares were deemed antidilutive and as
such, were not included in the computation of diluted loss per
share.  During the years ended December 31, 2007 and 2006, potential
common shares used in computing diluted earnings per share relate to stock
options for Class A and B common shares which, if exercised, would have a
dilutive effect on earnings per share.
 
 F-14
  The
(loss) earnings and weighted average shares outstanding used in the computation
of basic and diluted (loss) earnings per share are as follows (dollars in
thousands, except share and per share data):
 
 2008
                            
                            
                            2007
                            
                            
                            2006Numerator:Net
      (loss) earnings
                            
                            $
                            (14,929
                            )
                            
                            $
                            26,336
                            
                            
                            $
                            25,203Less
      Dividends declared:Class
      A
                            
                            
                            565
                            
                            
                            
                            534
                            
                            
                            
                            431Class
      B
                            
                            
                            2,619
                            
                            
                            
                            2,217
                            
                            
                            
                            1,810Undistributed
      (loss) earnings
                            
                            $
                            (18,113
                            )
                            
                            $
                            23,585
                            
                            
                            $
                            22,962Undistributed
      (loss) earnings allocation - basic:Class
      A undistributed (loss) earnings
                            
                            $
                            (3,614
                            )
                            
                            $
                            5,039
                            
                            
                            $
                            5,061Class
      B undistributed (loss) earnings
                            
                            
                            (14,499
                            )
                            
                            
                            18,546
                            
                            
                            
                            17,901Total
      undistributed (loss) earnings
                            
                            $
                            (18,113
                            )
                            
                            $
                            23,585
                            
                            
                            $
                            22,962Undistributed
      (loss) earnings allocation - diluted:Class
      A undistributed (loss) earnings
                            
                            $
                            (3,614
                            )
                            
                            $
                            5,030
                            
                            
                            $
                            5,041Class
      B undistributed (loss) earnings
                            
                            
                            (14,499
                            )
                            
                            
                            18,555
                            
                            
                            
                            17,921Total
      undistributed (loss) earnings
                            
                            $
                            (18,113
                            )
                            
                            $
                            23,585
                            
                            
                            $
                            22,962Net
      (loss) earnings allocation - basic:Class
      A undistributed (loss) earnings
                            
                            $
                            (3,049
                            )
                            
                            $
                            5,573
                            
                            
                            $
                            5,492Class
      B undistributed (loss) earnings
                            
                            
                            (11,880
                            )
                            
                            
                            20,763
                            
                            
                            
                            19,711Net
      (loss) earnings
                            
                            $
                            (14,929
                            )
                            
                            $
                            26,336
                            
                            
                            $
                            25,203Net
      (loss) earnings allocation - diluted:Class
      A undistributed (loss) earnings
                            
                            $
                            (3,049
                            )
                            
                            $
                            5,564
                            
                            
                            $
                            5,472Class
      B undistributed (loss) earnings
                            
                            
                            (11,880
                            )
                            
                            
                            20,772
                            
                            
                            
                            19,731Net
      (loss) earnings
                            
                            $
                            (14,929
                            )
                            
                            $
                            26,336
                            
                            
                            $
                            25,203Denominator:Weighted
      average shares outstanding:Class
      A - basic and diluted
                            
                            
                            2,391,088
                            
                            
                            
                            2,637,409
                            
                            
                            
                            2,702,677Class
      B - basic
                            
                            
                            9,135,986
                            
                            
                            
                            9,244,198
                            
                            
                            
                            9,104,897Dilutive
      impact of stock options andunvested
      restricted stock awards
                            
                            
                            -
                            
                            
                            
                            21,818
                            
                            
                            
                            44,548Class
      B - diluted
                            
                            
                            9,135,986
                            
                            
                            
                            9,266,016
                            
                            
                            
                            9,149,445(Loss)
      earnings per share:Class
      A - basic
                            
                            $
                            (1.28
                            )
                            
                            $
                            2.11
                            
                            
                            $
                            2.03Class
      A - diluted
                            
                            $
                            (1.28
                            )
                            
                            $
                            2.11
                            
                            
                            $
                            2.03Class
      B - basic
                            
                            $
                            (1.30
                            )
                            
                            $
                            2.25
                            
                            
                            $
                            2.16Class
      B - diluted
                            
                            $
                            (1.30
                            )
                            
                            $
                            2.24
                            
                            
                            $
                            2.15


F-15
 As the
Company experienced a loss during the year ended December 31, 2008, 55,660
outstanding stock options and 214,761 shares of unvested restricted stock were
not included in the calculation of diluted loss per share of Class B common
shares for the year ended December 31, 2008 as their effect would be
antidilutive. During the years ended December 31, 2007 and 2006, respectively,
14,000 and 14,000 outstanding options were not included in the foregoing
computations for Class B common shares because they were
antidilutive.
 
 STOCK-BASED
COMPENSATION – The Company has one stock-based compensation plan under
which both incentive stock-options and restricted stock awards are granted to
employees and directors.   The Company accounts for stock-based
compensation under SFAS No. 123 (R), "Share-Based Payment".  The
aggregate pretax compensation cost recognized for stock-based compensation
(including incentive stock options, restricted stock and dividends on restricted
stock, as further discussed below) amounted to approximately $1.5 million, $1.5
million and $1.6 million for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 During
the years ended December 31, 2008, 2007 and 2006, the Company issued 56,300,
74,200 and 21,600 class B common shares, respectively, under a restricted stock
plan to various employees and directors.  No options were granted
during the years ended December 31, 2008, 2007 and 2006.
 
 RESEARCH AND
DEVELOPMENT - Research and development costs are expensed as incurred,
and are included in cost of sales. Generally all research and development is
performed internally for the benefit of the Company.  The Company does
not perform such activities for others. Research and development costs include
salaries, building maintenance and utilities, rents, materials, administration
costs and miscellaneous other items.  Research and development
expenses for the years ended December 31, 2008, 2007 and 2006 amounted to $7.4
million, $7.2 million and $6.6 million, respectively.
 
 EVALUATION OF LONG-LIVED
ASSETS – The Company reviews property and equipment and finite-lived
intangible assets for impairment whenever events or changes in circumstances
indicate the carrying value may not be recoverable in accordance with guidance
in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.” If the carrying value of the long-lived asset exceeds the present value
of the related estimated future cash flows, the asset would be adjusted to its
fair value and an impairment loss would be charged to operations in the period
identified. As the Company ceased its manufacturing operations in its
Westborough, Massachusetts facility as of December 31, 2008, the fixed assets
related to that facility were evaluated for impairment.  Based on the
results of this analysis, the Company recorded a $0.7 million impairment charge
related to these fixed assets during the fourth quarter of 2008.
 
 FAIR VALUE OF FINANCIAL
INSTRUMENTS - For financial instruments, including cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
accrued expenses, the carrying amount approximates fair value because of the
short maturities of such instruments.
 
 F-16
 
 NEW
FINANCIAL ACCOUNTING STANDARDS
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
enhances existing guidance for measuring assets and liabilities using fair
value.  This Standard provides a single definition of fair value,
together with a framework for measuring it, and requires additional disclosure
about the use of fair value to measure assets and
liabilities.     In February 2008, the FASB issued
FASB Staff Position SFAS 157-1, “Application of SFAS No. 157 to SFAS No. 13 and
Its Related Interpretative Accounting Pronouncements that Address Leasing
Transactions” (“FSP SFAS 157-1”) and FASB Staff Position SFAS 157-2, “Effective
Date of SFAS No. 157” (“FSP SFAS 157-2”). FSP SFAS 157-1 excludes SFAS No.
13 and its related interpretive accounting pronouncements that address leasing
transactions from the requirements of SFAS No. 157, with the exception of fair
value measurements of assets and liabilities recorded as a result of a lease
transaction but measured pursuant to other pronouncements within the scope of
SFAS No. 157. FSP SFAS 157-2 delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). FSP SFAS 157-1 and FSP SFAS 157-2 became effective
for the Company upon adoption of SFAS No. 157 on January 1, 2008. See Note 3 for
disclosures related to the Company’s financial assets accounted for at fair
value on a recurring or nonrecurring basis.  The Company will provide
the additional disclosures required relating to the fair value measurement of
nonfinancial assets and nonfinancial liabilities when it completes its
implementation of SFAS No. 157 on January 1, 2009, as required, and does not
believe they will have a significant impact on its financial
statements.
 
 In
February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option
for Financial Assets and Financial Liabilities”, providing companies with an
option to report selected financial assets and liabilities at fair
value.  The Standard’s objective is to reduce both complexity in
accounting for financial instruments and the volatility in earnings caused by
measuring related assets and liabilities differently.  It also
requires entities to display the fair value of those assets and liabilities for
which the Company has chosen to use fair value on the face of the balance
sheet.  SFAS 159 is effective for fiscal years beginning after
November 15, 2007.  SFAS No. 159 did not have a material impact on the
Company’s financial statements.
 
 In June 2007, the Emerging Issues Task
Force of the FASB issued EITF Issue No. 07-3, "Accounting for Nonrefundable
Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities," which was effective for calendar year companies on
January 1, 2008.  The Task Force concluded that nonrefundable advance
payments for goods or services that will be used or rendered for future research
and development activities should be deferred and capitalized.  Such
amounts should be recognized as an expense as the related goods are delivered or
the services are performed, or when the goods or services are no longer expected
to be provided.  EITF Issue No. 07-3 did not impact the Company’s
financial statements.
 
 In
December 2007, the FASB issued SFAS 141(R), which replaces SFAS 141 “Business
Combinations”.  This statement is intended to improve the relevance,
completeness and representational faithfulness of the information provided in
financial reports about the assets acquired and the liabilities assumed in a
business combination.  This Statement requires an acquiror to
recognize the assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date, measured at their fair values
as of that date, with limited exceptions specified in the
Statement.  Under SFAS 141(R), acquisition-related costs, including
restructuring costs,  must be recognized separately from the
acquisition and will generally be expensed as incurred.  That replaces
SFAS 141’s cost-allocation process, which required the cost of an acquisition to
be allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values.  SFAS 141(R) shall be applied
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual report period beginning on or after
December 15, 2008.  The Company will adopt SFAS No. 141(R) on January
1, 2009, as required, and does not believe it will have a material impact on its
financial statements.
 
 F-17
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”).  SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States.  This Statement is effective
sixty days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.”  The
Company is currently evaluating the potential impact, if any, of the adoption of
SFAS No. 162 on its financial statements.
 
 
 2. GOODWILL
AND OTHER INTANGIBLES
 
 Goodwill
represents the excess of the purchase price and related acquisition costs over
the value assigned to the net tangible and other intangible assets with finite
lives acquired in a business acquisition.
 
 Other
intangibles include patents, product information, covenants not-to-compete and
supply agreements.  Amounts assigned to these intangibles have been
determined by management.  Management considered a number of factors
in determining the allocations, including valuations and independent
appraisals.  Other intangibles are being amortized over 1 to 10
years.  Amortization expense was $0.5 million, $0.8 million and $1.8
million for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 F-18
 The
changes in the carrying value of goodwill classified by geographic reporting
units, net of accumulated amortization, for the years ended December 31, 2008
and 2007 are as follows (dollars in thousands):
  Total
                      
                      
                      Asia
                      
                      
                      North America
                      
                      
                      EuropeBalance,
      January 1, 2007
                      
                      $
                      28,117
                      
                      
                      $
                      12,407
                      
                      
                      $
                      14,066
                      
                      
                      $
                      1,644Foreign
      exchange
                      
                      
                      330
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      330Balance,
      December 31, 2007
                      
                      
                      28,447
                      
                      
                      
                      12,407
                      
                      
                      
                      14,066
                      
                      
                      
                      1,974Impairment
      charge
                      
                      
                      (14,066
                      )
                      
                      
                      -
                      
                      
                      
                      (14,066
                      )
                      
                      
                      -Foreign
      exchange
                      
                      
                      (47
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (47
                      )Balance,
      December 31, 2008
                      
                      $
                      14,334
                      
                      
                      $
                      12,407
                      
                      
                      $
                      -
                      
                      
                      $
                      1,927
 
 For the
annual goodwill impairment assessment performed in 2008, the Company’s fair
value analysis was supported by a weighting of two generally accepted valuation
approaches, including the income approach and the market approach, as further
described below.  These approaches include numerous assumptions with
respect to future circumstances, such as industry and/or local market conditions
that might directly impact each of the operating segment’s operations in the
future, and are therefore uncertain.  These approaches are utilized to
develop a range of fair values and a weighted average of these approaches is
utilized to determine the best fair value estimate within that
range.
 
 The
income approach is based on a projection of discounted cash flows prepared by
Bel management.  The following range of assumptions was utilized in
calculating the Company’s future cash flow projection:
 
 ·
              Revenue
      growth rates from (8.9%) to 10.3%
 ·
              Weighted
      average cost of capital of 11.0% to
13.3%
 
 The
market approach applies multiples of guideline companies to certain of Bel’s
value measures (earnings before interest and taxes and debt-free cash flow, for
example).  A control premium ranging from 27.5% - 31.7%, varying by
operating segment, was factored into the calculation.
 
 Once the
fair value of each operating segment was determined under each valuation method,
the Company established the weight of each valuation method.  As
management’s projections provided for the discounted cash flow analysis are
believed to be more indicative of Bel’s future performance, the income approach
was weighted at 75%.  The guideline company approach relies on the
market and given the present state of the economy with significant market
fluctuations, the Company believes the discounted cash flow projections are
a more reliable base.  As a result, the market approach was weighted
at 25%.
 
 The
annual impairment test related to the Company's goodwill was performed by
operating segment during the fourth quarter of 2008.  The valuation test,
which heavily weights future cash flow projections, indicated that the goodwill
associated with our North America operating segment was fully impaired as of the
valuation date.  The reduced expected future cash flows in North America
was related to a combination of the ending of a certain product’s life cycle and
an overall reduction in sales anticipated during 2009 given the current economic
conditions.  Sales are projected to return to 2008 levels in 2010, with
moderate growth in subsequent years.  As a result, the Company
recorded a goodwill impairment charge of $14.1 million during the fourth quarter
of 2008.
 
 F-19
 The
components of intangible assets other than goodwill by geographic reporting unit
are as follows (dollars in thousands):
 
 December
      31, 2008
                                      
                                      
                                      December
      31, 2007Gross
      Carrying
                                      
                                      
                                      Accumulated
                                      
                                      
                                      Gross
      Carrying
                                      
                                      
                                      AccumulatedAmount
                                      
                                      
                                      Amortization
                                      
                                      
                                      Amount
                                      
                                      
                                      AmortizationPatents
      and ProductInformation
                                      
                                      $
                                      1,132
                                      
                                      
                                      $
                                      656
                                      
                                      
                                      $
                                      2,750
                                      
                                      
                                      $
                                      2,385Customer
      relationships
                                      
                                      
                                      1,830
                                      
                                      
                                      
                                      1,380
                                      
                                      
                                      
                                      1,830
                                      
                                      
                                      
                                      1,014$
                                      2,962
                                      
                                      
                                      $
                                      2,036
                                      
                                      
                                      $
                                      4,580
                                      
                                      
                                      $
                                      3,399
 During
the years ended December 31, 2008 and 2007, the Company acquired intangible
assets related to a customer licensing agreement in the amount of $0.3 million
and $0.1 million, respectively.  At the time of acquisition, these
intangible assets had a weighted average estimated life of 12
years.  At December 31, 2008, the Company wrote off $1.9 million of
fully amortized intangible assets.
 
 Estimated
amortization expense for intangible assets for the next five years is as follows
(dollars in thousands):
 
 Year
      Ending
                        
                        AmortizationDecember
      31,
                        
                        Expense2009
                        
                        $
                        4562010
                        
                        
                        1542011
                        
                        
                        472012
                        
                        
                        332013
                        
                        
                        33
 F-20
 
 3.           MARKETABLE
SECURITIES AND OTHER INVESTMENTS
 
 The
Company’s marketable securities and other investments consisted of the following
at December 31, 2008 and 2007 (dollars in thousands):
 
 For
      the Year EndedAs
      of December 31, 2008
                                
                                
                                December
      31, 2008Original
                                
                                
                                Carrying
                                
                                
                                Unrecognized
                                
                                
                                (Impairment
      Charge)/Cost
                                
                                
                                Value
                                
                                
                                Gains
      (Losses)
                                
                                
                                Gain
      (Loss) on SaleMarketable
      SecuritiesToko
                                
                                $
                                5,655
                                
                                
                                $
                                2,098
                                
                                
                                $
                                60
                                
                                
                                $
                                (3,617
                                )Power-One,
      Inc.
                                
                                
                                14,070
                                
                                
                                
                                8,733
                                
                                
                                
                                -
                                
                                
                                
                                (5,337
                                )Stephens,
      Inc.
                                
                                
                                2,902
                                
                                
                                
                                2,902
                                
                                
                                
                                -
                                
                                
                                
                                -Other
                                
                                
                                9
                                
                                
                                
                                2
                                
                                
                                
                                (7
                                )
                                
                                
                                -22,636
                                
                                
                                
                                13,735
                                
                                
                                
                                53
                                
                                
                                
                                (8,954
                                )Other
      InvestmentsColumbia
      Portfolio
                                
                                
                                6,139
                                
                                
                                
                                5,075
                                
                                
                                
                                -
                                
                                
                                
                                (1,404
                                )Totals
                                
                                $
                                28,775
                                
                                
                                $
                                18,810
                                
                                
                                $
                                53
                                
                                
                                $
                                (10,358
                                )
  For
      the Year EndedAs
      of December 31, 2007
                                  
                                  
                                  December
      31, 2007Original
                                  
                                  
                                  Carrying
                                  
                                  
                                  Unrecognized
                                  
                                  
                                  (Impairment
      Charge)/Cost
                                  
                                  
                                  Value
                                  
                                  
                                  Gains
      (Losses)
                                  
                                  
                                  Gain
      (Loss) on SaleMarketable
      SecuritiesToko
                                  
                                  $
                                  5,649
                                  
                                  
                                  $
                                  3,264
                                  
                                  
                                  $
                                  (2,385
                                  )
                                  
                                  $
                                  2,468Other
                                  
                                  
                                  12
                                  
                                  
                                  
                                  9
                                  
                                  
                                  
                                  (3
                                  )
                                  
                                  
                                  -5,661
                                  
                                  
                                  
                                  3,273
                                  
                                  
                                  
                                  (2,388
                                  )
                                  
                                  
                                  2,468Other
      InvestmentsColumbia
      Portfolio
                                  
                                  
                                  23,373
                                  
                                  
                                  
                                  23,078
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (322
                                  )Totals
                                  
                                  $
                                  29,034
                                  
                                  
                                  $
                                  26,351
                                  
                                  
                                  $
                                  (2,388
                                  )
                                  
                                  $
                                  2,146
 The above
gross unrecognized gains (losses) are included, net of tax, in accumulated other
comprehensive income (loss).   During the year ended December 31,
2006, the Company sold its investment of 2,037,500 shares of Artesyn
Technologies, Inc. common stock and realized a $5.2 million gain associated with
the sale.
 
 ColumbiaPortfolio:
 
 At
December 31, 2008, the Company’s investment securities included privately placed
units of beneficial interests in the Columbia Portfolio, which is an enhanced
cash fund sold as an alternative to money-market funds.  During the
latter half of 2007, the Company invested a portion of its cash balances on hand
in this fund.  In December 2007, due to adverse market conditions, the
fund was overwhelmed with withdrawal requests from investors and it was closed
with a restriction placed upon the cash redemption ability of its
holders.  As a result, the Company redesignated the Columbia Portfolio
units from cash equivalents (as previously classified during the second and
third quarters of 2007) to short-term investments or long-term investments based
upon the liquidation schedule provided by the fund.   At the time
the liquidation was announced, the Company held 25.7 million units of the
Columbia Portfolio at a book value of $25.7 million.
 
 F-21
 As of
December 31, 2008, the Company has received total cash redemptions to date of
$18.9 million (including $16.6 million during the year ended December 31,
2008) at a weighted-average net asset value of $.9661 per unit.  As the net
asset value has continued to decline, the Company has been recording impairment
charges on this investment.  During the years ended December 31, 2008
and 2007, the Company recorded $1.2 million and $0.3 million in impairment
charges, respectively.  In addition to the impairment charges in 2008,
the Company has also recorded realized losses of $0.2 million during the year
ended December 31, 2008, as the Company’s adjusted basis exceeded the net asset
value on the dates of redemption. As of December 31, 2008, the Company
holds 6.1 million units at a book value of $5.1 million.  On January
29, 2009, the Company received an additional cash redemption of $0.9 million at
a net asset value of $.8301 per share.  Information and the markets
relating to these investments remain dynamic, and there may be further declines
in the value of these investments, the value of the collateral held by these
entities, and the liquidity of the Company’s investments.  To the
extent that the Company determines that there is a further decline in fair
value, the Company may recognize additional impairment charges in future periods
up to the aggregate amount of these investments.
 
 Toko:
 
 As of
December 31, 2008, the Company owned a total of 1,840,919 shares, or
approximately 1.9% of the outstanding shares, of the common stock of Toko, Inc.
(“Toko”).  The Company’s original cost of these shares was $5.6
million ($3.07 per share).  Toko develops, manufactures and sells
power supply related components and radio frequency related components primarily
in Japan.  Toko had a market capitalization of approximately $111.2
million as of December 31, 2008.   These shares are reflected on
the Company’s consolidated balance sheets as marketable
securities.  These marketable securities are considered to be
available for sale under SFAS No. 115, “Accounting for Certain Investments in
Debt and Equity Securities”.  In accordance with FASB Staff Position
(“FSP”) 115-1, the Company periodically reviews its marketable securities and
determines whether the investments are other-than-temporarily
impaired.  The Company reviewed various factors in determining whether
an other-than-temporary impairment exists on its investment in Toko, including
volatility of the Toko share price, Toko’s recent financial results and the
Company’s intention and ability to hold the investment.  During the
second and third quarters of 2008, the Company deemed this investment to be
other-than-temporarily impaired and recorded pre-tax impairment charges totaling
$3.6 million to write this investment to its then current fair
value.  At December 31, 2008, the Company’s adjusted basis for the
Toko stock was $1.10 per share and the fair market value was $1.14 per
share.  As the fair market value of the Toko stock is above the
Company’s adjusted basis, no impairment exists at December 31,
2008.  The pre-tax unrealized gain of $0.1 million as of December 31,
2008 is included, net of tax, in accumulated other comprehensive income
(loss).
 
 During
April 2007, the Company sold 4,034,000 shares of common stock of Toko on the
open market which resulted in a gain of approximately $2.5 million, net of
investment banker fees and other expenses in the amount of $0.8
million.  The Company accrued bonuses of $0.5 million in connection
with this gain which were paid in 2008.  For financial statement
purposes, in 2007, approximately $0.4 million and $0.1 million of such bonuses
has been classified within cost of sales and selling, general and administrative
expenses, respectively.
 
 F-22
 Power-One,
Inc.:
 
 On
February 25, 2008, the Company announced that it had acquired 4,370,052 shares
of Power-One, Inc. (“Power-One”) common stock representing, to the Company’s
knowledge, 5% of Power-One’s outstanding common stock, at a total purchase price
of $10.1 million ($2.32 per share).  During October 2008, the Company
purchased an additional 2,968,946 shares of Power-One common stock representing,
to the Company’s knowledge, an additional 3.4% of Power-One’s outstanding common
stock, at a purchase price of $3.9 million.  As of December 31, 2008,
the Company owns a total of 7,338,998 share of Power-One common stock at an
aggregate cost of $14.1 million ($1.92 per share).  Power-One’s common
stock is quoted on the NASDAQ Global Market.  Power-One is a designer
and manufacturer of power conversion and power management
products.  As of December 31, 2008, the fair market value of the
Power-One stock was $1.19 per share, or $8.7 million in the
aggregate.   The Company reviewed various factors in determining
whether an other-than-temporary impairment exists on its investment in Power-One
at December 31, 2008.  These factors included volatility of the
Power-One share price, Power-One’s recent financial results and recent changes
made to its executive management, as well as the Company’s intention and ability
to hold the investment.  The Power-One share price has been extremely
volatile since the Company’s purchase of this stock, ranging from $0.90 - $3.70,
with an average closing price of $2.08 during the ownership
period.  During the fourth quarter of 2008, the stock price ranged
from $0.90 - $1.44, with an average closing price of $1.16 for the
quarter.  While the Company has the ability and intent to hold this
investment until the market improves, the weakening economic conditions
impacting the technology industry are not expected to rebound in the near
term.  Based on these factors, along with the severity of the decline
in the market price, the Company deemed this investment to be
other-than-temporarily impaired and recorded a pre-tax impairment charge of $5.3
million to write this investment to its fair value at December 31, 2008 ($1.19
per share).
 
 CDARS:
 
 During
June 2008, the Company invested $2.4 million in certificates of deposit (CDs)
through Stephens, Inc., with whom the Company has an investment banking
relationship.  During October 2008, the Company invested an additional
$2.5 million in CDs through Stephen, Inc.  These investments are part
of the Certificate of Deposit Account Registry Service (CDARS) program whereby
the funds are invested with various banks in order to achieve FDIC insurance on
the full invested amount.  The CDs have an initial maturity of
26-weeks and an early redemption feature with a 30-day interest
penalty.  During December 2008, $2.0 million of the CD’s matured and
were temporarily renewed for a period of 29 days.  This amount was
redesignated as a cash equivalent as of December 31, 2008, due to the short-term
nature of the investment.  These CDs were subsequently renewed in
January 2009 for a period of 13 weeks.
 
 Effective
January 1, 2008, the Company has adopted the provisions of SFAS 157 for its
financial assets and liabilities.  Although this partial adoption of
SFAS 157 had no material impact on its financial condition, results of
operations or cash flows, the Company is now required to provide additional
disclosures as part of its financial statements.  SFAS 157 clarifies
that fair value is an exit price, representing the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.  The Company
utilizes market data or assumptions that market participants would use in
pricing the asset or liability.  SFAS 157 establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair
value.  These tiers include:  Level 1, defined as observable
inputs such as quoted market prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs about which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
 
 F-23
 As of
December 31, 2008, the Company held certain financial assets that are measured
at fair value on a recurring basis.  These consisted of the Company’s
investments in Toko and Power-One stock (categorized as available-for-sale
securities). The fair value of these assets are determined based on quoted
market prices in public markets and is categorized as Level 1.  The
Company does not have any financial assets measured at fair value on a recurring
basis categorized as Level 2 or Level 3, and there were no transfers in or out
of Level 2 or Level 3 during the year ended December 31, 2008.
 
 The
following table sets forth by level, within SFAS 157’s fair value
hierarchy,  the Company’s financial assets accounted for at fair value
on a recurring basis as of December 31, 2008 (dollars in
thousands).
 
 Assets
      at Fair Value as of December 31, 2008Total
                        
                        
                        Quoted
      Prices in Active Markets for Identical Assets (Level
    1)
                        
                        
                        Significant
      Other Observable Inputs (Level 2)
                        
                        
                        Significant
      Unobservable Inputs (Level 3)Available-for-sale
      securities
                        
                        $
                        13,735
                        
                        
                        $
                        13,735
                        
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        $
                        13,735
                        
                        
                        $
                        13,735
                        
                        
                        
                        -
                        
                        
                        
                        -
  F-24
 The
following table sets forth by level within SFAS 157’s fair value hierarchy the
Company’s financial assets accounted for at fair value on a nonrecurring basis
as of December 31, 2008 (dollars in thousands).  These consisted of
the Company’s investment in the Columbia Portfolio (categorized as an other
investment in the table below).  The fair value of these investments
is determined based on significant other observable inputs and is categorized as
Level 2 (dollars in thousands).
 
 Assets
      at Fair Value as of December 31, 2008
                            
                            
                            Total
      LossesTotal
                            
                            
                            Quoted
      Prices in Active Markets for Identical Assets (Level
    1)
                            
                            
                            Significant
      Other Observable Inputs (Level 2)
                            
                            
                            Significant
      Unobservable Inputs (Level 3)
                            
                            
                            Year
      Ended
                              December
      31, 2008Other
      investments
                            
                            $
                            5,075
                            
                            
                            
                            -
                            
                            
                            $
                            5,075
                            
                            
                            
                            -
                            
                            
                            $
                            (1,404
                            )Total
                            
                            $
                            5,075
                            
                            
                            
                            -
                            
                            
                            $
                            5,075
                            
                            
                            
                            -
                            
                            
                            $
                            (1,404
                            )
  There
were no changes to the Company’s valuation techniques used to measure asset fair
values on a recurring or nonrecurring basis during the year ended December 31,
2008 and the Company did not have any financial liabilities as of December 31,
2008.
 
 
 4.   COMPANY-OWNED
LIFE INSURANCE
 
 Investments
in company-owned life insurance policies (“COLI”) were made with the intention
of utilizing them as a long-term funding source for the Company’s supplemental
retirement plan obligations, which amounted to $5.9 million at December 31,
2008. However, the cash surrender value of the COLI does not represent a
committed funding source for these obligations.  Any proceeds from
these policies are subject to claims from creditors, and the Company can
designate them to another purpose at any time.  The fair market value
of the COLI was $3.8 million and $4.9 million as of December 31, 2008 and 2007,
respectively.  During the fourth quarter of 2008, significant declines
in global equity markets had a significant effect in reducing the cash surrender
value and as a result, the Company recorded a $0.7 million charge to account for
the reduction in cash surrender value.  This charge was allocated
between cost of sales and selling, general and administrative expenses on the
Consolidated Statements of Operations for the year ended December 31,
2008.  The allocation is consistent with the costs associated with the
long-term employee benefit obligations that the COLI is intended to
fund.
 
 F-25
 
 5. INVENTORIES
 
 The
components of inventories are as follows (dollars in thousands):
 
 December
      31,2008
                              
                              
                              2007Raw
      materials
                              
                              $
                              25,527
                              
                              
                              $
                              24,089Work
      in progress
                              
                              
                              1,650
                              
                              
                              
                              2,434Finished
      goods
                              
                              
                              19,347
                              
                              
                              
                              12,526$
                              46,524
                              
                              
                              $
                              39,049
 6. CASUALTY
LOSS
 
 During
2006, the Company incurred a $1.0 million pre-tax casualty loss as a result of a
fire at its leased manufacturing facility in the Dominican Republic for raw
materials and equipment in excess of estimated insurance
proceeds.  The production at this facility was substantially restored
during July 2006.
 
 7. 
PROPERTY, PLANT AND EQUIPMENT
 
 Property,
plant and equipment consist of the following (dollars in
thousands):
 
 December
      31,2008
                              
                              
                              2007Land
                              
                              $
                              3,235
                              
                              
                              $
                              3,239Buildings
      and improvements
                              
                              
                              27,995
                              
                              
                              
                              27,035Machinery
      and equipment
                              
                              
                              55,680
                              
                              
                              
                              55,425Construction
      in progress
                              
                              
                              1,726
                              
                              
                              
                              3,43188,636
                              
                              
                              
                              89,130Accumulated
      depreciation
                              
                              
                              (48,700
                              )
                              
                              
                              (48,017
                              )$
                              39,936
                              
                              
                              $
                              41,113
 Depreciation
expense for the years ended December 31, 2008, 2007 and 2006 was $6.9 million,
$7.1 million and $7.2 million, respectively.
 
 During
the fourth quarter of 2008, the Company finalized its plans for the transfer,
sale or ultimate disposition of its fixed assets located in its Westborough,
Massachusetts facility, which had an approximate carrying amount of $1.2 million
at the time of determination.  While $0.3 million of the fixed assets
is intended to either stay in the Westborough facility or be transferred to
Bel’s existing facilities in Asia, $0.7 million was contracted to be sold to a
local vendor, with the remaining $0.2 million to be written off.  The
sale of the $0.7 million carrying amount of fixed assets was completed in
January 2009 at a price of $0.2 million, resulting in a loss on disposition of
$0.5 million.  As this arrangement was made prior to December 31,
2008, the carrying amount of these assets was reduced to its net realizable
value of $0.2 million and the assets were classified as assets held for sale in
the accompanying consolidated balance sheet as of December 31,
2008.  The reduction in net realizable value of the assets held for
sale coupled with the fixed assets identified for writeoff resulted in
impairment charges of $0.7 million.  These charges are included in
Impairment of Assets in the accompanying consolidated statement of operations
for the year ended December 31, 2008.
 
 F-26
 During
May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
for $6.0 million.  In December 2007, the Tidelands Resource Council
voted to approve the Bureau of Tideland’s Management’s recommendation for a
Statement of No Interest.  On March 14, 2008, the Commissioner of the
Department of Environmental Protection signed a letter to approve the Statement
of No Interest.  As final approval of the Statement of No Interest was
still pending as of December 31, 2008, the Company continued to defer the
estimated gain on sale of the land, in the amount of $4.6 million.  Of
the $6.0 million sales price, the Company received cash of $1.5 million before
closing costs, and $4.6 million (including interest) was being held in escrow
pending final resolution of the State of New Jersey tideland claim and
certain environmental costs.  During 2007, the Company paid $0.4
million related to environmental costs, which approximated the maximum amount of
environmental costs for which the Company is liable.  During May 2008, the
title company released $2.3 million of the escrow and as such, $2.3 remains in
escrow and has been classified as restricted cash as of December 31,
2008.  On February 27, 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  The Company
anticipates release of the remaining escrow and corresponding guarantees and
recognition of the gain during the first quarter of 2009.
 
 Additionally,
the Company realized a $5.5 million pre-tax gain from the sale of property,
plant and equipment in Hong Kong and Macao during the year ended December 31,
2007.
 
 8.           INCOME
TAXES
 
 The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainties in Income Taxes (“FIN 48”), on January 1,
2007.  Although the implementation of FIN 48 did not impact the total
amount of the Company’s liabilities for uncertain tax positions, which amounted
to $12.4 million at January 1, 2007, the Company separately recognizes the
liability for uncertain tax positions on its balance sheet.  Included
in the liabilities for uncertain tax positions at the date of adoption is $1.4
million for interest and penalties.
 
 At
December 31, 2008 and 2007, the Company has approximately $7.3 million and $9.2
million, respectively, of liabilities for uncertain tax positions ($3.9 million
and $2.3 million, respectively, included in income tax payable and $3.4 million
and $6.9 million, respectively, included in liability for uncertain tax
positions) all of which, if recognized, would reduce the Company’s effective tax
rate.
 
 The
Company and its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various states and foreign jurisdictions.  The
Company is no longer subject to U.S. federal examinations by tax authorities for
years before 2005 and for state examinations before
2004.   Regarding foreign subsidiaries, the Company is no longer
subject to examination by tax authorities for years before 2001.  The
Internal Revenue Service (“IRS”) commenced an examination of the Company’s U.S.
income tax returns for 2004 and reviewed 2003 and 2005 during the fourth quarter
of 2006 which resulted in no additional assessment.  The 2003 and 2004
statutes of limitations expired on September 15, 2007 and September 15, 2008,
respectively.
 
 F-27
 During
2008, the Company was audited by the State of New Jersey, Department of the
Treasury, Division of Taxation for the years ended December 31, 2003 through
2006, which resulted in a minimal assessment.
 
 During
February 2008, the Company received correspondence from the State of California
Franchise Tax Board.  The Board requested copies of U.S. federal
income tax returns for the years 2005 and 2006 for further analysis to determine
if the tax returns will be selected for audit.  On July 3, 2008 the
Company received correspondence from the State of California that the tax
returns for the years 2005 and 2006 will not be audited at this
time.
 
 The
Inland Revenue Department (“IRD”) of Hong Kong commenced an examination of one
of the Company’s Hong Kong subsidiaries’ income tax returns for the years 2000
through 2005 and issued a notice of additional assessment during 2007 and demand
for tax in the amount of $3.8 million.  This was paid in May and
August 2007.  There were no interest or penalties in connection with
this assessment.  The IRD proposed certain adjustments to the
Company’s offshore income tax claim position which Company management agreed
with.
 
 As a
result of the expiration of the statute of limitations for specific
jurisdictions, it is reasonably possible that the related unrecognized benefits
for tax positions taken regarding previously filed tax returns may change
materially from those recorded as liabilities for uncertain tax positions in the
Company’s consolidated financial statements at December 31,
2008.   A total of $3.9 million of previously recorded
liabilities for uncertain tax positions relates to the 2005 tax
year.  The statute of limitations related to this liability is
scheduled to expire on September 15, 2009.
 
 A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows (dollars in thousands):
 
 Balance
      January 1, 2008
                      
                      $
                      9,191Additions
      based on tax positionsrelated
      to the current year
                      
                      
                      415Expiration
      of statutes of limitations
                      
                      
                      (2,261
                      )Balance
      December 31, 2008
                      
                      $
                      7,345
 The
Company’s policy is to recognize interest and penalties related to uncertain tax
positions as a component of the current provision for income
taxes.  During the years ended December 31, 2008 and 2007, the Company
recognized approximately $0.1 million and $0.5 million, respectively, in
interest and penalties in the Consolidated Statement of
Operations.  The Company has approximately $1.6 million and $1.8
million accrued for the payment of interest and penalties at December 31, 2008
and 2007, respectively, which is included in both income taxes payable and
liability for uncertain tax positions in the Company’s consolidated balance
sheets.
 
 F-28
 The
(benefit) provision for income taxes consists of the following (dollars in
thousands):
 
 Years Ended December 31,2008
                              
                              
                              2007
                              
                              
                              2006Current:Federal
                              
                              $
                              (426
                              )
                              
                              $
                              4,294
                              
                              
                              $
                              4,784Foreign
                              
                              
                              (107
                              )
                              
                              
                              2,598
                              
                              
                              
                              1,619State
                              
                              
                              425
                              
                              
                              
                              515
                              
                              
                              
                              430(108
                              )
                              
                              
                              7,407
                              
                              
                              
                              6,833Deferred:Federal
      and state
                              
                              
                              (3,621
                              )
                              
                              
                              (2,119
                              )
                              
                              
                              (928
                              )Foreign
                              
                              
                              5
                              
                              
                              
                              80
                              
                              
                              
                              (60
                              )(3,616
                              )
                              
                              
                              (2,039
                              )
                              
                              
                              (988
                              )$
                              (3,724
                              )
                              
                              $
                              5,368
                              
                              
                              $
                              5,845
 
 A
reconciliation of taxes on income computed at the federal statutory rate to
amounts provided is as follows (dollars in thousands):
 
 Years Ended December 31,2008
                                            
                                            
                                            2007
                                            
                                            
                                            2006Tax
      (benefit) provisioncomputed
      at the Federalstatutory
      rate of 34%, 35% and 34%
                                            
                                            $
                                            (6,342
                                            )
                                            
                                            $
                                            11,096
                                            
                                            
                                            $
                                            10,556Increase
      (decrease) in taxes resulting from:Different
      tax rates and permanent differencesapplicable
      to foreign operations
                                            
                                            
                                            (161
                                            )
                                            
                                            
                                            (4,992
                                            )
                                            
                                            
                                            (4,816
                                            )Reversal
      of liability for uncertain tax positions - net
                                            
                                            
                                            (1,846
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Utilization
      of net operating loss carryforward
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (66
                                            )Permanent
      tax differences related to goodwillimpairment
      with no tax benefit
                                            
                                            
                                            4,264
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Utilization
      of research and development tax credits
                                            
                                            
                                            (383
                                            )
                                            
                                            
                                            (365
                                            )
                                            
                                            
                                            (409
                                            )State
      taxes, net of federal benefit
                                            
                                            
                                            368
                                            
                                            
                                            
                                            335
                                            
                                            
                                            
                                            279Other,
      including qualified production activity credits,non-qualified
      disposition of incentive stock options,fair
      value of vested stock awards over accruals andamortization
      of purchase accounting intangibles
                                            
                                            
                                            376
                                            
                                            
                                            
                                            (706
                                            )
                                            
                                            
                                            301$
                                            (3,724
                                            )
                                            
                                            $
                                            5,368
                                            
                                            
                                            $
                                            5,845
  Management’s
intention is to permanently reinvest the majority of the earnings of foreign
subsidiaries in the expansion of its foreign operations.  During the
year ended December 31, 2008, the Company repatriated previously taxed foreign
earnings of approximately $0.3 million.  Unrepatriated earnings, upon
which U.S. income taxes have not been accrued, are approximately $102.2 million
at December 31, 2008.  Such unrepatriated earnings are deemed by
management to be permanently reinvested.  Estimated income taxes (net
of estimated foreign tax credits) related to unrepatriated foreign earnings are
$24.4 million under the current tax law.  It is not ascertainable at
this time what effect, if any, future tax legislation will have on the Company’s
provision for income taxes or income tax liability.
 
 F-29
 Components
of deferred income tax assets are as follows (dollars in
thousands).
 
 December
      31,2008
                                          
                                          
                                          2007Tax
      Effect
                                          
                                          
                                          Tax
      EffectDeferred
      Tax Assets - current:Unrealized
      depreciation inmarketable
      securities
                                          
                                          $
                                          3,744
                                          
                                          
                                          $
                                          1,007Restructuring
      expenses
                                          
                                          
                                          280
                                          
                                          
                                          
                                          -United
      States net operating losscarryforward
                                          
                                          
                                          -
                                          
                                          
                                          
                                          241Foreign
      tax credits carryforward
                                          
                                          
                                          -
                                          
                                          
                                          
                                          564Reserves
      and accruals
                                          
                                          
                                          728
                                          
                                          
                                          
                                          849$
                                          4,752
                                          
                                          
                                          $
                                          2,661Deferred
      Tax Assets - noncurrent:Deferred
      gain on sale of property,plant
      and equipment
                                          
                                          $
                                          1,765
                                          
                                          
                                          $
                                          1,765Unfunded
      pension liability
                                          
                                          
                                          606
                                          
                                          
                                          
                                          481Depreciation
                                          
                                          
                                          205
                                          
                                          
                                          
                                          222Amortization
                                          
                                          
                                          1,051
                                          
                                          
                                          
                                          773Federal
      and state net operating lossand
      credits carryforward
                                          
                                          
                                          971
                                          
                                          
                                          
                                          331Restructuring
      expenses
                                          
                                          
                                          199
                                          
                                          
                                          
                                          -Other
      accruals
                                          
                                          
                                          1,379
                                          
                                          
                                          
                                          1,123Valuation
      allowances
                                          
                                          
                                          (971
                                          )
                                          
                                          
                                          (331
                                          )$
                                          5,205
                                          
                                          
                                          $
                                          4,364
 At the
time of the Company’s acquisition of Galaxy Power Inc., that entity had a net
operating loss carry forward of approximately $5.4 million.  The
remaining net operating loss carry forward of approximately $0.6 million at
December 31, 2007, arose principally from the non-qualified dispositions of
stock options and was fully utilized during the year ended December 31,
2008.  The Company has set up a valuation allowance for losses for
certain state and foreign tax credit carryforwards that it believes may not be
realized.
 
 During
2005, the Company was granted an offshore operating license from the government
of Macao to set up a Commercial Offshore Company ("MCO") named Bel Fuse (Macao
Commercial Offshore) Limited.  Sales to third party customers
commenced during the first quarter of 2006.  Sales consist of products
manufactured in the PRC.  The MCO is not subject to Macao corporation
income taxes.
 
 F-30
 
 9. DEBT
 
 Short-term
debt
 
 As of
December 31, 2007, a $20 million line of credit was available to the Company to
borrow.  The loan was collateralized with a first priority security
interest in 100% of the issued and outstanding shares of the capital stock of
the Company's material domestic subsidiaries and 65% of all the issued and
outstanding shares of the capital stock of certain of the foreign subsidiaries
of the Company.  On April 30, 2008, the Company renewed its unsecured
credit agreement in the amount of $20 million, which expires on June 30,
2011.  There have not been any borrowings under the credit agreement
during 2008 or 2007 and as a result, there was no balance outstanding as of
December 31, 2008 or 2007.  At those dates, the entire $20 million
line of credit was available to the Company to borrow.  The credit
agreement bears interest at LIBOR plus 0.75% to 1.25% based on certain financial
statement ratios maintained by the Company.  Under the terms of the
credit agreement, the Company is required to maintain certain financial ratios
and comply with other financial conditions.  At December 31, 2008, the
Company did not comply with the Fixed Charge Coverage Test covenant, as
defined.  The Company is currently in the process of obtaining a
waiver from its lender for the covenant violation.
 
 The
Company’s Hong Kong subsidiary had an unsecured line of credit of approximately
$2 million which was unused as of December 31, 2008 and 2007.  The
line of credit expired on January 31, 2009 and was subsequently renewed on
February 10, 2009.  Any borrowing on the line of credit will be
guaranteed by the U.S. parent.  The line of credit bears interest at a
rate determined by the lender as the financing is extended.
 
 The
Company recorded minimal interest expense during the year ended December 31,
2008. For the years ended December 31, 2007 and 2006, the Company recorded
interest expense and other costs of $0.1 million and $0.1 million,
respectively.  Included in interest expense for the year ended
December 31, 2007 is the write-off of approximately $0.1 million of previously
unamortized deferred financing charges in connection with a credit facility that
has been superseded.
 
 10.           ACCRUED
EXPENSES
 
 Accrued
expenses consist of the following (dollars in thousands):
 
 Year
      Ended December 31,2008
                              
                              
                              2007Sales
      commissions
                              
                              $
                              1,598
                              
                              
                              $
                              1,903Subcontracting
      labor
                              
                              
                              2,939
                              
                              
                              
                              1,723Salaries,
      bonuses andrelated
      benefits
                              
                              
                              2,834
                              
                              
                              
                              4,082Other
                              
                              
                              2,582
                              
                              
                              
                              4,405$
                              9,953
                              
                              
                              $
                              12,113
 See Note
18 for discussion and details associated with restructuring
accruals.
 
 F-31
 
 11.           BUSINESS
SEGMENT INFORMATION
 
 The
Company operates in one industry with three reportable segments.  The
segments are geographic and consist of North America, Asia and
Europe.  The primary criteria by which financial performance is
evaluated and resources are allocated are revenues and operating
income.  The following is a summary of key financial data (dollars in
thousands):
 
 2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2006Net
      sales from unrelatedentities
      and countryof
      Company's domicile:North
      America
                                                    
                                                    $
                                                    67,380
                                                    
                                                    
                                                    $
                                                    78,091
                                                    
                                                    
                                                    $
                                                    73,241Asia
                                                    
                                                    
                                                    165,164
                                                    
                                                    
                                                    
                                                    151,550
                                                    
                                                    
                                                    
                                                    153,037Europe
                                                    
                                                    
                                                    25,806
                                                    
                                                    
                                                    
                                                    29,496
                                                    
                                                    
                                                    
                                                    28,655$
                                                    258,350
                                                    
                                                    
                                                    $
                                                    259,137
                                                    
                                                    
                                                    $
                                                    254,933Net
      sales:North
      America
                                                    
                                                    $
                                                    79,862
                                                    
                                                    
                                                    $
                                                    90,939
                                                    
                                                    
                                                    $
                                                    80,860Asia
                                                    
                                                    
                                                    188,718
                                                    
                                                    
                                                    
                                                    182,301
                                                    
                                                    
                                                    
                                                    182,808Europe
                                                    
                                                    
                                                    27,143
                                                    
                                                    
                                                    
                                                    30,680
                                                    
                                                    
                                                    
                                                    30,105Less
      intergeographicrevenues
                                                    
                                                    
                                                    (37,373
                                                    )
                                                    
                                                    
                                                    (44,783
                                                    )
                                                    
                                                    
                                                    (38,840
                                                    )$
                                                    258,350
                                                    
                                                    
                                                    $
                                                    259,137
                                                    
                                                    
                                                    $
                                                    254,933(Loss)
      Income from Operations:North
      America
                                                    
                                                    $
                                                    (12,646
                                                    )
                                                    
                                                    $
                                                    6,515
                                                    
                                                    
                                                    $
                                                    2,658Asia
                                                    
                                                    
                                                    1,202
                                                    
                                                    
                                                    
                                                    17,488
                                                    
                                                    
                                                    
                                                    19,622Europe
                                                    
                                                    
                                                    695
                                                    
                                                    
                                                    
                                                    1,509
                                                    
                                                    
                                                    
                                                    838$
                                                    (10,749
                                                    )
                                                    
                                                    $
                                                    25,512
                                                    
                                                    
                                                    $
                                                    23,118Long
      Lived Assets:North
      America
                                                    
                                                    $
                                                    16,205
                                                    
                                                    
                                                    $
                                                    18,786Asia
                                                    
                                                    
                                                    27,170
                                                    
                                                    
                                                    
                                                    26,757Europe
                                                    
                                                    
                                                    954
                                                    
                                                    
                                                    
                                                    1,005$
                                                    44,329
                                                    
                                                    
                                                    $
                                                    46,548Capital
      Expenditures:North
      America
                                                    
                                                    $
                                                    948
                                                    
                                                    
                                                    $
                                                    1,453
                                                    
                                                    
                                                    $
                                                    2,823Asia
                                                    
                                                    
                                                    5,758
                                                    
                                                    
                                                    
                                                    7,069
                                                    
                                                    
                                                    
                                                    6,783Europe
                                                    
                                                    
                                                    181
                                                    
                                                    
                                                    
                                                    196
                                                    
                                                    
                                                    
                                                    227$
                                                    6,887
                                                    
                                                    
                                                    $
                                                    8,718
                                                    
                                                    
                                                    $
                                                    9,833Depreciation
      and Amortizationexpense:North
      America
                                                    
                                                    $
                                                    1,787
                                                    
                                                    
                                                    $
                                                    1,841
                                                    
                                                    
                                                    $
                                                    2,314Asia
                                                    
                                                    
                                                    5,484
                                                    
                                                    
                                                    
                                                    5,887
                                                    
                                                    
                                                    
                                                    6,476Europe
                                                    
                                                    
                                                    172
                                                    
                                                    
                                                    
                                                    193
                                                    
                                                    
                                                    
                                                    237$
                                                    7,443
                                                    
                                                    
                                                    $
                                                    7,921
                                                    
                                                    
                                                    $
                                                    9,027
 F-32
 
 Net sales
from external customers are attributed to individual segments based on the
geographic source of the billing for such customer sales.  Transfers
between geographic areas include finished products manufactured in foreign
countries which are then transferred to the United States and Europe for sale;
finished goods manufactured in the United States which are transferred to Europe
and Asia for sale; and semi-finished components manufactured in the United
States which are sold to Asia for further processing. Income from
operations represents gross profit less operating expenses.
 
 Long
lived assets consist of property, plant and equipment, net and other assets of
the Company that are identified with the operations of each geographic
area.
 
 The
territory of Hong Kong became a Special Administrative Region (“SAR”) of the PRC
in the middle of 1997. The territory of Macao became a SAR of the PRC at the end
of 1999. Management cannot presently predict what future impact this will have
on the Company, if any, or how the political climate in the PRC will affect the
Company's contractual arrangements in the PRC. Substantially all of the
Company's manufacturing operations and approximately 48% of its identifiable
assets are located in Asia.  Accordingly, events resulting from any
change in the "Most Favored Nation" status granted to the PRC by the U.S., could
have a material adverse effect on the Company.
 
 The
Company had sales to two customers in excess of ten percent of consolidated net
sales in 2008.  The combined revenue from these two customers was
$62.8 million during the year ended December 31, 2008, representing 24.3% of
total sales.  In 2007 and 2006, there was one customer in excess of
ten percent of consolidated net sales.  The amount and percentages of
the Company's sales to this customer in each year was $40.3 million (15.6%) in
2007 and $42.2 million (16.5%) in 2006 and were derived primarily in
Asia.   Management believes that the loss of either customer
could have a material adverse effect on the Company's consolidated results of
operations, financial position and cash flows.
 
 The
Company realized a $5.5 million pre-tax gain from the sale of property, plant
and equipment in Asia related to the sale of facilities in Hong Kong and Macao
during the year ended December 31, 2007.
 
 
 12.           RETIREMENT
FUND AND PROFIT SHARING PLAN
 
 The
Company maintains a domestic profit sharing plan and a contributory stock
ownership and savings 401(K) plan, which combines stock ownership and individual
voluntary savings provisions to provide retirement benefits for plan
participants.  The plan provides for participants to voluntarily
contribute a portion of their compensation, subject to certain legal
maximums.  The Company will match, based on a sliding scale, up to
$350 for the first $600 contributed by each participant.  Matching
contributions plus additional discretionary contributions are made with Company
stock purchased in the open market.  The expense for the years ended
December 31, 2008, 2007 and 2006 amounted to approximately $0.4 million, $0.5
million and $0.5 million, respectively. As of December 31, 2008, the plans owned
17,113 and 163,186 shares of Bel Fuse Inc. Class A and Class B common stock,
respectively.
 
 F-33
  The
Company's subsidiaries in Asia have a retirement fund covering substantially all
of their Hong Kong based full-time employees.  Eligible employees
contribute up to 5% of salary to the fund.  In addition, the Company
must contribute a minimum of 5% of eligible salary, as determined by Hong Kong
government regulations.  The Company currently contributes 7% of
eligible salary, in cash or Company stock.  The expense for the years
ended December 31, 2008, 2007 and 2006 amounted to approximately $0.4 million,
$0.4 million and $0.4 million, respectively. As of December 31, 2008, the plan
owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock,
respectively.
 
 The
Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to
provide a limited group of key management and highly compensated employees of
the Company with supplemental retirement and death
benefits.  Participants in the SERP are selected by the Compensation
Committee of the Board of Directors.   The SERP initially became
effective in 2002 and was amended and restated in April 2007 to conform with
applicable requirements of Section 409A of the Internal Revenue Code and to
modify the provisions regarding benefits payable in connection with a change in
control of the Company.  The Plan is unfunded.  Benefits
under the SERP are payable from the general assets of the Company, but the
Company has certain life insurance policies in effect on participants to
partially cover the Company’s obligations under the Plan. The Plan also allows
the Company to establish a grantor trust to provide for the payment of Plan
benefits.  The benefits available under the Plan vary according to
when and how the participant terminates employment with the
Company.  If a participant retires (with the prior written consent of
the Company) on his normal retirement date (65 years old, 20 years of service,
and 5 years of Plan participation), his normal retirement benefit under the Plan
would be annual payments equal to 40% of his average base compensation
(calculated using compensation from the highest 5 consecutive calendar years of
Plan participation), payable in monthly installments for the remainder of his
life.  If a participant retires early from the Company (55 years old,
20 years of service, and 5 years of Plan participation), his early retirement
benefit under the Plan would be an amount (i) calculated as if his early
retirement date were in fact his normal retirement date, (ii) multiplied by a
fraction, with the numerator being the actual years of service the participant
has with the Company and the denominator being the years of service the
participant would have had if he had retired at age 65, and (iii) actuarially
reduced to reflect the early retirement date.  If a participant dies
prior to receiving 120 monthly
payments  under  the  Plan,  his  beneficiary  would  be  entitled  to  continue  receiving
benefits for the shorter of (i) the time necessary to complete 120 monthly
payments or (ii) 60 months.  If a participant dies while employed by
the Company, his beneficiary would receive, as a survivor benefit, an annual
amount equal to (i) 100% of the participant’s annual base salary at date of
death for one year, and (ii) 50% of the participant’s annual base salary at date
of death for each of the following 4 years, each payable in monthly
installments.  The Plan also provides for disability benefits, and a
forfeiture of benefits if a participant terminates employment for reasons other
than those contemplated under the Plan. The expense for the years ended December
31, 2008, 2007 and 2006 amounted to approximately $0.7 million, $0.7 million and
$0.7 million, respectively.
  F-34
  The
following provides a reconciliation of benefit obligations, the funded status of
the SERP and a summary of significant assumptions (dollars in
thousands):
 
 December
      31,
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Change
      in benefit obligation:Projected
      benefit obligation at beginning of year
                      
                      $
                      4,698
                      
                      
                      $
                      4,728
                      
                      
                      $
                      4,476Service
      cost
                      
                      
                      293
                      
                      
                      
                      313
                      
                      
                      
                      325Interest
      cost
                      
                      
                      303
                      
                      
                      
                      282
                      
                      
                      
                      243Benefits
      paid
                      
                      
                      (75
                      )
                      
                      
                      (75
                      )
                      
                      
                      (131
                      )Actuarial
      losses (gains)
                      
                      
                      691
                      
                      
                      
                      (550
                      )
                      
                      
                      (185
                      )Minimum
      pension obligation andunfunded
      pension liability
                      
                      $
                      5,910
                      
                      
                      $
                      4,698
                      
                      
                      $
                      4,728Funded
      status of plan:Under
      funded status
                      
                      $
                      (5,910
                      )
                      
                      $
                      (4,698
                      )Unrecognized
      net loss
                      
                      
                      -
                      
                      
                      
                      -Unrecognized
      prior service costs
                      
                      
                      -
                      
                      
                      
                      -Accrued
      pension cost
                      
                      $
                      (5,910
                      )
                      
                      $
                      (4,698
                      )Change
      in plan assets:Fair
      value of plan assets, beginning of year
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Company
      contributions
                      
                      
                      75
                      
                      
                      
                      75
                      
                      
                      
                      131Benefit
      paid
                      
                      
                      (75
                      )
                      
                      
                      (75
                      )
                      
                      
                      (131
                      )Fair
      value of plan assets, end of year
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Balance
      sheet amounts:Minimum
      pension obligation andunfunded
      pension liability
                      
                      $
                      5,910
                      
                      
                      $
                      4,698Accumulated
      other comprehensive loss
                      
                      $
                      (1,588
                      )
                      
                      $
                      (1,154
                      )The
      components of SERP expense are as follows:Year
      Ended December 31,
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Service
      cost
                      
                      $
                      293
                      
                      
                      $
                      313
                      
                      
                      $
                      325Interest
      cost
                      
                      
                      303
                      
                      
                      
                      282
                      
                      
                      
                      243Net
      amortization and deferral
                      
                      
                      133
                      
                      
                      
                      146
                      
                      
                      
                      161Total
      SERP expense
                      
                      $
                      729
                      
                      
                      $
                      741
                      
                      
                      $
                      729Assumption
      percentages:Discount
      rate
                      
                      
                      6.00
                      %
                      
                      
                      6.50
                      %
                      
                      
                      6.00
                      %Rate
      of compensation increase
                      
                      
                      3.00
                      %
                      
                      
                      3.00
                      %
                      
                      
                      3.00
                      %
 The
accumulated benefit obligation for the SERP was $4.6 million and $3.6 million as
of December 31, 2008 and 2007, respectively.
 
 F-35
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post
Retirement Plans”, (“SFAS No. 158”).  This statement is effective for
fiscal years ending after December 15, 2006 and is applicable for the Company’s
SERP Plan.
 
 The
amount of net gain and prior service cost on a pretax basis included in Other
Comprehensive Income was $0 and $0.1 million, respectively, during each of the
years ended December 31, 2008 and 2007.  The estimated portion of net
periodic gain and prior service cost that will be recognized as a component of
net periodic benefit cost over the next fiscal year is $0 and
$0.1  million, respectively.  The Company expects to
contribute $0.1 million to the SERP in 2009.
 
 The
Company had no net transition assets or obligations recognized as an adjustment
to Other Comprehensive Income and does not anticipate any plan assets being
returned to the Company during 2009, as the plan has no assets.
 
 The
following benefit payments, which reflect expected future service, are expected
to be paid (dollars in thousands):
 
 Years
      EndingDecember 31,2009
                      
                      $
                      752010
                      
                      
                      1282011
                      
                      
                      722012
                      
                      
                      722013
                      
                      
                      1402014
      - 2018
                      
                      
                      1,318
 
 13.  SHARE-BASED
COMPENSATION
 
 The
Company records compensation expense in its Consolidated Statements of
Operations related to employee stock-based options and awards in accordance with
SFAS No. 123(R) “Share-Based Payment”.  The aggregate pretax
compensation cost recognized for stock-based compensation (including incentive
stock options, restricted stock and dividends on restricted stock, as further
discussed below) amounted to approximately $1.5 million, $1.5 million and $1.6
million for the years ended December 31, 2008, 2007 and 2006,
respectively.  The Company did not use any cash to settle any equity
instruments granted under share based arrangements during the years ended
December 31, 2008,  2007 and 2006.
 
 F-36
  Stock
Options
 
 The
Company has an equity compensation program (the "Program") which provides for
the granting of "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, non-qualified stock options and
restricted stock awards.  The Company believes that such awards better
align the interest of its employees with those of its
shareholders.  The Plan provides for the issuance of 2.4 million
common shares.  Unless otherwise provided at the date of grant or
unless subsequently accelerated, options granted under the Program become
exercisable twenty-five percent (25%) one year from the date of grant and
twenty-five percent (25%) for each year of the three years
thereafter.  Upon exercise the Company will issue new
shares.  The exercise price of incentive stock options granted
pursuant to the Plan is not to be less than 100 percent of the fair market value
of the shares on the date of grant.  In general, no option will be
exercisable after ten years from the date granted.
 
 No
incentive stock options were granted in 2008, 2007 or 2006.  Expected
lives of options previously granted were estimated using the historical exercise
behavior of employees.  Expected volatilities were based on implied
volatilities from historical volatility of the Company’s stock.  The
Company uses historical data to estimate employee forfeitures.  The
risk free rate is based on the U.S. Treasury yield curve in effect at the time
of grant.
 
 Information
regarding the Company’s stock options for the year ended December 31, 2008 is as
follows.  All of the stock options noted below relate to options to
purchase shares of the Company’s Class B common stock.
 Weighted-Weighted-
                                                                
                                                                Average
                                                                
                                                                
                                                                AggregateAverage
                                                                
                                                                Remaining
                                                                
                                                                
                                                                IntrinsicExercise
                                                                
                                                                Contractual
                                                                
                                                                
                                                                ValueStock
      Options
                                                                
                                                                
                                                                Shares
                                                                
                                                                
                                                                Price
                                                                
                                                                Term
                                                                
                                                                
                                                                (in
      000's)Outstanding
      at January 1, 2008
                                                                
                                                                
                                                                70,000
                                                                
                                                                
                                                                $
                                                                28.42Exercised
                                                                
                                                                
                                                                (16,500
                                                                )
                                                                
                                                                
                                                                18.89Granted
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Cancelled
                                                                
                                                                
                                                                (500
                                                                )
                                                                
                                                                
                                                                18.89Outstanding
      at December 31, 2008
                                                                
                                                                
                                                                53,000
                                                                
                                                                
                                                                $
                                                                31.48
                                                                
                                                                
                                                                
                                                                1.2 years
                                                                
                                                                
                                                                $
                                                                -Exercisable
      at December 31, 2008
                                                                
                                                                
                                                                38,000
                                                                
                                                                
                                                                $
                                                                32.26
                                                                
                                                                
                                                                
                                                                1.1 years
                                                                
                                                                
                                                                $
                                                                -
  During
the years ended December 31, 2008, 2007 and 2006 the Company received $0.3
million, $1.5 million and $3.2 million from the exercise of stock options and
realized tax benefits of approximately $0, $0.1 million and $0.3 million,
respectively.  The total intrinsic value of options exercised during
the years ended December 31, 2008, 2007 and 2006 was $0.2 million, $0.9 million
and $1.5 million, respectively.  Stock compensation expense applicable
to stock options was minimal during the year ended December 31, 2008 and was
approximately $0.1 million and $0.5 million for the years ended December 31,
2007 and 2006, respectively.
 
 F-37
 A summary
of the status of the Company’s non-vested options as of December 31, 2008 and
2007 and changes during the year ended December 31, 2008 is presented
below:
 
 Weighted-AverageGrant-DateNonvested
      options
                      
                      Options
                      
                      
                      Fair
      ValueNonvested
      at December 31, 2007
                      
                      
                      33,500
                      
                      
                      $
                      30.28Granted
                      
                      
                      -
                      
                      
                      
                      -Vested
                      
                      
                      (18,500
                      )
                      
                      $
                      30.92Forfeited
                      
                      
                      -
                      
                      
                      $
                      0.00Nonvested
      at December 31, 2008
                      
                      
                      15,000
                      
                      
                      $
                      29.50
 
 At
December 31, 2008 there was no unrecognized cost related to nonvested
stock-based compensation arrangements under the Program.  The fair
value of options that vested during the years ended December 31, 2008, 2007 and
2006 was $0.5 million, $1.6 million and $1.5 million,
respectively.  There was no intrinsic value associated with the
options that vested during 2008.  Currently, the Company believes that
substantially all options will vest.
 
 Restricted
Stock Awards
 
 The
Company provides common stock awards to certain officers and key
employees.  The Company grants these awards, at its discretion, from
the shares available under the Program.  Unless otherwise provided at
the date of grant or unless subsequently accelerated, the shares awarded are
earned in 25% increments on the second, third, fourth and fifth anniversaries of
the award, respectively, and are distributed provided the employee has remained
employed by the Company through such anniversary dates; otherwise the unearned
shares are forfeited.  The market value of these shares at the date of
award is recorded as compensation expense on the straight-line method over the
fiveyear periods
from the respective award dates, as adjusted for forfeitures of unvested awards.
During 2008, 2007 and 2006, the Company issued 56,300, 74,200 and 21,600 class B
common shares, respectively, under a restricted stock plan to various officers
and employees.   The shares vest 25% after two years of
employment with an additional 25% vesting in each of years three through
five.  This resulted in pre-tax compensation expense of $1.5 million,
$1.3 million and $1.1 million ($1.1 million, $0.9 million and $0.8 million,
after tax benefit) for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 F-38
 A summary
of the activity under the Restricted Stock Awards Plan as of December 31, 2008
is presented below:
 
 WeightedWeighted
                        
                        AverageAverage
                        
                        RemainingRestricted
      Stock
                        
                        
                        
                        
                        Award
                        
                        ContractualAwards
                        
                        Shares
                        
                        
                        Price
                        
                        TermOutstanding
      at January 1, 2008
                        
                        
                        195,400
                        
                        
                        $
                        35.31Granted
                        
                        
                        56,300
                        
                        
                        $
                        24.47Vested
                        
                        
                        (36,850
                        )
                        
                        $
                        21.67Forfeited
                        
                        
                        (11,950
                        )
                        
                        $
                        32.13Outstanding
      at December 31, 2008
                        
                        
                        202,900
                        
                        
                        $
                        32.58
                        
                        3.06
years
 As of
December 31, 2008, there was $4.4 million of total pre-tax unrecognized
compensation cost included within additional paid-in-capital related to
non-vested stock based compensation arrangements granted under the restricted
stock award plan; that cost is expected to be recognized over a period of 4.4
years.
 
 The
Company's policy is to issue new shares to satisfy Restricted Stock Awards
andstock
option exercises.  Currently the Company believes that substantially
all restricted stock awards will vest.
 
 14.  COMMON
STOCK
 
 During
2000, the Board of Directors of the Company authorized the purchase of up to ten
percent of the Company’s outstanding common shares. As of December 31, 2008, the
Company had purchased and retired 23,600 Class B common shares at a cost of
approximately $0.8 million and had purchased and retired 521,747 Class A common
shares at a cost of approximately $16.7 million.  No shares of Class B
common stock were repurchased during the year ended December 31, 2007 and
361,714 shares of Class A common stock were repurchased principally from a
related party during the year ended December 31, 2008 at a cost of $11.0
million.
 
 F-39
 There are
no contractual restrictions on the Company's ability to pay dividends provided
the Company is not in default under its credit agreements immediately before
such payment and after giving effect to such payment. Dividends paid during the
years ended December 31, 2007 and 2008 were as follows:
 
 Dividend
      per Share
                
                
                Total
      Dividend Payment (in 000’s)Class
      A
                
                
                Class
      B
                
                
                Class
      A
                
                
                Class
      BYear
      Ended December 31, 2007February
      1, 2007
                
                $
                0.04
                
                
                $
                0.05
                
                
                $
                108
                
                
                $
                451May
      1, 2007
                
                
                0.04
                
                
                
                0.05
                
                
                
                108
                
                
                
                452August
      1, 2007
                
                
                0.04
                
                
                
                0.05
                
                
                
                107
                
                
                
                453November
      1, 2007 (a)
                
                
                0.06
                
                
                
                0.07
                
                
                
                157
                
                
                
                637Year
      Ended December 31, 2008February
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                153
                
                
                
                638May
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                152
                
                
                
                638August
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                151
                
                
                
                640November
      1, 2008
                
                
                0.06
                
                
                
                0.07
                
                
                
                131
                
                
                
                689
 
 (a)
       During July 2007 the Board of Directors of the Company authorized an
      increase in the dividends by $.02 per share per quarter for both Class A
      and B common shares effective with the November 2007 dividend
      payment
 
 
 15.           COMMITMENTS
AND CONTINGENCIES
 
 Leases
 
 The
Company leases various facilities.  Some of these leases require the
Company to pay certain executory costs (such as insurance and
maintenance).
 
 Future
minimum lease payments for operating leases are approximately as follows
(dollars in thousands):
  Years
      EndingDecember 31,2009
                          
                          $
                          2,0012010
                          
                          
                          1,3692011
                          
                          
                          9102012
                          
                          
                          7832013
                          
                          
                          443Thereafter
                          
                          
                          44$
                          5,550
 F-40
 Rental
expense was approximately $2.3 million, $2.0 million and $1.7 million for the
years ended December 31, 2008, 2007, and 2006, respectively.
 
 Other
Commitments
 
 The
Company submits purchase orders for raw materials to various vendors throughout
the year for current production requirements, as well as forecasted
requirements.  Certain of these purchase orders relate to special
purpose material, and as such, the Company may incur penalties if the order is
cancelled.  At December 31, 2008, the Company has outstanding purchase
orders related to the purchase of raw materials in the aggregate amount of $9.2
million.
 
 Legal
Proceedings
 
 The
Company is a defendant in a lawsuit captioned Synqor, Inc. v. Artesyn
Technologies, Inc., Astec America, Inc., Emerson Network Power, Inc., Emerson
Electric Co., Bel Fuse Inc., Cherokee International Corp., Delta Electronics,
Inc., Delta Products Corp., Murata Electronics North America, Inc., Murata
Manufacturing Co., Ltd., Power-One, Inc., Tyco Electronics Corp. and Tyco
Electronics Ltd. brought in the United States District Court, Eastern District
of Texas in November 2007.  With respect to the Company, the plaintiff
claims that the Company infringed its patents covering certain power products.
Synqor is seeking an unspecified amount of damages.  The Company filed
an Answer to Synqor’s complaint, denying the allegations of infringement and
asserting invalidity of Synqor’s patents.
 
 The
Company was a defendant in a lawsuit captioned Halo Electronics, Inc. (“Halo”)
v. Bel Fuse Inc., Pulse Engineering, Inc. and Technitrol, Inc. brought in Nevada
Federal District Court.  Plaintiff claimed that the Company had
infringed its patents covering certain surface mount discrete magnetic products
made by the Company.  Halo was seeking unspecified damages, which it
claims should be trebled.  In December 2007, this case was dismissed
by the Nevada Federal District Court for lack of personal jurisdiction. Halo
then re-filed this suit, with similar claims against the Company, in the
Northern California Federal District Court, captioned Halo Electronics, Inc. v.
Bel Fuse Inc., Elec & Eltek (USA) Corporation, Wurth Electronics Midcom,
Inc., and Xfmrs, Inc.
 
 The
Company is a plaintiff in a lawsuit captioned Bel Fuse Inc.  v. Halo
Electronics, Inc. brought in the United States District Court of New Jersey
during May 2007.  The Company claims that Halo has infringed a patent
covering certain integrated connector modules made by Halo.  The
Company is seeking an unspecified amount of damages plus interest, costs and
attorney fees.
 
 The
Company was a plaintiff in a lawsuit captioned Bel Fuse Inc. and Bel Power, Inc.
v. Andrew Ferencz, Gregory Zvonar, Bernhard Schroter, EE2GO, Inc., Howard E.
Kaepplein and William Ng, brought in the Superior Court of the Commonwealth of
Massachusetts.  The Company was granted injunctive relief and was seeking
damages against the former stockholders of Galaxy Power, Inc., key employees of
Galaxy and a corporation formed by some or all of the individual defendants. The
Company hadalleged
that the defendants violated their written non-competition, non-disclosure and
non-solicitation agreements, diverted business and usurped substantial business
opportunities with key customers, misappropriated confidential information and
trade secrets, and harmed the Company's business.
  F-41
 In a
related matter, the Company was a defendant in a lawsuit captioned Robert
Chimielnski, P.C. on behalf of the stockholder representatives and the former
stockholders of Galaxy Power, Inc. v. Bel Fuse Inc. et al. brought in the
Superior Court of the Commonwealth of Massachusetts.  This complaint for
damages and injunctive relief was based on an alleged breach of contract and
other allegedly illegal acts in a corporate context arising out of the Company's
objection to the release of nearly $2.0 million held in escrow under the terms
of the stock purchase agreement between Galaxy and the
Company.
  The
parties came to a mutual agreement to end these lawsuits, and the matters have
been resolved. On December 18, 2008 the Suffolk Superior Court of the
Commonwealth of Massachusetts entered a judgment that terminated all the
litigation pursuant to the Stipulation of Dismissal that was filed December 17,
2008.
 
 The
Company is a defendant in a lawsuit captioned Murata Manufacturing Company, Ltd.
v. Bel Fuse Inc. et al, brought in Illinois Federal District Court. Plaintiff
claims that its patent covers all of the Company's modular jack products. That
party had previously advised the Company that it was willing to grant a
non-exclusive license to the Company under the patent for a 3% royalty on all
future gross sales of ICM products; payment of a lump sum of 3% of past sales
including sales of applicable Insilco products; an annual minimum royalty of
$0.05 million;  payment of all  attorney  fees;
and  marking of all  licensed ICM's with
the  third  party's patent number. The Company expects this
case to proceed to trial.  The Company was also a defendant in a
lawsuit, captioned Regal Electronics, Inc. v. Bel Fuse Inc., brought in
California Federal District Court. Plaintiff claimed that its patent covered
certain of the Company's modular jack products. That party had previously
advised the Company that it was willing to grant a non-transferable license to
the Company for an up front fee of $0.5 million plus a 6% royalty on future
sales. The District Court has granted summary judgment in the Company's favor
dismissing Regal Electronics' infringement claims, while at the same time
dismissing the Company's invalidity counterclaim against Regal
Electronics.  Regal has appealed the Court's rejection of its
infringement claims to the U.S. Court of Appeals.  The case was heard
on February 6, 2007 and the U.S. Court of Appeals upheld the District Court’s
ruling in favor of the Company.
 
 The
Company cannot predict the outcome of its unresolved legal proceedings; however,
management believes that the ultimate resolution of these matters will not have
a material impact on the Company's consolidated financial condition or results
of operations.  As of December 31, 2008, no amounts have been accrued
in connection with these lawsuits, as the amounts are not
determinable.
 
 The
Company is not a party to any other legal proceeding, the adverse outcome of
which is likely to have a material adverse effect on the Company's consolidated
financial condition or results of operations.
 
 F-42
 
 16. ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
 
 The
components of accumulated other comprehensive income (loss) as of December 31,
2008 and 2007 are summarized below (dollars in thousands)
 
 2008
                              
                              
                              2007Foreign
      currency translation adjustment
                              
                              $
                              1,746
                              
                              
                              $
                              2,101Unrealized
      holding gain (loss) on available-for-salesecurities
      under SFAS No. 115, net oftaxes
      of $23 and $(789) as ofDecember
      31, 2008 and 2007
                              
                              
                              30
                              
                              
                              
                              (1,291
                              )Unfunded
      SERP liability related to SFASNo.
      158, net of taxes of $(606) and $(483)as
      of December 31, 2008 and 2007
                              
                              
                              (1,588
                              )
                              
                              
                              (1,154
                              )Accumulated
      other comprehensive income (loss)
                              
                              $
                              188
                              
                              
                              $
                              (344
                              )
 17. RELATED PARTY
TRANSACTIONS
 
 As of
December 31, 2008, the Company has $2.0 million invested in a money market fund
with GAMCO Investors, Inc. (“GAMCO”).  In August 2008, the Company
repurchased 318,000 shares of its Class A common stock from
GAMCO.  GAMCO is a current shareholder of the Company, with holdings
of its Class A stock of approximately 11.4% as of December 31,
2008.
 
 18. RESTRUCTURING
ACTIVITY
 
 As part
of the Company’s planning of various strategic initiatives targeted principally
at reducing costs, enhancing organizational efficiency and consolidating and
rationalizing existing processes and facilities, the Company announced on July
31, 2008 that it would cease manufacturing operations at its Bel Power Inc.
facility in Westborough, Massachusetts.  The Company ceased all
manufacturing operations in this facility as of December 31,
2008.  The costs associated with this closure are being accounted for
under SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal
Activities”.  While the Company has decided to discontinue the
manufacturing of its power products at the Westborough facility, the Company
will continue its power product business with products manufactured primarily in
Asia, and sold in all of the Company’s regions.  Restructuring and
other related expenses incurred during the year ended December 31, 2008
impacting the operating profit of the Company’s North America operating segment
consist of the following (dollars in thousands):
  F-43
 
 Year
      EndedDecember
      31, 2008Severance
      and related benefits
                      
                      $
                      598Costs
      associated with facility lease obligation
                      
                      
                      524Restructuring
      charges
                      
                      
                      1,122Impairment
      of property, plant and equipment
                      
                      
                      739Inventory
      markdowns
                      
                      
                      355$
                      2,216
 Severance
and Related Benefits
 
 On July
31, 2008, the Company committed to a plan to layoff approximately 50 associates
as part of the Westborough facility closure.  Of the total $0.7
million cost of severance and related benefits, $0.6 million was incurred during
2008, and the remaining $0.1 million will be recorded during January
2009.  As of January 31, 2009, this portion of the restructuring plan
was complete.  The 2008 charges are included within restructuring
charges in the accompanying consolidated statement of operations for the year
ended December 31, 2008.
 
 Impairment
of Property, Plant and Equipment
 
 During
the fourth quarter of 2008, the Company evaluated the property, plant and
equipment located in its the Westborough facility, which had an approximate
carrying amount of $1.2 million at the time of the evaluation, in accordance
with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets”.
 
 Of these
fixed assets, $0.3 million is expected to either stay at the Westborough
facility to be used in research and development or be transferred to Bel’s other
existing facilities in Asia for use in production, and as such will continue to
generate future cash flows; accordingly, the carrying amount of these assets was
determined to be recoverable.
 
 Upon
cessation of manufacturing in December 2008, $0.9 million of assets were taken
out of service.  Prior to year-end, $0.7 million of these assets were
contracted to be sold to a local vendor for $0.2 million. The sale was completed
in January 2009, resulting in a loss on disposition of $0.5
million.  As this arrangement was made prior to December 31, 2008, the
carrying amount of these assets was reduced to its net realizable value of $0.2
million and the assets were classified as assets held for sale in the
accompanying consolidated balance sheet as of December 31,
2008.   As there is no potential buyer for the remaining $0.2
million of assets taken out of service, they will be disposed of and were
written off as of December 31, 2008.  The reduction in net realizable
value of the assets held for sale coupled with the writeoff of  fixed
assets identified for disposal resulted in charges of $0.7 million for the
impairment of property, plant and equipment noted in the table above and is
included in Impairment of assets in the accompanying consolidated statement of
operations for the year ended December 31, 2008.
 
 Lease
Obligation Costs
 
 The
Company ceased all manufacturing operations within the Westborough facility as
of December 31, 2008.  During the fourth quarter of 2008, a potential
sublessee was identified for the Westborough facility space.  Pending
finalization of a sublease, Bel intends to continue utilizing a portion of the
office and lab space while the remainder of the facility is idle.  As
of December 31, 2008, the Company has recorded restructuring charges of $0.5
million related to its Westborough lease obligation, representing lease payments
due on the idle space prior to the anticipated sublease effective date, and
incremental rent payments for which Bel would remain obligated during the
sublease.  This 2008 charge is included within restructuring charges
in the accompanying consolidated statement of operations for the year ended
December 31, 2008.
 
 F-44
 Inventory
Markdowns
 
 During
the fourth quarter of 2008, the Company finalized its plans for the transfer,
sale or ultimate disposition of its inventory on hand at its Westborough
facility, which had an approximate carrying amount of $1.0 million at the time
of determination.  Of this amount, $0.4 million will be transferred to
Bel’s other existing facilities in Asia for use in production, and $0.2 million
will be transferred to Bel’s Glen Rock, PA facility for eventual sale to
customers. The Company recorded an additional reserve of $0.4 million related to
a $0.2 million reduction in net realizable value of certain inventory items that
will ultimately be used for research and development, and $0.2 million that will
be scrapped.  This expense is included within Cost of Sales in the
accompanying consolidated statement of operations for the year ended December
31, 2008.
 
 Activity
and liability balances related to the restructuring charges for the year ended
December 31, 2008 are as follows:
 
 Liability
      at
                        
                        
                        New
                        
                        
                        Cash
      Payments &
                        
                        
                        Liability
      atDecember
      31, 2007
                        
                        
                        Charges
                        
                        
                        Other
      Settlements
                        
                        
                        December
      31, 2008Termination
      benefit charges
                        
                        $
                        -
                        
                        
                        $
                        598
                        
                        
                        $
                        (161
                        )
                        
                        $
                        437Facility
      lease obligation
                        
                        
                        -
                        
                        
                        
                        524
                        
                        
                        
                        -
                        
                        
                        
                        524$
                        -
                        
                        
                        $
                        1,122
                        
                        
                        $
                        (161
                        )
                        
                        $
                        961
  The
Company has included the current portion of $0.6 million in accrued
restructuring in the Consolidated Balance Sheet at December 31, 2008, and has
classified the remaining $0.4 million of the liability related to the facility
lease obligation as noncurrent.
 
 F-45
  CONDENSED
      SELECTED QUARTERLY FINANCIAL DATA(Unaudited)(In
      thousands, except per share
data)




Total
      YearQuarter Ended
                                        
                                        
                                        EndedMarch
      31,
                                        
                                        
                                        June
      30,
                                        
                                        
                                        September
      30,
                                        
                                        
                                        December
      31,
                                        
                                        
                                        December
      31,2008
                                        
                                        
                                        2008
                                        
                                        
                                        2008
                                        
                                        
                                        2008
                                        
                                        
                                        2008
      (a)Net
      sales
                                        
                                        $
                                        60,869
                                        
                                        
                                        $
                                        72,454
                                        
                                        
                                        $
                                        66,964
                                        
                                        
                                        $
                                        58,063
                                        
                                        
                                        $
                                        258,350Cost
      of sales
                                        
                                        
                                        49,638
                                        
                                        
                                        
                                        59,317
                                        
                                        
                                        
                                        56,337
                                        
                                        
                                        
                                        51,787
                                        
                                        
                                        
                                        217,079Net
      earnings (loss) (b)
                                        
                                        
                                        2,167
                                        
                                        
                                        
                                        1,811
                                        
                                        
                                        
                                        1,946
                                        
                                        
                                        
                                        (20,853
                                        )
                                        
                                        
                                        (14,929
                                        )Earnings
      (loss) per Class A common share:Basic
                                        
                                        $
                                        0.17
                                        
                                        
                                        $
                                        0.14
                                        
                                        
                                        $
                                        0.16
                                        
                                        
                                        $
                                        (1.78
                                        )
                                        
                                        $
                                        (1.28
                                        )Diluted
                                        
                                        $
                                        0.17
                                        
                                        
                                        $
                                        0.14
                                        
                                        
                                        $
                                        0.16
                                        
                                        
                                        $
                                        (1.78
                                        )
                                        
                                        $
                                        (1.28
                                        )Earnings
      (loss) per Class B common share:Basic
                                        
                                        $
                                        0.19
                                        
                                        
                                        $
                                        0.16
                                        
                                        
                                        $
                                        0.17
                                        
                                        
                                        $
                                        (1.85
                                        )
                                        
                                        $
                                        (1.30
                                        )Diluted
                                        
                                        $
                                        0.19
                                        
                                        
                                        $
                                        0.16
                                        
                                        
                                        $
                                        0.17
                                        
                                        
                                        $
                                        (1.85
                                        )
                                        
                                        $
                                        (1.30
                                        )
  Total
      YearQuarter Ended
                              
                              
                              EndedMarch
      31,
                              
                              
                              June
      30,
                              
                              
                              September
      30,
                              
                              
                              December
      31,
                              
                              
                              December
      31,2007
                              
                              
                              2007
                              
                              
                              2007
                              
                              
                              2007
                              
                              
                              2007
      (1)Net
      sales
                              
                              $
                              61,807
                              
                              
                              $
                              61,612
                              
                              
                              $
                              66,379
                              
                              
                              $
                              69,339
                              
                              
                              $
                              259,137Cost
      of sales
                              
                              
                              47,891
                              
                              
                              
                              48,599
                              
                              
                              
                              52,288
                              
                              
                              
                              54,229
                              
                              
                              
                              203,007Net
      earnings
                              
                              
                              4,009
                              
                              
                              
                              6,158
                              
                              
                              
                              5,914
                              
                              
                              
                              10,255
                              
                              
                              
                              26,336Earnings
      per Class A common share:Basic
                              
                              $
                              0.32
                              
                              
                              $
                              0.49
                              
                              
                              $
                              0.47
                              
                              
                              $
                              0.83
                              
                              
                              $
                              2.11Diluted
                              
                              $
                              0.32
                              
                              
                              $
                              0.49
                              
                              
                              $
                              0.47
                              
                              
                              $
                              0.83
                              
                              
                              $
                              2.11Earnings
      per Class B common share:Basic
                              
                              $
                              0.34
                              
                              
                              $
                              0.52
                              
                              
                              $
                              0.50
                              
                              
                              $
                              0.88
                              
                              
                              $
                              2.25Diluted
                              
                              $
                              0.34
                              
                              
                              $
                              0.52
                              
                              
                              $
                              0.50
                              
                              
                              $
                              0.88
                              
                              
                              $
                              2.24


(a)
              Quarterly
      amounts of earnings per share may not agree to the total for the year due
      to rounding.
 
 (b)
              Net
      earnings (loss) for the quarter ended December 31, 2008 includes a
      goodwill impairment charge of $14.1 million related to the Company’s North
      America operating segment and charges related to the closure of the
      Westborough, Massachusetts facility of $1.4 million ($0.9 million after
      tax).
 
 (c)
              Net
      earnings (loss) for the quarters ended June 30, 2008, September 30, 2008
      and December 31, 2008 include after tax other-than-temporary impairment
      charges related to the Company’s investments of $1.6 million, $0.9 million
      and $4.1 million, respectively.
  F-46
 
 BEL
      FUSE INC. AND SUBSIDIARIESSCHEDULE
      II - VALUATION AND QUALIFYING ACCOUNTS(Amounts
      in
thousands)
 Column A
                                                                              
                                                                              Column B
                                                                              
                                                                              
                                                                              Column C
                                                                              
                                                                              
                                                                              Column D
                                                                              
                                                                              
                                                                              Column E
                                                                              
                                                                              
                                                                              Column FCharged
                                                                              
                                                                              
                                                                              AdditionsBalance
      at
                                                                              
                                                                              
                                                                              to
      profit
                                                                              
                                                                              
                                                                              Charged
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              Balancebeginning
                                                                              
                                                                              
                                                                              and
      loss
                                                                              
                                                                              
                                                                              to
      other
                                                                              
                                                                              
                                                                              Deductions
                                                                              
                                                                              
                                                                              at
      closeDescription
                                                                              
                                                                              of
      period
                                                                              
                                                                              
                                                                              or
      income
                                                                              
                                                                              
                                                                              accounts
      (b)
                                                                              
                                                                              
                                                                              (describe)(a)
                                                                              
                                                                              
                                                                              of
      periodYear
      ended December 31, 2008Allowance
      for doubtfulaccounts
                                                                              
                                                                              $
                                                                              977
                                                                              
                                                                              
                                                                              $
                                                                              (191
                                                                              )
                                                                              
                                                                              $
                                                                              (43
                                                                              )
                                                                              
                                                                              $
                                                                              (83
                                                                              )
                                                                              
                                                                              $
                                                                              660Allowance
      for excess andobsolete
      inventory
                                                                              
                                                                              $
                                                                              3,266
                                                                              
                                                                              
                                                                              $
                                                                              1,079
                                                                              
                                                                              
                                                                              $
                                                                              (10
                                                                              )
                                                                              
                                                                              $
                                                                              (284
                                                                              )
                                                                              
                                                                              $
                                                                              4,051Year
      ended December 31, 2007Allowance
      for doubtfulaccounts
                                                                              
                                                                              $
                                                                              1,087
                                                                              
                                                                              
                                                                              $
                                                                              (50
                                                                              )
                                                                              
                                                                              $
                                                                              48
                                                                              
                                                                              
                                                                              $
                                                                              (108
                                                                              )
                                                                              
                                                                              $
                                                                              977Allowance
      for excess andobsolete
      inventory
                                                                              
                                                                              $
                                                                              5,004
                                                                              
                                                                              
                                                                              $
                                                                              (1,134
                                                                              )
                                                                              
                                                                              $
                                                                              17
                                                                              
                                                                              
                                                                              $
                                                                              (621
                                                                              )
                                                                              
                                                                              $
                                                                              3,266Year
      ended December 31, 2006Allowance
      for doubtfulaccounts
                                                                              
                                                                              $
                                                                              1,107
                                                                              
                                                                              
                                                                              $
                                                                              707
                                                                              
                                                                              
                                                                              $
                                                                              109
                                                                              
                                                                              
                                                                              $
                                                                              (836
                                                                              )
                                                                              
                                                                              $
                                                                              1,087Allowance
      for excess andobsolete
      inventory
                                                                              
                                                                              $
                                                                              5,017
                                                                              
                                                                              
                                                                              $
                                                                              1,470
                                                                              
                                                                              
                                                                              $
                                                                              (65
                                                                              )
                                                                              
                                                                              $
                                                                              (1,418
                                                                              )
                                                                              
                                                                              $
                                                                              5,004
 (a)  Write
      offs(b)  Includes
      foreign currency translation
adjustments
 
 S-1
 Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
 
 Not
applicable
 
 Item
9A  Controls and Procedures
 
 Evaluation
of Disclosure Controls and Procedures
 
 During
the fourth quarter of 2008, the Company’s management, including the principal
executive officer and principal financial officer, evaluated the Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) related to the recording, processing,
summarization, and reporting of information in the Company’s periodic reports
that the Company files with the SEC. These disclosure controls and procedures
have been designed to ensure that material information relating to the Company,
including its subsidiaries, is made known to the Company’s management, including
these officers, by other of the Company’s employees, and that this information
is recorded, processed, summarized, evaluated, and reported, as applicable,
within the time periods specified in the SEC’s rules and forms.  The
Company’s controls and procedures can only provide reasonable, not absolute,
assurance that the above objectives have been met.  Notwithstanding
these limitations, the Company believes that its disclosure controls and
procedures are designed to provide reasonable assurances of achieving their
objectives.
  Based on
their evaluation as of December 31, 2008, the Company’s principal executive
officer and principal financial officer have concluded that the Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) are effective to ensure that the
information required to be disclosed by the Company in the reports that the
Company files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms.
   Management’s
Report on Internal Control Over Financial Reporting
  The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f).  Under the supervision and with the participation
of the Company’s management, including the Company’s principal executive officer
and principal financial officer, the Company conducted an evaluation of the
effectiveness of the Company’s internal control over financial reporting based
on the framework in Internal
Control–Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.  Based on the Company’s evaluation under the framework in
Internal
Control – Integrated Framework, the
Company’s management concluded that the Company’s internal control over
financial reporting was effective as of December 31, 2008.
  The
Company’s independent registered public accounting firm, Deloitte & Touche
LLP, has audited the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2008 and has expressed an unqualified
opinion in their report which is included herein.
  48
  Changes
in Internal Controls Over Financial Reporting
  There
have been no changes in the Company’s internal control over financial reporting
that occurred during the last fiscal quarter of the year to which this Annual
Report on Form 10-K relates that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
 
 Item
9B.  Other
Information
 
 Not
applicable.
 
 
 Item
10.    Directors,Executive Officersand Corporate
Governance
 
 The
Registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this item.
  The
Registrant has adopted a code of ethics for its directors, executive officers
and all other senior financial personnel.  The Registrant will make
copies of its code of ethics available to investors upon request.  Any
such request should be sent by mail to Bel Fuse Inc., 206 Van Vorst Street,
Jersey City, NJ  07302 Attn: Colin Dunn or should be made by telephone
by calling Colin Dunn at 201-432-0463.
 
 Item
11.   Executive
Compensation
 
 The
Registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.
 
 Item
12.   Security Ownership of
Certain Beneficial Owners and Management and
RelatedStockholderMatters
 
 The
Registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.
 
 Item
13.   Certain Relationships and
Related Transactions, and Director
Independence
 
 The
Registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.
 
 Item
14.   PrincipalAccountantFees and
Services
 
 The
Registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.
  49
  
 PART
IV
  Item
      15.
                        Exhibits, Financial Statement
      SchedulesPage(a)
                        
                        Financial
      Statements1.
                        Financial
      statements filed as a part of this Annual Report on Form
      10-K:Report
      of Independent Registered Public Accounting Firm
                        
                        F-1
      – F-2Consolidated
      Balance Sheets as of December 31, 2008 and 2007
                        
                        F-3
      - F-4Consolidated
      Statements of Operations for Each of the Three Years in the Period Ended
      December 31, 2008
                        
                        F-5Consolidated
      Statements of Stockholders' Equity for Each of the Three Years in the
      PeriodEnded
      December 31, 2008
                        
                        F-6
      - F-7Consolidated
      Statements of Cash Flows for Each of the Three Years in the Period Ended
      December
      31, 2008
                        
                        F-8
      - F-10Notes
      to Consolidated Financial Statements
                        
                        F-
      11 - F-45Condensed
      Selected Quarterly Financial Data - Years Ended December 31, 2008 and 2007
      (Unaudited)
                        
                        F-462.
                        Financial
      statement schedules filed as part of this report:Schedule
      II:  Valuation and Qualifying Accounts
                        
                        S-1All
      other schedules are omitted because they are inapplicable, not
      required or the information is included in the consolidated financial
      statements or notes thereto.
  50
  (b)
              Exhibits
 
 Exhibit
No.:
  3.1
                  Certificate
      of Incorporation, as amended, is incorporated by reference to Exhibit 3.1
      of the Company’s Annual Report on Form 10-K for the year ended December
      31, 1999.3.2
                  By-laws,
      as amended, are incorporated by reference to Exhibit 4.2 of the Company's
      Registration Statement on Form S-2 (Registration No. 33-16703) filed with
      the Securities and Exchange Commission on August 25,
  1987.10.1
                  Agency
      agreement dated October 1, 1988 between Bel Fuse Ltd. and Rush Profit
      Ltd.  Incorporated by reference to Exhibit 10.1 of the Company's
      annual report on Form 10-K for the year ended December 31,
      1994.10.2
                  2002
      Equity Compensation Program.  Incorporated by reference to the
      Registrant’s proxy statement for its 2002 annual meeting of
      shareholders.10.3
                  Credit
      and Guaranty Agreement, dated as of February 12, 2007, by and among Bel
      Fuse, Inc., as Borrower, the Subsidiary Guarantors party thereto and the
      Bank of America, N.A., as Lender.  Filed as Exhibit 10.1 to the
      Company’s Current Report on Form 8-K filed on February 16, 2007 and
      incorporated herein by reference.10.4
                  Amended
      and Restated Bel Fuse Supplemental Executive Retirement Plan, dated as of
      April 17, 2007.  Filed as Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on April 23, 2007 and incorporated herein by
      reference.10.5
                  Contract
      for Purchase and Sale of Real Estate dated July 15, 2004 between Bel Fuse
      Inc. and Fields Development Group Co.  Incorporated by reference
      to Exhibit 10.9 of the Company’s Form 10-K for the year ended December 31,
      2004.11.1
                  A
      statement regarding the computation of earnings per share is omitted
      because such computation can be clearly determined from the material
      contained in this Annual Report on Form 10-K.14.1
                  Bel
      Fuse Inc. Code of Ethics, adopted February 11,
      2004.  Incorporated by reference to Exhibit 14.1 of the
      Company’s Form 10-K for the year ended December 31,
  2007.
  51
  Item
15. Exhibits, Financial
Statement Schedules and Reports
on
 Form 8-K
(continued)
 
 Exhibit
No.:
 
 21.1
                Subsidiaries
      of the Registrant.23.1
                Consent
      of Independent Registered Public Accounting Firm.24.1
                Power
      of attorney (included on the signature page)31.1
                Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                Certification
      of the Vice President of Finance pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                Certification
      of the Chief Executive Officer pursuant to Section 906 of the Sarbanes -
      Oxley Act of 2002.32.2
                Certification
      of the Vice-President of Finance pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
 
 52
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
  BEL FUSE
INC.
 
 BY:                                                               /s/Daniel
Bernstein
 Daniel
Bernstein, President, Chief Executive
 Officer and Director
 
 Dated:  March
13, 2009
 
 KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Daniel Bernstein and Colin Dunn as his/her
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him/her and in his/her name, place, and stead, in any and all capacities, to
sign and file any and all amendments to this Annual Report on Form 10-K, with
all exhibits thereto and hereto, and other documents with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue
hereof.
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 Signature
                                      
                                      Title
                                      
                                      Date/s/ Daniel Bernstein
                                      
                                      President,
      Chief
                                      
                                      March
      13, 2009Daniel
      Bernstein
                                      
                                      Executive
      Officer and Director/s/ Howard Bernstein
                                      
                                      Director
                                      
                                      March
      13, 2009Howard
      B. Bernstein/s/ Robert H. Simandl
                                      
                                      Director
                                      
                                      March
      13, 2009Robert
      H. Simandl/s/ Peter Gilbert
                                      
                                      Director
                                      
                                      March
      13, 2009Peter
      Gilbert/s/ John Tweedy
                                      
                                      Director
                                      
                                      March
      13, 2009John
      Tweedy/s/ John Johnson
                                      
                                      Director
                                      
                                      March
      13, 2009John
      Johnson/s/ Avi Eden
                                      
                                      Director
                                      
                                      March
      13, 2009Avi
      Eden/s/ Colin
      Dunn
                                      
                                      Vice-PresidentColin
      Dunn
                                      
                                      Finance
      and Secretary
                                      
                                      March
      13,
2009
  
 53