UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 (Mark
One)
 
 x     ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For
      the fiscal year ended
                December 31,
2009
 or
 
  ̈      TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the transition period from  to &
#160;
  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:  Class A Common
Stock, $0.10 par value; Class B Common Stock, $0.10 par value
 
 Securities
registered pursuant to Section 12(g) of the Act:  None
 
 Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.  ̈ Yes x
No
 
 Indicate
by checkmark if the registrant is not required to file reports to Section 13 or
15(d) of the
Act.  ̈
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     ̈  No
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
 
  ̈  Yes   ̈  No   
Not applicable to the registrant.
 
 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.  ̈
 
 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  ̈
                  Accelerated filer x
                  Non-accelerated filer  ̈
                  Smaller reporting company  ̈(Do not check if a smallerreporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). ̈  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, 2009) was $164.7
million.
 
 Number of shares of Common Stock
outstanding as of March 10, 2010: 2,174,912 Class A Common Stock; 9,464,343
Class B Common Stock
 
 Documents
incorporated by reference:
 
 Bel Fuse Inc.'s Definitive Proxy
Statement for the 2010 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
                              17Part IIItem
      4.
                              Not
      applicable
                              18Item
      5.
                              Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                              19Item
      6.
                              Selected
      Financial Data
                              21Item
      7.
                              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                              23Item
      7A.
                              Quantitative
      and Qualitative Disclosures About Market Risk
                              44Item
      8.
                              Financial
      Statements and Supplementary Data
                              44Item
      9.
                              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                              45Item
      9A.
                              Controls
      and Procedures
                              45Item
      9B.
                              Other
      Information
                              47Part IIIItem
      10.
                              Directors,
      Executive Officers and Corporate Governance
                              48Item
      11.
                              Executive
      Compensation
                              48Item
      12.
                              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                              48
  
 
 BEL FUSE
INC.
  INDEX
(Con't)
 
 PagePart III (Con't)Item
      13.
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          48Item
      14.
                          Principal
      Accountant Fees and Services
                          49Part IVItem
      15.
                          Exhibits,
      Financial Statement Schedule
                          50Signatures
                          53*Page
      F-1 follows page 44
  
 
 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®
integrated connectors), 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.
 
 The Company, which is organized under
New Jersey law, operates in one industry with three reportable operating
segments, which are geographic in nature. 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 operating segments, see Note 11 of
the notes to consolidated financial statements.
  -1-
 
 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
 
 The
Company has set forth below a description of its product groups as of December
31, 2009. For information regarding an acquisition (Cinch Connectors) made by
the Company subsequent to December 31, 2009, see “—Acquisitions”
below.
 
 Magnetics
 ·
              MagJack®
      integrated connector modules
 ·
              Diplexer
      and triplexer filters
 ·
              Power
      transformers
 ·
              Discrete
      components
 
 The
Company produces MagJack®
integrated connector modules. These devices integrate RJ45 and/or USB connectors
with discrete magnetic components to provide a more robust part that allows
customers to substantially reduce board space and inventory requirements.
MagJack® provides
the signal conditioning, electromagnetic interference suppression and signal
isolation for networking, telecommunications, and broadband applications. These
connectors are designed for network speeds from 10/100Base-T to 10GBase-T and
include options for Power over Ethernet (PoE) capability.
 
 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,
motion control, elevator, medical products and many other industries, Signal’s
designs are available in PC mount, chasses mount, surface mount and toroidal
footprints. These devices are designed to comply with the international safety
standards governing transformers including UL, CSA, IEC, TUV, and
VDE.
 
 Discrete
magnetic components comprise Bel’s legacy product group, which includes
transformers and chokes for use 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.
 
 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. Bel’s powerline modules are also being
integrated in smart meters and appliances to support emerging Smart Grid
technology developments.
 
 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
                                                                    
                                                                    ApplicationsMagneticsMagJack®
      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), PoE Plus, home networking, and cable modem
      applications.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. Class 2, three phase, chassis mount, and PC mount
      designs available.Discrete
      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).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. Also integrated in smart meters and
      appliances in support of developing Smart Grid
  technology.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.
 
 On
January 29, 2010, the Company completed the acquisition of Cinch Connectors
(“Cinch”) from Safran S.A. for approximately $37.5 million in cash plus
approximately $1.5 million for the assumption of certain
expenses.  The final purchase price remains subject to certain
adjustments related to working capital.  The transaction was funded
with cash on hand.  Cinch is headquartered in Lombard, Illinois and
has manufacturing facilities in Vinita, Oklahoma; Reynosa, Mexico; and Worksop,
England.
 
 Cinch
manufactures a broad range of interconnect products for customers in the
military and aerospace, high-performance computing, telecom/datacom, and
transportation markets.  The Company believes that the addition of
Cinch’s well-established lines of connector and cable products and extensive
customer base will provide Bel with immediate access to the large and growing
aerospace and military markets and will strengthen Bel’s position as a one-stop
supplier of high-performance computing, telecom and data products.  In
addition to these strategic synergies, there is a significant opportunity for
expense reduction and the elimination of redundancies.  The
combination of these factors and Bel’s ability to leverage its existing product
line have given rise to the provisional amount of goodwill detailed
below.
  -5-
 
 While the
initial accounting related to this business combination is not complete as of
the filing date of this Form 10-K, the following table depicts the Company’s
estimated acquisition date fair values of the consideration transferred and
identifiable net assets acquired (in thousands):
 
 ConsiderationCash
                                                  
                                                  $
                                                  39,755Assumption
      of change-in-control payments
                                                  
                                                  
                                                  747Fair
      value of total consideration transferred
                                                  
                                                  $
                                                  40,502Acquisition-related
      costs (included in selling, general and administrative expense for the
      year ended December 31, 2009)
                                                  
                                                  $
                                                  605Recognized
      amounts of identifiable assetsacquired and liabilities
      assumed:Cash
                                                  
                                                  $
                                                  660Accounts
      receivable
                                                  
                                                  
                                                  6,910Inventory
                                                  
                                                  
                                                  7,548Other
      current assets
                                                  
                                                  
                                                  803Property,
      plant and equipment
                                                  
                                                  
                                                  9,345
                                                  (a)Intangible
      assets
                                                  
                                                  
                                                  2,528
                                                  (b)Other
      assets
                                                  
                                                  
                                                  192Accounts
      payable
                                                  
                                                  
                                                  (2,923
                                                  )Accrued
      expenses and other current liabilities
                                                  
                                                  
                                                  (2,932
                                                  )Total
      identifiable net assets
                                                  
                                                  $
                                                  22,131Goodwill
                                                  
                                                  $
                                                  18,371
                                                  (c)
 
 (a)  As
of the filing date, the appraisal related to the building acquired was received
and the fair value of the building is included in this amount; however, the
appraisals related to machinery and equipment acquired were incomplete as of the
filing date and as such, this amount only includes the carrying value of those
assets.
 
 (b) The
Company has identified various intangible assets, including customer lists,
license agreements, non-compete agreements, in-process research and development,
and other intellectual property, that are being valued by a third-party
appraiser.  These appraisals were not complete as of the date of this
filing, and the amounts noted above only represent the carrying value of the
intangible assets on Cinch's balance sheet as of the acquisition
date.
 
 (c) The
amount of goodwill is provisional as of the filing date, as appraisals related
to property, plant and equipment, and various intangible assets are still
underway.  As the final amount of goodwill has not yet been determined
or allocated by country, the Company is unable to determine at this time the
portion of goodwill, if any, that will be deductible for tax
purposes.
 
 On July
1, 2009, the Company acquired all of the outstanding shares of Winsonko (Guangxi
Pingguo) Electron Co., Ltd. for $0.5 million in cash, including an immaterial
amount of transaction costs.  The company was renamed Bel Pingguo Ltd.
(“Bel Pingguo”).
  -6-
  Sales and
Marketing
 
 The
Company sells its products to customers throughout North America, 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,
2009, the Company had a sales and support staff of 57 persons that supported a
network of 68 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.
 
 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, 2009, 2008 and 2007 amounted to $7.8 million, $7.4 million and $7.2
million, respectively.
 
 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.
  -7-
 
 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, 2009, the Company had 2,674 full-time associates. The Company
employed 457 people at its North American facilities, 2,152 people at its Asian
facilities and 65 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 People’s Republic of
China (PRC) are represented by unions. At December 31, 2009, 28 of our workers
in the New York facility were previously covered by a collective bargaining
agreement which expired on September 30, 2009.  These associates have
continued to work and contract negotiations are currently
underway.  The Company believes that its relations with its associates
are satisfactory.
 
 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 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 estimated value of
the backlog of orders as of February 28, 2010 was approximately $125.6 million,
including $19.9 million related to the Cinch acquisition, as compared with a
backlog of $35.5 million as of February 28, 2009.  Management expects
that all of the Company's backlog as of February 28, 2010 will be shipped by
December 31, 2010. 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.  Due to these factors,
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."
  -8-
 
 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 10, 2010 to May
15, 2027.
 
 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.
 
 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.
  -9-
 
 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,
induce technological innovations as sales prices decline, or pass through cost
increases to customers.
 
 b)           Any
drop in demand or increase in supply of our products could cause a dramatic drop
in our average sales prices which in turn could result in a decrease in our
gross margins.  In addition, a shift in product mix could have a
favorable or unfavorable impact on our gross margins, depending upon the
underlying raw material content and labor requirements of the associated
products.
 
 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 caused customer demand for our product to be highly
volatile during 2009, which has materially adversely impacted Bel as we are
continually challenged to bring workforce and leadtimes in line with customer
demand.
 
 The
global financial crisis materially adversely impacted Bel’s financial results
during 2009.  Bel experienced a severe reduction in customer demand
beginning in the fourth quarter of 2008 and the reduced demand continued through
mid 2009.  Bel implemented a significant reduction in workforce as we
brought production levels in line with customer demand.  In the fourth
quarter of 2009, customer demand for our products increased in excess of our
ability and that of our wire wound component suppliers to hire manufacturing
labor and our ability to source enough components and raw materials to meet
their increased demand.  The ongoing shortage of labor, raw materials
and components in the PRC will continue to have an adverse effect on our
business and financial condition to an extent that we currently cannot
predict.
 
 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.
  -10-
 
 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, and may divert management’s focus
from the ongoing operations of the Company during the integration
period.
 
 If our
acquisitions fail to perform up to our expectations, or if the value of goodwill
decreases as a result of weakened economic conditions, we could be required to
record a loss from the impairment of assets.  The Company recorded
charges of $12.9 million and $14.1 million related to the impairment of goodwill
during the years ended December 31, 2009 and 2008, respectively.  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. On January 29, 2010, the
Company acquired Cinch as previously described in the Acquisitions section of
this Form 10-K.  Our inability to achieve our expectations with
respect to the Cinch acquisition or future acquisitions 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
either be funded with cash on hand or financed in part through bank borrowings
or the issuance of public or private debt or equity. The acquisition of Cinch
was funded with cash on hand.  If we borrow money to finance future
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 79% of our revenues during 2009 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,
and military instability or unrest, medical epidemic and natural
disasters.  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 in which we
operate.  The decoupling of the Chinese Renminbi from the U.S. dollar
has and will continue to increase financial risk.  In addition, with
the acquisition of Cinch, the Company will have additional exposure to foreign
currency risks associated with the Mexican Peso as there is now a large labor
force in Mexico.
  -11-
 
 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.
 
 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.  In addition, factory workers located in the
United Kingdom and Mexico brought over with the Cinch acquisition are
represented by labor 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.
 
 We may face risks relating to climate
change that could have an adverse impact on our business.
 
 Greenhouse
gas (“GHG”) emissions have increasingly become the subject of substantial
international, national, regional, state and local attention.  GHG
emission regulations have been promulgated in certain of the jurisdictions in
which we operate, and additional GHG requirements are in various stages of
development.  Such measures could require us to modify existing or
obtain new permits, implement additional pollution control technology, curtail
operations or increase our operating costs.  Any additional regulation
of GHG emissions, including through a cap-and-trade system, technology mandate,
emissions tax, reporting requirement or other program, could adversely affect
our business.
  -12-
 
 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, the volatility of raw material costs 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 of 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.
 
 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:
  -13-
 
 ·
              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.
 
 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.  In connection with a
patent infringement lawsuit discussed in Item 3. Legal Proceedings, the Company
paid a lump sum licensing fee of $2.1 million during 2009 in exchange for a
licensing agreement covering past and future sales of the Company’s MagJack®
integrated connector products.
 
 Our investments in marketable
securities could have a negative impact on our profitability.
 
 As part
of our acquisition strategies, we may from time to time acquire equity positions
in companies that could be attractive acquisition candidates or could otherwise
be potential co-venturers in potential business transactions with
us.  While the Company does not have a material amount of marketable
securities at December 31, 2009,  market declines occurring subsequent
to any future investments could have a negative impact on our
profitability.
  -14-
  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, 2010, 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, 2010, to the Company's
knowledge, these shareholders owned 20.1% and 17.1%, 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%. Unless and until
this situation is satisfied in a manner permitted by the Company’s Restated
Certificate of Incorporation, the subject shareholders will not be permitted to
vote their shares of Common Stock.
 
 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, 2010, Daniel Bernstein, the
Company's chief executive officer, beneficially owned 93,555 Class A common
shares (or 6.8%) of the outstanding Class A common shares whose voting rights
were not suspended, the Estate of Elliot Bernstein beneficially owned 140,000
Class A common shares (or 10.3%) 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 243,779 Class A common
shares (or 17.6%) 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
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 remained in escrow and had been classified as
restricted cash as of December 31, 2008.  In February 2009, the final
approval of the Statement of No Interest was received from the State of New
Jersey.  In March 2009, the title company released the remaining
escrow of $2.3 million and corresponding guarantees and the Company recognized
the gain associated with the sale of this property in the amount of $4.6
million.  In July 2009, the Company established a standby letter of
credit for the State of New Jersey as a performance guarantee related to
environmental cleanup associated with the Jersey City, New Jersey property
sale.  In connection with this agreement, the Company has a
compensating balance of $0.3 million which has been classified as restricted
cash as of December 31, 2009.  This compensating balance will be
reduced to less than $0.1 million upon its renewal in July
2010.
  -15-
 
 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.
 
 The Company operated 11 manufacturing
facilities in 6 countries as of December 31, 2009.    The
following is a list of the locations of the Company's principal manufacturing
facilities at December 31, 2009.
 Location
                                      
                                      Approximate
                                        SquareFeet
                                      
                                      Owned/
                                        Leased
                                      
                                      Percentage
                                        Usedfor
                                        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
                                      %Pingguo,
      People'sRepublic
      of China
                                      
                                      
                                      122,000
                                      
                                      Leased
                                      
                                      
                                      84
                                      %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
                                      %1,296,000
 
 Of the space described above, 122,000
square feet is used for engineering, warehousing, sales and administrative
support functions at various locations and 265,000 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 remains unoccupied as of December 31, 2009 and is excluded from the
table above.  Approximately 28% of the 1.4 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.
  -16-
 
 With the acquisition of Cinch in
January 2010, the Company acquired four additional facilities.  The
facility in Lombard, Illinois is used for administrative and research and
development functions.  The three remaining facilities are additions
to the above table of Bel manufacturing facilities in 2010:
  Location
                      
                      Approximate
                        Square Feet
                      
                      Owned/
                        Leased
                      
                      Percentage
                        Used for
                        ManufacturingVinita,
      Oklahoma
                      
                      
                      87,000
                      
                      Owned
                      
                      
                      53
                      %Reynosa,
      Mexico
                      
                      
                      77,000
                      
                      Leased
                      
                      
                      56
                      %Worksop,
      England (a)
                      
                      
                      52,000
                      
                      Leased
                      
                      
                      28
                      %216,000
  (a)
Approximately 58% of the Worksop facility is designated for manfacturing use,
but 30% is currently idle
 
 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 43% of its identifiable assets are located in
Asia.
 
 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.
 
 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 June 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.
  -17-
 
 The
Company was a defendant in a lawsuit captioned Murata Manufacturing Company,
Ltd. v. Bel Fuse Inc. et al., brought in Illinois Federal District Court. The
plaintiff claimed that its patent covers all of the Company's MagJack®integrated
connector products. The Company had expected this case to proceed to
trial.  In order to eliminate future legal fees related to this case,
a settlement was negotiated with Murata in October 2009 whereby the Company paid
a lump sum licensing fee of $2.1 million in exchange for a licensing agreement
covering the past and future sales of the Company’s MagJack®
integrated connector products.  As $2.0 million of this fee was deemed
to relate to product sales from prior periods, the Company included this expense
in cost of sales in the accompanying consolidated statements of operations for
the year ended December 31, 2009.  The Court issued an Order of
Dismissal on November 4, 2009.
 
 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, 2009, no amounts have been accrued
in connection with contingencies related to these lawsuits, as the amounts are
not estimable.
 
 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.             Not
applicable.
  -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 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, 2009First
      Quarter
                    
                    $
                    18.19
                    
                    
                    $
                    7.00
                    
                    
                    $
                    21.94
                    
                    
                    $
                    8.79Second
      Quarter
                    
                    
                    15.33
                    
                    
                    
                    10.80
                    
                    
                    
                    17.75
                    
                    
                    
                    12.44Third
      Quarter
                    
                    
                    19.30
                    
                    
                    
                    12.85
                    
                    
                    
                    20.65
                    
                    
                    
                    14.78Fourth
      Quarter
                    
                    
                    20.70
                    
                    
                    
                    16.80
                    
                    
                    
                    22.11
                    
                    
                    
                    17.23Year
      Ended December 31, 2008First
      Quarter
                    
                    $
                    34.44
                    
                    
                    $
                    24.73
                    
                    
                    $
                    30.75
                    
                    
                    $
                    24.61Second
      Quarter
                    
                    
                    32.00
                    
                    
                    
                    25.01
                    
                    
                    
                    30.83
                    
                    
                    
                    23.80Third
      Quarter
                    
                    
                    31.09
                    
                    
                    
                    25.07
                    
                    
                    
                    31.50
                    
                    
                    
                    21.86Fourth
      Quarter
                    
                    
                    28.16
                    
                    
                    
                    10.04
                    
                    
                    
                    29.69
                    
                    
                    
                    11.95
 
 The Common Stock is reported under the
symbols BELFA and BELFB in the NASDAQ Global Select Market.  Effective
September 1, 2010, the NASDAQ will be converting the format of all 5-character
trading symbols.  As such, the Company’s Common Stock will be reported
under the symbols BELF.A and BELF.B after such date.
 
 (b)     Holders
 
 As of February 28, 2010, there were 73
registered shareholders of the Company's Class A Common Stock and 193 registered
shareholders of the Company’s Class B Common Stock.  As of February
28, 2010, the Company estimates that there were 787 beneficial shareholders of
the Company’s Class A Common Stock and approximately 1,950 beneficial
shareholders of  the Company’s Class B Common Stock. At February 28,
2010, to the Company’s knowledge, there were two shareholders of the Company’s
Class A common stock whose voting rights were suspended.  These two
shareholders owned an aggregate of 37.2% of the Company’s outstanding shares of
Class A common stock.  See Item 1A – Risk Factors for additional
discussion.
  -19-
 
 (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, 2009 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, 2009February
      1, 2009
                  
                  $
                  0.06
                  
                  
                  $
                  0.07
                  
                  
                  $
                  130
                  
                  
                  $
                  642May
      1, 2009
                  
                  
                  0.06
                  
                  
                  
                  0.07
                  
                  
                  
                  130
                  
                  
                  
                  642August
      1, 2009
                  
                  
                  0.06
                  
                  
                  
                  0.07
                  
                  
                  
                  131
                  
                  
                  
                  641November
      1, 2009
                  
                  
                  0.06
                  
                  
                  
                  0.07
                  
                  
                  
                  131
                  
                  
                  
                  691Year
      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
 
 On
February 1, 2010, the Company paid a $0.06 and $0.07 per share dividend to all
shareholders of record at January 15, 2010 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 dividends
quarterly in the future.
 
 (d) Issuer Purchases of Equity
Securities
 
 As of
December 31, 2009, the Company had purchased and retired 527,817 Class A common
shares at a cost of approximately $16.8 million and had purchased and retired
23,600 Class B common shares at a cost of approximately $0.8
million.  A total of 6,070 shares of Class A common stock were
repurchased during the year ended December 31, 2009 at a cost of $0.1
million.  No shares of Class A common stock were repurchased during
the fourth quarter of 2009.  No shares of Class B common stock were
repurchased during the year ended December 31, 2009.
  -20-
 
 Item
6.  Selected Financial Data
 
 Years Ended December 31,2009
                            
                            
                            2008
                            
                            
                            2007
                            
                            
                            2006
                            
                            
                            2005(In thousands of dollars, except per share data)Selected
      Statements of Operations Data:Net
      sales
                            
                            $
                            182,753
                            
                            
                            $
                            258,350
                            
                            
                            $
                            259,137
                            
                            
                            $
                            254,933
                            
                            
                            $
                            215,916Cost
      of sales (f)
                            
                            
                            161,454
                            
                            
                            
                            217,079
                            
                            
                            
                            203,007
                            
                            
                            
                            192,985
                            
                            
                            
                            156,147Selling,
      general and administrative expenses (g)
                            
                            
                            30,055
                            
                            
                            
                            36,093
                            
                            
                            
                            36,117
                            
                            
                            
                            37,800
                            
                            
                            
                            33,152Impairment
      of assets (b) (d)
                            
                            
                            12,875
                            
                            
                            
                            14,805
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Restructuring
      charges (c)
                            
                            
                            413
                            
                            
                            
                            1,122
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Gain
      on sale of property, plant and equipment
                            
                            
                            (4,693
                            )
                            
                            
                            -
                            
                            
                            
                            (5,499
                            )
                            
                            
                            -
                            
                            
                            
                            -Casualty
      loss (a)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,030
                            
                            
                            
                            -Interest
      income and other, net
                            
                            
                            527
                            
                            
                            
                            2,454
                            
                            
                            
                            4,046
                            
                            
                            
                            2,780
                            
                            
                            
                            1,098Gain
      (loss/impairment charge) on investments (e)
                            
                            
                            7,129
                            
                            
                            
                            (10,358
                            )
                            
                            
                            2,146
                            
                            
                            
                            5,150
                            
                            
                            
                            -(Loss)
      earnings before provision for income taxes
                            
                            
                            (9,695
                            )
                            
                            
                            (18,653
                            )
                            
                            
                            31,704
                            
                            
                            
                            31,048
                            
                            
                            
                            27,715Income
      tax (benefit) provision
                            
                            
                            (1,385
                            )
                            
                            
                            (3,724
                            )
                            
                            
                            5,368
                            
                            
                            
                            5,845
                            
                            
                            
                            7,482Net
      (loss) earnings
                            
                            
                            (8,310
                            )
                            
                            
                            (14,929
                            )
                            
                            
                            26,336
                            
                            
                            
                            25,203
                            
                            
                            
                            20,233(Loss)
      earnings per Class A common share - basic
                            
                            
                            (0.71
                            )
                            
                            
                            (1.25
                            )
                            
                            
                            2.11
                            
                            
                            
                            2.03
                            
                            
                            
                            1.67(Loss)
      earnings per Class A common share - diluted
                            
                            
                            (0.71
                            )
                            
                            
                            (1.25
                            )
                            
                            
                            2.11
                            
                            
                            
                            2.03
                            
                            
                            
                            1.67(Loss)
      earnings per Class B common share - basic
                            
                            
                            (0.72
                            )
                            
                            
                            (1.28
                            )
                            
                            
                            2.25
                            
                            
                            
                            2.16
                            
                            
                            
                            1.79(Loss)
      earnings per Class B common share - diluted
                            
                            
                            (0.72
                            )
                            
                            
                            (1.28
                            )
                            
                            
                            2.24
                            
                            
                            
                            2.15
                            
                            
                            
                            1.77Cash
      dividends declared per Class A common share
                            
                            
                            0.24
                            
                            
                            
                            0.24
                            
                            
                            
                            0.20
                            
                            
                            
                            0.16
                            
                            
                            
                            0.16Cash
      dividends declared per Class B common share
                            
                            
                            0.28
                            
                            
                            
                            0.28
                            
                            
                            
                            0.24
                            
                            
                            
                            0.20
                            
                            
                            
                            0.20As of December 31,2009
                            
                            
                            2008
                            
                            
                            2007
                            
                            
                            2006
                            
                            
                            2005(In
      thousands of dollars, except percentages)Selected
      Balance Sheet Data and Ratios:Working
      capital
                            
                            $
                            167,833
                            
                            
                            $
                            163,985
                            
                            
                            $
                            173,171
                            
                            
                            $
                            144,677
                            
                            
                            $
                            128,203Total
      assets
                            
                            
                            245,946
                            
                            
                            
                            261,784
                            
                            
                            
                            293,860
                            
                            
                            
                            268,497
                            
                            
                            
                            242,056Long
      term debt
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Stockholders'
      equity
                            
                            
                            208,932
                            
                            
                            
                            217,773
                            
                            
                            
                            244,527
                            
                            
                            
                            222,150
                            
                            
                            
                            201,577Return
      on average total assets (h)
                            
                            
                            -3.32
                            %
                            
                            
                            -5.17
                            %
                            
                            
                            9.34
                            %
                            
                            
                            9.65
                            %
                            
                            
                            8.83
                            %Return
      on average stockholders' equity (h)
                            
                            
                            -3.88
                            %
                            
                            
                            -6.23
                            %
                            
                            
                            11.30
                            %
                            
                            
                            11.81
                            %
                            
                            
                            10.75
                            %
  -21-
 
 (a)
              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.
 
 (b)
              During
      the third quarter of 2009, the Company conducted an interim valuation test
      related to the Company’s goodwill by operating segment.  As a
      result of the reduction in fair value of the Asia operating segment, the
      Company recorded charges of $12.9 million related to the impairment of
      goodwill of its Asia operating segment during 2009.  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 during
    2008.
 
 (c)
              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.  The Company incurred an
      additional $0.4 million of restructuring costs in 2009 related primarily
      to the facility lease obligation.
 
 (d)
              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.
 
 (e)
              During
      2009, the Company realized a net gain for financial reporting purposes of
      $7.1 million related to the sale of its investments in Toko, Inc. and
      Power-One, Inc and the final redemptions of its investment in the Columbia
      Strategic Cash Portfolio.  During 2008, the Company recorded
      other-than-temporary impairment charges and realized losses of $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 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.
 
 (f)
              During
      2009, the Company incurred a $2.0 million licensing fee in connection with
      the settlement of the Murata lawsuit, as further described in Item
      3.
 
 (g)
              During
      2009, the Company incurred $0.6 million in acquisition costs related to
      the acquisitions of Bel Pingguo and Cinch
  Connectors.
 
 (h)
              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.
  -22-
 
 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, including in some cases future projections, 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, 2009 and 2008, the Company had an
allowance for doubtful accounts of $0.6 million and $0.7 million,
respectively.  While historical loss experience is utilized in
determining the Company’s allowance for doubtful accounts, the Company believes
this factor may not by itself 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 on the aforementioned assumptions. During the
fourth quarter of 2008, the Company recorded a $0.3 million inventory writedown
related to 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, 2009 and 2008, the Company had reserves for
excess or obsolete inventory of $2.8 million and $4.1 million,
respectively.  If actual market conditions are less favorable than
those projected by management, additional inventory write-downs may be
required.
  -23-
  When the
value of inventory is written down, it is never written back up. When inventory
that has been written down 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 the amount of consideration transferred 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.  Management reviews the carrying value of goodwill and other
indefinite-lived intangible assets on an annual basis or whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.  The Company tests goodwill for impairment, and has
established December 31 as the annual impairment test date, 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 they are employed in or are considered a
liability related to the operations of the reporting unit and are considered in
determining the fair value of the reporting unit.  The Company has
determined that its reportable operating segments are its reporting
units.
 
 The goodwill impairment test is a
two-step process.  If the fair value of a reporting unit exceeds its
carrying amount, goodwill of the reporting unit is considered not impaired and
the second step of the impairment test is unnecessary.  If the
carrying amount of a reporting unit exceeds its fair value, the second step of
the goodwill impairment test is performed to measure the amount of impairment
loss, if any.  The second step of the goodwill impairment test
compares implied fair value of the reporting unit’s goodwill (i.e., fair value
of the reporting unit less the fair value of the unit’s assets and liabilities,
including identifiable intangible assets) with the carrying amount of that
goodwill.  If the carrying value of goodwill exceeds its implied fair
value, the excess is required to be recorded as an impairment.
 
 During the third quarter of 2009, the
Company conducted an interim impairment test related to its goodwill by
operating segment as a result of continued market declines.  As of the
testing date of August 31, 2009, only the Company’s Asia and Europe operating
segments had goodwill associated with them.  The Company’s fair value
analysis related to the interim test was supported by a weighting of two
generally accepted valuation approaches, 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.
  -24-
 
 Income Approach–Discounted Cash
Flows.  This valuation approach derives a present value of an
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, costs 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.
 
 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 interim test performed in the third quarter of 2009
as compared to those assumptions utilized during the 2008 annual
valuation.  Assumptions may vary by reporting unit.  The
table below shows the range of assumptions utilized across the various reporting
units.
 
 Goodwill Impairment AnalysisKeyAssumptions2009-Interim
                                  
                                  
                                  2008-AnnualIncome
      Approach - Discounted Cash Flows:Revenue
      growth rates
                                  
                                  8.8%
      - 18.7%
                                  
                                  
                                  (8.9%)
      - 10.3%Cost
      of equity capital
                                  
                                  13.8%
      - 14.8%
                                  
                                  
                                  13.0%
      - 13.6%Cost
      of debt capital
                                  
                                  6.0%
      - 6.2%
                                  
                                  
                                  4.9%
      - 7.7%Weighted
      average cost of capital
                                  
                                  12.6%
      - 13.4%
                                  
                                  
                                  11.0%
      - 13.3%Market
      Approach - Multiples of Guideline Companies (a):EBIT
      multiples used
                                  
                                  7.9
      - 8.9
                                  
                                  
                                  6.0
      - 10.7EBITDA
      multiples used
                                  
                                  6.3
      - 7.1
                                  
                                  
                                  5.0
      - 7.5DFNI
      multiples used
                                  
                                  12.2
      - 13.7
                                  
                                  
                                  9.3
      - 13.5DFCF
      multiples used
                                  
                                  8.7
      - 11.0
                                  
                                  
                                  6.4
      - 7.4Control
      premium (b)
                                  
                                  16.2%
      - 32.0%
                                  
                                  
                                  27.5%
      - 31.7%Weighting
      of Valuation Methods:Income
      Approach - Discounted Cash Flows
                                  
                                  75%
                                  
                                  
                                  75%Market
      Approach - Multiples of Guideline Companies
                                  
                                  25%
                                  
                                  
                                  25%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 reporting units
 (b)
Determined based on the industry mean control premium as published each year in
MergerStat Review
  -25-
 
 The valuation test, which heavily
weights future cash flow projections, indicated that the goodwill associated
with the Asia reporting unit was fully impaired as August 31, 2009.  The
reduction in expected future cash flows in Asia related to an overall reduction
in projected future sales coupled with a significant decrease in projected cash
flow related to working capital changes as of the third quarter 2009 testing
date of August 31, 2009 as compared to December 31, 2008.   For
purposes of this analysis, management projected that sales would return to 2008
levels in 2011, with moderate growth in subsequent years.  This
statement constitutes 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.  Based
upon the results of the interim impairment test, the Company recorded a goodwill
impairment charge of $12.9 million during the third quarter of
2009.
 
 At December 31, 2009, the remaining
goodwill of $2.0 million related solely to the Company’s Europe reporting
unit.   Management has concluded that the fair value of the
Europe reporting unit exceeds its carrying value at December 31,
2009.  While it has been determined that no impairment exists as of
December 31, 2009, there can be no assurances that goodwill impairments will not
occur in the future.  The valuation model utilizes assumptions which
represent management’s 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 a corresponding revenue decline at rates greater than management’s
expectations, may lead to additional goodwill impairment
charges.  Furthermore, a continued decline in the guideline company
multiples may also lead to additional goodwill impairment
charges.    Our goodwill balance was $2.0 million and $14.3
million at December 31, 2009 and 2008, respectively.  See Note
2 to the consolidated financial statements for additional information on
the Company’s goodwill.
 
 Long-Lived
Assets
 
 Property, plant and equipment
represents an important component of the Company’s total assets.  The
Company depreciates its property, plant and equipment on a straight-line basis
over the estimated useful lives of the assets.  Management reviews
long-lived assets for potential impairment whenever significant events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.  An impairment exists when the estimated undiscounted
cash flows expected to result from the use of an asset and its eventual
disposition are less than its carrying amount.  If an impairment
exists, the resulting write-down would be the difference between fair market
value of the long-lived asset and the related net book value.  No
impairments related to long-lived assets were recorded during the year ended
December 31, 2009.  During 2008, the Company evaluated its long-lived
assets in its Westborough, Massachusetts facility due to the scheduled closing
of the facility at the end of 2008.  In connection with this
evaluation, the Company recorded  $0.7 million of impairment charges
related to its long-lived assets during the year ended December 31,
2008.
  -26-





Income
Taxes





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.  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.  The accounting literature 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.





As of December 31, 2009, the Company
has foreign income tax net operating losses (“NOL”) and credit carryforwards of
$3.6 million, net of valuation allowances of $0.1 million and state income tax
NOL’s and credit carryforwards of $8.9 million, net of valuation allowances of
$5.5 million.  Foreign NOL's can be carried forward indefinitely and
state NOL's expire through 2013 - 2029.





The Company believes that it is more
likely than not that the benefit from certain state net operating loss
carryforwards and credits will not be realized.  In recognition of
this risk, we have provided a valuation allowance of $0.9 million on the
deferred tax assets relating to these state net operating loss and credit
carryforwards.  If our assumptions change and we determine we will be
able to realize these NOLs, the tax benefits relating to any reversal of the
valuation allowance on deferred tax assets at December 31, 2009 will be
recognized as a reduction of income tax expense.





The President of the United States has
presented a budget to the United States Congress which contains various
modifications to international tax rules.  Some of the proposed
changes might subject the Company to, among other things, additional income
taxes, restrictions on how foreign tax credits would be calculated and affect
taxation regarding the transfer of intangible property.  The Company
cannot ascertain at this time what the final outcome of this proposed
legislation will be or the effect, if any, on the Company's results of
operations or financial condition.





Revenue
Recognition





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, creditworthiness of 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 exist, 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 relationship with 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.


-27-





The Company has a significant amount of
sales with several customers.  During the year ended December 31,
2009, the Company had three customers with sales in excess of 10% of Bel’s
consolidated revenue. Management believes that the individual loss of two
of these customers would have a material adverse effect on the Company’s results
of operations, financial position and cash flows.  During the year
ended December 31, 2009, the Company had sales of $28.6 million and $22.5
million, representing 15.7% and 12.3% of Bel’s consolidated revenue, to Hon Hai
Precision Industry Company Ltd. and Flextronics International Ltd.,
respectively.





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 2009, 68% of the Company’s revenues
were derived from Asia, 23% from North America and 9% 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 47% of our total net sales for 2009.  The remaining 2009
revenues related to sales of the Company’s modules products (30%), interconnect
products (18%) and circuit protection products (5%).





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 wire wound component suppliers 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 products at its own manufacturing
facilities in the People’s Republic of China (PRC), Glen Rock, Pennsylvania;
Inwood, New York; the Dominican Republic, Mexico; the Czech Republic, and, since
the Cinch acquisition, in Vinita, Oklahoma; Reynosa, Mexico; and Worksop,
England.


-28-





Trends
Affecting our Business





The
Company believes the key factors affecting Bel’s 2009 and/or 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 have created 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.  While we
      have seen an increase in the backlog of orders in the second half of 2009,
      we do not anticipate a rebound to the 2008 level of sales volume in the
      near term.





·
            Commodity
      prices, especially those pertaining to gold, copper and integrated
      circuits, have been highly volatile.  Fluctuations in these
      prices and other commodity prices associated with Bel’s raw materials will
      have a corresponding impact on Bel’s profit
  margins.





·
            The
      costs of labor, particularly in the PRC where several of Bel’s factories
      are located, have risen significantly as a result of government mandates
      for new minimum wage and overtime requirements (effective April
      2008).  These higher labor rates, in addition to new minimum
      wage levels issued by the PRC government in January 2010, will continue to
      have a negative impact on Bel’s profit
margins.





·
            The
      global nature of Bel’s business exposes Bel to earnings volatility
      resulting from exchange rate
fluctuations.





·
            At
      the end of the third quarter of 2009, there was an increase in customer
      demand.  As a result, the Company and its wire wound component
      suppliers hired additional workers to meet this increased demand for Bel’s
      products.   This led to higher labor costs in the fourth
      quarter of 2009.  Management anticipates this trend to continue
      into 2010 due to training costs and production inefficiencies related to
      these new workers.





·
            As
      overall demand in our industry begins to increase, our competitors have
      not been able to meet increased customer demand, which has resulted in
      additional time sensitive demand for Bel’s products.  This will
      likely become another factor contributing to rising labor costs in future
      quarters, as excess overtime may be incurred to achieve these additional
      customer demands on a timely basis.





·
            In
      January 2010, the Company completed its acquisition of
      Cinch.  In connection with this transaction and the Bel Pingguo
      acquisition, the Company incurred $0.6 million in acquisition-related
      costs during the year ended December 31, 2009.  Additional
      costs, including severance charges, related to the acquisition of Cinch
      will be incurred in the first quarter of
2010.





These
factors are expected to continue into the foreseeable future.  Given
the need to maintain competitive pricing while incurring higher labor costs to
accommodate the recent increase in demand, the Company anticipates that its
results of operations for 2010 will be materially adversely affected by the
continuing economic crisis.


-29-





Summary
by Operating Segment





Net sales
by operating segment for the years ended December 31, 2009, 2008 and 2007 were
as follows (dollars in thousands):


% (Decrease) Increase2009
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  
                  2009/2008
                  
                  
                  
                  2008/2007Net
      sales from external customers:North
      America
                  
                  $
                  41,898
                  
                  
                  $
                  67,380
                  
                  
                  $
                  78,091
                  
                  
                  
                  -38
                  %
                  
                  
                  -14
                  %Asia
                  
                  
                  123,764
                  
                  
                  
                  165,164
                  
                  
                  
                  151,550
                  
                  
                  
                  -25
                  %
                  
                  
                  9
                  %Europe
                  
                  
                  17,091
                  
                  
                  
                  25,806
                  
                  
                  
                  29,496
                  
                  
                  
                  -34
                  %
                  
                  
                  -13
                  %$
                  182,753
                  
                  
                  $
                  258,350
                  
                  
                  $
                  259,137
                  
                  
                  
                  -29
                  %
                  
                  
                  0
                  %





In 2008,
there was a reduction in North America revenue due to the ending of a certain
product’s life cycle. In addition, at the end of 2008, the Company transitioned
the remaining operations in Westborough, Massachusetts to the PRC to take
advantage of economies of scale.  There was also an overall shift in
product mix during 2008 which increased the proportion of product being
manufactured, shipped and billed from Asia.  In 2009, the Company
experienced large reductions in sales volumes across all operating segments due
to weakened economic conditions, and continued to transition manufacturing to
the PRC with the closure of the Westborough, Massachusetts facility at the end
of 2008.





(Loss)
income from operations by operating segment for the years ended December 31,
2009, 2008 and 2007 were as follows (dollars in thousands):





2009
                  
                  
                  2008
                  
                  
                  2007(Loss)
      Income from Operations:North
      America
                  
                  $
                  (205
                  )
                  
                  $
                  (12,646
                  )
                  
                  $
                  6,515Asia
                  
                  
                  (16,462
                  )
                  
                  
                  1,202
                  
                  
                  
                  17,488Europe
                  
                  
                  (684
                  )
                  
                  
                  695
                  
                  
                  
                  1,509$
                  (17,351
                  )
                  
                  $
                  (10,749
                  )
                  
                  $
                  25,512





In
addition to sales volumes being significantly lower in 2009 as compared to 2008,
the Company recorded a goodwill impairment charge of $12.9 million in its Asia
operating segment in 2009.  In 2008, the Company recorded asset
impairment charges in its North America operating segment totaling $14.8
million, primarily related to a $14.1 million goodwill impairment charge and
$0.7 million in asset impairments related to the closure of the Westborough,
Massachusetts facility.  Also in 2008, the Company experienced a
significant increase in labor costs in Asia, due to increased training costs and
production inefficiencies resulting from the hiring of 5,300 net new hires in
addition to significantly higher wage rate rates effective April 1, 2008, as
mandated by PRC officials.





See Note
11 to the notes to consolidated financial statements contained in this Annual
Report on Form 10-K for additional segment disclosures.





Our
2009 Results





The current market conditions have
impacted the Company considerably during the year ended December 31,
2009.


-30-





During the year ended December 31,
2009, the Company experienced a 29.3% decrease in sales as compared to
2008.  This was primarily due to a reduction in demand across all
product lines related to weak global economic conditions.  The Company
also recorded a goodwill impairment charge of $12.9 million in 2009 related to
its Asia reporting unit, a $2.1 million license fee in connection with a lawsuit
settlement and $0.6 million in acquisition costs related to the acquisitions of
Bel Pingguo and Cinch Connectors in 2009.  The Company incurred $0.4
million in restructuring charges related to the closure of its Westborough,
Massachusetts facility and experienced an increase in the cost of materials due
to a shift in product mix.  Interest income also decreased by $1.9
million due to lower interest rates on invested balances.  These items
were offset, in part, by a 16.7% reduction in selling, general and
administrative expenses, lower labor costs in 2009, a $4.7 million gain on sale
of property, a reversal of a previously established tax liability of $3.9
million during 2009 and a $7.1 million net gain for financial reporting purposes
related to the sale of the Company’s investments in Power-One common stock and
Toko common stock, and the redemptions from the Columbia Portfolio during
2009.  The reduction in sales coupled with these and other factors
resulted in a net loss of $8.3 million for the year ended December 31,
2009.  Additional details related to these factors affecting the 2009
results are described in the Results of Operations section below.





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 31,2009
                
                
                2008
                
                
                2007Net
      sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %Cost
      of sales
                
                
                88.3
                
                
                
                84.0
                
                
                
                78.3Selling,
      general and administrative expenses
                
                
                16.4
                
                
                
                14.0
                
                
                
                13.9Impairment
      of assets
                
                
                7.0
                
                
                
                5.7
                
                
                
                -Restructuring
      charges
                
                
                0.2
                
                
                
                0.4
                
                
                
                -Gain
      on sale of property, plant and equipment
                
                
                2.6
                
                
                
                -
                
                
                
                2.1Realized
      gain (loss/impairment charge) on investment
                
                
                3.9
                
                
                
                (4.0
                )
                
                
                0.8Interest
      income and other, net
                
                
                0.3
                
                
                
                1.0
                
                
                
                1.6(Loss)
      earnings before (benefit) provision for income taxes
                
                
                (5.3
                )
                
                
                (7.2
                )
                
                
                12.2Income
      tax (benefit) provision
                
                
                (0.8
                )
                
                
                (1.4
                )
                
                
                2.1Net
      (loss) earnings
                
                
                (4.5
                )
                
                
                (5.8
                )
                
                
                10.2





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) from
                                                      Prior Period2009 compared
                                                      with 2008
                                                    
                                                    
                                                    2008 compared
      with 2007Net
      sales
                                                    
                                                    
                                                    (29.3
                                                    )%
                                                    
                                                    
                                                    (0.3
                                                    )%Cost
      of sales
                                                    
                                                    
                                                    (25.6
                                                    )
                                                    
                                                    
                                                    6.9Selling,
      general and administrative expenses
                                                    
                                                    
                                                    (16.7
                                                    )
                                                    
                                                    
                                                    (0.1
                                                    )Net
      loss/earnings
                                                    
                                                    
                                                    (44.3
                                                    )
                                                    
                                                    
                                                    (156.7
                                                    )


-31-





Sales





Net sales decreased by $75.6 million or
29.3% from $258.4 million during 2008 to $182.8 million during 2009. The Company
attributes the decrease principally to a reduction in demand across all major
product groups as a result of the weak economic conditions.





The significant components of the
Company's revenues for 2009 were magnetic products of $86.3 million (as compared
with $118.5 million during 2008), interconnect products of $32.5 million (as
compared with $47.4 million during 2008), module products of $54.3 million (as
compared with $77.3 million during 2008), and circuit protection products of
$9.7 million (as compared with $15.1 million during 2008.)





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 2010.  The
Company had three customers with sales in excess of 10%, with customer sales for
2009 amounting to $28.6 million, $22.5 million and $20.8 million, representing
15.7%, 12.3% and 11.4%, respectively, of total sales during the year ended
December 31, 2009.  The loss of any or all of these customers would
cause a significant reduction in sales volume.





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 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®integrated
connector sales of $5.0 million during the year ended December 31, 2008 as
compared to 2007, which resulted primarily from production inefficiencies
during early 2008 in the PRC.





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.)





Cost of
Sales





Cost of sales as a percentage of net
sales increased from 84.0% during the year ended December 31, 2008 to 88.3%
during the year ended December 31, 2009. The increase in the cost of sales
percentage is primarily attributable to the following:





 ̈
            In
      order to eliminate future legal fees related to the Murata patent
      infringement claim against the Company, a settlement was negotiated with
      Murata in October 2009 whereby the Company paid a lump sum license fee of
      $2.1 million in exchange for a licensing agreement covering past and
      future sales of Bel’s MagJack® integrated
      connector products.  As $2.0 million of this amount was deemed
      to relate to product sales from prior periods, this portion is included in
      cost of sales for the year ended December 31,
  2009.


-32-





 ̈
            Material
      costs as a percentage of sales have increased from 51.1% during 2008 to
      55.3% during 2009.  Bel manufactures a particular product line
      within the modules group that consists of a larger percentage of purchased
      components than most of the Company’s other products.  The
      proportion of total sales attributable to this product has increased to
      13% of total sales for the year ended December 31, 2009 as compared to 12%
      of total sales in 2008, mainly due to relatively larger revenue declines
      in other product lines.  While these products are strategic to
      Bel’s growth and important to total earnings, they return lower gross
      profit margins due to their higher material content, and the Company’s
      average gross profit percentage will likely decrease as these sales
      continue to account for an increasing proportion of total
      sales.





 ̈
            Included
      in cost of sales are research and development expenses of $7.8 million and
      $7.4 million for the years ended December 31, 2009 and 2008,
      respectively.   The increase in research and development
      expenses during 2009 was primarily related to Bel’s power products and new
      MagJack® integrated
      connectors.





 ̈
            Labor
      costs as a percentage of sales have decreased from 15.0% during 2008 to
      11.5% during 2009, due to a variety of factors.  The Company
      experienced excessive labor costs in 2008 related to increased training
      costs and production inefficiencies associated with the large volume of
      new hires after the 2008 Chinese New Year, which did not reoccur in
      2009.  As discussed above, there was a shift in product mix
      during 2009 whereby there is a higher percentage of sales relating to a
      particular product line within the modules group that consists of a larger
      percentage of purchased components than most of the Company’s other
      products.  The manufacturing process around this product line is
      less labor intensive, resulting in reduced labor costs in
      2009.  In addition, the Company has continued to transition the
      labor intensive assembly operations of other product lines to lower cost
      regions of the PRC during 2009.





 ̈
            During
      2009, support labor and depreciation and amortization were $4.0 million
      and $0.7 million lower, respectively, than 2008.  However, due
      to the reduction in 2009 sales volume, these fixed costs increased as a
      percentage of sales by 0.5% and 0.7%, respectively, as compared to
      2008.





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.  If 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
      MagJack®integrated
      connectors.





Selling, General and
Administrative Expenses (“SG&A”)





The percentage relationship of selling,
general and administrative expenses to net sales increased from 14.0% during the
year ended December 31, 2008 to 16.4% during the year ended December 31,
2009.  While the percentage of sales increased from last year, the
dollar amount of selling, general and administrative expense for the year ended
December 31, 2009 was $6.0 million (or 16.7%) lower as compared to
2008.  The overall reduction in dollar amount was the result of the
following factors:





 ̈
            Sales
      commissions decreased by $2.0 million due to the 2009 lower sales
      volume.


 ̈
            Travel
      expenses were reduced by $1.0 million, as management implemented travel
      restrictions beginning in the first quarter of
  2009.


 ̈
            General
      and administrative salaries and fringe benefits decreased as compared to
      2008 as a result of savings of approximately $1.4 million from
      company-wide reductions in headcount and a reduction of $0.2 million in
      bonus expense, partially offset by severance expense of $0.4
      million.


 ̈
            As
      a result of the significant volatility in market conditions during 2008
      and 2009, the underlying investments associated with the portion of the
      Company’s company-owned life insurance (COLI) attributable to SG&A
      experienced a decrease in cash surrender value during 2008 of $0.4
      million, followed by an increase in cash surrender value of $0.1 million
      during 2009.  This accounted for a $0.5 million decrease in
      SG&A expense in 2009 as compared to
2008.


 ̈
            Other
      selling costs were $0.4 million lower as compared to 2008 due to a
      reduction in sales and marketing expenses in Europe as well as lower
      freight expenses globally.


 ̈
            Other
      reductions in SG&A of $2.0 million included reductions in various
      other expense categories that were not individually
      significant.





These
factors were partially offset by the following factors:





 ̈
            The
      Company incurred $0.6 million in acquisition costs related to the
      acquisitions of Bel Pingguo and Cinch
  Connectors.


 ̈
            The
      Company recorded charges totaling $0.5 million for compensation expense
      and fees related to the unauthorized issuance of
  stock.


-34-





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.





Impairment of
Assets





During the third quarter of 2009, the
Company performed an interim valuation of the Company’s goodwill.  In
connection with this analysis, it was determined that the goodwill associated
with the Company’s Asia operating segment was impaired, primarily due to a
reduction in estimated future cash flows.  The related impairment
charge of $12.9 million is included in the Company’s consolidated statement of
operations for the year ended December 31, 2009.  Management
determined that the fair value of the remaining goodwill at December 31, 2009
exceeded its carrying value and that no additional impairment existed as of that
date.





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.  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.


-35-





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.  The
Company incurred an additional $0.4 million of restructuring charges in 2009,
primarily related to the facility lease obligation.  See Note 18 of
the notes to consolidated financial statements for additional information on
these restructuring charges.





Gain on Sale of Property,
Plant and Equipment





During the year ended December 31,
2009, the Company recognized a previously deferred gain from the sale of
property in Jersey City, New Jersey in the amount of $4.6
million.  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.





Realized Gain
(Loss/Impairment Charge) on Investments





During the year ended December 31,
2009, the Company sold its remaining investments in Power-One Inc. (“Power-One”)
common stock and Toko Inc. (“Toko”) common stock.  These sales
resulted in an aggregate net gain for financial reporting purposes of $6.9
million which was recorded during 2009.  The Company also realized
$0.2 million in gains associated with redemptions of its investment in the
Columbia Strategic Cash Portfolio (“Columbia Portfolio”) during the year ended
December 31, 2009.  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 of $3.6 million, Power-One of $5.3 million and the
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.





Interest Income and Other,
Net





Interest income earned on cash and cash
equivalents decreased by approximately $1.9 million during the year ended
December 31, 2009, as compared to the year ended December 31, 2008. 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. The decreases in interest income during 2009 and 2008 as
compared to prior years is due primarily to the reduction in interest rates on
invested balances.


-36-





(Benefit) Provision forIncome
Taxes





The benefit for income taxes for the
year ended December 31, 2009 was $1.4 million compared to $3.7 million for the
year ended December 31, 2008.  The Company incurred losses before
benefit for income taxes for the years ended December 31, 2009 and 2008 which
resulted in a $9.0 million lower loss before benefit for income taxes during
2009 compared to 2008.  The Company’s effective tax rate, the income
tax benefit as a percentage of loss before benefit from income taxes, was
(14.3)% and (20.0)% for the years ended December 31, 2009 and 2008,
respectively. The Company’s effective tax rate will fluctuate based on the
geographic segment in which pretax profits/losses are earned.  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 effective tax benefit during
2009 as compared to 2008 is attributable to a gain on sale of property and
marketable securities in North America which was offset, in part, by the
settlement of a lawsuit.  In the Far East, the Company incurred losses
with no associated tax benefit as compared to the year ended December 31,
2008.  During the year ended December 31, 2009, certain statutes of
limitations expired which resulted in a reversal of a previously recognized
liability for uncertain tax positions in the amount of $3.9
million.  This was offset, in part, by an increase in the liability
for uncertain tax positions in the amount of $1.3 million during the year ended
December 31, 2009.





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 (loss) 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 (loss) 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 North America 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.





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 Macao. 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.





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 which are
imposed at a tax rate of 12%.





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.


-37-





The Company’s policy is to recognize
interest and penalties related to uncertain tax positions as a component of the
current (benefit) provision for income taxes.  During the years ended
December 31, 2009, 2008 and 2007, the Company recognized approximately $0.1
million, $0.1 million and $0.5 million, respectively, in interest and penalties
in the consolidated statements of operations.  The Company has
approximately $0.6 million and $1.6 million accrued for the payment of interest
and penalties at December 31, 2009 and 2008, respectively, which is included in
both income taxes payable and liability for uncertain tax positions in the
consolidated balance sheet.  The Company is not currently being
audited by any tax authorities.





The President of the United States has
presented a budget to the United States Congress which contains various
modifications to international tax rules.  Some of the proposed
changes might subject the Company to, among other things, additional income
taxes, restrictions on how foreign tax credits would be calculated and affect
taxation regarding the transfer of intangible property.  The Company
cannot ascertain at this time what the final outcome of this proposed
legislation will be or the effect, if any, on the Company's results of
operations or financial condition.





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 (approximately 1.7%) during the year ended December 31,
2009 as compared with 2008.  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 for the year ended December 31, 2008, which were charged to
expense.  Realized and unrealized currency gains (losses) during the
years ended December 31, 2009 and 2007 were not material.  Translation
of subsidiaries’ foreign currency financial statements into U.S. dollars
resulted in translation (losses) gains of ($0.4) million and $1.0 million for
the years ended December 31, 2008 and 2007, respectively, which are included in
accumulated other comprehensive (loss) income.  Translation gains
during the year ended December 31, 2009 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.


-38-





The
Company has an 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 and as such, there was no balance outstanding as of
December 31, 2009 and December 31, 2008.  At each of 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.  The Company is in compliance with its debt covenants as of
December 31, 2009.





The
Company's Hong Kong subsidiary had an unsecured line of credit of approximately
$2 million, which was unused at December 31, 2009.  The line of credit
expired on January 31, 2009 and was 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 years ended December 31,
2009 and 2008.  For the year ended December 31, 2007, the Company
recorded interest expense of $0.1 million.





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 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
remained in escrow and had been classified as restricted cash as of December 31,
2008.  In February 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  In March 2009,
the title company released the remaining escrow of $2.3 million and
corresponding guarantees and the Company recognized the gain associated with the
sale of this property in the amount of $4.6 million.  In July 2009,
the Company established a standby letter of credit for the State of New Jersey
as a performance guarantee related to environmental cleanup associated with the
Jersey City, New Jersey property sale.  In connection with this
agreement, the Company has a compensating balance of $0.3 million which has been
classified as restricted cash as of December 31, 2009.  This
compensating balance will be reduced to less than $0.1 million upon its renewal
in July 2010.


-39-


On
January 29, 2010, the Company completed the acquisition of Cinch Connectors
(“Cinch”) from Safran S.A. for approximately $37.5 million in cash plus
approximately $1.5 million for the assumption of certain
expenses.  The final purchase price remains subject to certain
adjustments related to working capital.  The transaction was funded
with cash on hand.  Cinch is headquartered in Lombard, Illinois and
has manufacturing facilities in Vinita, Oklahoma, Reynosa, Mexico and Worksop,
England.





Columbia
Portfolio:





Through
December 2009, the Company’s investment securities included privately placed
units of beneficial interests in the Columbia Portfolio, which was an enhanced
cash fund sold as an alternative to money-market funds.  Due to
adverse market conditions, the fund was overwhelmed with withdrawal requests
from investors and the fund was closed with a restriction placed upon the cash
redemption ability of its holders.  At the time the liquidation was
announced in December 2007, the Company held 25.7 million units of the Columbia
Portfolio at a book value of $25.7 million.  At December 31, 2008, the
Company held 6.1 million units at a book value of $5.1 million, which
approximated its fair value at that date.





As of
December 31, 2009, the Company has received total cash redemptions to date of
$24.2 million (including $5.3 million during the year ended December 31,
2009) at a weighted-average net asset value of $.9410 per unit.  The
Company recorded a gain of $0.2 million during the year ended December 31, 2009,
as the net asset value exceeded the adjusted basis of this investment on the
dates of redemption.  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 noted, 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.  The Company received the final redemption
from this fund in December 2009 and the fund was fully liquidated as of December
31, 2009.





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).  During the year ended December 31, 2009,
the Company sold its remaining investment in Toko common stock on the open
market at an aggregate fair market value of $1.9 million, resulting in a loss of
$0.1 million for financial reporting purposes.  The Company had
previously recorded pre-tax impairment charges totaling $3.6 million during the
year ended December 31, 2008 related to this investment.





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.





Power-One,
Inc.:





As of
December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One
common stock at an aggregate cost of $14.1 million ($1.92 per
share).  During the year ended December 31, 2009, the Company sold its
full investment in Power-One common stock on the open market at an aggregate
fair market value of $15.8 million, resulting in a gain of $7.0 million for
financial reporting purposes.  The Company had previously recorded a
pre-tax impairment charge of $5.3 million during the year ended December 31,
2008 related to this investment.


-40-





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,
2009, the Company's cash and cash equivalents increased by $49.3 million from
$75.0 million at December 31, 2008 to $124.2 million at December 31, 2009,
reflecting approximately $29.2 million provided by operating activities. This
resulted primarily from a reduction in 2009 sales volume and the associated
decrease in purchasing of raw materials and overall reduction in manufacturing
of finished products which led to a $11.3 million decrease in accounts
receivable and a $14.8 million decrease in inventory on hand as compared to
those balances at December 31, 2008.  Other factors contributing to
the overall increase in cash and cash equivalents at December 31, 2009 included
$20.6 million from the sale of marketable securities, $5.3 million from the
final redemptions of the Columbia Portfolio, $1.5 million of proceeds from the
cash surrender value of company-owned life insurance policies and $2.6 million
of proceeds from the sale of property, plant and equipment, primarily from the
$2.3 million release of final escrow related to the sale of the Jersey City
property, offset, in part, by $2.4 million for the purchase of property, plant
and equipment, $0.1 million for the repurchase of the Company’s common stock,
$3.5 million for the purchase of marketable securities, $0.4 million for payment
of an acquisition, $0.1 million for the purchase of a license agreement and $3.1
million for payments of dividends.  The remaining reduction in cash
and cash equivalent relates to $0.3 million which was reclassified as restricted
cash as of December 31, 2009.





During
the year ended December 31, 2008, the Company's cash and cash equivalents
decreased by $8.9 million from $83.9 million at December 31, 2007 to $75.0
million at December 31, 2008, 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 from
$76.8 million at December 31, 2006 to $83.9 million at December 31, 2007,
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).


-41-





Cash and cash equivalents, marketable
securities, short-term investments and accounts receivable comprised
approximately 64.7% and 53.0% of the Company's total assets at December 31, 2009
and December 31, 2008, respectively. The Company's current ratio (i.e., the
ratio of current assets to current liabilities) was 7.0 to 1 and 6.5 to 1 at
December 31, 2009 and December 31, 2008, respectively.





Accounts receivable, net of allowances,
were $34.8 million at December 31, 2009, as compared with $46.0 million at
December 31, 2008.  The decrease in accounts receivable is primarily
due to a 16.2% decrease in fourth quarter sales for 2009 as compared to 2008 in
addition to a decrease in the Company’s days sales outstanding (DSO) from 73
days at December 31, 2008 to 62 days at December 31, 2009.  Marketable
securities decreased by $13.7 million as a result of Bel’s sales of its
investments in Power-One and Toko common stocks for an aggregate fair market
value of $17.7 million, offset by purchases of $3.5 million of marketable
securities.  Short-term investments were $4.0 million lower at
December 31, 2009 as compared to 2008, as the remainder of this investment was
liquidated during 2009. Inventories were $31.8 million at December 31, 2009, as
compared with $46.5 million at December 31, 2008.  The decrease in
inventory levels was primarily related to an $11.5 million reduction in finished
goods inventory as compared to December 31, 2008, due to lower customer demand
for Bel’s products during most of 2009.  Accounts payable was $17.2
million at December 31, 2009 as compared to $14.3 million at December 31, 2008,
as the Company has hired additional workers in order to meet an upturn in
customer demand and purchased raw materials to accommodate the resulting
increase in production.





The following table sets forth at
December 31, 2009 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, amounting to $1.8 million
included in income taxes payable and $2.9 million included in liability for
uncertain tax positions, as of December 31, 2009, as the Company is unable to
make reasonable reliable estimates of the period of cash settlements, if any,
with the respective taxing authorities.




Payments due by periodContractual Obligations
                          
                          Total
                          
                          
                          Less than 1
                            year
                          
                          
                          1-3
                            years
                          
                          
                          3-5
                            years
                          
                          
                          More than
                            5 yearsCapital
      expenditure obligations
                          
                          $
                          1,442
                          
                          
                          $
                          1,442
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Operating
      leases
                          
                          
                          4,784
                          
                          
                          
                          1,977
                          
                          
                          
                          2,174
                          
                          
                          
                          605
                          
                          
                          
                          28Raw
      material purchase obligations
                          
                          
                          19,949
                          
                          
                          
                          19,949
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Total
                          
                          $
                          26,175
                          
                          
                          $
                          23,368
                          
                          
                          $
                          2,174
                          
                          
                          $
                          605
                          
                          
                          $
                          28





The Company is required to pay SERP
obligations at the occurrence of certain events. As of December 31, 2009, $5.6
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, 2009 is the cash surrender value of company-owned life insurance
and marketable securities held in a Rabbi trust with an aggregate value of $6.4
million, which has been designated by the Company to be utilized to fund the
Company’s SERP obligations.


-42-





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 either be
funded with cash on hand or would 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.





New Financial Accounting
Standards





During 2009, the Company adopted the
revised accounting guidance related to business combinations. This guidance
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 literature.  In accordance with this guidance,
acquisition-related costs, including restructuring costs,  must be
recognized separately from the acquisition and will generally be expensed as
incurred.  That replaces the cost-allocation process detailed in
previous accounting literature, which required the cost of an acquisition to be
allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values.   The Company implemented this new
guidance effective January 1, 2009 and, as a result, a total of $0.6
million in acquisition-related costs were charged to selling, general and
administrative expense during 2009.





During
2009, the Company implemented an update to the accounting guidance related to
earnings per share.  In accordance with this accounting guidance,
unvested share-based payment awards with rights to dividends are participating
securities and shall be included in the computation of basic earnings per
share.  The Company adopted this guidance effective January 1, 2009
and in accordance with the accounting guidance, all prior-period earnings per
share data presented has been adjusted retrospectively to conform to the
provisions of the new guidance.  This adjustment did not have a
material impact on prior periods presented.





The FASB
has published an update to the accounting guidance on fair value measurements
and disclosures as it relates to investments in certain entities that calculate
net asset value per share (or its equivalent). This accounting guidance
permits a reporting entity to measure the fair value of certain investments on
the basis of the net asset value per share of the investment (or its
equivalent). This update also requires new disclosures, by major category of
investments, about the attributes of investments included within the scope of
this amendment to the Codification. The guidance in this update is effective for
interim and annual periods ending after December 15, 2009. The Company does not
expect the adoption of this standard to have a material impact on the Company’s
results of operations, financial condition or cash flows.


-43-





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.





The Company enters into transactions
denominated in U.S. Dollars, Hong Kong Dollars, the Chinese Renminbi, Euros,
British Pounds, the Czech Koruna and other European
currencies.  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.


-44-





BEL FUSE
INC.


INDEX





Financial Statements
                
                PageReport
      of Independent Registered Public Accounting Firm
                
                F-1
      - F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                
                F-3
      - F-4Consolidated
      Statements of Operations for Each of the Three Years in the Period Ended
      December 31, 2009
                
                F-5Consolidated
      Statements of Stockholders' Equity for Each of the Three Years in the
      Period Ended December 31, 2009
                
                F-6
      - F-7Consolidated
      Statements of Cash Flows for Each of the Three Years in the Period Ended
      December 31, 2009
                
                F-8
      - F-10Notes
      to Consolidated Financial Statements
                
                F-11
      - F-50







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, 2009 and 2008, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2009.  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, 2009, 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, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2009, in conformity with accounting principles generally accepted
in the United States of America.  Also, in our opinion, such financial
statement schedule of Bel Fuse Inc. and subsidiaries, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents 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, 2009, based on the criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.




DELOITTE
& TOUCHE LLP




New York,
New York


March 12,
2010


F-2




BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(dollars
in thousands, except share and per share data)





December 31,
                
                
                December 31,2009
                
                
                2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                
                $
                124,231
                
                
                $
                74,955Marketable
      securities
                
                
                2
                
                
                
                13,735Short-term
      investments
                
                
                -
                
                
                
                4,013Accounts
      receivable - less allowance for doubtful accounts of $596 and $660 at
      December 31, 2009 and December 31, 2008, respectively
                
                
                34,783
                
                
                
                46,047Inventories
                
                
                31,791
                
                
                
                46,524Prepaid
      expenses and other current assets
                
                
                953
                
                
                
                859Refundable
      income taxes
                
                
                3,255
                
                
                
                2,498Assets
      held for sale
                
                
                -
                
                
                
                236Deferred
      income taxes
                
                
                815
                
                
                
                4,752Total
      Current Assets
                
                
                195,830
                
                
                
                193,619Property,
      plant and equipment - net
                
                
                35,943
                
                
                
                39,936Restricted
      cash
                
                
                250
                
                
                
                2,309Long-term
      investments
                
                
                -
                
                
                
                1,062Deferred
      income taxes
                
                
                4,516
                
                
                
                5,205Intangible
      assets - net
                
                
                551
                
                
                
                926Goodwill
                
                
                1,957
                
                
                
                14,334Other
      assets
                
                
                6,899
                
                
                
                4,393TOTAL
      ASSETS
                
                $
                245,946
                
                
                $
                261,784





See notes
to consolidated financial statements.


F-3





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS (Continued)


(dollars
in thousands, except share and per share data)





December 31,
                
                
                December 31,2009
                
                
                2008LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                
                $
                17,194
                
                
                $
                14,285Accrued
      expenses
                
                
                7,991
                
                
                
                9,953Accrued
      restructuring costs
                
                
                156
                
                
                
                555Income
      taxes payable
                
                
                1,863
                
                
                
                4,054Dividends
      payable
                
                
                793
                
                
                
                787Total
      Current Liabilities
                
                
                27,997
                
                
                
                29,634Long-term
      Liabilities:Accrued
      restructuring costs
                
                
                508
                
                
                
                406Deferred
      gain on sale of property
                
                
                -
                
                
                
                4,616Liability
      for uncertain tax positions
                
                
                2,887
                
                
                
                3,445Minimum
      pension obligation and unfunded pension liability
                
                
                5,622
                
                
                
                5,910Total
      Long-term Liabilities
                
                
                9,017
                
                
                
                14,377Total
      Liabilities
                
                
                37,014
                
                
                
                44,011Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value, authorized 1,000,000 shares; none
    issued
                
                
                -
                
                
                
                -Class
      A common stock, par value $.10 per share - authorized 10,000,000 shares;
      outstanding 2,174,912 and 2,180,982 shares, respectively (net of 1,072,769
      treasury shares)
                
                
                217
                
                
                
                218Class
      B common stock, par value $.10 per share - authorized 30,000,000 shares;
      outstanding 9,464,343 and 9,369,893 shares, respectively (net of 3,218,307
      treasury shares)
                
                
                946
                
                
                
                937Additional
      paid-in capital
                
                
                21,663
                
                
                
                19,963Retained
      earnings
                
                
                185,014
                
                
                
                196,467Accumulated
      other comprehensive income
                
                
                1,092
                
                
                
                188Total
      Stockholders' Equity
                
                
                208,932
                
                
                
                217,773TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                245,946
                
                
                $
                261,784





See notes
to consolidated financial statements.


F-4





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(dollars
in thousands, except share and per share data)





Years Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007Net
      Sales
                    
                    $
                    182,753
                    
                    
                    $
                    258,350
                    
                    
                    $
                    259,137Costs
      and expenses:Cost
      of sales
                    
                    
                    161,454
                    
                    
                    
                    217,079
                    
                    
                    
                    203,007Selling,
      general and administrative
                    
                    
                    30,055
                    
                    
                    
                    36,093
                    
                    
                    
                    36,117Impairment
      of assets
                    
                    
                    12,875
                    
                    
                    
                    14,805
                    
                    
                    
                    -Restructuring
      charges
                    
                    
                    413
                    
                    
                    
                    1,122
                    
                    
                    
                    -Gain
      on sale of property, plant and equipment
                    
                    
                    (4,693
                    )
                    
                    
                    -
                    
                    
                    
                    (5,499
                    )200,104
                    
                    
                    
                    269,099
                    
                    
                    
                    233,625(Loss)
      income from operations
                    
                    
                    (17,351
                    )
                    
                    
                    (10,749
                    )
                    
                    
                    25,512Gain
      (loss/impairment charge) on investment
                    
                    
                    7,129
                    
                    
                    
                    (10,358
                    )
                    
                    
                    2,146Interest
      income and other, net
                    
                    
                    527
                    
                    
                    
                    2,454
                    
                    
                    
                    4,046(Loss)
      earnings before (benefit) provision for income taxes
                    
                    
                    (9,695
                    )
                    
                    
                    (18,653
                    )
                    
                    
                    31,704Income
      tax (benefit) provision
                    
                    
                    (1,385
                    )
                    
                    
                    (3,724
                    )
                    
                    
                    5,368Net
      (loss) earnings
                    
                    $
                    (8,310
                    )
                    
                    $
                    (14,929
                    )
                    
                    $
                    26,336(Loss)
      earnings per Class A common shareBasic
                    
                    $
                    (0.71
                    )
                    
                    $
                    (1.25
                    )
                    
                    $
                    2.11Diluted
                    
                    $
                    (0.71
                    )
                    
                    $
                    (1.25
                    )
                    
                    $
                    2.11Weighted
      average Class A common shares outstandingBasic
                    
                    
                    2,175,322
                    
                    
                    
                    2,391,088
                    
                    
                    
                    2,637,409Diluted
                    
                    
                    2,175,322
                    
                    
                    
                    2,391,088
                    
                    
                    
                    2,637,409(Loss)
      earnings per Class B common shareBasic
                    
                    $
                    (0.72
                    )
                    
                    $
                    (1.28
                    )
                    
                    $
                    2.25Diluted
                    
                    $
                    (0.72
                    )
                    
                    $
                    (1.28
                    )
                    
                    $
                    2.24Weighted
      average Class B common shares outstandingBasic
                    
                    
                    9,363,199
                    
                    
                    
                    9,350,747
                    
                    
                    
                    9,244,198Diluted
                    
                    
                    9,363,199
                    
                    
                    
                    9,350,747
                    
                    
                    
                    9,266,016





See notes
to consolidated financial statements.


F-5





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


(dollars
in thousands)





AccumulatedComprehensive
                          
                          
                          
                          
                          
                          Other
                          
                          
                          Class A
                          
                          
                          Class B
                          
                          
                          AdditionalIncome
                          
                          
                          Retained
                          
                          
                          Comprehensive
                          
                          
                          Common
                          
                          
                          Common
                          
                          
                          Paid-InTotal
                          
                          
                          (Loss)
                          
                          
                          Earnings
                          
                          
                          Income (Loss)
                          
                          
                          Stock
                          
                          
                          Stock
                          
                          
                          CapitalBalance,
      January 1, 2007
                          
                          $
                          222,150
                          
                          
                          
                          
                          
                          $
                          190,953
                          
                          
                          $
                          (1,816
                          )
                          
                          $
                          270
                          
                          
                          $
                          917
                          
                          
                          $
                          31,826Exercise
      of stock options
                          
                          
                          1,452
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          6
                          
                          
                          
                          1,446Tax
      benefits arising from the disposition of non-qualified incentive stock
      options
                          
                          
                          149
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          149Cash
      dividends declared on Class A common stock
                          
                          
                          (534
                          )
                          
                          
                          
                          
                          
                          (534
                          )Cash
      dividends declared on Class B common stock
                          
                          
                          (2,175
                          )
                          
                          
                          
                          
                          
                          (2,175
                          )Issuance
      of restricted common stock
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          7
                          
                          
                          
                          (7
                          )Termination
      of restricted common stock
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (1
                          )
                          
                          
                          1Repurchase/retirement
      of Class A common stock
                          
                          
                          (5,733
                          )
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (15
                          )
                          
                          
                          
                          
                          
                          
                          (5,718
                          )Currency
      translation adjustment
                          
                          
                          960
                          
                          
                          $
                          960
                          
                          
                          
                          
                          
                          
                          
                          960Unrealized
      holding gains on marketable securities arising during the year, net of
      taxes of $1,275
                          
                          
                          2,077
                          
                          
                          
                          2,077
                          
                          
                          
                          
                          
                          
                          
                          2,077Reclassification
      adjustment for gains included in net earnings, net of taxes of
      ($1,261)
                          
                          
                          (2,058
                          )
                          
                          
                          (2,058
                          )
                          
                          
                          
                          
                          
                          
                          (2,058
                          )Stock-based
      compensation expense
                          
                          
                          1,410
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1,410Change
      in unfunded SERP liability, net of taxes of $204
                          
                          
                          493
                          
                          
                          
                          493
                          
                          
                          
                          
                          
                          
                          
                          493Net
      earnings
                          
                          
                          26,336
                          
                          
                          
                          26,336
                          
                          
                          
                          26,336Comprehensive
      income
                          
                          
                          
                          
                          
                          $
                          27,808Balance,
      December 31, 2007
                          
                          $
                          244,527
                          
                          
                          
                          
                          
                          
                          $
                          214,580
                          
                          
                          $
                          (344
                          )
                          
                          $
                          255
                          
                          
                          $
                          929
                          
                          
                          $
                          29,107Exercise
      of stock options
                          
                          $
                          312
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          3
                          
                          
                          $
                          309Tax
      benefits arising from the disposition of non-qualified incentive stock
      options
                          
                          
                          39
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          39Cash
      dividends declared on Class A common stock
                          
                          
                          (565
                          )
                          
                          
                          
                          
                          
                          $
                          (565
                          )Cash
      dividends declared on Class B common 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 of ($2,591)
                          
                          
                          (4,230
                          )
                          
                          
                          (4,230
                          )
                          
                          
                          
                          
                          
                          
                          (4,230
                          )Reclassification
      adjustment of unrealized holding losses for impairment charge included in
      net loss, net of taxes of $3,402
                          
                          
                          5,551
                          
                          
                          
                          5,551
                          
                          
                          
                          
                          
                          
                          
                          5,551Stock-based
      compensation expense
                          
                          
                          1,478
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1,478Change
      in unfunded SERP liability, net of taxes of ($123)
                          
                          
                          (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-6





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


(dollars
in thousands)





Accumulated
                      
                      
                      
                      
                      
                      
                      
                      
                      AdditionalOther
                      
                      
                      Class A
                      
                      
                      Class B
                      
                      
                      Paid-InComprehensive
                      
                      
                      Retained
                      
                      
                      Comprehensive
                      
                      
                      Common
                      
                      
                      Common
                      
                      
                      CapitalTotal
                      
                      
                      Loss
                      
                      
                      Earnings
                      
                      
                      Income
                      
                      
                      Stock
                      
                      
                      Stock
                      
                      
                      (APIC)Balance,
      December 31, 2008
                      
                      $
                      217,773
                      
                      
                      
                      
                      
                      $
                      196,467
                      
                      
                      $
                      188
                      
                      
                      $
                      218
                      
                      
                      $
                      937
                      
                      
                      $
                      19,963Cash
      dividends declared on Class A common stock
                      
                      
                      (521
                      )
                      
                      
                      
                      
                      
                      (521
                      )Cash
      dividends declared on Class B common stock
                      
                      
                      (2,622
                      )
                      
                      
                      
                      
                      
                      (2,622
                      )Issuance
      of restricted common stock
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      14
                      
                      
                      
                      (14
                      )Termination
      of restricted common stock
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (2
                      )
                      
                      
                      2Repurchase/retirement
      of Class A common stock
                      
                      
                      (92
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (1
                      )
                      
                      
                      
                      
                      
                      
                      (91
                      )Currency
      translation adjustment
                      
                      
                      43
                      
                      
                      $
                      43
                      
                      
                      
                      
                      
                      
                      
                      43Unrealized
      holding gains on marketable securities arising during the year, net of
      taxes of $2,648
                      
                      
                      4,321
                      
                      
                      
                      4,321
                      
                      
                      
                      
                      
                      
                      
                      4,321Reclassification
      adjustment of unrealized holding gains included in net earnings, net of
      taxes of ($2,629)
                      
                      
                      (4,289
                      )
                      
                      
                      (4,289
                      )
                      
                      
                      
                      
                      
                      
                      (4,289
                      )Reduction
      in APIC pool associated with tax deficiencies related to restricted stock
      awards
                      
                      
                      (287
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (287
                      )Unauthorized
      issuance of common stock
                      
                      
                      812
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      812Return
      of unauthorized shares of common stock
                      
                      
                      (456
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (3
                      )
                      
                      
                      (453
                      )Stock-based
      compensation expense
                      
                      
                      1,731
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      1,731Change
      in unfunded SERP liability, net of taxes of $264
                      
                      
                      829
                      
                      
                      
                      829
                      
                      
                      
                      
                      
                      
                      
                      829Net
      loss
                      
                      
                      (8,310
                      )
                      
                      
                      (8,310
                      )
                      
                      
                      (8,310
                      )Comprehensive
      loss
                      
                      
                      
                      
                      
                      $
                      (7,406
                      )Balance,
      December 31, 2009
                      
                      $
                      208,932
                      
                      
                      
                      
                      
                      
                      $
                      185,014
                      
                      
                      $
                      1,092
                      
                      
                      $
                      217
                      
                      
                      $
                      946
                      
                      
                      $
                      21,663





See notes
to consolidated financial statements.


F-7





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(dollars
in thousands)





Year Ended December 31,2009
                
                
                2008
                
                
                2007Cash
      flows from operating activities:Net
      (loss) earnings
                
                $
                (8,310
                )
                
                $
                (14,929
                )
                
                $
                26,336Adjustments
      to reconcile net (loss) earnings to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                6,778
                
                
                
                7,443
                
                
                
                7,921Stock-based
      compensation
                
                
                1,731
                
                
                
                1,478
                
                
                
                1,465Restructuring
      charges, net of cash payments
                
                
                (297
                )
                
                
                961
                
                
                
                -Excess
      tax benefits from share-based payment arrangements
                
                
                -
                
                
                
                (39
                )
                
                
                (149
                )Gain
      on sale of property, plant and equipment
                
                
                (4,693
                )
                
                
                -
                
                
                
                (5,499
                )Realized
      (gain) loss/impairment charge on investment
                
                
                (7,129
                )
                
                
                10,358
                
                
                
                (2,146
                )Impairment
      of assets
                
                
                12,875
                
                
                
                14,805
                
                
                
                -Other,
      net
                
                
                807
                
                
                
                1,565
                
                
                
                207Deferred
      income taxes
                
                
                4,004
                
                
                
                (3,616
                )
                
                
                (2,039
                )Changes
      in operating assets and liabilities (see below)
                
                
                23,392
                
                
                
                (7,737
                )
                
                
                (6,250
                )Net
      Cash Provided by Operating Activities
                
                
                29,158
                
                
                
                10,289
                
                
                
                19,846Cash
      flows from investing activities:Purchase
      of property, plant and equipment
                
                
                (2,357
                )
                
                
                (6,887
                )
                
                
                (9,169
                )Purchase
      of intangible asset
                
                
                (99
                )
                
                
                (300
                )
                
                
                (100
                )Purchase
      of marketable securities
                
                
                (3,545
                )
                
                
                (18,970
                )
                
                
                (11,801
                )Payment
      for acquisition
                
                
                (454
                )
                
                
                -
                
                
                
                -Cash
      transferred to restricted cash
                
                
                (250
                )
                
                
                -
                
                
                
                -Redesignation
      of marketable security to cash equivalent
                
                
                -
                
                
                
                2,000
                
                
                
                -Redesignation
      of cash equivalent to investment (Note 3)
                
                
                -
                
                
                
                -
                
                
                
                (25,684
                )Proceeds
      from sale of marketable securities
                
                
                20,592
                
                
                
                -
                
                
                
                26,647Proceeds
      from sale of property, plant and equipment
                
                
                2,639
                
                
                
                2,272
                
                
                
                11,332Proceeds
      from cash surrender value of company-owned life insurance
                
                
                1,518
                
                
                
                -
                
                
                
                -Redemption
      of investment
                
                
                5,286
                
                
                
                16,600
                
                
                
                2,284Net
      Cash Provided by (Used In) Investing Activities
                
                
                23,330
                
                
                
                (5,285
                )
                
                
                (6,491
                )





See notes
to consolidated financial statements.


F-8





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


(dollars
in thousands)





Year Ended December 31,2009
                
                
                2008
                
                
                2007Cash
      flows from financing activities:Proceeds
      from exercise of stock options
                
                $
                -
                
                
                $
                312
                
                
                $
                1,452Dividends
      paid to common shareholders
                
                
                (3,137
                )
                
                
                (3,192
                )
                
                
                (2,473
                )Purchase and retirement of Class
      A common
      stock
                
                
                (92
                )
                
                
                (11,002
                )
                
                
                (5,733
                )Excess tax benefits from
      share-based payment
      arrangements
                
                
                -
                
                
                
                39
                
                
                
                149Net
      Cash Used In Financing Activities
                
                
                (3,229
                )
                
                
                (13,843
                )
                
                
                (6,605
                )Effect
      of exchange rate changes on cash
                
                
                17
                
                
                
                (81
                )
                
                
                364Net
      Increase (Decrease) in Cash and Cash Equivalents
                
                
                49,276
                
                
                
                (8,920
                )
                
                
                7,114Cash
      and Cash Equivalents - beginning of period
                
                
                74,955
                
                
                
                83,875
                
                
                
                76,761Cash
      and Cash Equivalents - end of period
                
                $
                124,231
                
                
                $
                74,955
                
                
                $
                83,875Changes in operating
      assets and
      liabilities consist of:Decrease
      (increase) in accounts receivable
                
                $
                11,297
                
                
                $
                6,010
                
                
                $
                (7,934
                )Decrease
      (increase) in inventories
                
                
                14,763
                
                
                
                (7,585
                )
                
                
                7,482(Increase) decrease in prepaid
      expenses and other
      current assets
                
                
                (92
                )
                
                
                579
                
                
                
                (1
                )Decrease
      (increase) in other assets
                
                
                76
                
                
                
                (20
                )
                
                
                (1,135
                )Increase
      (decrease) in accounts payable
                
                
                2,905
                
                
                
                (1,842
                )
                
                
                (1,184
                )Decrease
      in income taxes payable
                
                
                (3,510
                )
                
                
                (2,743
                )
                
                
                (3,194
                )Decrease
      in accrued expenses
                
                
                (2,047
                )
                
                
                (2,136
                )
                
                
                (284
                )$
                23,392
                
                
                $
                (7,737
                )
                
                $
                (6,250
                )





See notes
to consolidated financial statements.


F-9





BEL
FUSE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Concluded)


(dollars
in thousands)





Year Ended December 31,2009
                          
                          
                          2008
                          
                          
                          2007Supplementary
      information:Cash
      (received) paid during the year for:Income
      taxes
                          
                          $
                          (1,909
                          )
                          
                          $
                          2,606
                          
                          
                          $
                          10,809Interest
                          
                          
                          2
                          
                          
                          
                          4
                          
                          
                          
                          -Details
      of acquisition:Fair
      value of assets acquired
                          
                          $
                          25
                          
                          
                          $
                          -
                          
                          
                          $
                          -Goodwill
                          
                          
                          468
                          
                          
                          
                          -
                          
                          
                          
                          -493Amount
      held back on acquisition payment
                          
                          $
                          (39
                          )
                          
                          
                          -
                          
                          
                          
                          -Cash
      paid for acquisition
                          
                          $
                          454
                          
                          
                          $
                          -
                          
                          
                          $
                          -





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, 2009, 2008 and 2007




1.           DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Bel Fuse
Inc. and subsidiaries (“Bel” or the “Company”) operate in one industry with
three geographic operating 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 reportable operating segments: North
America, Asia and Europe.  Sales are predominantly in North America,
Asia and Europe.





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. Estimates are used in
determining such items as accruals, depreciable/useful lives, allowance for
doubtful accounts, testing for impairment of goodwill and intangible assets,
stock-based compensation, income taxes, postretirement benefit plan assumptions
and other reserves.  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.





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, 2009 and 2008, the Company had an allowance for doubtful accounts of $0.6
million and $0.7 million, respectively.  While historical loss
experience is utilized in determining the Company’s allowance for doubtful
accounts, the Company believes this factor may not by itself 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.


F-11





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.  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.  During
the year ended December 31, 2009, the Company recorded net realized gains on its
investments in the amount of $7.1 million.





BUSINESS COMBINATIONS
– During 2009, the Company adopted the revised accounting guidance related to
business combinations. This guidance 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 literature.  In accordance
with this guidance, acquisition-related costs, including restructuring
costs,  must be recognized separately from the acquisition and will
generally be expensed as incurred.  That replaces the cost-allocation
process detailed in previous accounting literature, which required the cost of
an acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values.   The Company
implemented this new guidance effective January 1, 2009 and, as a result, a
total of $0.6 million in acquisition-related costs were charged to selling,
general and administrative expense during 2009.





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
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 for the year ended December 31, 2008 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 and
unrealized foreign currency gains (losses) for the years ended December 31, 2009
and 2007 were less than $0.1 million.





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.


F-12


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.  The Company did not record any additional
impairment charges related to this investment during 2009 and the fund was fully
liquidated by December 31, 2009. See Note 3 for additional information regarding
this investment.





INVENTORIES -
Inventories are stated at the lower of weighted average cost or
market.





REVENUE RECOGNITION –
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 2009, 2008 and 2007, 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 had a remaining warranty
accrual related to these defective parts in the amount of $0.3
million.  This liability was 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 – Goodwill
is tested for impairment on an annual basis or whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.  The Company tests goodwill for impairment, and has
established December 31 as the annual impairment test date, 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 they are employed in or are considered a
liability related to the operations of the reporting unit and are considered in
determining the fair value of the reporting unit.  The Company has
determined that its reportable operating segments are its reporting
units.


F-13





The
goodwill impairment test is a two-step process.  If the fair value of
a reporting unit exceeds its carrying amount, goodwill of the reporting unit is
considered not impaired and the second step of the impairment test is
unnecessary.  If the carrying amount of a reporting unit exceeds its
fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any.  The second step of the
goodwill impairment test compares implied fair value of the reporting unit’s
goodwill (i.e., fair value of the reporting unit less the fair value of the
unit’s assets and liabilities, including identifiable intangible assets) with
the carrying amount of that goodwill.  If the carrying value of
goodwill exceeds its implied fair value, the excess is required to be recorded
as an impairment. See Note 2 of the consolidated financial
statements.





DEPRECIATION -
Property, plant and equipment are stated at cost less accumulated depreciation
and amortization.  Depreciation and amortization are calculated
primarily using the straight-line method over the estimated useful life of
the asset.  The estimated useful lives primarily range from 3 to 39 years
for buildings and leasehold improvements, and from 3 to 11 years for machinery
and equipment.





INCOME TAXES - The
Company accounts for income taxes under the asset and liability method, which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements.  Under this method, deferred tax assets and liabilities
are determined based on the differences between the financial statements and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.  The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in
income in the period that includes the enactment date.





The
Company records net deferred tax assets to the extent it believes these assets
will more-likely-than-not be realized.  In making such determination,
the Company considers all available positive and negative evidence, including
future reversals of existing taxable temporary differences, projected future
taxable income, tax planning strategies and recent financial
operations.  In the event the Company were to determine that it would
be able to realize its deferred income tax assets in the future in excess of its
net recorded amount, the Company would make an adjustment to the valuation
allowance which would reduce the provision for income taxes.





The
Company establishes reserves for tax contingencies when, despite the belief that
the Company’s tax return positions are fully supported, it is probable that
certain positions may be challenged and may not be fully sustained. The tax
contingency reserves are analyzed on a quarterly basis and adjusted based upon
changes in facts and circumstances, such as the conclusion of federal and state
audits, expiration of the statute of limitations for the assessment of tax, case
law and emerging legislation. The Company’s effective tax rate includes the
effect of tax contingency reserves and changes to the reserves as considered
appropriate by management.


F-14





(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 years ended
December 31, 2009 and 2008, all potential common shares were deemed antidilutive
and as such, were not included in the computation of diluted loss per
share.  During the year ended December 31, 2007, 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-15





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):





2009
                              
                              
                              2008
                              
                              
                              2007Numerator:Net
      (loss) earnings
                              
                              $
                              (8,310
                              )
                              
                              $
                              (14,929
                              )
                              
                              $
                              26,336Less
      Dividends declared:Class
      A
                              
                              
                              521
                              
                              
                              
                              565
                              
                              
                              
                              534Class
      B
                              
                              
                              2,622
                              
                              
                              
                              2,619
                              
                              
                              
                              2,217Undistributed
      (loss) earnings
                              
                              $
                              (11,453
                              )
                              
                              $
                              (18,113
                              )
                              
                              $
                              23,585Undistributed
      (loss) earnings allocation - basic:Class
      A undistributed (loss) earnings
                              
                              $
                              (2,075
                              )
                              
                              $
                              (3,547
                              )
                              
                              $
                              5,039Class
      B undistributed (loss) earnings
                              
                              
                              (9,378
                              )
                              
                              
                              (14,566
                              )
                              
                              
                              18,546Total
      undistributed (loss) earnings
                              
                              $
                              (11,453
                              )
                              
                              $
                              (18,113
                              )
                              
                              $
                              23,585Undistributed
      (loss) earnings allocation - diluted:Class
      A undistributed (loss) earnings
                              
                              $
                              (2,075
                              )
                              
                              $
                              (3,547
                              )
                              
                              $
                              5,030Class
      B undistributed (loss) earnings
                              
                              
                              (9,378
                              )
                              
                              
                              (14,566
                              )
                              
                              
                              18,555Total
      undistributed (loss) earnings
                              
                              $
                              (11,453
                              )
                              
                              $
                              (18,113
                              )
                              
                              $
                              23,585Net
      (loss) earnings allocation - basic:Class
      A undistributed (loss) earnings
                              
                              $
                              (1,554
                              )
                              
                              $
                              (2,982
                              )
                              
                              $
                              5,573Class
      B undistributed (loss) earnings
                              
                              
                              (6,756
                              )
                              
                              
                              (11,947
                              )
                              
                              
                              20,763Net
      (loss) earnings
                              
                              $
                              (8,310
                              )
                              
                              $
                              (14,929
                              )
                              
                              $
                              26,336Net
      (loss) earnings allocation - diluted:Class
      A undistributed (loss) earnings
                              
                              $
                              (1,554
                              )
                              
                              $
                              (2,982
                              )
                              
                              $
                              5,564Class
      B undistributed (loss) earnings
                              
                              
                              (6,756
                              )
                              
                              
                              (11,947
                              )
                              
                              
                              20,772Net
      (loss) earnings
                              
                              $
                              (8,310
                              )
                              
                              $
                              (14,929
                              )
                              
                              $
                              26,336Denominator:Weighted
      average shares outstanding:Class
      A - basic and diluted
                              
                              
                              2,175,322
                              
                              
                              
                              2,391,088
                              
                              
                              
                              2,637,409Class
      B - basic
                              
                              
                              9,363,199
                              
                              
                              
                              9,350,747
                              
                              
                              
                              9,244,198Dilutive
      impact of stock options andunvested
      restricted stock awards
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              21,818Class
      B - diluted
                              
                              
                              9,363,199
                              
                              
                              
                              9,350,747
                              
                              
                              
                              9,266,016(Loss)
      earnings per share:Class
      A - basic
                              
                              $
                              (0.71
                              )
                              
                              $
                              (1.25
                              )
                              
                              $
                              2.11Class
      A - diluted
                              
                              $
                              (0.71
                              )
                              
                              $
                              (1.25
                              )
                              
                              $
                              2.11Class
      B - basic
                              
                              $
                              (0.72
                              )
                              
                              $
                              (1.28
                              )
                              
                              $
                              2.25Class
      B - diluted
                              
                              $
                              (0.72
                              )
                              
                              $
                              (1.28
                              )
                              
                              $
                              2.24


F-16





During
2009, the Company implemented an update to the accounting guidance related to
earnings per share.  In accordance with this accounting guidance,
unvested share-based payment awards with rights to dividends are participating
securities and shall be included in the computation of basic earnings per
share.  The Company adopted this guidance effective January 1, 2009
and in accordance with the accounting guidance, all prior-period earnings per
share data presented have been adjusted retrospectively to conform to the
provisions of the new guidance.  This adjustment did not have a
material impact on prior periods presented.





As the
Company experienced a loss during the years ended December 31, 2009 and 2008, a
weighted average of 42,249 and 55,660 outstanding stock options, respectively,
were not included in the calculation of diluted loss per share of Class B common
shares for the years ended December 31, 2009 and 2008 as their effect would be
antidilutive. During the year ended December 31, 2007, 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 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 $1.7 million, $1.5 million and $1.5 million for the
years ended December 31, 2009, 2008 and 2007, respectively.





During
the years ended December 31, 2009, 2008 and 2007, the Company issued 141,300,
56,300 and 74,200 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, 2009, 2008 and 2007.





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.





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, 2009, 2008 and 2007 amounted to $7.8 million, $7.4 million and $7.2
million, respectively, and are included in cost of sales in the accompanying
consolidated statements of operations.


F-17


EVALUATION OF LONG-LIVED
ASSETS – Property, plant and equipment represents an important component
of the Company’s total assets.  The Company depreciates its property,
plant and equipment on a straight-line basis over the estimated useful lives of
the assets.  Management reviews long-lived assets for potential
impairment whenever significant events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.  An impairment
exists when the estimated undiscounted cash flows expected to result from the
use of an asset and its eventual disposition are less than its carrying
amount.  If an impairment exists, the resulting write-down would be
the difference between fair market value of the long-lived asset and the related
net book value. 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.





NEW FINANCIAL ACCOUNTING
STANDARDS





During 2009, the Company adopted the
revised accounting guidance related to business combinations. This guidance
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 literature.  In accordance with this guidance,
acquisition-related costs, including restructuring costs,  must be
recognized separately from the acquisition and will generally be expensed as
incurred.  That replaces the cost-allocation process detailed in
previous accounting literature, which required the cost of an acquisition to be
allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values.   The Company implemented this new
guidance effective January 1, 2009 and, as a result, a total of $0.6 million in
acquisition-related costs were charged to selling, general and administrative
expense during 2009.





During
2009, the Company implemented an update to the accounting guidance related to
earnings per share.  In accordance with this accounting guidance,
unvested share-based payment awards with rights to dividends are participating
securities and shall be included in the computation of basic earnings per
share.  The Company adopted this guidance effective January 1, 2009
and in accordance with the accounting guidance, all prior-period earnings per
share data presented has been adjusted retrospectively to conform to the
provisions of the new guidance.  This adjustment did not have a
material impact on prior periods presented.





The FASB
has published an update to the accounting guidance on fair value measurements
and disclosures as it relates to investments in certain entities that calculate
net asset value per share (or its equivalent). This accounting guidance
permits a reporting entity to measure the fair value of certain investments on
the basis of the net asset value per share of the investment (or its
equivalent). This update also requires new disclosures, by major category of
investments, about the attributes of investments included within the scope of
this amendment to the Codification. The guidance in this update is effective for
interim and annual periods ending after December 15, 2009. The Company does not
expect the adoption of this standard to have a material impact on the Company’s
results of operations, financial condition or cash flows.


F-18





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, license agreements 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, $0.5 million and $0.8
million for the years ended December 31, 2009, 2008 and 2007,
respectively.





The
changes in the carrying value of goodwill classified by geographic reporting
units, net of accumulated amortization, for the years ended December 31, 2009
and 2008 are as follows (dollars in thousands):





Total
                
                
                Asia
                
                
                North America
                
                
                EuropeBalance,
      January 1, 2008
                
                $
                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
                
                
                
                -
                
                
                
                1,927Goodwill
      allocation related to acquisition
                
                
                468
                
                
                
                468
                
                
                
                -
                
                
                
                -Impairment
      charge
                
                
                (12,875
                )
                
                
                (12,875
                )
                
                
                -
                
                
                
                -Foreign
      exchange
                
                
                30
                
                
                
                -
                
                
                
                -
                
                
                
                30Balance,
      December 31, 2009
                
                $
                1,957
                
                
                $
                -
                
                
                $
                -
                
                
                $
                1,957


F-19


The net
goodwill balances above are comprised of the following (dollars in
thousands):





Total
                          
                          
                          Asia
                          
                          
                          North America
                          
                          
                          EuropeAs of December 31, 2008:Goodwill
      balance, gross
                          
                          $
                          28,400
                          
                          
                          $
                          12,407
                          
                          
                          $
                          14,066
                          
                          
                          $
                          1,927Accumulated
      impairment charges
                          
                          
                          (14,066
                          )
                          
                          
                          -
                          
                          
                          
                          (14,066
                          )
                          
                          
                          -Goodwill,
      net of impairment charges
                          
                          $
                          14,334
                          
                          
                          $
                          12,407
                          
                          
                          $
                          -
                          
                          
                          $
                          1,927As of December 31, 2009:Goodwill
      balance, gross
                          
                          $
                          28,898
                          
                          
                          $
                          12,875
                          
                          
                          $
                          14,066
                          
                          
                          $
                          1,957Accumulated
      impairment charges
                          
                          
                          (26,941
                          )
                          
                          
                          (12,875
                          )
                          
                          
                          (14,066
                          )
                          
                          
                          -Goodwill,
      net of impairment charges
                          
                          $
                          1,957
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          1,957





For the
interim goodwill impairment assessment performed as of August 31, 2009 and 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.





Detailed
below is a table of key underlying assumptions utilized in the fair value
estimate calculation for the interim test performed as of August 31, 2009 as
compared to those assumptions utilized during the 2008 annual
valuation.  Assumptions may vary by reporting unit.  The
table below shows the range of assumptions utilized across the various reporting
units.


F-20





Goodwill Impairment AnalysisKey Assumptions2009 - Interim
                        
                        
                        2008 - AnnualIncome
      Approach - Discounted Cash Flows:Revenue
      growth rates
                        
                        
                        8.8%
      - 18.7%
                        
                        
                        
                        (8.9%)
      - 10.3%Cost
      of equity capital
                        
                        
                        13.8%
      - 14.8%
                        
                        
                        
                        13.0%
      - 13.6%Cost
      of debt capital
                        
                        
                        6.0%
      - 6.2%
                        
                        
                        
                        4.9%
      - 7.7%Weighted
      average cost of capital
                        
                        
                        12.6%
      - 13.4%
                        
                        
                        
                        11.0%
      - 13.3%Market
      Approach - Multiples of Guideline Companies (a):EBIT
      multiples used
                        
                        
                        7.9
      - 8.9
                        
                        
                        
                        6.0
      - 10.7EBITDA
      multiples used
                        
                        
                        6.3
      - 7.1
                        
                        
                        
                        5.0
      - 7.5DFNI
      multiples used
                        
                        
                        12.2
      - 13.7
                        
                        
                        
                        9.3
      - 13.5DFCF
      multiples used
                        
                        
                        8.7
      - 11.0
                        
                        
                        
                        6.4
      - 7.4Control
      premium (b)
                        
                        
                        16.2%
      - 32.0%
                        
                        
                        
                        27.5%
      - 31.7%Weighting
      of Valuation Methods:Income
      Approach - Discounted Cash Flows
                        
                        
                        75%
                        
                        
                        
                        75%Market
      Approach - Multiples of Guideline Companies
                        
                        
                        25%
                        
                        
                        
                        25%





Definitions:


EBIT -
Earnings before interest and taxes


EBITDA -
Earnings before interest, taxes, depreciation and amortization


DFNI -
Debt-free net income


DFCF -
Debt-free cash flow





(a)
Multiple range reflects multiples used throughout the North America, Asia and
Europe reporting units


(b)
Determined based on the industry mean control premium as published each year in
MergerStat Review





The
interim impairment test related to the Company's goodwill was performed by
reporting unit.  The valuation test, which heavily weights future cash flow
projections, indicated that the goodwill associated with the Company’s Asia
reporting unit was fully impaired and, as a result, the Company recorded an
impairment charge of $12.9 million during the third quarter of
2009.  The Company’s goodwill associated with its Asia reporting unit
originated from several of Bel’s prior acquisitions, primarily e-Power, APC and
Lucent (which represented $8.0 million, $2.0 million and $1.5 million,
respectively, of the carrying value of goodwill at the testing
date).  The annual goodwill impairment test performed during the
fourth quarter of 2008 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
future sales projections given the economic conditions at that time.  As a
result, the Company recorded a goodwill impairment charge of $14.1 million
during the fourth quarter of 2008. The carrying value of the Company's goodwill
was $14.3 million at December 31, 2008.  The remaining goodwill as of
December 31, 2009 has a carrying value of $2.0 million and relates solely to the
Company’s Europe reporting unit. Management determined that the fair value
of the remaining goodwill at December 31, 2009 exceeded its carrying value and
that no additional impairment existed as of that date.


F-21





The
components of intangible assets other than goodwill are as follows (dollars in
thousands):





December 31, 2009
                    
                    
                    December 31, 2008Gross Carrying
                    
                    
                    Accumulated
                    
                    
                    Gross Carrying
                    
                    
                    AccumulatedAmount
                    
                    
                    Amortization
                    
                    
                    Amount
                    
                    
                    AmortizationPatents
      and ProductInformation
                    
                    $
                    1,231
                    
                    
                    $
                    764
                    
                    
                    $
                    1,132
                    
                    
                    $
                    656Customer
      relationships
                    
                    
                    1,830
                    
                    
                    
                    1,746
                    
                    
                    
                    1,830
                    
                    
                    
                    1,380$
                    3,061
                    
                    
                    $
                    2,510
                    
                    
                    $
                    2,962
                    
                    
                    $
                    2,036





During
the years ended December 31, 2009 and 2008, the Company acquired intangible
assets related to customer licensing agreements in the amount of $0.1 million
and $0.3 million, respectively.  At the time of acquisition, these
intangible assets had a weighted average estimated life of 16 months and 34
months, respectively.





Estimated
amortization expense for intangible assets for the next five years is as follows
(dollars in thousands):





Year Ending
                      
                      AmortizationDecember 31,
                      
                      Expense2010
                      
                      $
                      2282011
                      
                      
                      542012
                      
                      
                      332013
                      
                      
                      332014
                      
                      
                      33





3.
            MARKETABLE
      SECURITIES AND OTHER INVESTMENTS





At
December 31, 2008, the Company’s marketable securities had an adjusted cost
basis of $13.7 million, which approximated fair value.  These
marketable securities related primarily to the Company’s investments in Toko,
Inc. (“Toko”) and Power-One, Inc. (“Power-One”), as further described
below.  During 2009, the Company sold its investments in both Toko and
Power-One and recorded an aggregate net gain on these sales of $6.9 million
during the year ended December 31, 2009.  The Company has an
immaterial amount of marketable securities as of December 31,
2009.  At December 31, 2008, the Company had an other investment
related to its investment in the Columbia Strategic Cash Portfolio (the
“Columbia Portfolio”) with a carrying amount of $5.1 million, which approximated
its fair value at that date.  The remaining balance in the Columbia
Portfolio was liquidated during 2009, as further described
below.


F-22





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.  The Company’s original cost of these shares was $5.6 million
($3.07 per share).  During the year ended December 31, 2009, the
Company sold its remaining investment in Toko common stock on the open market at
an aggregate fair market value of $1.9 million, resulting in a loss of $0.1
million for financial reporting purposes.  The Company had previously
recorded pre-tax impairment charges totaling $3.6 million during the year ended
December 31, 2008 related to this investment.





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.





Power-One,
Inc.:





As of
December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One
common stock at an aggregate cost of $14.1 million ($1.92 per
share).  During the year ended December 31, 2009, the Company sold its
full investment in Power-One common stock on the open market at an aggregate
fair market value of $15.8 million, resulting in a gain of $7.0 million for
financial reporting purposes.  The Company had previously recorded a
pre-tax impairment charge of $5.3 million during the year ended December 31,
2008 related to this investment.





Columbia
Portfolio:





Through
December 2009, the Company’s investment securities included privately placed
units of beneficial interests in the Columbia Portfolio, which was an enhanced
cash fund sold as an alternative to money-market funds.  Due to
adverse market conditions, the fund was overwhelmed with withdrawal requests
from investors and the fund was closed with a restriction placed upon the cash
redemption ability of its holders.  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.   At December 31, 2008, the Company
held 6.1 million units at a book value of $5.1 million, which approximated its
fair value at that date.





As of
December 31, 2009, the Company has received total cash redemptions to date of
$24.2 million (including $5.3 million during the year ended December
31, 2009) at a weighted-average net asset value of $.9410 per unit.
 The Company recorded a gain of $0.2 million during the year ended December
31, 2009, as the net asset value exceeded the adjusted basis of this investment
on the dates of redemption.  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 noted,
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.  The Company received the
final redemption from this fund in December 2009 and the fund was fully
liquidated as of December 31, 2009.


F-23





4.
            FAIR
      VALUE MEASUREMENTS





The
Company adopted the new accounting guidance for fair value measurements and
disclosures on January 1, 2008, for all financial assets and liabilities
that are recognized or disclosed at fair value in the consolidated financial
statements on a recurring basis or on a nonrecurring basis during the reporting
period. While the Company adopted the provisions of the new accounting guidance
for nonfinancial assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a recurring basis, no such assets or
liabilities existed at the balance sheet date. As permitted by the accounting
guidance, the Company delayed implementation of this standard for all
nonfinancial assets and liabilities recognized or disclosed at fair value in the
financial statements on a nonrecurring basis and adopted these provisions
effective January 1, 2009.





The 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 based upon the best use of the asset or liability at the
measurement date.  The Company utilizes market data or assumptions
that market participants would use in pricing the asset or
liability.  The accounting guidance establishes a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair
value.  These tiers are defined as follows:





Level 1
-
              Observable
      inputs such as quoted market prices in active
  markets





Level 2
-
              Inputs
      other than quoted prices in active markets that are either directly or
      indirectly observable





Level 3
-
                Unobservable
      inputs about which little or no market data exists, therefore requiring an
      entity to develop its own
assumptions





As of
December 31, 2009, the Company held certain financial assets that are measured
at fair value on a recurring basis.  These consisted primarily of the
Company’s investments in a Rabbi Trust which are intended to fund the Company’s
SERP obligations.  These are categorized as available-for-sale
securities, and are included as other assets in the accompanying consolidated
balance sheet at December 31, 2009. The fair value of these investments is
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, 2009.  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, 2009.


F-24





The
following table sets forth by level, within the fair value
hierarchy,  the Company’s financial assets accounted for at fair value
on a recurring basis as of December 31, 2009 and 2008 (dollars in
thousands).





Assets at Fair Value UsingTotal
                          
                          
                          Quoted Prices
                            in Active
                            Markets for
                            IdenticalAssets
                            (Level 1)
                          
                          
                          Significant
                            Other
                            Observable
                            Inputs
                            (Level 2)
                          
                          
                          Significant
                            Unobservable
                            Inputs
                            (Level 3)As of December 31, 2009Available-for-sale
      securities:Investments
      held in Rabbi Trust
                          
                          $
                          3,656
                          
                          
                          $
                          3,656
                          
                          
                          $
                          -
                          
                          
                          $
                          -Marketable
      securities
                          
                          
                          2
                          
                          
                          
                          2
                          
                          
                          
                          -
                          
                          
                          
                          -Total
                          
                          $
                          3,658
                          
                          
                          $
                          3,658
                          
                          
                          $
                          -
                          
                          
                          $
                          -As of December 31, 2008Available-for-sale
      securities:Marketable
      securities
                          
                          $
                          13,735
                          
                          
                          $
                          13,735
                          
                          
                          $
                          -
                          
                          
                          $
                          -Total
                          
                          $
                          13,735
                          
                          
                          $
                          13,735
                          
                          
                          $
                          -
                          
                          
                          $
                          -





The
following table sets forth by level within the 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).  There were no financial assets
accounted for at fair value on a nonrecurring basis as of December 31,
2009.





Assets at Fair Value as of December 31, 2008
                  
                  
                  Total LossesTotal
                  
                  
                  QuotedPrices
                    inActive
                    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
                  )





The
Company has other financial instruments, such as accounts receivable, accounts
payable and accrued expenses, which have been excluded from the table
above.  Due to the short-term nature of these instruments, the
carrying value of accounts receivable, accounts payable and accrued expenses
approximate their fair values.  The Company did not have any other
financial liabilities within the scope of the fair value disclosure requirements
as of December 31, 2009.


F-25





Nonfinancial
assets and liabilities, such as goodwill and long-lived assets,
are accounted for at fair value on a nonrecurring
basis.   These items are tested for impairment upon the
occurrence of a triggering event or in the case of goodwill, on at least an
annual basis.  While there were signs of improvement at the
beginning of the third quarter of 2009, the Company’s actual revenue stream for
the eight months ended August 31, 2009 was significantly lower than the
financial projections utilized in the annual goodwill impairment analysis
(performed in the fourth quarter of 2008), and was not projected to rebound
to those levels in 2009.  The Company determined that current business
conditions, and the resulting decrease in the Company’s projected cash flows,
constituted a triggering event which required the Company to perform interim
impairment tests related to its long-lived assets and goodwill during the third
quarter of 2009.  The Company’s interim test on its long-lived assets
indicated that the carrying value of its long-lived assets was recoverable and
that no impairment existed as of the testing date.  The Company’s
interim impairment test on its goodwill by reporting unit indicated that the
goodwill associated with the Company’s Asia reporting unit was fully impaired
and, as a result, the Company recorded an impairment charge of $12.9 million
during the third quarter of 2009.  The Company’s fair value analysis
related to the interim test was supported by a weighting of two generally
accepted valuation approaches, the income approach and the market
approach.  The fair value of the Asia reporting unit was determined
utilizing Level 3 inputs.  The valuation methods and the key
underlying assumptions utilized in the fair value estimate calculations are
outlined in Note 2.





5.   OTHER
ASSETS





At
December 31, 2009, the Company has obligations of $5.6 million associated with
its supplemental executive retirement plan (“SERP”).  As a means of
informally funding these obligations, the Company has invested in life insurance
policies related to certain employees and marketable securities held in a Rabbi
Trust.  At December 31, 2009, these assets had a combined fair value
of $6.4 million.





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 SERP
obligations.  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.  The fair market value of the COLI at December 31, 2008 was
$3.8 million.  During the second quarter of 2009, the Company
surrendered certain of the policies within the COLI at a cash surrender value of
$1.5 million and purchased an additional $0.3 million in new COLI
policies.  During 2009, the volatility in global equity markets had a
significant effect on the cash surrender value and as a result, the Company
recorded income to account for the increase in cash surrender value in the
amount of $0.4 million during the year ended December 31, 2009.  This
increase in cash surrender value was allocated between cost of sales and
selling, general and administrative expenses on the consolidated statements of
operations for the year ended December 31, 2009.  The allocation is
consistent with the costs associated with the long-term employee benefit
obligations that the COLI is intended to fund.  At December 31, 2009,
the fair market value of the COLI was $2.7 million and is included in other
assets in the accompanying consolidated balance sheets.


F-26





Other
Investments





During
the second quarter of 2009, the Company invested $3.5 million in various
marketable securities. Together with the COLI described above, these investments
are intended to fund the Company’s SERP obligations and are classified as other
assets in the accompanying consolidated balance sheets.   These
investments are classified as available for sale and the Company monitors these
investments for impairment on an ongoing basis.  At December 31, 2009,
the fair market value of these investments was $3.7 million.  The
unrealized gain of $0.2 million at December 31, 2009 has been included in
accumulated other comprehensive income.





6.    INVENTORIES





The
components of inventories are as follows (dollars in thousands):





December 31,2009
                  
                  
                  2008Raw
      materials
                  
                  $
                  22,431
                  
                  
                  $
                  25,527Work
      in progress
                  
                  
                  1,478
                  
                  
                  
                  1,650Finished
      goods
                  
                  
                  7,882
                  
                  
                  
                  19,347$
                  31,791
                  
                  
                  $
                  46,524





7.
            PROPERTY,
      PLANT AND EQUIPMENT





Property,
plant and equipment consist of the following (dollars in
thousands):





December 31,2009
                  
                  
                  2008Land
                  
                  $
                  3,237
                  
                  
                  $
                  3,235Buildings
      and improvements
                  
                  
                  21,454
                  
                  
                  
                  27,995Machinery
      and equipment
                  
                  
                  55,336
                  
                  
                  
                  55,680Construction
      in progress
                  
                  
                  1,538
                  
                  
                  
                  1,72681,565
                  
                  
                  
                  88,636Accumulated
      depreciation
                  
                  
                  (45,622
                  )
                  
                  
                  (48,700
                  )$
                  35,943
                  
                  
                  $
                  39,936





Depreciation
expense for the years ended December 31, 2009, 2008 and 2007 was $6.3 million,
$6.9 million and $7.1 million, respectively.


F-27





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.





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 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
remained in escrow and had been classified as restricted cash as of December 31,
2008.  In February 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  In March 2009,
the title company released the remaining escrow of $2.3 million and
corresponding guarantees and the Company recognized the gain associated with the
sale of this property in the amount of $4.6 million.  In July 2009,
the Company established a standby letter of credit for the State of New Jersey
as a performance guarantee related to environmental cleanup associated with the
Jersey City, New Jersey property sale.  In connection with this
agreement, the Company has a compensating balance of $0.3 million which has been
classified as restricted cash as of December 31, 2009.This compensating balance
will be reduced to less than $0.1 million upon its renewal in July
2010.





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





At
December 31, 2009 and 2008, the Company has approximately $4.7 million and $7.3
million, respectively, of liabilities for uncertain tax positions ($1.8 million
and $3.9 million, respectively, included in income taxes payable and $2.9
million and $3.4 million, respectively, included in liability for uncertain tax
positions) all of which, if recognized, would reduce the Company’s effective tax
rate.


F-28





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 2006 and for state examinations before
2005.   Regarding foreign subsidiaries, the Company is no longer
subject to examination by tax authorities for years before 2002.  The
Company is not currently being audited by any tax authorities.





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, with which Company management
agreed.





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,
2009.   A total of $1.8 million of previously recorded
liabilities for uncertain tax positions relates to the 2006 tax
year.  The statute of limitations related to this liability is
scheduled to expire on September 15, 2010.





A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows (dollars in thousands):





2009
                        
                        
                        2008
                        
                        
                        2007Unrecognized
      tax benefit - January 1
                        
                        $
                        7,345
                        
                        
                        $
                        9,191
                        
                        
                        $
                        12,396Additions
      based on tax positionsrelated
      to the current year
                        
                        
                        1,277
                        
                        
                        
                        415
                        
                        
                        
                        1,669Additions
      for tax positions of prior years
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,000Expiration
      of statutes of limitations
                        
                        
                        (3,900
                        )
                        
                        
                        (2,261
                        )
                        
                        
                        (1,382
                        )Reductions
      for tax positions of prior years
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (699
                        )Settlements
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (3,793
                        )Unrecognized
      tax benefit - December 31
                        
                        $
                        4,722
                        
                        
                        $
                        7,345
                        
                        
                        $
                        9,191





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, 2009, 2008 and 2007, the
Company recognized approximately $0.1 million, $0.1 million and $0.5 million,
respectively, in interest and penalties in the consolidated statements of
operations.  The Company has approximately $0.6 million and $1.6
million accrued for the payment of interest and penalties at December 31, 2009
and 2008, respectively, which is included in both income taxes payable and
liability for uncertain tax positions in the Company’s consolidated balance
sheets.


F-29


The
(benefit) provision for income taxes consists of the following (dollars in
thousands):





Years Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Current:Federal
                  
                  $
                  (5,383
                  )
                  
                  $
                  (426
                  )
                  
                  $
                  4,294Foreign
                  
                  
                  12
                  
                  
                  
                  (107
                  )
                  
                  
                  2,598State
                  
                  
                  (18
                  )
                  
                  
                  425
                  
                  
                  
                  515(5,389
                  )
                  
                  
                  (108
                  )
                  
                  
                  7,407Deferred:Federal
                  
                  
                  4,229
                  
                  
                  
                  (3,240
                  )
                  
                  
                  (1,896
                  )State
                  
                  
                  302
                  
                  
                  
                  (381
                  )
                  
                  
                  (223
                  )Foreign
                  
                  
                  (527
                  )
                  
                  
                  5
                  
                  
                  
                  804,004
                  
                  
                  
                  (3,616
                  )
                  
                  
                  (2,039
                  )$
                  (1,385
                  )
                  
                  $
                  (3,724
                  )
                  
                  $
                  5,368





A
reconciliation of taxes on income computed at the federal statutory rate to
amounts provided is as follows (dollars in thousands):





Years Ended December 31,2009
                                                              
                                                              
                                                              2008
                                                              
                                                              
                                                              2007$
                                                              
                                                              
                                                              %
                                                              
                                                              
                                                              $
                                                              
                                                              
                                                              %
                                                              
                                                              
                                                              $
                                                              
                                                              
                                                              %Tax
      (benefit) provision computed at thefederal
      statutory rate
                                                              
                                                              $
                                                              (3,296
                                                              )
                                                              
                                                              
                                                              34
                                                              %
                                                              
                                                              $
                                                              (6,342
                                                              )
                                                              
                                                              
                                                              34
                                                              %
                                                              
                                                              $
                                                              11,096
                                                              
                                                              
                                                              
                                                              35
                                                              %Increase
      (decrease) in taxes resulting from:Different
      tax rates and permanent differencesapplicable
      to foreign operations
                                                              
                                                              
                                                              720
                                                              
                                                              
                                                              
                                                              -8
                                                              %
                                                              
                                                              
                                                              (161
                                                              )
                                                              
                                                              
                                                              1
                                                              %
                                                              
                                                              
                                                              (4,992
                                                              )
                                                              
                                                              
                                                              -16
                                                              %Reversal
      of liability for uncertain tax positions - net
                                                              
                                                              
                                                              (2,623
                                                              )
                                                              
                                                              
                                                              27
                                                              %
                                                              
                                                              
                                                              (1,846
                                                              )
                                                              
                                                              
                                                              10
                                                              %
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              0
                                                              %Permanent
      tax differences related to goodwillimpairment
      with no tax benefit
                                                              
                                                              
                                                              4,378
                                                              
                                                              
                                                              
                                                              -45
                                                              %
                                                              
                                                              
                                                              4,264
                                                              
                                                              
                                                              
                                                              -23
                                                              %
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              0
                                                              %Utilization
      of research and development and foreigntax
      credits
                                                              
                                                              
                                                              (674
                                                              )
                                                              
                                                              
                                                              7
                                                              %
                                                              
                                                              
                                                              (383
                                                              )
                                                              
                                                              
                                                              2
                                                              %
                                                              
                                                              
                                                              (365
                                                              )
                                                              
                                                              
                                                              -1
                                                              %State
      taxes, net of federal benefit
                                                              
                                                              
                                                              290
                                                              
                                                              
                                                              
                                                              -3
                                                              %
                                                              
                                                              
                                                              368
                                                              
                                                              
                                                              
                                                              -2
                                                              %
                                                              
                                                              
                                                              335
                                                              
                                                              
                                                              
                                                              1
                                                              %Other,
      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
                                                              
                                                              
                                                              (180
                                                              )
                                                              
                                                              
                                                              2
                                                              %
                                                              
                                                              
                                                              376
                                                              
                                                              
                                                              
                                                              -2
                                                              %
                                                              
                                                              
                                                              (706
                                                              )
                                                              
                                                              
                                                              -2
                                                              %Tax
      (benefit) provision computed at the Company'seffective
      tax rate
                                                              
                                                              $
                                                              (1,385
                                                              )
                                                              
                                                              
                                                              14
                                                              %
                                                              
                                                              $
                                                              (3,724
                                                              )
                                                              
                                                              
                                                              20
                                                              %
                                                              
                                                              $
                                                              5,368
                                                              
                                                              
                                                              
                                                              17
                                                              %





As of
December 31, 2009, the Company has foreign income tax net operating losses
(“NOL”) and credit carryforwards of $3.6 million, net of valuation allowances of
$0.1 million and state income tax NOLs and credit carryforwards of $8.9 million,
net of valuation allowances of $5.5 million.  Foreign NOL's can be
carried forward indefinitely and state NOL's expire through 2013 -
2029.


F-30





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 $85.7 million
at December 31, 2009.  Such unrepatriated earnings are deemed by
management to be permanently reinvested.  The estimated federal income
tax liability (net of estimated foreign tax credits) related to unrepatriated
foreign earnings is $19.3 million under the current tax law.





The
President of the United States has presented a budget to the United States
Congress which contains various modifications to international tax
rules.  Some of the proposed changes might subject the Company to,
among other things, additional income taxes, restrictions on how foreign tax
credits would be calculated and affect taxation regarding the transfer of
intangible property.  The Company cannot ascertain at this time what
the final outcome of this proposed legislation will be or the effect, if any, on
the Company's results of operations or financial condition.





Components
of deferred income tax assets are as follows (dollars in
thousands).





December 31,2009
                          
                          
                          2008Tax Effect
                          
                          
                          Tax EffectDeferred
      Tax Assets - current:Unrealized
      depreciation inmarketable
      securities
                          
                          $
                          -
                          
                          
                          $
                          3,744Restructuring
      expenses
                          
                          
                          -
                          
                          
                          
                          280Reserves
      and accruals
                          
                          
                          917
                          
                          
                          
                          728Valuation
      allowance
                          
                          
                          (102
                          )
                          
                          
                          -$
                          815
                          
                          
                          $
                          4,752Deferred
      Tax Assets - noncurrent:Deferred
      gain on sale of property,plant
      and equipment
                          
                          $
                          -
                          
                          
                          $
                          1,765Unfunded
      pension liability
                          
                          
                          341
                          
                          
                          
                          606Depreciation
                          
                          
                          138
                          
                          
                          
                          205Amortization
                          
                          
                          1,076
                          
                          
                          
                          1,051Federal,
      state and foreign net operating lossand
      credits carryforward
                          
                          
                          1,893
                          
                          
                          
                          971Restructuring
      expenses
                          
                          
                          294
                          
                          
                          
                          199Other
      accruals
                          
                          
                          1,550
                          
                          
                          
                          1,379Valuation
      allowances
                          
                          
                          (776
                          )
                          
                          
                          (971
                          )$
                          4,516
                          
                          
                          $
                          5,205





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 People’s Republic of China (PRC).  The MCO is not
subject to Macao corporation income taxes.


F-31





9.
            DEBT





As of
December 31, 2008, a $20 million line of credit, which expires on June 30, 2011,
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.  There have not been any
borrowings under the credit agreement during 2009 or 2008 and, as a result,
there was no balance outstanding as of December 31, 2009 or 2008.  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, 2009, the Company was in compliance with
its debt covenants.





The
Company’s Hong Kong subsidiary had an unsecured line of credit of approximately
$2 million which was unused as of December 31, 2009 and 2008.  The
line of credit expired on January 31, 2009 and was 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.





In July
2009, the Company established a standby letter of credit with the State of New
Jersey as a performance guarantee related to environmental cleanup associated
with the Jersey City, New Jersey property sale.  In connection with
this agreement, the Company has a compensating balance of $0.3 million which has
been classified as restricted cash as of December 31, 2009. This compensating
balance will be reduced to less than $0.1 million upon its renewal in July
2010.





The
Company recorded minimal interest expense during the years ended December 31,
2009 and 2008. For the year ended December 31, 2007, the Company recorded
interest expense and other costs of $0.1 million relating primarily to the
write-off 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 31,2009
                      
                      
                      2008Sales
      commissions
                      
                      $
                      1,506
                      
                      
                      $
                      1,598Subcontracting
      labor
                      
                      
                      2,615
                      
                      
                      
                      2,939Salaries,
      bonuses andrelated benefits
                      
                      
                      1,475
                      
                      
                      
                      2,834Other
                      
                      
                      2,395
                      
                      
                      
                      2,582$
                      7,991
                      
                      
                      $
                      9,953


F-32





See Note
18 for discussion and details associated with restructuring
accruals.





11.
            BUSINESS
      SEGMENT INFORMATION





The
Company operates in one industry with three reportable operating segments, which
are geographic in nature.  The segments 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):





2009
                                
                                
                                2008
                                
                                
                                2007Net
      Sales from External Customers:North
      America
                                
                                $
                                41,898
                                
                                
                                $
                                67,380
                                
                                
                                $
                                78,091Asia
                                
                                
                                123,764
                                
                                
                                
                                165,164
                                
                                
                                
                                151,550Europe
                                
                                
                                17,091
                                
                                
                                
                                25,806
                                
                                
                                
                                29,496$
                                182,753
                                
                                
                                $
                                258,350
                                
                                
                                $
                                259,137Net
      Sales:North
      America
                                
                                $
                                51,189
                                
                                
                                $
                                79,862
                                
                                
                                $
                                90,939Asia
                                
                                
                                144,572
                                
                                
                                
                                188,718
                                
                                
                                
                                182,301Europe
                                
                                
                                18,110
                                
                                
                                
                                27,143
                                
                                
                                
                                30,680Less
      intergeographic revenues
                                
                                
                                (31,118
                                )
                                
                                
                                (37,373
                                )
                                
                                
                                (44,783
                                )$
                                182,753
                                
                                
                                $
                                258,350
                                
                                
                                $
                                259,137(Loss)
      Income from Operations:North
      America
                                
                                $
                                (205
                                )
                                
                                $
                                (12,646
                                )
                                
                                $
                                6,515Asia
                                
                                
                                (16,462
                                )
                                
                                
                                1,202
                                
                                
                                
                                17,488Europe
                                
                                
                                (684
                                )
                                
                                
                                695
                                
                                
                                
                                1,509$
                                (17,351
                                )
                                
                                $
                                (10,749
                                )
                                
                                $
                                25,512Total
      Assets:North
      America
                                
                                $
                                131,078
                                
                                
                                $
                                131,604Asia
                                
                                
                                107,546
                                
                                
                                
                                122,284Europe
                                
                                
                                7,322
                                
                                
                                
                                7,896$
                                245,946
                                
                                
                                $
                                261,784Capital
      Expenditures:North
      America
                                
                                $
                                353
                                
                                
                                $
                                948
                                
                                
                                $
                                1,453Asia
                                
                                
                                1,979
                                
                                
                                
                                5,758
                                
                                
                                
                                7,069Europe
                                
                                
                                25
                                
                                
                                
                                181
                                
                                
                                
                                196$
                                2,357
                                
                                
                                $
                                6,887
                                
                                
                                $
                                8,718Depreciation
      and Amortization Expense:North
      America
                                
                                $
                                1,535
                                
                                
                                $
                                1,787
                                
                                
                                $
                                1,841Asia
                                
                                
                                5,087
                                
                                
                                
                                5,484
                                
                                
                                
                                5,887Europe
                                
                                
                                156
                                
                                
                                
                                172
                                
                                
                                
                                193$
                                6,778
                                
                                
                                $
                                7,443
                                
                                
                                $
                                7,921


F-33





Net sales
from external customers are attributed to individual operating 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.
(Loss) income from operations represents gross profit less operating
expenses.





The
following items are included in the (loss) income from operations presented
above:





Impairment of Assets
– During the third quarter of 2009, the Company conducted an interim valuation
test related to the Company’s goodwill by operating segment.  As a
result of the reduction in fair value of the Asia operating segment, the Company
recorded charges of $12.9 million related to the impairment of goodwill of its
Asia operating segment during 2009.  During the fourth quarter of
2008, the Company conducted its annual valuation test related to the Company's
goodwill by reporting unit.  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 during 2008.  The Company also incurred fixed asset
impairments in the North America operating segment of $0.7 million related to
assets located at the Westborough, Massachusetts facility which ceased
operations as of December 31, 2008.





Restructuring Charges
– In connection with the closure of its Westborough, Massachusetts facility, the
Company incurred severance costs during 2008 of $0.6 million and lease
termination costs of $0.5 million.  The Company incurred an additional
$0.4 million of restructuring costs in 2009 related primarily to the facility
lease obligation.





Gain on Sale of Property,
Plant & Equipment – During the year ended December 31, 2009, the
Company recognized a previously-deferred $4.6 million pre-tax gain in the North
America operating segment from the 2007 sale of a property in Jersey City, New
Jersey.  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.


F-34





Entity-Wide
Information





The
following is a summary of entity-wide information related to the Company’s net
sales to external customers by geographic area and by major product line
(dollars in thousands).





2009
                      
                      
                      2008
                      
                      
                      2007Net
      Sales by Geographic Area:United
      States
                      
                      $
                      41,898
                      
                      
                      $
                      67,380
                      
                      
                      $
                      78,091Macao
                      
                      
                      123,764
                      
                      
                      
                      165,164
                      
                      
                      
                      151,550Germany
                      
                      
                      13,959
                      
                      
                      
                      21,280
                      
                      
                      
                      26,534Czech
      Republic
                      
                      
                      3,132
                      
                      
                      
                      4,526
                      
                      
                      
                      2,962Consolidated
      net sales
                      
                      $
                      182,753
                      
                      
                      $
                      258,350
                      
                      
                      $
                      259,137Net
      Sales by Major Product Line:Magnetic
      products
                      
                      $
                      86,326
                      
                      
                      $
                      118,552
                      
                      
                      $
                      125,487Interconnect
      products
                      
                      
                      32,447
                      
                      
                      
                      47,407
                      
                      
                      
                      44,281Module
      products
                      
                      
                      54,323
                      
                      
                      
                      77,285
                      
                      
                      
                      70,247Circuit
      protection products
                      
                      
                      9,657
                      
                      
                      
                      15,106
                      
                      
                      
                      19,122Consolidated
      net sales
                      
                      $
                      182,753
                      
                      
                      $
                      258,350
                      
                      
                      $
                      259,137





Net sales
from external customers are attributed to individual countries based on the
geographic source of the billing for such customer sales.





The
following is a summary of long-lived assets by geographic area as of December
31, 2009 and 2008 (dollars in thousands):





2009
                    
                    
                    2008Long-lived
      Assets by Geographic Location:United
      States
                    
                    $
                    17,549
                    
                    
                    $
                    15,935People's
      Republic of China (PRC)
                    
                    
                    24,199
                    
                    
                    
                    27,170All
      other foreign countries
                    
                    
                    1,094
                    
                    
                    
                    1,224Consolidated
      long-lived assets
                    
                    $
                    42,842
                    
                    
                    $
                    44,329





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 43% 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.


F-35





Net Sales to Major
Customers





The
Company had sales to three customers in excess of ten percent of consolidated
net sales in 2009.  The combined revenue of these three customers was
$71.9 million during the year ended December 31, 2009, representing 39.4% of
total sales.  In 2008, there were two customers in excess of ten
percent of consolidated net sales.  The combined revenue of these two
customers was $62.8 million during the year ended December 31, 2008,
representing 24.3% of total sales.  In 2007, there was one customer
with sales of $40.3 million, or 15.6% of consolidated net sales for the year
ended December 31, 2007.  Sales related to these significant customers
were primarily reflected in the Asia operating segment.





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, 2009, 2008 and 2007 amounted to approximately $0.4 million, $0.4
million and $0.5 million, respectively. As of December 31, 2009, the plans owned
17,086 and 178,369 shares of Bel Fuse Inc. Class A and Class B common stock,
respectively.





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, 2009, 2008 and 2007 amounted to approximately $0.3 million,
$0.4 million and $0.4 million, respectively. As of December 31, 2009, 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 established a rabbi trust which includes certain life insurance
policies in effect on participants as well as other investments to partially
cover the Company’s obligations under the Plan.


F-36




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, 2009, 2008 and 2007 amounted to approximately $0.9 million, $0.7 million and
$0.7 million, respectively.


F-37




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,
                                                        
                                                        2009
                                                        
                                                        
                                                        2008
                                                        
                                                        
                                                        2007Change
      in benefit obligation:Projected
      benefit obligation at beginning of year
                                                        
                                                        $
                                                        5,910
                                                        
                                                        
                                                        $
                                                        4,698
                                                        
                                                        
                                                        $
                                                        4,728Service
      cost
                                                        
                                                        
                                                        383
                                                        
                                                        
                                                        
                                                        293
                                                        
                                                        
                                                        
                                                        313Interest
      cost
                                                        
                                                        
                                                        352
                                                        
                                                        
                                                        
                                                        303
                                                        
                                                        
                                                        
                                                        282Benefits
      paid
                                                        
                                                        
                                                        (75
                                                        )
                                                        
                                                        
                                                        (75
                                                        )
                                                        
                                                        
                                                        (75
                                                        )Actuarial
      (gains) losses
                                                        
                                                        
                                                        (948
                                                        )
                                                        
                                                        
                                                        691
                                                        
                                                        
                                                        
                                                        (550
                                                        )Minimum
      pension obligation and unfunded pension liability
                                                        
                                                        $
                                                        5,622
                                                        
                                                        
                                                        $
                                                        5,910
                                                        
                                                        
                                                        $
                                                        4,698Funded
      status of plan:Under
      funded status
                                                        
                                                        $
                                                        (5,622
                                                        )
                                                        
                                                        $
                                                        (5,910
                                                        )Unrecognized
      net loss
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Unrecognized
      prior service costs
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Accrued
      pension cost
                                                        
                                                        $
                                                        (5,622
                                                        )
                                                        
                                                        $
                                                        (5,910
                                                        )Change
      in plan assets:Fair
      value of plan assets, beginning of year
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Company
      contributions
                                                        
                                                        
                                                        75
                                                        
                                                        
                                                        
                                                        75
                                                        
                                                        
                                                        
                                                        75Benefits
      paid
                                                        
                                                        
                                                        (75
                                                        )
                                                        
                                                        
                                                        (75
                                                        )
                                                        
                                                        
                                                        (75
                                                        )Fair
      value of plan assets, end of year
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Balance
      sheet amounts:Minimum
      pension obligation and unfunded pension liability
                                                        
                                                        $
                                                        5,622
                                                        
                                                        
                                                        $
                                                        5,910Amounts
      recognized in accumulated other comprehensive income,
    pretax:Prior
      service cost
                                                        
                                                        $
                                                        1,276
                                                        
                                                        
                                                        $
                                                        1,410Net
      (gains) losses
                                                        
                                                        
                                                        (176
                                                        )
                                                        
                                                        
                                                        784$
                                                        1,100
                                                        
                                                        
                                                        $
                                                        2,194The
      components of SERP expense are as follows:Year
      Ended December 31,
                                                        
                                                        2009
                                                        
                                                        
                                                        2008
                                                        
                                                        
                                                        2007Service
      cost
                                                        
                                                        $
                                                        383
                                                        
                                                        
                                                        $
                                                        293
                                                        
                                                        
                                                        $
                                                        313Interest
      cost
                                                        
                                                        
                                                        352
                                                        
                                                        
                                                        
                                                        303
                                                        
                                                        
                                                        
                                                        282Net
      amortization and deferral
                                                        
                                                        
                                                        147
                                                        
                                                        
                                                        
                                                        133
                                                        
                                                        
                                                        
                                                        146Total
      SERP expense
                                                        
                                                        $
                                                        882
                                                        
                                                        
                                                        $
                                                        729
                                                        
                                                        
                                                        $
                                                        741Assumption
      percentages:Discount
      rate
                                                        
                                                        
                                                        6.00
                                                        %
                                                        
                                                        
                                                        6.00
                                                        %
                                                        
                                                        
                                                        6.50
                                                        %Rate
      of compensation increase
                                                        
                                                        
                                                        3.00
                                                        %
                                                        
                                                        
                                                        3.00
                                                        %
                                                        
                                                        
                                                        3.00
                                                        %





The
accumulated benefit obligation for the SERP was $4.8 million and $4.6 million as
of December 31, 2009 and 2008, respectively.


F-38


The
estimated net gain/loss and prior service cost for the defined benefit pension
plan that will be amortized from other comprehensive income into 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 2010.





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 2010, 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 31,2010
                  
                  $
                  562011
                  
                  
                  -2012
                  
                  
                  722013
                  
                  
                  1302014
                  
                  
                  1792015
      - 2019
                  
                  
                  1,384





13.  SHARE-BASED
COMPENSATION





The
Company records compensation expense in its Consolidated Statements of
Operations related to employee stock-based options and awards.  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 $1.7 million, $1.5
million and $1.5 million for the years ended December 31, 2009, 2008 and 2007,
respectively.  The Company did not use any cash to settle any equity
instruments granted under share based arrangements during the years ended
December 31, 2009,  2008 and 2007.





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.


F-39





No
incentive stock options were granted in 2009, 2008 or 2007.  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, 2009 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, 2009
                                                          
                                                          
                                                          53,000
                                                          
                                                          
                                                          $
                                                          31.48Exercised
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Granted
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Cancelled
                                                          
                                                          
                                                          (19,000
                                                          )
                                                          
                                                          
                                                          35.03Outstanding
      at December 31, 2009
                                                          
                                                          
                                                          34,000
                                                          
                                                          
                                                          $
                                                          29.50
                                                          
                                                          0.5 years
                                                          
                                                          $
                                                          -Exercisable
      at December 31, 2009
                                                          
                                                          
                                                          34,000
                                                          
                                                          
                                                          $
                                                          29.50
                                                          
                                                          0.5 years
                                                          
                                                          $
                                                          -





No stock
options were exercised during the year ended December 31,
2009.  During the years ended December 31, 2008 and 2007, the Company
received $0.3 million and $1.5 million from the exercise of stock options and
realized tax benefits of approximately $0 and $0.1 million,
respectively.  The total intrinsic value of options exercised during
the years ended December 31, 2008 and 2007 was $0.2 million and $0.9 million,
respectively.  Stock compensation expense applicable to stock options
was minimal during the years ended December 31, 2009 and 2008 and was
approximately $0.1 million for the year ended December 31, 2007.





A summary
of the status of the Company’s non-vested options as of December 31, 2009 and
2008 and changes during the year ended December 31, 2009 is presented
below:





Weighted-AverageGrant-DateNonvested options
                        
                        Options
                        
                        
                        Fair ValueNonvested
      at December 31, 2008
                        
                        
                        15,000
                        
                        
                        $
                        29.50Granted
                        
                        
                        -
                        
                        
                        
                        -Vested
                        
                        
                        (10,000
                        )
                        
                        $
                        29.50Forfeited
                        
                        
                        (5,000
                        )
                        
                        $
                        29.50Nonvested
      at December 31, 2009
                        
                        
                        -
                        
                        
                        
                        -





The fair
value of options that vested during the years ended December 31, 2009, 2008 and
2007 was $0.2 million, $0.5 million and $1.6 million,
respectively.  There was no intrinsic value associated with the
options that vested during 2009.


F-40





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 2009, 2008 and 2007, the Company issued 141,300, 56,300 and 74,200 class
B common shares, respectively, under a restricted stock plan to various officers
and employees.   In connection with these and other awards
granted in prior years, the Company recorded pre-tax compensation expense of
$1.7 million, $1.5 million and $1.3 million ($1.2 million, $1.1 million and $0.9
million, after tax benefit) for the years ended December 31, 2009, 2008 and
2007, respectively.





A summary
of the activity under the Restricted Stock Awards Plan as of December 31, 2009
is presented below:





WeightedWeighted
                          
                          AverageAverage
                          
                          RemainingRestricted Stock
                          
                          
                          
                          
                          Award
                          
                          ContractualAwards
                          
                          Shares
                          
                          
                          Price
                          
                          TermOutstanding
      at January 1, 2009
                          
                          
                          202,900
                          
                          
                          $
                          32.58
                          
                          3.1
      yearsGranted
                          
                          
                          141,300
                          
                          
                          $
                          18.71Vested
                          
                          
                          (50,700
                          )
                          
                          $
                          35.38Forfeited
                          
                          
                          (19,650
                          )
                          
                          $
                          31.76Outstanding
      at December 31, 2009
                          
                          
                          273,850
                          
                          
                          $
                          24.96
                          
                          3.6 years





As of
December 31, 2009, there was $4.7 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 4.8
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, 2009, 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 527,817 Class A common
shares at a cost of approximately $16.8 million.  No shares of Class B
common stock were repurchased during the year ended December 31, 2009 and 6,070
shares of Class A common stock were repurchased during the year ended December
31, 2009 at a cost of $0.1 million.


F-41





As of
December 31, 2009, to the Company’s knowledge, there were two shareholders of
the Company’s common stock (other than shareholders subject to specific
exceptions) with ownership in excess of 10% of Class A outstanding shares with
no ownership of the Company’s Class B common stock.  In accordance
with the Company’s certificate of incorporation, the Class B Protection clause
is triggered if a shareholder owns 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).  In
such a circumstance, 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 December 31, 2009, to the Company’s knowledge, these
shareholders had not purchased any Class B shares to comply with these
requirements.  In order to vote their 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 December 31,
2009, to the Company’s knowledge, these shareholders owned 20.1% and 17.0%,
respectively, of the Company’s Class A common stock in the aggregate 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%. Unless and until this
situation is satisfied in a manner permitted by the Company’s Restated
Certificate of Incorporation, the subject shareholders will not be permitted to
vote their shares of common stock.





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, 2009 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, 2009February
      1, 2009
                
                
                0.06
                
                
                
                0.07
                
                
                
                130
                
                
                
                642May
      1, 2009
                
                
                0.06
                
                
                
                0.07
                
                
                
                130
                
                
                
                642August
      1, 2009
                
                
                0.06
                
                
                
                0.07
                
                
                
                131
                
                
                
                641November
      1, 2009
                
                
                0.06
                
                
                
                0.07
                
                
                
                131
                
                
                
                691Year
      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




F-42


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 31,2010
                          
                          $
                          1,9772011
                          
                          
                          1,2032012
                          
                          
                          9712013
                          
                          
                          5222014
                          
                          
                          83Thereafter
                          
                          
                          28$
                          4,784





Rental
expense was approximately $2.2 million, $2.3 million and $2.0 million for the
years ended December 31, 2009, 2008, and 2007, 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, 2009, the Company has outstanding purchase
orders related to the purchase of raw materials in the aggregate amount of $19.9
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.


F-43


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 June 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 defendant in a lawsuit captioned Murata Manufacturing Company,
Ltd. v. Bel Fuse Inc. et al., brought in Illinois Federal District Court. The
plaintiff claimed that its patent covers all of the Company's MagJack®
integrated connector products. The Company had expected this case to proceed to
trial.  In order to eliminate future legal fees related to this case,
a settlement was negotiated with Murata in October 2009 whereby the Company paid
a lump sum licensing fee of $2.1 million in exchange for a licensing agreement
covering the past and future sales of the Company’s MagJack®
integrated connector products.  As $2.0 million of this fee was deemed
to relate to product sales from prior periods, the Company included this expense
in cost of sales in the accompanying consolidated statements of operations for
the year ended December 31, 2009.  The Court issued an Order of
Dismissal on November 4, 2009.





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, 2009, no amounts have been accrued
in connection with contingencies related to these lawsuits, as the amounts are
not estimable.





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-44


16.
            ACCUMULATED
      OTHER COMPREHENSIVE INCOME





The
components of accumulated other comprehensive income as of December 31, 2009 and
2008 are summarized below (dollars in thousands)





2009
                  
                  
                  2008Foreign
      currency translation adjustment
                  
                  $
                  1,789
                  
                  
                  $
                  1,746Unrealized
      holding gain (loss) on available-for-sale securities, net of taxes of $42
      and $23 as of December 31, 2009 and 2008
                  
                  
                  62
                  
                  
                  
                  30Unfunded
      SERP liability, net of taxes of $(341) and $(606) as of December 31, 2009
      and 2008
                  
                  
                  (759
                  )
                  
                  
                  (1,588
                  )Accumulated
      other comprehensive income
                  
                  $
                  1,092
                  
                  
                  $
                  188





17.
            RELATED
      PARTY TRANSACTIONS





As of
December 31, 2009, the Company has $2.0 million invested in a money market fund
with GAMCO Investors, Inc. (“GAMCO”).  GAMCO is a current shareholder
of the Company, with holdings of its Class A stock of approximately
20.1%.  However, as discussed in Note 14, GAMCO’s voting rights are
currently suspended.





18.
            RESTRUCTURING
      ACTIVITY





During
July 2008, the Company announced that it would cease all manufacturing
operations at its Bel Power Inc. facility in Westborough, Massachusetts as of
December 31, 2008.  The costs associated with this closure are being
accounted for in accordance with the accounting guidance related to exit or
disposal cost obligations.  During the fourth quarter of 2008, the
Company evaluated the inventory and property, plant and equipment at the
Westborough, Massachusetts facility for obsolescence and/or impairment, which
resulted in charges as outlined in the table below.  The Company also
incurred severance and related benefit expenses in 2008 and 2009 associated with
the layoff of approximately 50 associates.  The Company has been
unable to sublease the facility in Westborough, Massachusetts and in light of
the current real estate market, it is not anticipated that a sublease can be
reasonably obtained for this facility.  As a result, the Company has
incurred charges related to its facility lease obligation in both 2008 and
2009.  The charges detailed below impacted the operating profit of the
Company’s North America operating segment.


F-45





Year
      Ended December 31,2009
                      
                      
                      2008Severance
      and related benefits
                      
                      $
                      121
                      
                      
                      $
                      598Costs
      associated with facility lease obligation
                      
                      
                      292
                      
                      
                      
                      524Restructuring
      charges
                      
                      
                      413
                      
                      
                      
                      1,122Impairment
      of property, plant and equipment
                      
                      
                      -
                      
                      
                      
                      739Inventory
      markdowns
                      
                      
                      -
                      
                      
                      
                      355$
                      413
                      
                      
                      $
                      2,216





Activity
and liability balances related to the restructuring charges for the year ended
December 31, 2009 are as follows:





Liability at
                  
                  
                  New
                  
                  
                  Cash Payments and
                  
                  
                  Liability atDecember 31,2008
                  
                  
                  Charges
                  
                  
                  Other Settlements
                  
                  
                  December 31, 2009Termination
      benefit charges
                  
                  $
                  437
                  
                  
                  $
                  121
                  
                  
                  $
                  (558
                  )
                  
                  $
                  -Facility
      lease obligation
                  
                  
                  524
                  
                  
                  
                  292
                  
                  
                  
                  (152
                  )
                  
                  
                  664$
                  961
                  
                  
                  $
                  413
                  
                  
                  $
                  (710
                  )
                  
                  $
                  664





The
Company has included the current portion of $0.2 million in accrued
restructuring in the Consolidated Balance Sheet at December 31, 2009, and has
classified the remaining $0.5 million of the liability related to the facility
lease obligation as noncurrent.





19.
            UNAUTHORIZED
      TRANSACTIONS





In April
2009, as part of the March 31, 2009 quarter-end review, the Company's internal
accounting personnel identified a questionable entry in the Company's stock
option exercise records. After questioning by management, a Company employee
(the "Employee") responsible for certain aspects of the Company's benefit plan
administration admitted fabricating certain Company records for his own benefit
in order to enable him to exercise stock options that had not been granted to
him by the Company's Compensation Committee. The Company's management
immediately terminated the employment of the Employee and reported the matter to
the Company's Audit Committee. The Audit Committee, in turn, directed internal
accounting personnel to investigate this matter and directed counsel to engage a
forensic accounting firm to supplement the Company's internal
review.





The
Company's review has focused on the Employee's role in the administration of the
Company's stock option plan, 401(k) plan and profit-sharing plan. The following
determinations have been made:





·
            With
      respect to the stock option plan, the Company has determined that over a
      period of approximately eight years, the Employee exercised options
      covering 30,000 shares of Class B Common Stock on the basis of
      documentation that the Employee fabricated.  The fair value of
      these 30,000 shares at the times of issuance approximated $0.8
      million.  Option exercises covering an additional 1,000 shares
      are questionable but have not, as yet, been determined to be based on
      fabricated documentation. At this time, the Company does not believe that
      it will be able to obtain sufficient evidentiary documents to conclusively
      determine that these additional 1,000 shares related to fraudulent
      transactions.  The Employee has returned 30,000 shares to the
      Company for cancellation with a fair market value on the dates of their
      return of approximately $0.4
million.


F-46


·
            With
      respect to the Company's 401(k) plan, the Company has determined that over
      the same approximate eight-year period, the Employee fraudulently
      increased the balance in his 401(k) account by a total of $44,300. The
      Employee has not been permitted to withdraw any funds in his 401(k)
      account. Accordingly, in July 2009, the Company recouped the $44,300
      directly from the Employee's 401(k) account.  In addition, the
      Employee initiated special 401(k) stock distributions directly into the
      Employee’s IRA account representing 3,420 shares of Class B Common Stock
      and 65 shares of Class A Common Stock.  The fair value of these
      shares at the time of transfer approximated $0.1 million.  The
      Employee has returned 1,200 shares of Class B Common Stock to the Company
      for cancellation with a fair market value on the dates of their return of
      approximately $16,000.  The Company contends that the withdrawal
      of these shares constituted a withdrawal of his Plan funds and intends to
      use the current balance of 6 Class A and 864 Class B shares plus $33,156
      associated in the Plan with his account as partial payment of an over
      withdrawal from his account.  The Company has demanded that the
      Employee return the balance to the
Plan.





·
            With
      respect to the Company's profit-sharing plan, the Company has determined
      that the Employee diverted to his account a total of $3,600 credited to
      the account of an employee whose employment had terminated and who
      therefore was about to forfeit his profit-sharing interest. The Employee
      has not been permitted to withdraw any funds from his profit-sharing
      account. The Company intends to recoup such $3,600 directly from the
      Employee.





The
review by the Company's internal accounting personnel and forensic accounting
firm is complete. The Company has reported this matter to the appropriate
governmental authorities, which may take further action with respect to the
Employee.  The Company's forensic accounting firm performed an email
search designed to ascertain whether there was any evidence that the Employee's
actions extended beyond his own personal accounts or whether other employees
were directly involved in such actions. To date, the Company has not discovered
any evidence that suggests that the fraudulent practices identified pursuant to
the internal investigation extended beyond the Employee's personal accounts or
directly involved Company personnel other than the Employee.





During
the year ended December 31, 2009, the Company recorded an unauthorized issuance
of common stock charge of $0.9 million related to this theft.  This
charge was offset by $0.5 million related to the fair market value of shares
returned by the Employee during 2009.  In addition, the Company
incurred $0.2 million in legal and professional fees related to this
activity.  These charges are included within selling, general and
administrative expenses in the accompanying consolidated statement of operations
for the year ended December 31, 2009.


F-47


20.
            SUBSEQUENT
      EVENT – ACQUISITION OF CINCH
CONNECTORS





On
January 29, 2010, the Company completed the acquisition of Cinch Connectors
(“Cinch”) from Safran S.A. for approximately $37.5 million in cash plus
approximately $1.5 million for the assumption of certain
expenses.  The final purchase price remains subject to certain
adjustments related to working capital.  The transaction was funded
with cash on hand.  Cinch is headquartered in Lombard, Illinois and
has manufacturing facilities in Vinita, Oklahoma, Reynosa, Mexico and Worksop,
England.





Cinch
manufactures a broad range of interconnect products for customers in the
military and aerospace, high-performance computing, telecom/datacom, and
transportation markets.  The Company believes that the addition of
Cinch’s well-established lines of connector and cable products and extensive
customer base will provide Bel with immediate access to the large and growing
aerospace and military markets and will strengthen Bel’s position as a one-stop
supplier of high-performance computing, telecom and data products.  In
addition to these strategic synergies, there is a significant opportunity for
expense reduction and the elimination of redundancies.  The
combination of these factors, and Bel’s ability to leverage its existing product
line, have given rise to the provisional amount of goodwill detailed
below.





While the
initial accounting related to this business combination is not complete as of
the filing date of this Form 10-K, the following table depicts the Company’s
estimated acquisition date fair values of the consideration transferred and
identifiable net assets acquired (in thousands):


F-48





ConsiderationCash
                        
                        $
                        39,755Assumption
      of change-in-control payments
                        
                        
                        747Fair
      value of total consideration transferred
                        
                        $
                        40,502Acquisition-related
      costs (included in selling, general and administrative expense for the
      year ended December 31, 2009)
                        
                        $
                        605Recognized
      amounts of identifiable assetsacquired and liabilities
      assumed:Cash
                        
                        $
                        660Accounts
      receivable
                        
                        
                        6,910Inventory
                        
                        
                        7,548Other
      current assets
                        
                        
                        803Property,
      plant and equipment
                        
                        
                        9,345
                        (a)Intangible
      assets
                        
                        
                        2,528
                        (b)Other
      assets
                        
                        
                        192Accounts
      payable
                        
                        
                        (2,923
                        )Accrued
      expenses and other current liabilities
                        
                        
                        (2,932
                        )Total
      identifiable net assets
                        
                        $
                        22,131Goodwill
                        
                        $
                        18,371
                        (c)





(a)  As
of the filing date, the appraisal related to the building acquired was received
and the fair value of the building is included in this amount; however, the
appraisals related to machinery and equipment acquired were incomplete as of the
filing date and as such, this amount only includes the carrying value of those
assets.





(b) The
Company has identified various intangible assets, including customer lists,
license agreements, non-compete agreements, in-process research and development,
and other intellectual property, that are being valued by a third-party
appraiser.  These appraisals were not complete as of the date of this
filing, and the amounts noted above only represent the carrying value of the
intangible assets on Cinch's balance sheet as of the acquisition
date.





(c) The
amount of goodwill is provisional as of the filing date, as appraisals related
to property, plant and equipment, and various intangible assets are still
underway.  As the final amount of goodwill has not yet been determined
or allocated by country, the Company is unable to determine at this time the
portion of goodwill, if any, that will be deductible for tax
purposes.


F-49


21.
              SELECTED
      QUARTERLY FINANCIAL DATA
(UNAUDITED)





Quarterly
results (unaudited) for the years ended December 31, 2009 and 2008 are
summarized as follows (in thousands, except per share data):





Total YearQuarter Ended
                        
                        
                        EndedMarch 31,
                        
                        
                        June 30,
                        
                        
                        September 30,
                        
                        
                        December 31,
                        
                        
                        December 31,2009 (d)
                        
                        
                        2009
                        
                        
                        2009 (c)
                        
                        
                        2009 (b)
                        
                        
                        2009 (a)Net
      sales
                        
                        $
                        43,871
                        
                        
                        $
                        44,934
                        
                        
                        $
                        45,283
                        
                        
                        $
                        48,665
                        
                        
                        $
                        182,753Cost
      of sales
                        
                        
                        38,211
                        
                        
                        
                        40,192
                        
                        
                        
                        41,516
                        
                        
                        
                        41,535
                        
                        
                        
                        161,454Net
      earnings (loss)
                        
                        
                        816
                        
                        
                        
                        (1,272
                        )
                        
                        
                        (10,752
                        )
                        
                        
                        2,898
                        
                        
                        
                        (8,310
                        )Earnings
      (loss) per Class A common share:Basic
                        
                        $
                        0.06
                        
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.90
                        )
                        
                        $
                        0.23
                        
                        
                        $
                        (0.71
                        )Diluted
                        
                        $
                        0.06
                        
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.90
                        )
                        
                        $
                        0.23
                        
                        
                        $
                        (0.71
                        )Earnings
      (loss) per Class B common share:Basic
                        
                        $
                        0.07
                        
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.94
                        )
                        
                        $
                        0.25
                        
                        
                        $
                        (0.72
                        )Diluted
                        
                        $
                        0.07
                        
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.94
                        )
                        
                        $
                        0.25
                        
                        
                        $
                        (0.72
                        )





Total
      YearQuarter Ended
                      
                      
                      EndedMarch
      31,
                      
                      
                      June
      30,
                      
                      
                      September
      30,
                      
                      
                      December
      31,
                      
                      
                      December
      31,2008
                      
                      
                      2008 (f)
                      
                      
                      2008 (f)
                      
                      
                      2008 (e)(f)(g)
                      
                      
                      2008 (a)(g)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)
                      
                      
                      2,167
                      
                      
                      
                      1,811
                      
                      
                      
                      1,946
                      
                      
                      
                      (20,853
                      )
                      
                      
                      (14,929
                      )Earnings
      (loss) per Class A common share:Basic
                      
                      $
                      0.17
                      
                      
                      $
                      0.14
                      
                      
                      $
                      0.16
                      
                      
                      $
                      (1.75
                      )
                      
                      $
                      (1.25
                      )Diluted
                      
                      $
                      0.17
                      
                      
                      $
                      0.14
                      
                      
                      $
                      0.16
                      
                      
                      $
                      (1.75
                      )
                      
                      $
                      (1.25
                      )Earnings
      (loss) per Class B common share:Basic
                      
                      $
                      0.19
                      
                      
                      $
                      0.16
                      
                      
                      $
                      0.17
                      
                      
                      $
                      (1.82
                      )
                      
                      $
                      (1.28
                      )Diluted
                      
                      $
                      0.19
                      
                      
                      $
                      0.16
                      
                      
                      $
                      0.17
                      
                      
                      $
                      (1.82
                      )
                      
                      $
                      (1.28
                      )





(a)
            Quarterly
      amounts of earnings per share may not agree to the total for the year due
      to rounding.





(b)
            Net
      earnings for the quarter ended December 31, 2009 include a gain on sale of
      investment of $5.4 million ($3.3 million after tax), primarily related to
      the sale of the investment in Power-One common
  stock.





(c)
            The
      net loss for the quarter ended September 30, 2009 includes a goodwill
      impairment charge of $12.9 million related to the Company’s Asia operating
      segment and a $2.0 million ($1.2 million after tax) charge related to the
      Murata licensing fee.





(d)
            Net
      earnings for the quarter ended March 31, 2009 include a gain on the sale
      of property in Jersey City, New Jersey of $4.7 million ($2.9 million after
      tax) offset by restructuring charges associated with the closure of the
      Company’s Westborough, Massachusetts facility of $0.4 million ($0.3
      million after tax).





(e)
            The
      net 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).





(f)
            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.





(g)
            The
      Company adopted the update to Accounting Standards Codification 260
      effective January 1, 2009, which required that all 2008 outstanding shares
      and EPS figures be recast to include certain participating
      securities.  The impact of the adoption was not more
      than $0.03 per share in any period presented
  above.


F-50


BEL FUSE
INC. AND SUBSIDIARIES


SCHEDULE
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, 2009Allowance
      for doubtful accounts
                  
                  $
                  660
                  
                  
                  $
                  36
                  
                  
                  $
                  6
                  
                  
                  $
                  (106
                  )
                  
                  $
                  596Allowance
      for excess and obsolete inventory
                  
                  $
                  4,051
                  
                  
                  $
                  (849
                  )
                  
                  $
                  (26
                  )
                  
                  $
                  (409
                  )
                  
                  $
                  2,767Deferred
      tax assets - valuation allowances
                  
                  $
                  971
                  
                  
                  $
                  231
                  
                  
                  $
                  -
                  
                  
                  $
                  (324
                  )
                  
                  $
                  878Year
      ended December 31, 2008Allowance
      for doubtful accounts
                  
                  $
                  977
                  
                  
                  $
                  (191
                  )
                  
                  $
                  (43
                  )
                  
                  $
                  (83
                  )
                  
                  $
                  660Allowance
      for excess and obsolete inventory
                  
                  $
                  3,266
                  
                  
                  $
                  1,079
                  
                  
                  $
                  (10
                  )
                  
                  $
                  (284
                  )
                  
                  $
                  4,051Deferred
      tax assets - valuation allowances
                  
                  $
                  331
                  
                  
                  $
                  640
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  971Year
      ended December 31, 2007Allowance
      for doubtful accounts
                  
                  $
                  1,087
                  
                  
                  $
                  (50
                  )
                  
                  $
                  48
                  
                  
                  $
                  (108
                  )
                  
                  $
                  977Allowance
      for excess and obsolete inventory
                  
                  $
                  5,004
                  
                  
                  $
                  (1,134
                  )
                  
                  $
                  17
                  
                  
                  $
                  (621
                  )
                  
                  $
                  3,266Deferred
      tax assets - valuation allowances
                  
                  $
                  338
                  
                  
                  $
                  (7
                  )
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  331




(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





As of the
end of the Company’s most recently completed fiscal quarter covered by this
report, the Company carried out an evaluation, with the participation of the
Company’s management, including the Company’s Chief Executive Officer and Vice
President - Finance, of the effectiveness of the Company’s disclosure controls
and procedures pursuant to Securities Exchange Act Rule 13a-15.  As
part of the March 31, 2009 quarter-end review, the Company's internal accounting
personnel identified a questionable entry in the Company's stock option exercise
records. After questioning by management, a Company employee (the "Employee")
responsible for certain aspects of the Company's benefit plan administration
admitted fabricating certain Company records for his own benefit in order to
enable him to exercise stock options that had not been granted to him by the
Company's Compensation Committee. The Company's management immediately
terminated the employment of the Employee and reported the matter to the
Company's Audit Committee. The Audit Committee, in turn, directed internal
accounting personnel to investigate this matter and directed counsel to engage a
forensic accounting firm to supplement the Company's internal
review.





The
Company's review has focused on the Employee's role in the administration of the
Company's stock option plan, 401(k) plan and profit-sharing plan. The following
determinations have been made:





·
              With
      respect to the stock option plan, the Company has determined that over a
      period of approximately eight years, the Employee exercised options
      covering 30,000 shares of Class B Common Stock on the basis of
      documentation that the Employee fabricated.  The fair value of
      these 30,000 shares at the times of issuance approximated $0.8
      million.  Option exercises covering an additional 1,000 shares
      are questionable but have not, as yet, been determined to be based on
      fabricated documentation. At this time, the Company does not believe that
      it will be able to obtain sufficient evidentiary documents to conclusively
      determine that these additional 1,000 shares related to fraudulent
      transactions.  The Employee has returned 30,000 shares to the
      Company for cancellation with a fair market value on the dates of their
      return of approximately $0.4
million.





·
              With
      respect to the Company's 401(k) plan, the Company has determined that over
      the same approximate eight-year period, the Employee fraudulently
      increased the balance in his 401(k) account by a total of $44,300. The
      Employee has not been permitted to withdraw any funds in his 401(k)
      account. Accordingly, in July 2009, the Company recouped the $44,300
      directly from the Employee's 401(k) account.  In addition, the
      Employee initiated special 401(k) stock distributions directly into the
      Employee’s IRA account representing 3,420 shares of Class B Common Stock
      and 65 shares of Class A Common Stock.  The fair value of these
      shares at the time of transfer approximated $0.1 million.  The
      Employee has returned 1,200 shares of Class B Common Stock to the Company
      for cancellation with a fair market value on the dates of their return of
      approximately $16,000.  The Company contends that the withdrawal
      of these shares constituted a withdrawal of his Plan funds and intends to
      use the current balance of 6 Class A and 864 Class B shares plus $33,156
      associated in the Plan with his account as partial payment of an over
      withdrawal from his account.  The Company has demanded that the
      Employee return the balance to the
Plan.


-45-


·
              With
      respect to the Company's profit-sharing plan, the Company has determined
      that the Employee diverted to his account a total of $3,600 credited to
      the account of an employee whose employment had terminated and who
      therefore was about to forfeit his profit-sharing interest. The Employee
      has not been permitted to withdraw any funds from his profit-sharing
      account. The Company intends to recoup such $3,600 directly from the
      Employee.





The
review by the Company's internal accounting personnel and forensic accounting
firm is complete. The Company has reported this matter to the appropriate
governmental authorities, which may take further action with respect to the
Employee.  The Company's forensic accounting firm performed an email
search designed to ascertain whether there was any evidence that the Employee's
actions extended beyond his own personal accounts or whether other employees
were directly involved in such actions. To date, the Company has not discovered
any evidence that suggests that the fraudulent practices identified pursuant to
the internal investigation extended beyond the Employee's personal accounts or
directly involved Company personnel other than the Employee.





Based
upon the information discovered to date:





·
              The
      Company does not believe that the Employee's actions have had or will have
      a material effect on the Company's consolidated financial
      statements.





·
              The
      Audit Committee directed the Company's internal audit staff to assess
      whether existing controls should be enhanced to assure that employees
      engaged in benefit plan administration do not have the ability to allocate
      employment benefits to themselves absent a third party
      approval.  The Company’s internal audit staff has completed this
      assessment and has implemented certain enhancements to the Company’s
      internal control structure related to the Company’s benefit plan
      administration.





·
              Management
      recommended to the Company's Compensation Committee that no stock options
      or restricted stock be granted by the Company until such time as the Audit
      Committee determines that enhanced controls have been implemented or are
      not necessary. The Company’s Audit Committee has reviewed the enhancements
      to the control procedures implemented during the second quarter of 2009
      and cleared the Company for future issuances of stock options and
      restricted stock.





·
              The
      Company's Chief Executive Officer and Vice President - Finance have
      concluded that the Company’s disclosure controls and procedures are
      effective in ensuring that information required to be disclosed by the
      Company in the reports that it files or submits under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s 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, 2009.




-46-




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, 2009 and has expressed an unqualified opinion in their report which
is included in Item 8 herein.




Changes in Internal Controls
Over Financial Reporting




There
were no significant 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.


-47-


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 2010 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 code of ethics is available on the Registrant’s
website under Corporate Governance.  The Registrant will also 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 2010 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 table below depicts the securities
authorized for issuance under the Company’s equity compensation plans. The
Registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2010 annual meeting of shareholders that is
responsive to the remaining information required with respect to this
Item.





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
                        
                        
                        34,000
                        
                        
                        $
                        29.50
                        
                        
                        
                        835,785Equity
      compensation plans not approved by security holders
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Totals
                        
                        
                        34,000
                        
                        
                        $
                        29.50
                        
                        
                        
                        835,785





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 2010 annual meeting of shareholders that is responsive to the
information required with respect to this Item.


-48-


Item
      14.
            PrincipalAccountantFees and
      Services





The Registrant incorporates by
reference herein information to be set forth in its definitive proxy statement
for its 2010 annual meeting of shareholders that is responsive to the
information required with respect to this Item.


-49-


PART
IV





Item
      15.
            Exhibits, Financial
      Statement Schedules


Page(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, 2009 and 2008
                          F-3
      - F-4Consolidated
      Statements of Operations for Each of the Three Years in the Period Ended
      December 31, 2009
                          F-5Consolidated
      Statements of Stockholders' Equity for Each of the Three Years in the
      Period Ended December 31, 2009
                          F-6
      - F-7Consolidated
      Statements of Cash Flows for Each of the Three Years in the Period Ended
      December 31, 2009
                          F-8
      - F-10Notes
      to Consolidated Financial Statements
                          F-
      11 - F-502.
                          Financial
      statementschedules 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.





10.6
            First
      Amendment to Credit and Guaranty Agreement dated as of April 30, 2008, by
      and among Bel Fuse, Inc., as Borrower, the Subsidiary Guarantors party
      thereto and the Bank of America, N.A., as
  Lender.





10.7
            Second
      Amendment to Credit and Guaranty Agreement dated as of June 30, 2009, by
      and among Bel Fuse, Inc., as Borrower, the Subsidiary Guarantors party
      thereto and the Bank of America, N.A., as
  Lender.





10.8
            Stock
      purchase agreement by and among Safran USA, Inc., Safran UK Limited and
      Bel Fuse Inc., dated as of December 28,
2009.





10.9
            Third
      Amendment to Credit and Guaranty Agreement dated as of January 29, 2010,
      by and among Bel Fuse, Inc., as Borrower, the Subsidiary Guarantors party
      thereto and the Bank of America, N.A., as
  Lender.





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 onForm 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 2002





31.2
            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 BernsteinDaniel
      Bernstein, President, Chief ExecutiveOfficer
      and Director





Dated:  March
12, 2010





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
      12, 2010Daniel
      Bernstein
                      
                      Executive
      Officer andDirector/s/ Howard Bernstein
                      
                      Director
                      
                      March
      12, 2010Howard
      B. Bernstein/s/ Robert H. Simandl
                      
                      Director
                      
                      March
      12, 2010Robert
      H. Simandl/s/ Peter Gilbert
                      
                      Director
                      
                      March
      12, 2010Peter
      Gilbert/s/ John Tweedy
                      
                      Director
                      
                      March
      12, 2010John
      Tweedy/s/ John Johnson
                      
                      Director
                      
                      March
      12, 2010John
      Johnson


-53-




Signature
                    
                    Title
                    
                    Date/s/ Avi Eden
                    
                    Director
                    
                    March
      12, 2010Avi
      Eden/s/ Colin Dunn
                    
                    Vice-President
      -Colin
      Dunn
                    
                    Finance
      and Secretary
                    
                    March
      12,
2010


-54-