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**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 year ended
            December
                31, 2005




or





o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





For
      the
      transition period from ____________________________ to
      ____________________________





Commission
      File Number: 0-11676





**BEL
      FUSE INC.**


(Exact
      name of registrant as specified in its charter)





NEW
                JERSEY
            22-1463699(State
                of other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





206
                Van Vorst Street, Jersey City, New Jersey
            07302(Address
                of principal executive offices)
            (Zip
                Code)





(201)
      432-0463


(Registrant's
      telephone number, including area code)





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


None





Securities
      registered pursuant to Section 12(g) of the Act:


Class
      A
      Common Stock, $0.10 par value; Class B Common Stock, $0.10 par
      value





Indicate
      by checkmark if the registrant is a well-known issuer, as defined in Rule 405
      of
      the


Securities
      Act. o Yes x
      No





Indicate
      by checkmark if the registrant is not required to file reports to Section 13
      or
      15(d)


Of
      the
      Act. o Yes x
      No





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.    x Yes o No







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Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K. o





Indicate
      by checkmark whether the registrant is a large accelerated filer, an accelerated
      filer, or a non-accelerated filer. See definition of “accelerated filer” and
“large accelerated filer” in Rule 12b-2 of the Securities Exchange Act of
      1934.


Large
      accelerated filer o
      Accelerated filer x
      Non-accelerated filer o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


o
      Yes x No





The
      aggregate market value of the voting and non-voting common equity of the
      registrant held by non-affiliates (for this purpose, persons and entities other
      than executive officers, directors, and 5% or more shareholders) of the
      registrant, as of the last business day of the registrant's most recently
      completed second fiscal quarter (June 30, 2005), was $259,550,000.





Number
      of
      shares of Common Stock outstanding as of March 1, 2006: 2,702,677 Class A Common
      Stock; 9,059,677- Class B Common Stock





Documents
      incorporated by reference:





Bel
      Fuse
      Inc.'s Definitive Proxy Statement for the 2006 Annual Meeting of Stockholders
      is
      incorporated by reference into Part III.




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              Statements**




BEL
                FUSE INC.INDEXForward
                Looking Information
            PagePart
                IItem
                1.
            Business
            1Item
                1A.
            Risk
                Factors
            12Item
                1B.
            Unresolved
                Staff Comments
            18Item
                2.
            Properties
            18Item
                3.
            Legal
                Proceedings
            20Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            21Part
                IIItem
                5.
            Market
                for Registrant's Common Equity, Related Stockholder
                Matters and Issuer Purchase of Equity Securities
            22Item
                6.
            Selected
                Financial Data
            24Item
                7.
            Management's
                Discussion and Analysis of Financial Condition
                and Results of Operations
            26Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            45Item
                8.
            Financial
                Statements and Supplementary
                Data
            45Item
                9.
            Changes
                in and Disagreements With Accountants on Accounting
                and Financial Disclosure
            47Item
                9A.
            Controls
                and Procedures
            47Item
                9B.
            Other
                Information
            49Part
                IIIItem
                10.
            Directors
                and Executive Officers of the
                Registrant
            49Item
                11.
            Executive
                Compensation
            49Item
                12.
            Security
                Ownership of Certain Beneficial Owners and
                Management
            49Item
                13.
            Certain
                Relationships and Related
                Transactions
            49Item
                14.
            Principal
                Accounting Fees and Services
            49Part
                IVItem
                15.
            Exhibits,
                Financial Statement Schedules
            50Signatures
            53


*
        Page F-1 follows page 46
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              Statements**
  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 designs, manufactures
      and
      markets a broad array of magnetics, modules, circuit protection devices and
      interconnect products. 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
      55 years in the electronics industry, Bel has reliably demonstrated the ability
      to succeed in a variety of product areas across multiple industries. Founded
      in
      1949, the Company has a strong track record of technical innovation working
      with
      the engineering communities of market leaders. Bel has consistently proven
      itself a valuable supplier to the foremost companies in its chosen industries
      by
      developing cost-effective solutions for the challenges of new product
      development. By combining our strength in product design with our own
      specially-designed manufacturing facilities, Bel has established itself as
      a
      formidable competitor on a global basis.




-1-
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            Statements**




The
      Company, which is organized under New Jersey law, operates in one industry
      with
      three geographic reporting segments as defined in Statement of Financial
      Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
      and
      Related Information". Bel’s principal executive offices are located at 206 Van
      Vorst Street, Jersey City, New Jersey 07302; (201) 432-0463. The Company
      operates other facilities in North America, Europe and the Far East and trades
      on the NASDAQ (BELFA and BELFB). For information regarding Bel's three
      geographic reporting units, see Note 11 of the Notes to Consolidated Financial
      Statements.





The
      terms
“Company” and “Bel” as used in this Annual Report on Form 10-K refers to Bel
      Fuse Inc. and its consolidated subsidiaries unless otherwise
      specified.




Product
      Groups





Magnetics


§
            Discrete
                components


§
            Power
                transformers


§
            MagJack®integrated connector modules





The
      Company, a leading producer of discrete magnetics, markets an extensive line
      of
      products (transformers, diplex filters, common mode chokes and delay lines)
      used
      in networking, telecommunications and broadband applications. These magnetic
      devices condition, filter and isolate the signal as it travels through network
      equipment helping to ensure accurate data and/or voice transmission. Bel’s
      magnetic components are also used in the automotive and consumer products
      markets.





Power
      transformer products include standard and custom designs that have been added
      to
      the Company’s product mix as a result of the Company's Signal Transformer
      acquisition in 2003. Manufactured for use in alarm, security and medical
      products, these devices are designed to comply with international safety
      standards governing transformers, including UL, CSA, IEC, TUV and VDE.





Marketed
      under the brand MagJack®, Bel's connectors with integrated magnetics provide the
      signal conditioning, electromagnetic interference suppression and signal
      isolation previously performed by multiple, discrete magnetics.





Modules


§
            Power
                conversion modules


§
            Integrated
                analog front end modules


§
            Custom
                modules





Bel’s
      Power conversion products include standard and custom non-isolated DC-DC
      converters designed specifically to power low voltage silicon devices. The
      need
      for converting one DC voltage to another voltage is growing rapidly as the
      developers of integrated circuits commonly adjust the supply voltage as a means
      of optimizing device performance. These DC-DC converters are used in data
      networking equipment, distributed power architecture, and telecommunication
      devices, as well as computers and peripherals.





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            Statements**





The
      Company develops IC-compatible, integrated front end modules for
      broadband and telecommunication applications. These modules, including products
      acquired in the Company's APC acquisition in 2003, can eliminate the need for
      several discrete components by providing the same functionality in a single,
      compact device.





The
      Company continues to pursue market opportunities, such as those in the
      automotive industry, where it can supply customized value-added modules to
      customers requiring integrated products that combine one or more of the
      Company's capabilities in surface mount assembly, automatic winding, hybrid
      fabrication and component encapsulation.





Circuit
      Protection


§
            Miniature
                fuses


§
            Micro
                fuses


§
            Surface
                mount fuses





The
      Company’s circuit protection products include board level fuse designs
      (miniature, micro and surface mount fuses) designed for the global electronic
      and telecommunication markets. Fuses 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.




While
      the
      Company continues to manufacture traditional fuse types, its surface mount
      chip
      fuses are in high demand for use in space-critical applications such as mobile
      phones and computers. Like the majority of Bel’s fuse products, the chip fuses
      comply with RoHS 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





Through
      the Company's Stewart Connector acquisition in 2003, the Company has added
      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 including newly released
      Category 6 compliant products targeted to next generation network standards
      for
      Gigabit Ethernet and 10Gigabit Ethernet.




-3-
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            Statements**


The
      following table describes, for each of Bel's product groups, the principal
      functions and applications associated with such product groups.





**Product
                Group**
            **Function**
            **Application****Magnetics**Discrete
                Components
            Condition,
                filter and isolate the electronic signal to ensure accurate data
                and/or
                voice transmission.
            Network
                switches, routers, hubs and PCs used in 10/100Base-TX, Gigabit, Voice
                over
                the Internet Protocol (”VoIP"), home networking and cable modem
                applications.Power
                Transformers
            Safety
                isolation and distribution.
            Power
                supplies, alarm, fire detection and security systems, HVAC, lighting
                and
                medical equipment.MagJack®Integrated Connector Modules
            Condition,
                filter and isolate an electronic signal to ensure accurate data and/or
                voice transmission and to provide RJ45 and USB
                connectivity
            Network
                switches, routers, hubs and PCs used in 10/100Base-TX, Gigabit, and
                VoIP.**Modules**Power
                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
                Analog Front End Modules
            Condition,
                filter and isolate the electronic signal to ensure accurate data
                and/or
                voice transmission.
            Broadband
                and telecom equipment supporting ISDN, T1/E1, xDSL technologies.Custom
                Modules
            Integrate
                several discrete devices to provide customized, space-saving
                solution.
            Automotive
                products.**Circuit
                Protection**Miniature
                Fuses
            Protects
                devices by preventing current in an electrical circuit from exceeding
                acceptable levels.
            Power
                supplies, electronic ballasts and consumer electronics.Micro
                Fuses
            Protects
                devices by preventing current in an electrical circuit from exceeding
                acceptable levels.
            Cellular
                phone chargers, consumer electronics, power supplies and set top
                boxes.Surface
                Mount Fuses
            Protects
                devices by preventing current in an electrical circuit from exceeding
                acceptable levels.
            Cellular
                phones, mobile computers, IC and battery protection, power supplies
                and
                telecom line cards.**Interconnect**Passive
                Jacks
            RJ45
                and RJ11 connectivity for
              data
                and/or voice transmission.
            Network
                routers, hubs, switches and patch panels deployed in Category 5,
                5e and 6
                cable systems.Plugs
            RJ45
                and RJ11 connectivity for
              data
                and/or voice transmission.
            Network
                routers, hubs, switches and patch panels deployed in Category 5,
                5e and 6
                cable systems.Cable
                Assemblies
            RJ45
                and RJ11 connectivity for
              data
                and voice transmission.
            Structured
                Category 5, 5e and 6 cabling systems (premise
                wiring).




-4-


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        Statements**


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
      June
      30, 2005, the Company acquired the common stock of Netwatch s.r.o., located
      in
      Prague, The Czech Republic, for approximately $1.9 million of which the final
      $0.5 million is due to the sellers by June 30, 2006. Netwatch s.r.o. is a
      designer and manufacturer of high-performance fiber optic and copper cable
      assemblies for data and telecommunication applications. Purchase price
      allocations have been estimated by management . Management has estimated
      approximately $1.0 million of goodwill arose from the transaction which is
      included in the Company’ European reporting unit.





The
      Company believes that the strategic value of the Netwatch s.r.o. acquisition
      was
      the establishment of a European manufacturing presence for the Company and
      the
      addition of fiber optic capability to the Bel Stewart Connector Group to
      complement the Company's existing copper-based product portfolio. The Company
      believes that this acquisition enabled Bel Stewart to support the Company's
      customer base, including the world's largest structured cabling providers,
      with
      a broad range of both copper and fiber based components and
      assemblies.





This
      acquisition was accounted for using the purchase method of accounting and
      accordingly, the results of operations of Netwatch s.r.o. have been included
      in
      the Company’s financial statements from June 30, 2005.





There
      was
      no in process research and development acquired as part of this
      acquisition.





On
      March
      22, 2005, the Company acquired the common stock of Galaxy Power Inc. (“Galaxy”)
      for approximately $19.0 million in cash including transaction costs of
      approximately $0.4 million. Purchase price allocations have been initially
      estimated by management and are subject to adjustment. The purchase price has
      been allocated to both tangible and intangible assets and liabilities based
      on
      estimated fair values after considering an independent formal appraisal.
      Approximately $11.5 million of goodwill and $2.0 million of identifiable
      intangible assets arose from the transaction and are included in the Company’s
      North American reporting unit. The identifiable intangible assets and related
      deferred tax liabilities are being amortized on a straight-line basis over
      their
      estimated useful lives.




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The
      Company believes that the purchase of Galaxy’s Power Group was a logical
      strategic fit with Bel’s Power Products group. The Company believes that the
      products are highly complementary with minimal overlap. The customer base is
      similar but still affords ample opportunity for cross selling. While Bel offers
      Galaxy a much-needed cost competitive manufacturing base in China, Galaxy brings
      a portfolio of products and technologies aimed at higher end markets. In
      addition to these strategic synergies, there is significant opportunity for
      expense reduction and the elimination of redundancies.





This
      acquisition was accounted for using the purchase method of accounting and
      accordingly, the results of operations of Galaxy have been included in the
      Company’s financial statements from March 23, 2005.





There
      was
      no in process research and development acquired as part of this
      acquisition.





On
      March
      22, 2003, the Company acquired certain assets, subject to certain liabilities,
      and common shares of certain entities comprising the Passive Components Group
      of
      Insilco Technologies, Inc. ("Insilco") for $37.0 million (including cash
      acquired of $799,000) in cash, including transaction costs of approximately
      $1.4
      million. This acquisition included the Stewart Connector Systems Group
      (“Stewart”), InNet Technologies (“InNet”) and the Signal Transformer Group
      (“Signal Transformer”). The purchase price has been allocated to both tangible
      and intangible assets and liabilities based on estimated fair values after
      considering various independent formal appraisals. Approximately $1.6 million
      of
      identifiable intangible assets (patents) arose from this transaction; such
      intangible assets are being amortized on a straight-line basis over a period
      of
      five years. In addition, $2.9 million has been attributed to goodwill. Patents
      having a carrying value of $1.6 million and goodwill of $0.8 million have been
      included in the Company's Asia reporting unit. Goodwill of $1.5 million and
      $0.6
      million has been included in the Company's North America and European reporting
      units, respectively.




-6-
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The
      Company believes that the purchase of Insilco's Passive Components Group was
      a
      logical strategic fit with Bel's then existing products and markets. With the
      increased diversification of its product line, the Company believes it has
      become a more attractive supplier to current customers seeking a greater variety
      of products.





Both
      Bel
      and the acquired InNet/Stewart Group were leaders in the Integrated Connector
      Module ("ICM") market with their respective MagJack product offerings.
      Consolidating the engineering, manufacturing and sales capabilities of Bel
      and
      Stewart has strengthened the Company’s leadership in this important market. The
      Company's expertise in electrical engineering and high-volume, low-cost
      manufacturing complements Stewart's strengths in mechanical design and
      engineering. The San Diego based InNet group was dissolved into Bel’s existing
      San Diego operations.





The
      Signal Transformer Group acquisition resulted in a new product line of 60Hz
      power transformers for Bel and produced many new customers. The Company is
      seeking to capitalize on Signal Transformer’s broad base of customers with Bel’s
      expanded product offering.





Effective
      January 2, 2003, the Company entered into an asset purchase agreement with
      Advanced Power Components plc ("APC") to purchase the communication products
      division of APC for $5.5 million in cash plus the assumption of certain
      liabilities. The Company was required to make contingent payments equal to
      5% of
      sales (as defined) in excess of $5.5 million per year for the years 2003 and
      2004. No contingent purchase price payment amounts were due for 2003 or 2004.
      The purchase price has been allocated to both tangible and intangible assets
      and
      liabilities based on estimated fair values. Goodwill of approximately $2.1
      million has been included in the Company's Asia reporting segment.





There
      was
      no in-process research and development acquired as part of the Passive
      Components Group of Insilco and APC acquisitions.





These
      transactions were accounted for using the purchase method of accounting and,
      accordingly, the results of operations of the Passive Components Group of
      Insilco have been included in the Company's financial statements from March
      22,
      2003 and the results of operations of APC have been included in the Company's
      financial statements from January 2, 2003.





The
      following unaudited pro forma summary results of operations assume that Galaxy
      and Netwatch s.r.o. had been acquired as of January 1, 2004 (in thousands,
      except per share data):


December
                31,2005
            
            2004Net
                sales
            
            $
            221,227
            
            $
            212,331Net
                earnings
            
            
            20,026
            
            
            25,419Earnings
                per share - diluted
            
            
            1.74
            
            
            2.21





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            Statements**




The
      information above is not necessarily indicative of the results of operations
      that would have occurred if the acquisitions had been consummated as of January
      1, 2003, 2004 and 2005. Such information should not be construed as a
      representation of the future results of operations of the Company.





A
      condensed balance sheet of the major assets and liabilities of Galaxy and
      Netwatch s.r.o. at the acquisition dates is as follows:


Cash
            
            $
            311,856Accounts
                receivable
            
            
            3,687,331Inventories
            
            
            2,862,571Prepaid
                expenses
            
            
            96,120Income
                taxes receivable
            
            
            5,488Property,
                plant andequipment
            
            
            1,545,526Other
                assets
            
            
            32,083Deferred
                tax asset
            
            
            1,392,850Goodwill
            
            
            12,456,080Intangible
                assets
            
            
            1,960,000Notes
                payable
            
            
            (860,694
            )Accounts
                payable
            
            
            (2,129,165
            )Accrued
                expenses
            
            
            (465,002
            )Net
                assets acquired
            
            $
            20,895,044




As
      part
      of its acquisition strategy, the Company acquired 2,037,500 shares of common
      stock of Artesyn Technologies, Inc. during 2004 at a total price of $16,331,469.
      These purchases are reflected on the Company’s consolidated statement of cash
      flows as purchases of marketable securities and are reflected on the Company’s
      consolidated balance sheet as marketable securities. As of December 31, 2005
      and
      2004, the Company has recorded unrealized gains, net of income taxes, of
      approximately $2.9 million and $4.0 million, respectively. In connection with
      this transaction the Company is obligated to pay an investment banker’s advisory
      fee to a third party of 20% of the appreciation in the stock of Artesyn or
      $1
      million, whichever is lower. As of December 31, 2005, the Company has accrued
      a
      fee in the amount of approximately $0.9 million. The Company proposed to Artesyn
      that Bel acquire it, but they did not indicate any interest in negotiating
      such
      a transaction with Bel. On February 2, 2006, Artesyn announced that it had
      entered into an agreement to be acquired by Emerson Network Power for $11.00
      per
      share in cash. Artesyn has stated that consummation of the agreement is subject
      to customary regulatory approvals and approval by Artesyn’s shareholders. Based
      on the current terms of the agreement, the Company expects to recognize a gain
      of approximately $3.2 million, net of tax and investment banker’s advisory fees.
      Such gain will be recognized upon closing the transaction. The Company also
      expects to pay bonuses to key employees in connection with the
      transaction.




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During
      2005, the Company also acquired 4,600,000 shares of common stock of a merger
      candidate (“Merger Candidate”) at a total purchase price of $14,393,032. The
      Merger Candidate had a market capitalization of approximately $363 million
      as of
      February 23, 2006. These shares represent approximately 4.7% of Merger
      Candidate’s outstanding shares. The Merger Candidate is a multi-national
      manufacturer and marketer of electronic components, assemblies, and systems.
      The
      Company’s purchases of Merger Candidate’s stock are reflected on the Company’s
      consolidated statement of cash flows as purchases of marketable securities.
      As
      of December 31, 2005, the Company has recorded an unrealized gain, net of income
      taxes, of approximately $0.6 million, which is included in other comprehensive
      income as stated in the consolidated statement of stockholders’ equity. In
      connection with this transaction, the Company is obligated to pay an investment
      banker’s advisory fee to a third party of 20% of the appreciation in the stock
      of Merger Candidate, or $1 million, whichever is lower. As of December 31,
      2005,
      the Company has accrued a fee in the amount of approximately $0.2 million.
      Such
      amount has been deferred within other assets. If the proposed acquisition of
      the
      Merger Candidate is consummated, the investment banker’s advisory fee will be
      capitalized as part of the acquisition costs. Such amount will be expensed
      at
      such time if and when the Company deems the consummation of the proposed
      acquisition to be unsuccessful. The Company cannot assure that it will be
      successful in acquiring the Merger Candidate.





Sales
      and
      Marketing





The
      Company sells its products to customers throughout North America, Western Europe
      and the Far East. Sales are made through one of three channels: direct strategic
      account managers, 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,
      2005, the Company had a sales and support staff of 50 persons that supported
      a
      network of 90 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.




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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, 2005, 2004 and 2003 amounted to $7.3 million, $7.3 million and
      $8.4
      million, respectively. The decline from 2003 to 2004 and 2005 is principally
      attributed to the closure of the Company's Indiana research facility in 2003
      and
      lower research and development costs in the Far East as many research and
      development jobs were moved by the Company from Hong Kong to China and several
      positions were eliminated.





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. It
      is management’s opinion that Bel’s expanded product portfolio helps to
      differentiate the Company in these markets and, as a result, reduces the
      possibility of any single direct competitor operating across all product groups.





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 significant 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.




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Employees





As
      of
      December 31, 2005, the Company had 1,851 full-time employees. The Company
      employed 591 people in its North American facilities, 1,196 people in its Asian
      facilities and 64 people in its European facilities, excluding workers supplied
      by independent contractors. The Company's manufacturing facility in New York
      is
      represented by a labor union. The Company believes that its relations with
      employees 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.





Backlog





The
      Company manufactures products against firm orders and projected usage by
      customers. Cancellation and return arrangements are either negotiated by the
      Company on a transactional basis or contractually determined. The Company's
      backlog of orders as of February 28, 2006 was approximately $50.1 million,
      as
      compared with a backlog of $43.7 million as of February 28, 2005 . Management
      expects that all of the Company's backlog as of February 28, 2006 will be
      shipped by December 31, 2006. Such expectation constitutes a Forward-Looking
      Statement. Factors that could cause the Company to fail to ship all such orders
      by year-end include unanticipated supply difficulties, changes in customer
      demand and new customer designs. The Company's major customers have negotiated
      reduced lead times on purchase orders and have implemented consignment inventory
      programs with the goal of reducing their inventories. Accordingly, backlog
      may
      no longer 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."




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Intellectual
      Property





The
      Company has been granted a number of U.S. patents and has additional U.S. 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 March 11, 2006 to February 15, 2021.





The
      Company utilizes U.S. registered trademarks 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.





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.





***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.




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***Our
      backlog figures may not be reliable indicators.***





Many
      of
      the orders that comprise our backlog may be canceled by customers without
      penalty. Customers may on occasion double and triple order components 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 increasing pressure on suppliers to lower prices.
      Our
      profits will suffer if we are not able to reduce our costs of production or
      induce technological innovations as sales prices decline.





b) Any
      drop
      in demand or increase in supply of our products due to the overcapacity of
      our
      competitors could cause a dramatic drop in our average sales prices causing
      a
      decrease in our gross margins.





c) The
      average selling prices for our products tend to decrease rapidly over their
      life
      cycle, and customers are increasing pressure on suppliers to lower prices.
      In
      addition, increased competition from low cost suppliers around the world has
      put
      further pressures on pricing. The Company continually strives to lower its
      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.




***We
      are dependent on our ability to develop new products*** *.*





Our
      future operating results are dependent, in part, on our ability to develop,
      produce and market new and more technologically advanced products. There are
      numerous risks inherent in this process, including the risks that we will be
      unable to anticipate the direction of technological change or that we will
      be
      unable to timely develop and bring to market new products and applications
      to
      meet customers’ changing needs.





***Our
      acquisitions may not produce the anticipated results.***





A
      significant portion of our recent growth is from acquisitions. We cannot assure
      you that we will identify or successfully complete transactions with suitable
      acquisition candidates in the future. We also cannot assure you that
      acquisitions we complete will be successful. 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.




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If
      our
      acquisitions fail to perform up to our expectations, or as the value of goodwill
      decreases, we could be required to record a loss from the impairment of assets.
      Integration of new acquisitions into our consolidated operations may result
      in
      lower average operating results for the group as a whole.





Our
      strategy also focuses on the reduction of selling, general and administrative
      expenses through the integration or elimination of redundant sales offices
      and
      administrative functions at acquired companies. Our inability to achieve these
      goals could have a material and adverse effect on our results of
      operations.





We
      intend
      to continue to seek additional acquisition candidates, although we cannot
      predict when or if we will make any additional acquisitions, and what the impact
      of any such acquisitions may have on our financial performance. If we were
      to
      undertake a substantial acquisition for cash, the acquisition would likely
      need
      to be financed in part through bank borrowings or the issuance of public or
      private debt or equity. If we borrow money to finance acquisitions, this would
      likely decrease our ratio of earnings to fixed charges and adversely affect
      other leverage criteria and could result in the imposition of material
      restrictive covenants. Under our existing credit facility, we are required
      to
      obtain our lenders’ consent for certain additional debt financing, to comply
      with other covenants including the application of specific financial ratios,
      and
      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 eight countries around the world outside the United States, and
      approximately 68 % of our revenues during 2005 were derived from sales to
      customers outside the United States. Some of the countries in which we operate
      have in the past experienced and may continue to experience political, economic,
      medical epidemic and military instability or unrest. These conditions could
      have
      a material and adverse impact on our ability to operate in these regions and,
      depending on the extent and severity of these conditions, could materially
      and
      adversely affect our overall financial condition and operating results.





Although
      our operations have traditionally been largely transacted in U.S. dollars or
      U.S. dollar linked currencies, recent world financial instability and recent
      acquisitions in the Dominican Republic, Mexico, Germany, the United Kingdom,
      Hong Kong and The People's Republic of China (“PRC”) may cause additional
      foreign currency risks.





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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 and Macao, 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
      results of operations may be materially and adversely impacted by environmental
      and other regulations*** *.*





Our
      manufacturing operations, products and/or product packaging are subject to
      environmental laws and regulations governing air emissions, wastewater
      discharges, the handling, disposal and remediation of hazardous substances,
      wastes and certain chemicals used or generated in our manufacturing processes,
      employee health and safety labeling or other notifications with respect to
      the
      content or other aspects of our processes, products or packaging, restrictions
      on the use of certain materials in or on design aspects of our products or
      product packaging and responsibility for disposal of products or product
      packaging. More stringent environmental regulations may be enacted in the
      future, and we cannot presently determine the modifications, if any, in our
      operations that any such future regulations might require, or the cost of
      compliance with these regulations.





***Our
      results may vary substantially from period to period*** *.*





Our
      revenues and expenses may vary significantly from one accounting period to
      another accounting period due to a variety of factors, including customers'
      buying decisions, our product mix and general market and economic conditions.
      Such variations could significantly impact our stock price.




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***A
      shortage of availability or an increase in the cost of raw materials and
      components and our ability to procure high quality raw materials at cost
      effective prices may negatively impact profit
      margins.***





a) Our
      results of operations may be adversely impacted by difficulties in obtaining
      raw
      materials, supplies, power, 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. Many of these materials and components are produced by a limited
      number of suppliers and may be constrained by supplier capacity.





Our
      results of operations may be adversely impacted by difficulties in obtaining
      raw
      materials, supplies, power, natural resources and any other items needed for
      the
      production of our products, as well as by the effects of quality deviations
      in
      raw materials and the effects of significant fluctuations in the prices on
      existing inventories and purchase commitments for these materials.





b) Our
      results of operations may be adversely impacted by difficulties in obtaining
      raw
      materials, supplies, power, natural resources and any other items needed for
      the
      production of our products, as well as by the effects of quality deviations
      in
      raw materials and the effects of significant fluctuations in the prices on
      existing inventories and purchase commitments for these materials.





As
      product life cycles shorten and during periods of market slowdowns, the risk
      of
      material obsolescence increases and this may 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 and impact financial
      results.




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***A
      loss of the services of the Company’s executive officers or other skilled
      employees 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 industries in which we compete and would be extremely difficult
      to
      replace. The loss of the services of any of these employees may materially
      and
      adversely impact our results of operations if we are unable to replace them
      in a
      timely manner.





***Our
      stock price, like that of many technology companies, has been and may continue
      to be volatile.***





The
      market price of our common stock may fluctuate as a result of variations in
      our
      quarterly operating results and other factors beyond our control. These
      fluctuations may be exaggerated if the trading volume of our common stock is
      low. In addition, the market price of our common stock may rise and fall in
      response to a variety of factors, including:





·
            announcements
                of technological or competitive
                developments;


·
            acquisitions
                or strategic alliances by us or our
                competitors;


·
            the
                gain or loss of a significant customer or
                order;


·
            changes
                in estimates of our financial performance or changes in recommendations
                by
                securities analysts regarding us or our industry;
                or


·
            general
                market or economic conditions.





In
      addition, equity securities of many technology companies have experienced
      significant price and volume fluctuations. 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 materially adversely 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 materially adversely affect us by, for example,
      causing us to enter into costly royalty arrangements or forcing us to incur settlement
      or litigation costs.




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Item
              1B.
            Unresolved
                Staff
                Comments





Not
      applicable.





Item
              2.
            Properties





The
      Company is headquartered in Jersey City, New Jersey where it currently owns
      62,000 square feet of office and warehouse space. On July 15, 2004 the Company
      entered into an agreement for the sale of land and building of approximately
      40,000 square feet located in Jersey City, New Jersey. See Item 7 of this Annual
      Report on Form10-K for additional information regarding this agreement. The
      Company operated 13 manufacturing facilities in 7 countries as of December
      31,
      2005. An additional 117,000 square foot manufacturing facility is being
      constructed in the PRC to meet customer demand with an estimated completion
      date
      of early 2006.





The
      following is a list of the locations of the Company's principal manufacturing
      facilities at December 31, 2005.


Location
            
            Approximate
              Square
                Feet
            
            Owned/
              Leased
            
            Percentage
              Used
                for
              ManufacturingDonnguan,
                People'sRepublic
                of China
            
            
            346,000
            
            
            Leased
            
            
            61
            %Zhongshan,
                People'sRepublic
                of China
            
            
            416,000
            
            
            Leased
            
            
            81
            %Zhongshan,
                People'sRepublic
                of China
            
            
            128,000
            
            
            Leased
            
            
            74
            %Zhongshan,
                People'sRepublic
                of China
            
            
            77,000
            
            
            Owned
            
            
            81
            %Hong
                Kong
            
            
            66,000
            
            
            Owned
            
            
            29
            %Macao
            
            
            71,000
            
            
            Owned
            
            
            28
            %Prague,
                Czech Republic
            
            
            9,000
            
            
            Leased
            
            
            76
            %Dominican
                Republic
            
            
            29,000
            
            
            Leased
            
            
            76
            %Cananea,
                Mexico
            
            
            28,000
            
            
            Leased
            
            
            65
            %Inwood,
                New York
            
            
            35,000
            
            
            Owned
            
            
            60
            %Glen
                Rock, Pennsylvania
            
            
            74,000
            
            
            Owned
            
            
            60
            %Westboro,
                MA
            
            
            22,000
            
            
            Leased
            
            
            85
            %1,301,000






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In
      addition to this manufacturing space, 95,000 square feet of space is used for
      engineering, warehousing, sales and administrative support functions at various
      locations and 265,000 square feet of space is used for dormitories, canteen
      and
      other employee related facilities in the PRC and the Special Administrative
      Regions of Hong Kong and Macao in Asia.





The
      Territory of Hong Kong became a Special Administrative Region (“SAR”) of The
      People's Republic of China during 1997. The territory of Macao became a SAR
      of
      The People's Republic of China 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 China and the Dominican Republic will affect its
      contractual arrangements in China or labor relationships in the Dominican
      Republic. A significant portion of the Company's manufacturing operations and
      approximately 38% of its identifiable assets are located in Hong Kong, Macao,
      and The People's Republic of China. Accordingly, events resulting from any
      change in the "Most Favored Nation" status granted to China by the U.S. could
      have a material adverse effect on the Company.





Approximately
      22% of the 1,400,000 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 .





For
      information regarding a fire occurring in the Company’s leased facility in the
      Dominican Republic, see Item 7 of this Annual Report on Form 10-K -
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations - 2006 Event”.




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Item
              3.
            Legal
                Proceedings





The
      Company is a plaintiff in a lawsuit captioned Bel Fuse Inc., a New Jersey
      corporation, and Bel Power, Inc., a Massachusetts corporation, v. Andrew
      Ferencz, Gregory Zovonar, Bernhard Schroter, EE2GO, Inc., a Massachusetts
      corporation, Howard E. Kaepplein and William Ng, Defendants brought in the
      Supreme Court of the Commonwealth of Massachusetts. The Company was granted
      injunctive relief and is seeking damages against the former stockholders of
      Galaxy Power, Inc, the Company’s recent acquisition, and key employees of Galaxy
      and a corporation formed by some or all of the individual defendants. The
      Company has alleged that the defendants violated their written non-competition,
      non-disclosure and non-solicitation agreements, diverted business and usurped
      substantial business opportunities with key customers, misappropriated
      confidential information and trade secrets, and harmed the Company’s business.




The
      Company is a defendant in a lawsuit captioned Murata Manufacturing Company,
      Ltd.
      v. Bel Fuse Inc et al and brought in Illinois Federal District Court. Plaintiff
      claims that its patent covers all of the Company's modular jack products. That
      party had previously advised the Company that it was willing to grant a
      non-exclusive license to the Company under the patent for a 3% royalty on all
      future gross sales of ICM products; payment of a lump sum of 3% of past sales
      including sales of applicable Insilco products; an annual minimum royalty of
      $500,000; payment of all attorney fees; and marking of all licensed ICM's with
      the third party's patent number. The Company is also a defendant in a lawsuit,
      captioned Regal Electronics, Inc. v. Bel Fuse Inc. and brought in California
      Federal District Court. Plaintiff claims that its patent covers certain of
      the
      Company's modular jack products. That party had previously advised the Company
      that it was willing to grant a non transferable license to the Company for
      an up
      front fee of $500,000 plus a 6% royalty on future sales. The District Court
      has
      granted summary judgment in the Company's favor dismissing Regal Electronics'
      infringement claims, while at the same time the Court dismissed the Company's
      invalidity counterclaim against Regal Electronics. As of the date hereof, the
      Company has not been advised as to whether Regal will appeal the Court's
      rejection of its infringement claims. The Company believes that none of its
      products are covered by these patents and intends to vigorously defend its
      position and no accrual has been provided in the accompanying consolidated
      financial statements.




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The
      Company cannot predict the outcome of these matters; 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.




The
      Company is not a party to any other legal proceeding, the adverse outcome of
      which is expected to have a material adverse effect on the Company's
      consolidated financial condition or results of operations.




Item
              4.
            Submission
                of Matters to a Vote of Security
                Holders





No
      matters were submitted to a vote of the Company's shareholders during the fourth
      quarter of 2005.




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PART
      II





Item
              5.
            Market
                for Registrant's Common Equity and RelatedStockholder
                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 National Market. The following table
      sets forth the high and low closing sales price range (as reported by The Nasdaq
      Stock Market Inc.) for the Common Stock on NASDAQ for each quarter during the
      past two years.





Class
                A
            
            Class
                A
            
            Class
                B
            
            Class
                BHigh
            
            Low
            
            High
            
            LowYear
                Ended December 31, 2004First
                Quarter
            
            $
            34.75
            
            $
            24.24
            
            $
            40.16
            
            $
            28.80Second
                Quarter
            
            
            36.00
            
            
            24.00
            
            
            42.00
            
            
            29.78Third
                Quarter
            
            
            35.96
            
            
            27.15
            
            
            41.99
            
            
            32.12Fourth
                Quarter
            
            
            31.20
            
            
            24.62
            
            
            36.45
            
            
            30.33Year
                Ended December 31, 2005First
                Quarter
            
            
            29.79
            
            
            24.10
            
            
            34.92
            
            
            28.42Second
                Quarter
            
            
            26.74
            
            
            21.50
            
            
            31.72
            
            
            25.54Third
                Quarter
            
            
            29.50
            
            
            24.50
            
            
            36.48
            
            
            29.72Fourth
                Quarter
            
            
            30.10
            
            
            22.39
            
            
            37.00
            
            
            28.88





The
      Common Stock is reported under the symbols BELFA and BELFB in the NASDAQ
      National Market.




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(b)
            Holders





As
      of
      February 28, 2006 there were 209 registered shareholders of the Company's Class
      A Common Stock and Class B Common Stock. The Company estimates that there were
      2,486 beneficial shareholders of Class A Common Stock and Class B Common Stock
      as of February 28, 2006.





(c)
            Dividends





There
      are
      no contractual restrictions on the Company's ability to pay dividends provided
      the Company continues to comply with the financial tests in its credit
      agreement. On February 2, 2005, May 2, 2005, August 1, 2005, and November 1,
      2005 the Company paid a $0.05 per share dividend to all shareholders of record
      of Class B Common Stock in the total amount of $433,450, $437,175, $439,450,
      and
      $442,356, respectively. On February 2, 2005, May 2, 2005, August 1, 2005 and
      November 1, 2005 the Company paid a $0.04 per share dividend to all shareholders
      of record of Class A Common Stock in the total amount of $107,735, $107,735,
      $107,735 and $107,735, respectively. On February 2, 2004, May 2, 2004, August
      2,
      2004, and November 2, 2004 the Company paid a $0.05 per share dividend to all
      shareholders of record of Class B Common Stock in the total amount of $422,474,
      $424,449, $431,470, and $432,406, respectively. During May 2004 the Company
      paid
      a dividend on Class B common stock in the amount of $26,860 in connection with
      a
      shortfall of prior payments. On February 2, 2004, May 2, 2004, August 2, 2004,
      and November 2, 2004 the Company paid a $0.04 per share dividend to all
      shareholders of record of Class A Common Stock in the total amount of $107,641,
      $107,641, $107,678, and $107,694, respectively.





On
      February 1, 2006 the Company paid a $0.04 and $0.05 per share dividend to all
      shareholders of record at January 15, 2006 of Class A and Class B Common Stock
      in the amount of $107,735 and $440,580, respectively. The Company currently
      anticipates paying these dividends in the future.





(d)
            Securities
                authorized for issuance under the Equity Compensation
                Plans





Equity
      Compensation Plan Information


Plan
                category
            
            Number
                of securities to be
              issued
                upon exercise of
              outstanding
                options, warrants
              and
                rights and restricted stock
              awards
                to be granted
            
            Weighted
                average exercise
              price
                of outstanding options,
              warrants
                and rights
            
            Number
                of securities remaining
              available
                for future issuanceEquity
                compensation plans approvedby
                security holders
            
            
            286,013
            
            $
            24.96
            
            
            810,985Equity
                compensation plans notapproved
                by security holders
            
            
            —
            
            
            —
            
            
            —Totals
            
            
            286,013
            
            $
            24.96
            
            
            810,985






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Item
                6.
              Selected
                  Financial
                  Data


Years
                Ended December 31,2005
            
            2004
            
            2003
            
            2002
            
            2001(In
                thousands of dollars, except per share data)Selected
                Statements of Operations Data: (a) (b) (c)Net
                sales
            
            $
            215,916
            
            $
            190,022
            
            $
            158,498
            
            $
            95,528
            
            $
            96,045Cost
                of sales
            
            
            156,147
            
            
            132,776
            
            
            113,813
            
            
            72,420
            
            
            89,603Selling,
                general andadministrative
                expenses
            
            
            33,152
            
            
            31,302
            
            
            26,757
            
            
            22,270
            
            
            21,561Fixed
                asset impairment
            
            
            —
            
            
            1,033
            
            
            —
            
            
            —
            
            
            —Interest
                income - net
            
            
            1,098
            
            
            525
            
            
            249
            
            
            940
            
            
            2,411Lawsuit
                proceeds
            
            
            —
            
            
            2,935
            
            
            —
            
            
            —
            
            
            —Earnings
                (loss) before provision (benefit)for
                income taxes
            
            
            27,715
            
            
            28,371
            
            
            18,177
            
            
            1,778
            
            
            (12,709
            )Income
                tax provision (benefit)
            
            
            7,482
            
            
            3,649
            
            
            4,413
            
            
            1,199
            
            
            (547
            )Net
                earnings (loss)
            
            
            20,233
            
            
            24,722
            
            
            13,764
            
            
            579
            
            
            (12,162
            )Earnings
                (loss) per commonshare
                - basic
            
            
            1.76
            
            
            2.19
            
            
            1.25
            
            
            0.05
            
            
            (1.13
            )Earnings
                (loss) per commonshare
                - diluted
            
            
            1.75
            
            
            2.15
            
            
            1.24
            
            
            0.05
            
            
            (1.13
            )Cash
                dividends declared perClass
                A common share
            
            
            0.16
            
            
            0.16
            
            
            0.08
            
            
            —
            
            
            —Cash
                dividends declared perClass
                B common share
            
            
            0.20
            
            
            0.20
            
            
            0.20
            
            
            0.20
            
            
            0.20




As
                of December 31,2005
            
            2004
            
            2003
            
            2002
            
            2001(In
                thousands of dollars, except per share data and
                percentages)Selected
                Balance Sheet Data and Ratios:Working
                capital
            
            $
            128,203
            
            $
            127,624
            
            $
            102,370
            
            $
            82,986
            
            $
            83,698Total
                assets
            
            
            242,056
            
            
            217,777
            
            
            181,817
            
            
            147,840
            
            
            147,517Long
                term debt
            
            
            —
            
            
            6,500
            
            
            8,500
            
            
            —
            
            
            —Stockholders'
                equity
            
            
            201,577
            
            
            178,461
            
            
            146,855
            
            
            130,659
            
            
            129,463Book
                value pershare
            
            
            18.21
            
            
            15.70
            
            
            13.16
            
            
            11.95
            
            
            12.02Return
                on averagetotal
                assets, %
            
            
            8.83
            
            
            12.37
            
            
            7.95
            
            
            0.40
            
            
            (7.60
            )Return
                on averageStockholders'equity,
                %
            
            
            10.75
            
            
            15.20
            
            
            9.93
            
            
            0.44
            
            
            (8.80
            )








(a)
            On
                May 11, 2001, the Company acquired 100% of the common stock of E-Power
                Ltd
                ("E-Power") and the assets and business of Current Concepts, Inc.
                ("Current Concepts") for an aggregate of $6,285,000 in cash (including
                acquisition expenses). During the years ended December 31, 2005,
                2004,
                2003 and 2002, the Company paid $697,000, $354,000, $209,000 and
                $61,000,
                respectively, in contingent purchase price payments. The transactions
                were
                accounted for using the purchase method of accounting and, accordingly,
                the results of operations of Current Concepts and E-Power have been
                included in the Company's financial statements since the date of
                acquisition.




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(b)
            See
                Item 1 for information regarding the acquisitions during 2005 of
                Galaxy
                and Netwatch and during 2003 of APC and the Passive Components Group
                of
                Insilco. These transactions were accounted for using the purchase
                method
                of accounting and, accordingly, the results of operations of Galaxy,
                Netwatch, the Passive Components Group of Insilco and APC have been
                included in the Company's financial statements since their respective
                dates of acquisition.


(c)
              The
                  Company was a party to an arbitration proceeding related to the
                  acquisition of its Telecom Components business in 1998. The Company
                  asserted that the seller breached the terms of a related Global
                  Procurement Agreement dated October 2, 1998 and sought damages
                  related
                  thereto. During December 2004, the Company and the seller settled
                  this
                  matter. The settlement resulted in a payment to the Company and
                  an
                  unconditional release by the seller of all counterclaims against
                  the
                  Company. The net gain of $2,935,000 from the settlement is included
                  in the
                  Company’s consolidated statement of operations for the year ended December
                  31, 2004.






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Item
              7.
            Management’s
                Discussion and Analysis of Financial Condition andResults
                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 infer 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, income taxes and contingencies
      and
      litigation. The Company bases its estimates on historical experience and on
      various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.




The
      Company believes the following critical accounting policies affect its more
      significant judgments and estimates used in the preparation of its consolidated
      financial statements.




Allowance
      for Doubtful Accounts





The
      Company maintains allowances for doubtful accounts for estimated losses from
      the
      inability of its customers to make required payments. The Company determines
      its
      reserves by both specific identification of customer accounts where appropriate
      and the application of historical loss experience to non-specific accounts.
      If
      the financial condition of the Company's customers were to deteriorate,
      resulting in an impairment of their ability to make payments, additional
      allowances may be required.




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Inventory





The
      Company makes purchasing decisions principally based upon firm sales orders
      from
      customers, the availability and pricing of raw materials and projected customer
      requirements. Future events that could adversely affect these decisions and
      result in significant charges to the Company’s operations include miscalculating
      customer requirements, technology changes which render certain raw materials
      and
      finished goods obsolete, loss of customers and/or cancellation of sales orders,
      stock rotation with distributors and termination of distribution agreements.
      The
      Company writes down its inventory for estimated obsolescence or unmarketable
      inventory equal to the difference between the cost of inventory and the
      estimated market value based upon the aforementioned assumptions. If actual
      market conditions are less favorable than those projected by management,
      additional inventory write-downs may be required.




When
      inventory is written-off, it is never written back up; the cost remains at
      zero
      or the level to which it has been written-down. When inventory that has been
      written-off is subsequently used in the manufacturing process, the lower
      adjusted cost of the material is charged to cost of sales. Should any of this
      inventory be used in the manufacturing process for customer orders, the improved
      gross profit will be recognized at the time the completed product is shipped
      and
      the sale is recorded.




Acquisitions




Acquisitions
      continue to be a key element in the Company's growth strategy. If the Company's
      evaluation of a Merger Candidate misjudges its technology, estimated future
      sales and profitability levels, or ability to keep pace with the latest
      technology, these factors could impair the value of the investment, which could
      materially adversely affect the Company's profitability. The Company recorded
      a
      goodwill impairment charge of $5.2 million in 2002.





Income
      Taxes





The
      Company files income tax returns in every jurisdiction in which it has reason
      to
      believe it is subject to tax. Historically, the Company has been subject to
      examination by various taxing jurisdictions. To date, none of these examinations
      has resulted in any material additional tax. Nonetheless, any tax jurisdiction
      may contend that a filing position claimed by the Company regarding one or
      more
      of its transactions is contrary to that jurisdiction's laws or
      regulations.




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Revenue
      Recognition





The
      Company recognizes revenue in accordance with the guidance contained in SEC
      Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial
      Statements”. Revenue is recognized when the product has been delivered and title
      and risk of loss have passed to the customer, collection of the resulting
      receivable is deemed probable 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 recognition. Some issues relate to product warranty, credit worthiness
      of its customers and concentration of sales among a few major
      customers.





The
      Company is not contractually obligated to accept returns from non-distributor
      customers except for defective product or in instances where the product does
      not meet the Company’s quality specifications. If these conditions existed, the
      Company would be obligated to repair or replace the defective product or make
      a
      cash settlement with the customer. Distributors generally have the right to
      return up to 5% of their purchases over the previous three to six months and
      are
      obligated to purchase an amount at least equal to the return. If the Company
      terminates a distributor, the Company is obligated to accept as a return all
      of
      the distributor’s inventory from the Company. If the financial conditions of the
      Company’s customers were to deteriorate, resulting in an impairment of their
      ability to make payments, additional allowances for bad debt may be required
      which could have a material adverse effect on the Company’s consolidated results
      of operations and financial condition. The Company has a significant amount
      of
      sales with several major customers. The loss of any one of these customers
      could
      have a material adverse effect on the Company’s consolidated results of
      operations and financial position.




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Overview





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, 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.





We
      design
      our products to enhance the systems in which they operate. As our products
      typically become components in other third-party’s systems, our revenues are
      largely driven by the extent to which our customers can design and develop
      new
      applications and the extent to which those customers have needs for the types
      of
      components that we can provide. We are problem-solvers; we design most of our
      products to combine various discrete components in a manner that will allow
      the
      systems designer to save space and to offer a more efficient
      product.





Our
      expenses are driven principally by the cost of the materials that we use and
      the
      cost of labor where our factories are located. In recent years, the increasing
      cost of copper, steel and petroleum-based products and the increased wage
      structure in the Far East have contributed to increases in manufacturing
      costs.





During
      2005, approximately $12.0 million of the Company’s sales increase was
      attributable to the acquisition by the Company of Galaxy Power, Inc. (“Galaxy”)
      which occurred on March 22, 2005 and Netwatch s.r.o. (now named Bel Stewart
      Net
      s.r.o.) which occurred on June 30, 2005. Excluding 2005 acquisitions, the
      Company had an organic sales increase of 7.3% for the year. The 2005
      acquisitions resulted in additional Cost of Sales and Selling, General and
      Administrative expenses of $10.5 million and $2.0 million, respectively. Galaxy
      reflected a loss of approximately $1.3 million, net of tax benefit, including
      amortization of intangibles of approximately $.7 million.





Gross
      profit margins were lower during 2005 compared to 2004, principally due to
      increased raw material resulting from higher commodity prices for copper, steel,
      and petroleum-based products and changes in the Company’s product mix. Sales of
      the Company’s DC-DC power products have increased. While these products are
      strategic to Bel’s growth and important to total earnings, they return lower
      gross profit percentage margins as a larger percentage of their bills of
      material are purchased components. As these sales continue to increase, the
      Company’s average gross profit percentage will likely decrease. The increasing
      sales also have an impact on the accelerated write off of intangible assets
      related to the acquisition of Current Concepts.





Additionally,
      the Company incurred increased amortization expense in the pretax amount of
      $1.3
      million related to identifiable intangibles arising from contingent payments
      which were made under the terms of the Current Concepts acquisition and from
      the
      Galaxy acquisition. See Notes 2 and 3 of Notes to Consolidated Financial
      Statements relating to Acquisitions and Goodwill and Other
      Intangibles.




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The
      Company also incurred a $0.2 million pretax stock compensation expense in
      connection with its Restricted Stock Award Plan which was implemented during
      2005. This expense is reflected in the Company’s selling, general and
      administrative expenses.





During
      June 2005 and December 2005, the Company repatriated earnings from certain
      controlled foreign corporations in the amounts of $25.6 million and $45.0
      million, respectively, to take advantage of the lower federal tax rate of 5.25%
      which was created under the American Jobs Creation Act of 2004 for repatriations
      effected on or before December 31, 2005. This repatriation resulted in an
      additional tax expense of approximately $3.1 million, net of foreign tax credits
      of $529,000, for the year ended December 31, 2005.





The
      Company repaid bank debt during June 2005 in the amount of $14.5 million and
      during December 2005 in the amount of $4.0 million. Such debt was incurred
      partially to fund the acquisition of Galaxy and the purchase of the capital
      stock of the previously mentioned Merger Candidate. The Company also repaid
      bank
      and other obligations associated with the Galaxy acquisition in the amount
      of
      approximately $.9 million.





2006
      EVENT





On
      February 17, 2006, a fire resulted in the temporary closure of the Company’s
      leased manufacturing facility in San Cristobal, Dominican Republic. Management
      is implementing a recovery plan that will include temporarily shifting certain
      production to other Company facilities. The Company maintains insurance for
      damage to this facility and some of its contents, as well as for business
      interruption. The Company does not believe it has adequate insurance to cover
      its entire loss. The Company estimates that the Dominican Republic facility
      was
      responsible for approximately 4% of the Company’s worldwide revenues in
      2005.





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 31,2005
            
            2004
            
            2003Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            72.3
            
            
            69.9
            
            
            71.8Selling,
                general andadministrative
                expenses
            
            
            15.4
            
            
            16.5
            
            
            16.9Fixed
                asset impairment
            
            
            —
            
            
            0.5
            
            
            —Interest
                income - net
            
            
            0.5
            
            
            0.3
            
            
            0.2Lawsuit
                proceeds
            
            
            —
            
            
            1.5
            
            
            —Earnings
                before provision forincome
                taxes
            
            
            12.8
            
            
            14.9
            
            
            11.5Income
                tax provision
            
            
            3.5
            
            
            1.9
            
            
            2.8Net
                earnings
            
            
            9.3
            
            
            13.0
            
            
            8.7






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The
      following table sets forth the year over year percentage increases or decreases
      of certain items included in the Company's consolidated statements of
      operations.




Increase
                (Decrease) fromPrior
                Period2005
                compared
            
            2004
              comparedwith
                2004
            
            with
                2003Net
                sales
            
            
            13.6
            %
            
            19.9
            %Cost
                of sales
            
            
            17.6
            
            
            16.7Selling,
                general and administrative expenses
            
            
            5.9
            
            
            17.0Net
                earnings
            
            
            (18.2
            )
            
            79.6


Sales





Net
      sales
      increased 13.6% from $190.0 million during the year ended December 31, 2004
      to
      $215.9 million during the year ended December 31, 2005. The Company attributes
      the increase to increased module sales of $14.4 million of which $10.6 million
      is attributable to the acquisition of Galaxy, strong demand for interconnect
      products resulting in an increase of $6.6 million in such sales, of which $1.4
      million is attributable to the acquisition of Netwatch and strong demand for
      magnetic sales resulting in an increase of $4.9 million in such sales, while
      circuit protection sales remained substantially unchanged. Excluding 2005
      acquisitions, Bel had an organic sales increase of 7.3% for the
      year.




The
      significant components of the Company's revenues for the year ended December
      31,
      2005 were magnetic products of $127.2 million (as compared with $122.4 million
      during the year ended December 31, 2004), interconnect products of $40.7 million
      (as compared with $34.0 million during the year ended December 31, 2004), module
      products of $28.2 million (as compared with $13.8 million during the year ended
      December 31, 2004 and circuit protection products of $19.8 million(as compared
      with 19.8 million during the year ended December 31, 2004.)




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Based
      in
      part on conflicting opinions the Company received from customers and competitors
      in the electronics industry pertaining to revenue growth during 2005, the
      Company cannot predict with any degree of certainty sales revenue for 2006.
      Although the Company's backlog has been stable, the Company feels that this
      is
      not a good indicator of revenues. The Company continues to have limited
      visibility as to future customer requirements. The Company had one customer
      with
      sales in excess of 10% (15.2%) of total sales during the year ended December
      31,
      2005. The loss of this customer could have a material adverse effect on the
      Company's results of operations, financial position and cash flows.




The
      Company cannot quantify the extent of sales growth arising from unit sales
      mix
      and/or price changes. Given the change in the nature of the products purchased
      by customers from period to period, the Company believes that neither unit
      changes nor price changes are meaningful. Over the past year, newer and more
      sophisticated products with higher unit selling prices have been introduced.
      Through the Company's engineering and research effort, the Company has been
      successful in adding additional value to existing product lines, which tends
      to
      increase sales prices initially until that generation of products becomes mature
      and sales prices experience price degradation. In general, as products become
      mature, average selling prices decrease.




Net
      sales
      increased 19.9% from $158.5 million during 2003 to $190.0 million during 2004.
      The Company attributes a portion of this increase to sales of approximately
      $15.2 million from Insilco’s Passive Components Group during the first quarter
      of 2004, compared to $1.9 million during the first quarter of 2003. The
      acquisition took place on March 22, 2003. Additionally, the Company attributes
      the increase to strong demand for magnetics sales from Bel’s existing business,
      resulting in an increase of $11.0 million in such sales, increased module sales
      of $4.6 million and increased circuit protection sales of $2.4 million offset
      in
      part by decreases in interconnect product sales of $1.7 million.




The
      significant components of the Company's 2004 sales were from magnetic products
      of $122.4 million (as compared with $103.0 million during the year ended
      December 31, 2003), circuit protection of $19.8 million (as compared with $17.4
      million during the year ended December 31, 2003), interconnect products of
      $34.0
      million (as compared with $29.9 million during the year ended December 31,
      2003), and module products of $13.8 million (as compared with $8.2 million
      during the year ended December 31, 2003).




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Cost
      of Sales





Bel
      generally enters into processing arrangements with five independent third party
      contractors in the Far East. Costs are recorded as incurred for all products
      manufactured either at the Company's third party facilities or at the Company's
      own manufacturing facilities. Such amounts are determined based upon the
      estimated stage of production and include labor cost and fringes and related
      allocations of factory overhead. The Company manufactures finished goods at
      its
      own manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York,
      the
      Dominican Republic and Mexico.





Cost
      of
      sales as a percentage of net sales increased from 69.9 % during the year ended
      December 31, 2004 to 72.3% during the year ended December 31, 2005. The increase
      in the cost of sales percentage is primarily attributable to the
      following:




 ̈
            The
                Company incurred a 2.1% increase in material costs as a percentage
                of net
                sales. The increase in raw material costs is principally related
                to
                increased manufacturing of value-added products (including new Galaxy
                products in 2005), which have a higher raw material content than
                the
                Company’s other products, and increased costs for raw materials such as
                copper, steel and petroleum-based
                products.





 ̈
            The
                Company has also started to pay higher wage rates and benefits to
                its
                production workers in China. These higher rates and benefits are
                reflected
                in the Company’s cost of goods sold.





 ̈
            Sales
                of the Company’s DC-DC power products have increased. While these products
                are strategic to Bel’s growth and important to total earnings, they return
                lower gross profit percentage margins as a larger percentage of their
                bills of materials are purchased components. As these sales continue
                to
                increase, the Company’s average gross profit percentage will likely
                decrease. The increasing sales also have an impact on the accelerated
                write off of intangibles related to contingent purchase price payments
                arising from the acquisition of Current
                Concepts.





Included
      in cost of sales are research and development expenses of $7.3 million and
      $7.3
      million for the years ended December 31, 2005 and 2004, respectively.




Cost
      of
      sales as a percentage of net sales decreased from 71.8 % during the year ended
      December 31, 2003 to 69.9 % in 2004. The decrease in the cost of sales
      percentage is primarily attributable to a 1.46 % decrease in research and
      development as a percentage of sales and a 1.44 % decrease in direct labor
      and
      support as a percentage of sales offset in part by increased raw material costs
      of 1.07%. The decrease in research and development expenses as a percentage
      of
      sales is more fully discussed below. The decrease in direct labor and support
      as
      a percentage of sales is primarily attributable to the lower labor costs
      associated with the Insilco manufacturing operations and the Company's
      relocating direct labor from Hong Kong to China where labor costs are lower.
      The
      increase in raw material costs is principally related to increased manufacturing
      of value-added products which has a higher raw material content than the
      Company’s other products.




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The
      acquisition of Insilco’s Passive Components Group resulted in additional cost of
      sales in the amount of $10.7 million during the first three months of 2004.
      The
      acquisition took place on March 22, 2003.




In
      2003,
      the Company reduced the manufacturing activities of its Fuse department in
      Hong
      Kong and moved those positions to the PRC. In Jersey City, Mexico, Macao and
      Europe, the Company reduced headcount.




Included
      in cost of sales are research and development expenses of $7.3 million and
      $8.4
      million for the years ended December 31, 2004 and 2003, respectively. The
      principal reasons for the decrease in research and development expense from
      2003
      to 2004 are the closure of the Indiana research facility, and lower research
      and
      development costs in the Far East as many of these jobs were moved by the
      Company from Hong Kong to China and several positions were
      eliminated.





Selling,
      General and Administrative Expenses





The
      percentage relationship of selling, general and administrative expenses to
      net
      sales decreased from 16.5% during the year ended December 31, 2004 to 15.4%
      during the year ended December 31, 2005, in part as a result of the Company's
      ability to leverage general and administrative expenses over a larger revenue
      base. The Company attributes the $1.8 million increase in the dollar amount
      of
      such expenses primarily to increased selling expenses of approximately $1.1
      million, including $0.6 million in Galaxy related expenses. In addition, the
      Company incurred a $.7 million increase in general and administrative expenses.
      This increase includes $1.8 million related to Galaxy, additional bad debt
      expense of approximately $0.3 million additional stock compensation expense
      of
      $0.2 million, arising from the Company’s restricted stock award plan, and
      additional amortization of identifiable intangibles in the amount of $.8 million
      principally arising from the acquisition of Galaxy. Of the $.8 million increase
      in amortization of intangibles $.7 million is included in the $1.8 million
      increase in general and administrative expenses related to Galaxy. The Company
      incurred increased Supplemental Executive Retirement Plan (“SERP”) costs of
      approximately $0.2 million as additional employees were added to the plan.
      This
      was offset in part by lower employment costs of $0.6 million due to reduced
      bonuses and lower professional fees of $1.2 million due to lower Sarbanes-Oxley
      compliance costs.




During
      2006, the Company will be required to expense share based compensation costs
      in
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
“Share-based Payment. This charge will be principally included in selling,
      general and administrative expenses. The Company estimates an expense of
      approximately $1.2 million, net of taxes, for the year ended December 31, 2006.
      See "New Financial Accounting Standards" included in Management's Discussion
      and
      Analysis of Financial Condition and Results of Operations for information
      regarding SFAS No. 123(R). This estimate, which assumes no additional option
      grants during 2006, represents a Forward Looking Statement. Factors which could
      cause this projection to be inaccurate include changes in employee termination
      estimates and/or tax laws.




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The
      percentage relationship of selling, general and administrative expenses to
      net
      sales decreased from 16.9% during the year ended December 31, 2003 to 16.5%
      during the year ended December 31, 2004, in part as a result of the Company's
      ability to leverage general and administrative expenses over a larger revenue
      base.  The
      Company attributes the $4.5 million increase in the dollar amount of such
      expenses primarily to increased selling expenses of approximately $1.5 million
      which includes salaries, commissions and related expenses. This increase relates
      to increased sales. Other cost increases relate to costs associated with Insilco
      operations of approximately $2.0 million which are included for the entire
      year
      2004 as compared with approximately 9 months during 2003. In addition, the
      Company incurred a $1.5 million increase in professional fees, principally
      related to Sarbanes-Oxley compliance offset in part by $0.5 million in reduced
      severance, exchange rate losses and the write off of property in Indiana during
      2003.





Fixed
      Asset Impairment





During
      the year ended December 31, 2004 the Company wrote down fixed assets,
      principally machinery and equipment, with a net book value of $1,033,000 at
      its
      Far East manufacturing facilities. The Company considered these fixed assets
      to
      be surplus equipment which was replaced by equipment with more advanced
      technology.




Interest
      Income




Interest
      income earned on cash and cash equivalents increased by approximately $660,000
      during the year ended December 31, 2005 as compared to the comparable period
      in
      2004. The increase is due primarily to increased earnings on cash and cash
      equivalent balances and marketable securities.




Interest
      income earned on cash and cash equivalents increased by approximately $285,000
      during the year ended December 31, 2004 as compared to 2003. The increase is
      due
      primarily to increased earnings on higher cash and cash equivalent
      balances.




Interest
      Expense




A
      $10
      million term loan was entered into on March 21, 2003, which was borrowed for
      the
      acquisition of Insilco's Passive Components Group. The loan bore interest at
      LIBOR plus 1.50% payable quarterly and was completely paid off by June 30,
      2005.
      Interest expense increased by approximately $90,000 during the year ended
      December 31, 2005 compared with 2004. The increase is attributable in part
      to
      higher interest rates charged on the loan during 2005 compared to 2004 and
      in
      part to the fact that during March 2005 the Company borrowed $8.0 million
      against its domestic line of credit to partially finance the acquisition of
      Galaxy. During October and November of 2005 the Company borrowed approximately
      $4.0 million against its line of credit. The loan was repaid during December,
      2005. The loan bore interest at LIBOR plus .75% to 1.25% annually based on
      certain financial statement ratios maintained by the Company.




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Interest
      expense increased by approximately $10,000 during the year ended December 31,
      2004 compared to 2003. The increase is attributable to higher interest rates
      charged under the above mentioned $10 million loan for the entire year during
      2004 versus nine months during 2003, offset in part by principal reductions
      of
      $500,000 per quarter during 2004.





Lawsuit
      Proceeds





During
      the year ended December 31, 2004, the Company settled an arbitration proceeding
      related to a 1998 acquisition. The Company received $2,935,000 (net of $65,000
      of related legal expenses incurred during the period) pursuant to that
      settlement.





Provision
      for Income Taxes




The
      provision for income taxes for the year ended December 31, 2005 was $7.5 million
      compared to $3.6 million during the year ended December 31, 2004. The Company's
      earnings before income taxes for the year ended December 31, 2005 are
      approximately $0.6 million less than in 2004. The Company incurred higher taxes
      of approximately $3.1 million as a result of repatriating $70.6 million of
      foreign earnings during 2005. Additionally, the income tax effective rate is
      higher than the prior year’s provision primarily due to higher foreign taxes.
      Recent developments in Hong Kong suggest that the authorities are applying
      different standards in the treatment of offshore income. This was offset in
      part
      by the utilization of approximately $0.6 million in research and development
      tax
      credits and the utilization of a $0.1 million net operating loss carryforward
      tax benefit related to a foreign subsidiary. In addition, during the year ended
      December 31, 2004, the Company reversed tax accruals no longer required in
      the
      amount of approximately $0.4 million, utilized certain tax credits amounting
      to
      $0.8 million and utilized net operating loss carry forwards with a tax effect
      of
      approximately $0.1 million.




The
      provision for income taxes for the years ended December 31, 2004 and 2003 was
      $3.6 million and $4.4 million, respectively. The Company experienced increased
      earnings before income taxes for the year ended December 31, 2004, as compared
      with 2003. The income tax provision is lower than both the statutory federal
      income tax rate and the prior year provision primarily due to lower foreign
      tax
      rates, the reversal of accruals no longer required in the amount of
      approximately $0.4 million, the utilization of certain tax credits amounting
      to
      $0.8 million and the utilization of net operating loss carryforwards with a
      tax
      effect of approximately $0.1 million, the reduction of deferred taxes previously
      provided relative to the planned repatriation of foreign earnings of $6.3
      million and the establishment of accruals relative to certain tax matters of
      $5.3 million. See Note 8 of Notes to Consolidated Financial
      Statements.




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The
      Company conducts manufacturing activities in the Far East. More specifically,
      the Company has the majority of its products manufactured in the People’s
      Republic of China (“PRC”), Hong Kong and Macao and has not been subject to
      corporate income tax in the PRC. The Company's activities in Hong Kong have
      generally consisted of administration, quality control and accounting, as well
      as some limited manufacturing activities. Hong Kong imposes corporate income
      tax
      at a rate of 17.5 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. Since the Bel entity in Hong Kong conducts most of its manufacturing
      and quality control activities in the PRC, a portion of this entity’s income is
      deemed “offshore” and thus not fully taxable in Hong Kong. Although the
      statutory tax rate in Hong Kong is 17.5 percent, the Company generally pays
      an
      effective Hong Kong rate of less than 4 percent.





The
      Company also conducts manufacturing operations in Macao. Macao has a statutory
      corporate income tax rate of 16 percent. However, the Company, as a result
      of
      investing in a certain location in Macao, was able to obtain a 10-year tax
      holiday in Macao, thereby reducing its effective Macao income tax rate from
      16
      percent to 8 percent. The tax holiday in Macao expired in April 2004. Since
      most
      of the Company's operations are conducted in the Far East, the majority of
      its
      profits are sourced in these three Far East jurisdictions. Accordingly, the
      profits earned in the U.S. are comparatively small in relation to its profits
      earned in the Far East. Therefore, there is generally a significant difference
      between the statutory U.S. tax rate and the Company's effective tax rate.







During
      2005, the Company was granted an offshore operating license from the government
      of Macao to set up a Commercial Offshore Company ("MCO") named Bel Fuse (Macao
      Commercial Offshore) Limited with the intent to handle all of the Company’s
      sales to third party customers in Asia. Sales to third party customers will
      commence during the first quarter of 2006. Sales will consist of products
      manufactured in the PRC. The MCO will not be subject to Macao corporation income
      taxes. It is not possible at this time to determine the tax impact on the
      Company regarding the establishment of this new entity.





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 the Far East, such funds would be subject to United States
      Federal income taxes. During the year ended December 31, 2005, management has
      repatriated foreign earnings of approximately $70.6 million which are eligible
      for the reduced tax rate of 5.25% under the American Jobs Creations Act of
      2004.
      See Note 8 of Notes to Consolidated Financial Statements. As a result of the
      favorable tax treatment afforded the repatriation of controlled foreign
      corporation (“ CFC”) earnings and management’s decision to repatriate such funds
      in 2005, the Company recorded a $6,326,000 tax benefit in 2004 which results
      from the difference in tax rates between the Act and the tax rates previously
      provided on the portion of CFC earnings which were expected to be repatriated,
      leaving deferred income taxes in the amount of approximately $1,342,000 recorded
      in such earnings to be repatriated.




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Inflation
        and Foreign Currency Exchange





During
      the past two 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. Commencing with the acquisition of the Passive Components Group,
      the
      Company's European entity has sales transactions which are denominated
      principally in Euros and British Pounds. Conversion of these transactions into
      U.S. dollars has resulted in currency exchange losses of $27,000, $54,000 and
      $236,000 for the years ended December 31, 2005, 2004 and 2003, respectively,
      were charged to expense, and approximately ($669,000), $386,000 and $1,015,000
      for the years ended December 31, 2005, 2004 and 2003, respectively, in
      unrealized exchange gains (losses) relating to the translation of foreign
      subsidiary financial statements which are included in other comprehensive
      income. Any change in linkage of the U.S. Dollar and the Hong Kong Dollar,
      the
      Chinese Renminbi or the Macao Pataca could have a material effect on the
      Company's consolidated financial position or results of operations.


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Liquidity
      and Capital Resources





Historically,
      the Company has financed its capital expenditures primarily through cash flows
      from operating activities. Currently, due to the recent acquisitions of the
      Passive Components Group of Insilco Technologies, Inc. and Galaxy, the Company
      has borrowed money under a secured term loan and line of credit and has unused
      lines of credit as described below. 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 the near term. Such statement constitutes a Forward Looking
      Statement. Factors which could cause the Company to require additional capital
      include, among other things, a 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.




Previously,
      the Company had one domestic line of credit of $10 million. During March 2005,
      the Company borrowed $8 million against this line of credit to partially finance
      the acquisition of Galaxy. The outstanding balance was paid off in its entirety
      on June 20, 2005. During July 2005, the Company amended its credit agreement
      to
      increase the line of credit to $20 million, which expires on July 31, 2008.
      During October 2005, the Company borrowed $4.0 million against the line of
      credit which was paid off during December 2005. As of December 31, 2005 there
      was no loan balance on the line of credit. The loan bears interest at LIBOR
      plus
      0.75% to 1.25% based on certain financial statement ratios maintained by the
      Company. The entire $20 million line of credit is available to the Company
      to
      borrow. The
      loan
      is collateralized with a first priority security interest in and lien on 65%
      of
      all the issued and outstanding shares of the capital stock of certain of the
      foreign subsidiaries of the Company and all other personal property and certain
      real property of the Company.




For
      the
      years ended December 31, 2005, 2004 and 2003, the Company recorded interest
      expense of approximately $325,000, $239,000 and $228,000, respectively.




The
      Company's Hong Kong subsidiary has an unsecured line of credit of approximately
      $2 million, which was unused at December 31, 2005. This line of credit expires
      on May 31, 2006. Borrowing on this line of credit is guaranteed by the
      Company.




For
      information regarding further commitments under the Company's operating leases,
      see Note 15 of Notes to Company's Consolidated Financial Statements in this
      Annual Report on Form 10-K.




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For
      information regarding the Company's 2005 acquisitions of Galaxy Power Inc.
      and
      Netwatch s.r.o. and the Company's 2003 acquisition of APC and the Passive
      Components Group of Insilco, see Item 1 of this Annual Report on Form
      10-K.




For
      information regarding the Company’s proposed acquisition of the Merger
      Candidate, see Item 1 of this Annual Report on Form 10-K.




The
      Company is constructing an 117,000 square foot manufacturing facility in
      Zhongshan City, PRC for approximately $2.3 million. As of December 31, 2005,
      the
      Company has paid approximately $1.3 million toward the construction. The Company
      expects to complete the construction during 2006.




During
      2004, the Company completed construction of a 64,000 square foot manufacturing
      facility in Zhongshan City, PRC for approximately $1.0 million.




On
      July
      15, 2004, the Company entered into an agreement for the sale of a certain parcel
      of land located in Jersey City, New Jersey. The sales agreement is subject
      to a
      due diligence period by the buyer. The sales agreement expired during January
      2006. The buyer and seller are continuing to negotiate about certain
      environmental matters among themselves and with the State of New Jersey. The
      seller and buyer are aware that a portion of the property may be subject to
      tidelands claims by the State of New Jersey. Additionally, the Company is
      obligated for environmental remediation costs of up to $350,000. As
      of
      December 31, 2005, the Company has also paid $177,000 of legal, site testing
      and
      State of New Jersey Environmental Protection Agency Fees.As these costs
      are incurred, the Company capitalizes them on the Company's consolidated balance
      sheet as assets held for sale. The Company has classified the asset as held
      for
      sale with a net book value of approximately $828,000 on the Company's
      consolidated balance sheet at December 31, 2005.




Under
      the
      terms of the E-Power and Current Concepts acquisition agreements of May 11,
      2001, the Company will be required to make contingent purchase price payments
      up
      to an aggregate of $7.6 million should the acquired companies attain specified
      related sales levels. E-Power will be paid $2.0 million in contingent purchase
      price payments if sales reach $15.0 million and an additional $4.0 million
      if
      sales reach $25.0 million on a cumulative basis through May 2007. During January
      2006, the $2.0 million of contingent purchase price consideration was earned
      by
      E-Power. Current Concepts will be paid 16% of related sales on the first $10.0
      million in sales through May 2007. During the years ended December 31, 2005,
      2004 and 2003, the Company paid approximately $697,000, $354,000 and $209,000,
      respectively, in contingent purchase price payments to Current Concepts. The
      Company estimates that contingent payments to Current Concepts in 2006 should
      be
      approximately the same as in 2005. This estimate represents a Forward Looking
      Statement. The primary factor which could cause such estimate to be understated
      would be higher than anticipated demand for this product line. The contingent
      purchase price payments have been accounted for as additional purchase price
      and
      as an increase other intangibles when such payment obligations are
      incurred.




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On
      May 9,
      2000, the Board of Directors authorized the repurchase of up to 10% of the
      Company’s outstanding common shares from time to time in market or privately
      negotiated transactions. As of December 31, 2005, the Company had purchased
      and
      retired 23,600 Class B shares at a cost of approximately $808,000, which reduced
      the number of Class B common shares outstanding. No shares were repurchased
      during the year ended December 31, 2005.




During
      the year ended December 31, 2005, the Company's cash and cash equivalents
      decreased by approximately $19.2 million, reflecting approximately $20.8 million
      used principally for acquisitions, $19.4 million for loan repayments, $7.8
      million for the purchase of property, plant and equipment, $18.0 million for
      the
      purchase of marketable securities, and $2.2 million for payments of dividends
      offset, in part, by $31.3 million provided by operating activities (principally
      as a result of net income of $20.2 million and depreciation and amortization
      expense of $10.1 million), borrowings of $12.0 million, proceeds of $4.1 million
      from the exercise of stock options and $1.6 million in proceeds from the sale
      of
      marketable securities.




During
      the year ended December 31, 2004, the Company’s cash and cash equivalents
      increased by approximately $13.7 million, reflecting approximately $32.1 million
      provided by operating activities (principally as a result of net income of
      $24.7
      million and depreciation expense of $9.0 million), $6.3 million provided from
      the sale of marketable securities and $3.9 million from proceeds from the
      exercise of stock options offset, in part, by $17.7 million for the purchase
      of
      marketable securities, $6.6 million for the purchase of property, plant and
      equipment, $2.0 million for loan repayments, $2.2 million for payment of
      dividends and $.4 million for contingent acquisition payments.




During
      2003, the Company’s cash and cash equivalents decreased by approximately $1.5
      million, reflecting approximately $36.3 million in payments for acquisitions,
      $3.1 million in purchases of property , plant and equipment, $5.0 million in
      purchase of marketable securities and $1.9 million in dividends offset, in
      part,
      by $8.5 million from net proceeds from borrowings (net of repayments), $4.9
      million from the sale of marketable securities, $2.6 million provided by the
      exercise of stock options and $28.7 million provided by operating
      activities.




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Cash,
      marketable securities and cash equivalents and accounts receivable comprised
      approximately 53.7% and 58.6% of the Company's total assets at December 31,
      2005
      and December 31, 2004, respectively. The Company's current ratio (i.e., the
      ratio of current assets to current liabilities) was 4.5 to 1 and 5.0 to 1 at
      December 31, 2005 and December 31, 2004, respectively.




The
      following table sets forth at December 31, 2005 the amounts of payments due
      under specific types of contractual obligations, aggregated by category of
      contractual obligation, for the time periods described below.




Payments
                due by periodContractual
                Obligations
            
            Total
            
            Less
                than
              1
                year
            
            1-3
              years
            
            3-5
              years
            
            More
                than
              5
                yearsCapital
                expenditure obligations
            
            $
            1,753,728
            
            $
            1,753,728
            
            $
            —
            
            $
            —
            
            $
            —Contingent
                purchase price commitments
            
            
            2,000,000
            
            
            2,000,000
            
            
            —Operating
                leases
            
            
            3,287,395
            
            
            1,472,846
            
            
            1,102,869
            
            
            711,680Raw
                material purchase obligations
            
            
            12,016,161
            
            
            12,016,161Total
            
            $
            19,057,284
            
            $
            17,242,735
            
            $
            1,102,869
            
            $
            711,680
            
            $
            —


For
      information on the contingent purchase price commitments, see Note 3 of Notes
      to
      Consolidated Financial Statements.




The
      Company is required to pay the SERP obligations at the occurrence of certain
      events. As of December 31, 2005 the SERP had an unfunded benefit obligation
      of
      approximately $3.5 million.





Other
      Matters





The
      Company believes that it has sufficient cash reserves to fund its foreseeable
      working capital needs. It may, however, seek to expand such resources through
      bank borrowings, at favorable lending rates, from time to time. If the Company
      were to undertake a substantial acquisition for cash, the acquisition would
      likely need to be financed in part through bank borrowings or the issuance
      of
      public or private debt or equity. If the Company borrows money to finance
      acquisitions, this would likely decrease the Company’s ratio of earnings to
      fixed charges and adversely affect other leverage criteria and could result
      in
      the imposition of material restrictive covenants. Under its existing credit
      facility, the Company is required to obtain its lender’s consent for certain
      additional debt financing, to comply with other covenants including the
      application of specific financial ratios, and may be restricted from paying
      cash
      dividends on its common stock. The Company cannot assure that the necessary
      acquisition financing would be available to it on acceptable terms, or at all,
      when required. If the Company issues a substantial amount of stock either as
      consideration in an acquisition or to finance an acquisition, such issuance
      may
      dilute existing stockholders and may take the form of capital stock having
      preferences over its existing common stock.




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New
      Financial Accounting Standards





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement on
      Financial Accounting Standards (“SFAS”) No. 154, "Accounting Changes and Error
      Correction" - a replacement of APB Opinion No. 20 and FASB statement No. 3.
      This
      statement applies to all voluntary changes in accounting principles. It also
      applies to changes required by an accounting pronouncement in the unusual
      instance that the pronouncement does not include specific transition provisions.
      This statement requires retrospective application to prior periods' financial
      statements of changes in accounting principle, unless it is impracticable to
      determine either the period-specific effects or the cumulative effect of the
      change. The statement also carries forward the guidance in APB Opinion No.
      20
      requiring justification of a change in accounting principle on the basis of
      preferability. This statement is effective for accounting changes and
      corrections made in fiscal years beginning after December 31, 2005. The adoption
      of SFAS 154 is not expected to have a material effect on the Company’s
      consolidated financial position or results of operations.




In
      December 2004, FASB issued SFAS No. 123(R), "Share-Based Payment" , that will
      require compensation costs related to share-based payment transactions to be
      recognized in the financial statements. With limited exceptions, the amount
      of
      compensation cost will be measured based on the grant-date fair value of the
      equity or liability instruments issued. In addition, liability awards will
      be
      remeasured each reporting period. Compensation cost will be recognized over
      the
      period that an employee provides service in exchange for the reward. SFAS No.
      123(R) is effective as to the Company as of the beginning of the Company's
      2006
      fiscal year. The Company will account for the stock-based compensation costs
      prospectively at the time of adoption. The adoption of SFAS 123(R) is expected
      to have a material effect on the Company's consolidated results of
      operations.





In
      December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
      "Application of FASB Statement No. 109, Accounting for Income Taxes, to the
      Tax
      Deduction on Qualified Production Activities Provided by the American Jobs
      Creation Act of 2004" to provide guidance on the application of FASB Statement
      No. 109 to the provision within the American Jobs Creations Act of 2004 (the
      "Act") that provides tax relief to U.S. domestic manufacturers. The FSP states
      that the deduction provided for under the Act should be accounted for as a
      special deduction in accordance with Statement 109 and not as a tax rate
      reduction. The FSP is effective upon issuance. The adoption of FAS 109-1
      increased the provision for income taxes $3.1 million during the year ended
      December 31, 2005.





In
      December 2004, the FASB staff issued FSP No. FAS 109-2, "Accounting and
      Disclosure Guidance for the Foreign Earnings Repatriation Provision Within
      the
      American Jobs Creation Act of 2004" to provide accounting and disclosure
      guidance for the repatriation provisions included in the Act. The Act introduced
      a special limited-time dividends received deduction on the repatriation of
      certain foreign earnings to a U.S. taxpayer. The FSP is effective upon issuance.
      The adoption of FAS 109-2 increased the provision for income taxes $3.1 million
      during the year ended December 31, 2005.


-43-
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              to Table of Contents**
 **Index
              to Financial
              Statements**


In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets",
      an amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29
      by
      eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetary exchange
      has commercial substance if the future cash flows of the entity are expected
      to
      change significantly as a result of the exchange. SFAS No. 153 is effective
      for
      periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
      expected to have a material effect on the Company's consolidated financial
      position or results of operations.





In
      November 2004 the FASB issued SFAS No. 151, “Inventory Costs”, an amendment to
      Accounting Research Bulletin No. 43 chapter 4. SFAS No. 151 requires that
      abnormal costs of idle facility expenses, freight, handling costs and wasted
      material (spoilage) be recognized as current-period charges. SFAS No. 151 is
      effective for fiscal years beginning after June 15, 2005. Adoption of SFAS
      No.
      151 is not expected to have a material impact on the Company's results of
      operations or financial position.




-44-
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            Statements**




Item
              7A.
            Quantitative
                and Qualitative Disclosures About Market
                Risk





Fair
      Value of Financial Instruments — The following disclosure of the estimated fair
      value of financial instruments is made in accordance with the requirements
      of
      SFAS No. 107. The estimated fair values of financial instruments have been
      determined by the Company using available market information and appropriate
      valuation methodologies.




However,
      considerable judgment is required in interpreting market data to develop the
      estimates of fair value. Accordingly, the estimates presented herein are not
      necessarily indicative of the amounts that the Company could realize in a
      current market exchange.




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 Macao Pataca, the Chinese Renminbi, Euros and British Pounds. 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.




-45-
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            to Financial
            Statements**




BEL
                FUSE INC.INDEXFinancial
                Statements
            
            PageReport
                of Independent Registered Public Accounting
                Firm
            
            F-1Consolidated
                Balance Sheet as of December 31, 2005 and
                2004
            
            F-2
                - F-3Consolidated
                Statements of Operations for Each of the Three
                Years in the Period Ended December 31, 2005
            
            F-4Consolidated
                Statements of Stockholders' Equity for Each of
                the Three Years in the Period Ended December 31, 2005
            
            F-5
                - F-6Consolidated
                Statements of Cash Flows for Each of the Three
                Years in the Period Ended December 31, 2005
            
            F-7
                - F-9Notes
                to Consolidated Financial
                Statements
            
            F-10
                - F-39Selected
                Quarterly Financial Data - Years Ended December
                31, 2005 and 2004 (Unaudited)
            
            F-40






-46-
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            Statements**





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, 2005 and 2004, and the related
      consolidated statements of operations, stockholders' equity and cash flows
      for
      each of the three years in the period ended December 31, 2005. Our audits also
      included the financial statement schedule listed in the Index at Item 15. We
      also have audited management's assessment, included in the accompanying
      Management’s Report on Internal Control Over Financial Reporting, that the
      Company maintained effective internal control over financial reporting as of
      December 31, 2005, based on criteria established in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. As
      described in Management’s Report on Internal Control Over Financial Reporting,
      management excluded from their assessment the internal control over financial
      reporting at the Galaxy Power business, which was acquired on March 22, 2005,
      and whose financial statements reflect total assets and net sales constituting
      2.7% and 4.9%, respectively, of the related consolidated financial statement
      amounts as of and for the year ended December 31, 2005.  Accordingly, our
      audit did not include the internal control over financial reporting at the
      Galaxy Power business.  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. Our responsibility
      is to express an opinion on these financial statements and financial statement
      schedule, an opinion on management's assessment, and an opinion on the
      effectiveness of 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
      audit of 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, evaluating management's assessment, testing
      and evaluating the design and operating effectiveness of internal control,
      and
      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 accordance with 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.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company as of December
      31, 2005 and 2004, and the results of their operations and their cash flows
      for
      each of the three years in the period ended December 31, 2005, in conformity
      with accounting principles generally accepted in the United States of America.
      Also, in our opinion, such financial statement schedule, when considered in
      relation to the basic consolidated financial statements taken as a whole,
      presents fairly, in all material respects, the information set forth therein.
      Also in our opinion, management's assessment that the Company maintained
      effective internal control over financial reporting as of December 31, 2005,
      is
      fairly stated, in all material respects, based on the criteria established
      in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission.
      Furthermore, in our opinion, the Company maintained, in all material respects,
      effective internal control over financial reporting as of December 31, 2005,
      based on the criteria established in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway
      Commission.




/S/
      DELOITTE & TOUCHE LLP


New
      York,
      New York


March
      13,
      2006




F-1
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**BEL
                FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE
                SHEETS**




December
                31,2005
            
            2004**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            51,997,634
            
            $
            71,197,891Marketable
                securities
            
            
            38,463,108
            
            
            23,120,028Accounts
                receivable - less allowance for doubtfulaccounts
                of $1,107,000 and $1,610,000 atDecember
                31, 2005 and 2004, respectively
            
            
            39,304,984
            
            
            33,247,911Inventories
            
            
            32,947,103
            
            
            29,101,060Prepaid
                expenses and other currentassets
            
            
            1,691,017
            
            
            2,404,718Assets
                held for sale
            
            
            828,131
            
            
            696,013Total
                Current Assets
            
            
            165,231,977
            
            
            159,767,621Property,
                plant and equipment - net
            
            
            42,379,356
            
            
            41,244,759Deferred
                income taxes
            
            
            3,901,000
            
            
            —Intangible
                assets - net
            
            
            2,782,188
            
            
            2,691,682Goodwill
            
            
            22,427,934
            
            
            9,881,854Prepaid
                pension costs
            
            
            1,655,362
            
            
            1,127,941Other
                assets
            
            
            3,678,100
            
            
            3,062,714TOTAL
                ASSETS
            
            $
            242,055,917
            
            $
            217,776,571


See
      notes
      to consolidated financial statements.






F-2
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS**
  December
                  31,2005
              
              2004**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Current
                  portion of long-term debt
              
              $
              —
              
              $
              2,000,000Accounts
                  payable
              
              
              14,560,827
              
              
              8,814,161Accrued
                  expenses
              
              
              10,667,558
              
              
              10,293,576Deferred
                  income taxes
              
              
              1,412,000
              
              
              3,322,000Income
                  taxes payable
              
              
              9,840,295
              
              
              7,172,955Dividends
                  payable
              
              
              548,000
              
              
              541,000Total
                  Current Liabilities
              
              
              37,028,680
              
              
              32,143,692Long-term
                  Liabilities:Minimum
                  pension obligation
              
              
              3,450,688
              
              
              2,261,583Long-term
                  debt - net of current portion
              
              
              —
              
              
              4,500,000Deferred
                  income taxes
              
              
              —
              
              
              410,000Total
                  Long-term Liabilities
              
              
              3,450,688
              
              
              7,171,583Total
                  Liabilities
              
              
              40,479,368
              
              
              39,315,275Commitments
                  and ContingenciesStockholders'
                  Equity:Preferred
                  stock, no par value,authorized
                  1,000,000 shares;none
                  issued
              
              
              —
              
              
              —Class
                  A common stock, par value$.10
                  per share - authorized10,000,000
                  shares; outstanding2,702,677
                  and 2,702,677 shares, respectively(net
                  of 1,072,770 treasury shares)
              
              
              270,268
              
              
              270,268Class
                  B common stock, par value$.10
                  per share - authorized30,000,000
                  shares; outstanding 9,013,264and
                  8,660,589 shares, respectively(net
                  of 3,218,310 treasury shares)
              
              
              901,327
              
              
              866,059Additional
                  paid-in capital
              
              
              31,713,608
              
              
              21,989,174Retained
                  earnings
              
              
              167,991,188
              
              
              149,949,283Deferred
                  stock-based compensation
              
              
              (3,562,709
              )
              
              —Cumulative
                  other comprehensiveincome
              
              
              4,262,867
              
              
              5,386,512Total
                  Stockholders' Equity
              
              
              201,576,549
              
              
              178,461,296TOTAL
                  LIABILITIES ANDSTOCKHOLDERS'
                  EQUITY
              
              $
              242,055,917
              
              $
              217,776,571


See
      notes to consolidated financial
      statements.








F-3
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF OPERATIONS**
  Years
                  Ended December 31,2005
              
              2004
              
              2003Net
                  Sales
              
              $
              215,915,756
              
              $
              190,021,953
              
              $
              158,497,502Costs
                  and expenses:Cost
                  of sales
              
              
              156,146,724
              
              
              132,776,304
              
              
              113,812,860Selling,
                  general and administrative
              
              
              33,151,672
              
              
              31,301,722
              
              
              26,757,349Fixed
                  asset impairment
              
              
              —
              
              
              1,032,786
              
              
              —189,298,396
              
              
              165,110,812
              
              
              140,570,209Income
                  from operations
              
              
              26,617,360
              
              
              24,911,141
              
              
              17,927,293Interest
                  expense
              
              
              (324,802
              )
              
              (238,552
              )
              
              (228,459
              )Interest
                  income
              
              
              1,422,719
              
              
              763,000
              
              
              477,860Lawsuit
                  proceeds
              
              
              —
              
              
              2,935,000
              
              
              —Earnings
                  before provision for income taxes
              
              
              27,715,277
              
              
              28,370,589
              
              
              18,176,694Income
                  tax provision
              
              
              7,482,000
              
              
              3,649,000
              
              
              4,413,000Net
                  earnings
              
              $
              20,233,277
              
              $
              24,721,589
              
              $
              13,763,694Earnings
                  per common share - basic
              
              $
              1.76
              
              $
              2.19
              
              $
              1.25Earnings
                  per common share - diluted
              
              $
              1.75
              
              $
              2.15
              
              $
              1.24Weighted
                  average common sharesoutstanding
                  - basic
              
              
              11,510,175
              
              
              11,283,750
              
              
              11,020,916Weighted
                  average common sharesoutstanding
                  - diluted
              
              
              11,593,258
              
              
              11,511,095
              
              
              11,133,471


See
      notes to consolidated financial
      statements.




F-4
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**




**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS'
                  EQUITY**
  CumulativeOther
              
              
              
              
              
              
              
              DeferredCompre-
              
              
              
              Compre-
              
              Class
                  A
              
              Class
                  B
              
              Additional
              
              Stock-hensive
              
              Retained
              
              hensive
              
              Common
              
              Common
              
              Paid-In
              
              BasedTotal
              
              Income
              
              Earnings
              
              Income
              
              Stock
              
              Stock
              
              Capital
              
              CompensationBalance,
                  January 1, 2003
              
              $
              130,659,147
              
              
              
              
              $
              115,632,819
              
              $
              (50,132
              )
              $
              267,623
              
              $
              826,149
              
              $
              13,982,688
              
              $
              —Exercise
                  of stockoptions
              
              
              2,580,224
              
              
              
              
              
              
              
              
              
              
              
              2,544
              
              
              19,920
              
              
              2,557,760Tax
                  benefits arisingfrom
                  the disposition ofnon-qualifiedincentive
                  stock options
              
              
              812,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              812,000Cash
                  dividends on Class Acommon
                  stock
              
              
              (322,234
              )
              
              
              
              
              (322,234
              )Cash
                  dividends on Class Bcommon
                  stock
              
              
              (1,667,586
              )
              
              
              
              
              (1,667,586
              )Currency
                  translationadjustment
                  - net of taxes
              
              
              1,014,808
              
              $
              1,014,808
              
              
              
              
              
              1,014,808Increase
                  in unrealized gain orloss
                  on marketable securities-net
                  of taxes
              
              
              14,900
              
              
              14,900
              
              
              
              
              
              14,900Net
                  earnings
              
              
              13,763,694
              
              
              13,763,694
              
              
              13,763,694Comprehensive
                  income
              
              
              
              
              $
              14,793,402Balance,
                  December 31, 2003
              
              
              146,854,953
              
              
              
              
              
              127,406,693
              
              
              979,576
              
              
              270,167
              
              
              846,069
              
              
              17,352,448
              
              
              —Exercise
                  of stockoptions
              
              
              3,891,266
              
              
              
              
              
              
              
              
              
              
              
              101
              
              
              19,990
              
              
              3,871,175Tax
                  benefits arisingfrom
                  the disposition ofnon-qualifiedincentive
                  stock options
              
              
              765,551
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              765,551Cash
                  dividends on Class Acommon
                  stock
              
              
              (430,707
              )
              
              
              
              
              (430,707
              )Cash
                  dividends on Class Bcommon
                  stock
              
              
              (1,748,292
              )
              
              
              
              
              (1,748,292
              )Currency
                  translationadjustment
                  - net of taxes
              
              
              386,257
              
              $
              386,257
              
              
              
              
              
              386,257Increase
                  in unrealized gain orloss
                  on marketable securities-net
                  of taxes
              
              
              4,020,679
              
              
              4,020,679
              
              
              
              
              
              4,020,679Net
                  earnings
              
              
              24,721,589
              
              
              24,721,589
              
              
              24,721,589Comprehensive
                  income
              
              
              
              
              $
              29,128,525Balance,
                  December 31, 2004
              
              
              178,461,296
              
              
              
              
              
              149,949,283
              
              
              5,386,512
              
              
              270,268
              
              
              866,059
              
              
              21,989,174
              
              
              —


See
      notes to consolidated financial
      statements.


F-5
 **Back
              to Table of Contents**
 **Index
              to Financial
              Statements**
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS'
                    EQUITY**
  CumulativeOtherCompre-
                
                
                
                Compre-
                
                Class
                    A
                
                Class
                    B
                
                Additional
                
                Stock-hensive
                
                Retained
                
                hensive
                
                Common
                
                Common
                
                Paid-In
                
                BasedTotal
                
                Income
                
                Earnings
                
                Income
                
                Stock
                
                Stock
                
                Capital
                
                CompensationExercise
                    of stockoptions
                
                
                4,115,508
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                20,028
                
                
                4,095,480Tax
                    benefits arisingfrom
                    the disposition ofnon-qualifiedincentive
                    stock options
                
                
                429,802
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                429,802
                
                
                —Cash
                    dividends on Class Acommon
                    stock
                
                
                (430,940
                )
                
                
                
                
                (430,940
                )Cash
                    dividends on Class Bcommon
                    stock
                
                
                (1,760,432
                )
                
                
                
                
                (1,760,432
                )Issuance
                    of restrictedcommon
                    stock
                
                
                5,214,392
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,240
                
                
                5,199,152Deferred
                    stock-basedcompensation
                    - net of taxes
                
                
                (3,810,840
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (3,810,840
                )Currency
                    translationadjustment
                    - net of taxes
                
                
                (669,153
                )
                $
                (669,153
                )
                
                
                
                
                (669,153
                )Decrease
                    in unrealized gain orloss
                    on marketable securities-net
                    of taxes
                
                
                (454,492
                )
                
                (454,492
                )
                
                
                
                
                (454,492
                )Stock-based
                    compensationexpense
                
                
                248,131
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                248,131Net
                    earnings
                
                
                20,233,277
                
                
                20,233,277
                
                
                20,233,277Comprehensive
                    income
                
                
                
                
                $
                19,109,632Balance,
                    December 31, 2005
                
                $
                201,576,549
                
                
                
                
                $
                167,991,188
                
                $
                4,262,867
                
                $
                270,268
                
                $
                901,327
                
                $
                31,713,608
                
                $
                (3,562,709
                )
 See
        notes to consolidated financial
        statements.
 F-6
 **Back
                to Table of Contents**
 **Index
                to Financial
                Statements**
  **BEL
                      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                      STATEMENTS OF CASH
                      FLOWS**
  Years
                      Ended December 31,2005
                  
                  2004
                  
                  2003Cash
                      flows from operatingactivities:Net
                      income
                  
                  $
                  20,233,277
                  
                  $
                  24,721,589
                  
                  $
                  13,763,694Adjustments
                      to reconcile netincome
                      to net cash providedby
                      operating activities:Depreciation
                      and amortization
                  
                  
                  10,104,373
                  
                  
                  9,025,364
                  
                  
                  8,374,918Fixed
                      asset impairment
                  
                  
                  —
                  
                  
                  1,032,786
                  
                  
                  364,843Other
                  
                  
                  1,712,000
                  
                  
                  1,238,000
                  
                  
                  812,000Deferred
                      income taxes
                  
                  
                  (3,602,000
                  )
                  
                  (4,986,000
                  )
                  
                  1,591,000Changes
                      in operating assetsand
                      liabilities (net of acquisitions)
                  
                  
                  2,825,445
                  
                  
                  1,077,010
                  
                  
                  3,759,738Net
                      Cash Provided byOperating
                      Activities
                  
                  
                  31,273,095
                  
                  
                  32,108,749
                  
                  
                  28,666,193Cash
                      flows from investing activities:Purchase
                      of property, plantand
                      equipment
                  
                  
                  (7,745,817
                  )
                  
                  (6,578,658
                  )
                  
                  (3,119,321
                  )Purchase
                      of marketablesecurities
                  
                  
                  (17,998,601
                  )
                  
                  (17,723,615
                  )
                  
                  (4,953,449
                  )Payment
                      for acquisitions - net ofcash
                      acquired
                  
                  
                  (20,807,083
                  )
                  
                  (353,464
                  )
                  
                  (36,277,457
                  )Proceeds
                      from repaymentby
                      contractors
                  
                  
                  —
                  
                  
                  29,000
                  
                  
                  29,000Proceeds
                      from sale ofmarketable
                      securities
                  
                  
                  1,621,603
                  
                  
                  6,345,595
                  
                  
                  4,904,875Proceeds
                      from sale ofbuilding
                  
                  
                  252,587
                  
                  
                  —
                  
                  
                  —Net
                      Cash Used inInvesting
                      Activities
                  
                  
                  (44,677,311
                  )
                  
                  (18,281,142
                  )
                  
                  (39,416,352
                  )
 See
          notes to consolidated financial
          statements.
   F-7
 **Back
                to Table of Contents**
 **Index
                to Financial
                Statements**
  **BEL
                      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                      STATEMENTS OF CASH FLOWS
                      (Continued)**
  Year
                      Ended December 31,2005
                  
                  2004
                  
                  2003Cash
                      flows from financingactivities:Proceeds
                      from borrowings
                  
                  
                  12,000,000
                  
                  
                  —
                  
                  
                  10,000,000Loan
                      repayments
                  
                  
                  (19,360,694
                  )
                  
                  (2,000,000
                  )
                  
                  (1,500,000
                  )Proceeds
                      from exercise ofstock
                      options
                  
                  
                  4,115,508
                  
                  
                  3,891,266
                  
                  
                  2,580,224Dividends
                      paid to commonshareholders
                  
                  
                  (2,183,371
                  )
                  
                  (2,168,258
                  )
                  
                  (1,871,494
                  )Net
                      Cash (Used In) Provided ByFinancing
                      Activities
                  
                  
                  (5,428,557
                  )
                  
                  (276,992
                  )
                  
                  9,208,730Effect
                      of exchange rate changes on cash
                  
                  
                  (367,484
                  )
                  
                  186,124
                  
                  
                  —Net
                      Increase (decrease) inCash
                      and Cash Equivalents
                  
                  
                  (19,200,257
                  )
                  
                  13,736,739
                  
                  
                  (1,541,429
                  )Cash
                      and Cash Equivalents-
                      beginning of year
                  
                  
                  71,197,891
                  
                  
                  57,461,152
                  
                  
                  59,002,581Cash
                      and Cash Equivalents-
                      end of year
                  
                  $
                  51,997,634
                  
                  $
                  71,197,891
                  
                  $
                  57,461,152Changes
                      in operating assetsand
                      liabilities (net of acquisitions) consist of:(Increase)
                      decrease in accountsreceivable
                  
                  $
                  (2,638,200
                  )
                  $
                  (2,671,513
                  )
                  $
                  1,763,149(Increase)
                      decrease in inventories
                  
                  
                  (1,145,242
                  )
                  
                  (2,774,275
                  )
                  
                  2,043,609(Increase)
                      decrease in prepaidexpenses
                      and othercurrent
                      assets
                  
                  
                  809,821
                  
                  
                  (700,243
                  )
                  
                  (1,187,276
                  )Decrease
                      in prepaid taxes
                  
                  
                  —
                  
                  
                  —
                  
                  
                  681,887(Increase)
                      decrease in other assets
                  
                  
                  (383,980
                  )
                  
                  (738,878
                  )
                  
                  (425,880
                  )Increase
                      (decrease) inaccounts
                      payable
                  
                  
                  3,629,923
                  
                  
                  1,299,301
                  
                  
                  (295,887
                  )Increase
                      in income taxes payable
                  
                  
                  3,071,828
                  
                  
                  6,946,523
                  
                  
                  792,432(Decrease)
                      increase inaccrued
                      expenses
                  
                  
                  (518,705
                  )
                  
                  (283,905
                  )
                  
                  387,704$
                  2,825,445
                  
                  $
                  1,077,010
                  
                  $
                  3,759,738
 See
          notes to consolidated financial
          statements.
  F-8
 **Back
                to Table of Contents**
 **Index
                to Financial
                Statements**
  **BEL
                      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                      STATEMENTS OF CASH FLOWS
                      (Concluded)**
  Year
                      Ended December 31,2005
                  
                  2004
                  
                  2003Supplementary
                      information:Cash
                      paid during the year for:Income
                      taxes
                  
                  $
                  6,578,000
                  
                  $
                  2,128,000
                  
                  $
                  1,031,000Interest
                  
                  $
                  325,000
                  
                  $
                  239,000
                  
                  $
                  228,000Details
                      of acquisitions:Fair
                      value of assets acquired (excludingcash
                      of $311,856 in 2005 and $799,000in
                      2003)
                  
                  $
                  6,167,138
                  
                  $
                  —
                  
                  $
                  35,853,854Intangibles
                  
                  
                  2,657,518
                  
                  
                  353,464
                  
                  
                  6,870,724Goodwill
                  
                  
                  12,456,080
                  
                  
                  —
                  
                  
                  —21,280,736
                  
                  
                  353,464
                  
                  
                  42,724,578Less:
                      Cash on deposit in 2002
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (6,447,121
                  )Amounts
                      due on acquisition payment
                  
                  
                  (473,653
                  )
                  
                  —
                  
                  
                  —Cash
                      paid for acquisitions
                  
                  $
                  20,807,083
                  
                  $
                  353,464
                  
                  $
                  36,277,457
 See
            notes to consolidated financial
            statements.


F-9
 **Back
            to Table of Contents**
 **Index
            to Financial
            Statements**





BEL
      FUSE
      INC. AND SUBSIDIARIES


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS




FOR
      THE
      YEARS ENDED DECEMBER 31, 2005, 2004 and 2003






1. DESCRIPTION
      OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Bel
      Fuse
      Inc. and subsidiaries operate in one industry with three geographic reporting
      segments and are engaged in the design, manufacture and sale of products used
      in
      local area networking, telecommunication, business equipment and consumer
      electronic applications. The Company manages its operations geographically
      through its three reporting units: North America, Asia and Europe. Sales are
      predominantly in North America, Europe and Asia.





PRINCIPLES
      OF CONSOLIDATION - The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries including the businesses acquired since their
      respective dates of acquisition. All intercompany transactions and balances
      have
      been eliminated.





USE
      OF
      ESTIMATES - The
      preparation of the consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      revenues and expenses during the reporting period. Actual results could differ
      from those estimates.





CASH
      EQUIVALENTS - Cash
      equivalents include short-term investments in U.S. treasury bills and commercial
      paper with an original maturity of three months or less when purchased. At
      December 31, 2005 and December 31, 2004, cash equivalents approximated
      $13,444,000 and $38,355,000, respectively.





MARKETABLE
      SECURITIES - The
      Company classifies its equity securities as "available for sale", and
      accordingly, reflects unrealized gains and losses, net of deferred income taxes,
      as other comprehensive income.





The
      fair
      values of marketable securities are based on quoted market prices. Realized
      gains or losses from the sale of marketable securities are based on the specific
      identification method.




F-10
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 **Index
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            Statements**





ACQUISITION
      EXPENSES - The
      Company capitalizes all direct costs associated with proposed acquisitions.
      If
      the proposed acquisitions are consummated, such costs will be included as a
      component of the overall cost of the acquisition. Such costs are expensed at
      such time as the Company deems the consummation of a proposed acquisition to
      be
      unsuccessful.





FOREIGN
      CURRENCY TRANSLATION - The
      functional currency for some foreign operations is the local currency. Assets
      and liabilities of foreign operations are translated at balance sheet date
      rates
      of exchange and income, expense and cash flow items are translated at the
      average exchange rate for the 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.
      A
      combination of current and historical exchange rates is used in measuring the
      local currency transactions of these subsidiaries and the resulting exchange
      adjustments are included in the statement of operations. Current exchange rates
      are used for all foreign subsidiaries except for two subsidiaries in the Far
      East which use both current and historical exchange rates. Realized foreign
      currency losses were $27,000, $54,000 and $236,000 for the years ended December
      31, 2005, 2004 and 2003, respectively, and have been expensed in the
      consolidated statement of operations.





CONCENTRATION
      OF CREDIT RISK - Financial
      instruments which potentially subject the Company to concentrations of credit
      risk consist principally of accounts receivable and temporary cash investments.
      The Company grants credit to customers that are primarily original equipment
      manufacturers and to subcontractors of original equipment manufacturers based
      on
      an evaluation of the customer's financial condition, without requiring
      collateral. Exposure to losses on receivables is principally dependent on each
      customer's financial condition. The Company controls its exposure to credit
      risk
      through credit approvals, credit limits and monitoring procedures and
      establishes allowances for anticipated losses.





The
      Company places its temporary cash investments with quality financial
      institutions and commercial issuers of short-term paper and, by policy, limits
      the amount of credit exposure in any one financial instrument.





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





REVENUE
      RECOGNITION - The
      Company recognizes revenue in accordance with the guidance contained in SEC
      Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements"
      Revenue is recognized when the product has been delivered and title and risk
      of
      loss has passed to the customer, collection of the resulting receivable is
      deemed probable 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.




F-11
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 **Index
            to Financial
            Statements**





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 2005 and 2004, inventory on consignment was
      immaterial.





The
      Company typically has a twelve-month warranty policy for workmanship defects.
      Warranty returns have historically averaged at or below 1% of annual net sales.
      The Company establishes warranty reserves when a warranty issue becomes known
      as
      warranty claims have historically been immaterial. 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 gross sales and provided for at
      the
      time revenue is recognized.





GOODWILL
      AND OTHER INTANGIBLES - The
      Company tests goodwill for impairment annually (fourth quarter), using a fair
      value approach at the reporting unit level. A reporting unit is an operating
      segment or one level below an operating segment for which discrete financial
      information is available and reviewed regularly by management. Assets and
      liabilities of the Company have been assigned to the reporting units to the
      extent that they are employed in or are considered a liability related to the
      operations of the reporting unit and were considered in determining the fair
      value of the reporting unit.





DEPRECIATION
      - Property,
      plant and equipment are stated at cost less accumulated depreciation and
      amortization. Depreciation and amortization are calculated primarily using
      the
      declining-balance method for machinery and equipment and the straight-line
      method for buildings and improvements over their estimated useful
      lives.




F-12
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 **Index
            to Financial
            Statements**





INCOME
      TAXES - The
      Company accounts for income taxes using an asset and liability approach under
      which deferred income taxes are recognized by applying enacted tax rates
      applicable to future years to the differences between the financial statement
      carrying amounts and the tax bases of reported assets and
      liabilities.





Except
      for a portion of foreign earnings that have been repatriated, an income tax
      provision has not been recorded for U.S. federal income taxes on the
      undistributed earnings of foreign subsidiaries as such earnings are intended
      to
      be permanently reinvested in those operations. Such earnings would become
      taxable upon the sale or liquidation of these foreign subsidiaries or upon
      the
      repatriation of earnings. See Note 8 of Notes to Consolidated Financial
      Statements.





During
      2005, the Company repatriated approximately $70.6 million of foreign subsidiary
      earnings to take advantage of the temporary 85% dividends received deductions
      for cash dividends in excess of the historical "base-period" average. This
      favorable tax treatment created under the American Jobs Creation Act of 2004
      expired on December 31, 2005. The dividend repatriation resulted in an
      additional income tax of approximately $3.1 million, which was recorded during
      the year ended December 31, 2005.





The
      principal items giving rise to deferred taxes are unrealized gains on marketable
      securities available for sale, the use of accelerated depreciation methods
      for
      machinery and equipment, timing differences between book and tax amortization
      of
      intangible assets and goodwill and certain expenses which have been deducted
      for
      financial reporting purposes which are not currently deductible for income
      tax
      purposes.





STOCK-BASED
      COMPENSATION - The
      Company has two stock-based compensation plans under which incentive
      stock-options and restricted stock awards are granted to employees and
      directors. The Company accounts for stock option grants issued to employees
      in
      accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
      for Stock Issued to Employees". APB No. 25 Opinion requires the use of the
      intrinsic value method, which measures compensation cost as the excess, if
      any,
      of the quoted market price of the stock at the measurement date over the amount
      an employee must pay to acquire the stock. The Company makes disclosures of
      pro
      forma net earnings and earnings per share as if the fair-value-based method
      of
      accounting had been applied as required by Statement of Financial Accounting
      Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" .





During
      2005, the Company issued 152,400 class B common shares under a restricted stock
      plan to various officers and employees. The shares vest 25% after two years
      of
      employment with an additional 25% vesting in each of years three through five.
      This resulted in compensation expense of $179,295, net of tax benefit, for
      the
      year ended December 31, 2005. The balance of $3,562,709 of deferred stock-based
      compensation, net of taxes, is included within Stockholders’ Equity on the
      Company’s consolidated balance sheets.




F-13
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 **Index
            to Financial
            Statements**





In
      December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
      Compensation-Transition and Disclosure, an amendment of FASB Statement No.
      123”.
      SFAS No. 148 provides alternative methods of transition for a voluntary change
      to the fair value based method of accounting for stock-based employee
      compensation. It also requires disclosure in both annual and interim financial
      statements about the method of accounting for stock-based employee compensation
      and the effect of the method used on reported results. The Company adopted
      the
      disclosure provisions of SFAS No. 148 beginning with the year ended December
      31,
      2002. The Company grants stock options with exercise prices at fair market
      value
      at the date of the grant. The Company will continue to account for stock-based
      employee compensation under the recognition and measurement principle of APB
      Opinion No. 25 and related interpretations through December 31, 2005.
      Thereafter, the Company will account for stock based compensation under SFAS
      No.
      123(R), “Share-based Payment”. The Company will account for the compensation
      costs prospectively at the time of adoption.





The
      Company has adopted the disclosure-only provisions of SFAS No. 123. Had
      compensation cost for the Company's stock option plan been determined based
      on
      the fair value at the grant date for awards in 2005, 2004 and 2003 consistent
      with the provisions of SFAS No. 123, the Company's net earnings and earnings
      per
      share would have been reduced to the pro forma amounts indicated
      below:


December
                31,2005
            
            2004
            
            2003Net
                earnings - as reported
            
            $
            20,233,277
            
            $
            24,721,589
            
            $
            13,763,694Add:
                Stock-based compensationexpense
                included in net income,net
                of taxes, as reported
            
            
            179,295
            
            
            —
            
            
            —Deduct:
                Total stock-basedemployee
                compensation expensedetermined
                under fair value basedmethod
                for all awards,net
                of taxes
            
            
            (643,472
            )
            
            (1,125,427
            )
            
            (2,080,375
            )Net
                earnings- pro forma
            
            $
            19,769,100
            
            $
            23,596,162
            
            $
            11,683,319Earnings
                per common share -basic-as
                reported
            
            $
            1.76
            
            $
            2.19
            
            $
            1.25Earnings
                per common share -basic-pro
                forma
            
            $
            1.72
            
            $
            2.09
            
            $
            1.06Earnings
                per common share -diluted-as
                reported
            
            $
            1.75
            
            $
            2.15
            
            $
            1.24Earnings
                per common share -diluted-pro
                forma
            
            $
            1.71
            
            $
            2.04
            
            $
            1.05






F-14
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 **Index
            to Financial
            Statements**





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions used for grants in 2004 and 2003: dividends yield of 0.9% and 0.9%,
      expected volatility of 35% and 54% for Class B; risk-free interest rate of
      5%
      and 2% and expected lives of 5 years. No options were granted during the year
      ended December 31, 2005.





RESEARCH
      AND DEVELOPMENT - Research
      and development costs are expensed as incurred, and are included in cost of
      sales. Generally all research and development is performed internally for the
      benefit of the Company. The Company does not perform such activities for others.
      Research and development costs include salaries, building maintenance and
      utilities, rents, materials, administration costs and miscellaneous other items.
      Research and development expenses for the years ended December 31, 2005, 2004
      and 2003 amounted to $7.3 million, $7.3 million and $8.4 million,
      respectively.





EVALUATION
      OF LONG-LIVED ASSETS - The
      Company reviews property and equipment for impairment whenever events or changes
      in circumstances indicate the carrying value may not be recoverable in
      accordance with guidance in SFAS No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets.” If the carrying value of the long-lived asset
      exceeds the present value of the related estimated future cash flows, the asset
      would be adjusted to its fair value and an impairment loss would be charged
      to
      operations in the period identified.




EARNINGS
      PER SHARE - Basic
      earnings per common share are computed by dividing net earnings by the weighted
      average number of common shares outstanding during the period. Diluted earnings
      per common share are computed by dividing net earnings by the weighted average
      number of common shares and potential common shares outstanding during the
      period. Potential common shares used in computing diluted earnings per share
      relate to stock options and warrants which, if exercised, would have a dilutive
      effect on earnings per share.





The
      following table includes a reconciliation of shares used in the calculation
      of
      basic and diluted earnings per share:


2005
            
            2004
            
            2003Weighted
                average shares outstanding - basic
            
            
            11,510,175
            
            
            11,283,750
            
            
            11,020,916Dilutive
                impact of stock options andunvested
                restricted stock awards
            
            
            83,083
            
            
            227,345
            
            
            112,555Weighted
                average shares oustanding - diluted
            
            
            11,593,258
            
            
            11,511,095
            
            
            11,133,471






F-15
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 **Index
            to Financial
            Statements**




During
      the years ended December 31, 2005, 2004 and 2003, respectively, 20,000, 24,000
      and 209,600 outstanding options were not included in the foregoing computations
      because they were antidilutive.





FAIR
      VALUE OF FINANCIAL INSTRUMENTS - For
      financial instruments, including cash, accounts receivable, accounts payable
      and
      accrued expenses, it was assumed that the carrying amount approximated fair
      value because of the short maturities of such instruments. Interest rates that
      are currently available to the Company for issuance of debt with similar terms
      and remaining maturities are used to estimate fair value for bank debt.
      Management believes that the carrying amount of bank debt is a reasonable
      estimate of its fair value.





NEW
      FINANCIAL ACCOUNTING STANDARDS





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 154, "Accounting Changes and Error
      Correction" - a replacement of APB Opinion No. 20 and FASB Statement No. 3.
      This
      statement applies to all voluntary changes in accounting principles. It also
      applies to changes required by an accounting pronouncement in the unusual
      instance that the pronouncement does not include specific transition provisions.
      This statement requires retrospective application to prior periods' financial
      statements of changes in accounting principles, unless it is impracticable
      to
      determine either the period-specific effects or the cumulative effect of the
      change. This statement is effective for accounting changes and corrections
      made
      in fiscal years beginning after December 31, 2005. The adoption of SFAS 154
      is
      not expected to have a material effect on the Company’s consolidated financial
      position or results of operations.




In
      December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payments”, that
      will require compensation costs related to share-based payment transactions
      to
      be recognized in the financial statements. With limited exceptions, the amount
      of compensation cost will be measured based on the grant-date fair value of
      the
      equity or liability instruments issued. In addition, if granted, liability
      awards will be remeasured each reporting period. Compensation cost will be
      recognized over the period that an employee provides service in exchange for
      the
      reward. SFAS No. 123(R) is effective as to the Company as of the beginning
      of
      the Company's 2006 fiscal year. The Company will account for stock-based
      compensation costs prospectively at the time of adoption. The adoption of SFAS
      123(R) is expected to have a material effect on the Company's consolidated
      results of operations.




In
      December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
      "Application of FASB Statement No. 109, Accounting for Income Taxes, to the
      Tax
      Deduction on Qualified Production Activities Provided by the American Jobs
      Creation Act of 2004" to provide guidance on the application of Statement 109
      to
      the provision within the American Jobs Creations Act of 2004 (the "Act") that
      provides tax relief to U.S. domestic manufacturers. The FSP states that the
      deduction provided for under the Act should be accounted for as a special
      deduction in accordance with FASB Statement No. 109 and not as a tax rate
      reduction. The FSP is effective upon issuance. The adoption of FAS 109-1
      increased the provision for income taxes approximately $3.1 million during
      the
      year ended December 31, 2005.




F-16
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            to Financial
            Statements**





In
      December 2004, the FASB staff issued FSP FAS 109-2, "Accounting and Disclosure
      Guidance for the Foreign Earnings Repatriation Provision Within the American
      Jobs Creation Act of 2004" to provide accounting and disclosure guidance for
      the
      repatriation provisions included in the Act. The Act introduced a special
      limited-time dividends received deduction on the repatriation of certain foreign
      earnings to a U.S. taxpayer. The FSP is effective upon issuance. The adoption
      of
      FAS 109-2 increased the provision for income taxes approximately $3.1 million
      during the year ended December 31, 2005.




In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets",
      an amendment of APB Opinion No. 29. SFAS No. 153 amends APB Opinion No. 29
      by
      eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetary exchange
      has commercial substance if the future cash flows of the entity are expected
      to
      change significantly as a result of the exchange. SFAS No. 153 is effective
      for
      periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
      expected to have a material effect on the Company's financial position or
      results of operations.




In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs”, an amendment to
      Accounting Research Bulletin No. 43 chapter 4 . SFAS No. 151 requires that
      abnormal costs of idle facility expenses, freight, handling costs and wasted
      material (spoilage) be recognized as current-period charges. SFAS No. 151 is
      effective for fiscal years beginning after June 15, 2005. Adoption of SFAS
      No.
      151 is not expected to have a material impact on the Company's results of
      operations or financial position.





2.
            ACQUISITIONS





On
      June
      30, 2005, the Company acquired the common stock of Netwatch s.r.o., located
      in
      Prague, the Czech Republic, for approximately $1.9 million in cash of which
      $0.5
      million is due to the sellers by June 30, 2006. Netwatch s.r.o. is a designer
      and manufacturer of high-performance fiber optic and copper cable assemblies
      for
      data and telecommunication applications. Purchase price allocations have been
      estimated by management, and are preliminary . Management has estimated
      approximately $1.0 million of goodwill arose from the transaction which is
      included in the Company’s European reporting unit.




The
      acquisition has been accounted for using the purchase method of accounting
      and,
      accordingly, the results of operation of Netwatch s.r.o. have been included
      in
      the Company’s consolidated financial statements from June 30, 2005.




There
      was
      no in process research and development acquired as part of this
      acquisition.




F-17
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            Statements**




On
      March
      22, 2005, the Company acquired the common stock of Galaxy Power Inc. ("Galaxy"),
      located in Westborough, Massachusetts, for approximately $19.0 million in cash
      including transaction costs of approximately $0.4 million. Galaxy is a designer
      and manufacturer of high-density DC-DC converters for distributed power and
      telecommunication applications. Purchase price allocations have been initially
      estimated by management and are preliminary and subject to adjustment. The
      purchase price has been allocated to both tangible and intangible assets and
      liabilities based on estimated fair values after considering an independent
      formal appraisal. Approximately $11.5 million of goodwill and $2.0 million
      of
      identifiable intangible assets arose from the transaction and are included
      in
      the Company’s North American reporting unit. The identifiable intangible assets
      and related deferred tax liabilities are being amortized on a straight-line
      basis over their estimated useful lives.





The
      acquisition has been accounted for using the purchase method of accounting
      and,
      accordingly, the results of operations of Galaxy have been included in the
      Company's consolidated financial statements from March 22, 2005.





There
      was
      no in process research and development acquired as part of this
      acquisition.





The
      following unaudited pro forma summary results of operations assume that Galaxy
      and Netwatch s.r.o. had been acquired as of January 1, 2004 (in thousands,
      except per share data):


Years
                EndedDecember
                31,2005
            
            2004Net
                sales
            
            $
            221,227
            
            $
            212,331Net
                earnings
            
            
            20,026
            
            
            25,419Earnings
                per share - diluted
            
            
            1.74
            
            
            2.21




The
      information above is not necessarily indicative of the results of operations
      that would have occurred if the acquisitions had been consummated as of January
      1, 2003, 2004 and 2005. Such information should not be construed as a
      representation of the future results of operations of the Company.





F-18
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            Statements**





A
      condensed combined balance sheet of the major assets and liabilities of Galaxy
      and Netwatch s.r.o., as of their acquisition dates is as follows:


Cash
            
            $
            311,856Accounts
                receivable
            
            
            3,687,331Inventories
            
            
            2,862,571Prepaid
                expenses
            
            
            96,120Income
                taxes receivable
            
            
            5,488Property,
                plant andequipment
            
            
            1,545,526Other
                assets
            
            
            32,083Deferred
                tax asset
            
            
            1,392,850Goodwill
            
            
            12,456,080Intangible
                assets
            
            
            1,960,000Notes
                payable
            
            
            (860,694
            )Accounts
                payable
            
            
            (2,129,165
            )Accrued
                expenses
            
            
            (465,002
            )Net
                assets acquired
            
            $
            20,895,044




On
      March
      22, 2003, the Company acquired certain assets (including cash acquired of
      $799,000), subject to certain liabilities, and common shares of certain entities
      comprising the Passive Components Group of Insilco Technologies, Inc.
      ("Insilco") for $37.0 million in cash, including transaction costs of
      approximately $1.4 million. This acquisition included the Stewart Connector
      Systems Group (“Stewart”), InNet Technologies (“InNet”) and the Signal
      Transformer Group (“Signal Transformer”). The purchase price has been allocated
      to both tangible and intangible assets and liabilities based on estimated fair
      values after considering various independent formal appraisals. Approximately
      $1.6 million of identifiable intangible assets (patents) arose from this
      transaction; such intangible assets are being amortized on a straight-line
      basis
      over a period of five years. In addition, $2.9 million has been attributed
      to
      goodwill. Patents having a carrying value of $1.6 million and goodwill of $0.8
      million have been included in the Company's Asia reporting unit. Goodwill of
      $1.5 million and $0.6 million has been included in the Company's North America
      and European reporting units, respectively.





Effective
      January 2, 2003, the Company entered into an asset purchase agreement with
      Advanced Power Components plc ("APC") to purchase the communication products
      division of APC for $5.5 million in cash plus the assumption of certain
      liabilities. The Company was required to make contingent payments equal to
      5% of
      sales (as defined) in excess of $5.5 million per year for the years 2003 and
      2004. No contingent purchase price payment amounts are due as of December 31,
      2004, which was the expiration for the contingent payments. The purchase price
      has been allocated to both tangible and intangible assets and liabilities based
      on estimated fair values. Goodwill of approximately $2.1 million has been
      included in the Company's Asia reporting segment.





F-19
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            Statements**





There
      was
      no in process research and development acquired as part of these
      acquisitions.





These
      transactions were accounted for using the purchase method of accounting and,
      accordingly, the results of operations of Insilco's Passive Components Group
      have been included in the Company's financial statements from March 22, 2003
      and
      the results of operations of APC have been included in the Company's financial
      statements from January 2, 2003.




3.
            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.





Effective
      January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
      Intangible Assets". Under SFAS No. 142, goodwill and intangible assets deemed
      to
      have indefinite lives are no longer amortized, but are subject to, at a minimum,
      an annual impairment test. If the carrying value of goodwill or intangible
      assets exceeds its fair market value, an impairment loss would be recorded.





Other
      intangibles include patents, product information, covenants not-to-compete
      and
      supply agreements. Amounts assigned to these intangibles have been determined
      by
      management. Management considered a number of factors in determining the
      allocations, including valuations and independent appraisals. Other intangibles
      are being amortized over 1 to 10 years. Amortization expense was $2,567,000,
      $1,299,000 and $976,000 for the years ended December 31, 2005, 2004 and 2003,
      respectively.





Under
      the
      terms of the E-Power Ltd (“E-Power”) and Current Concepts, Inc. (“Current
      Concepts”) acquisition agreements of May 11, 2001, the Company is required to
      make contingent purchase price payments up to an aggregate of $7.6 million
      should the acquired companies attain specified sales levels. E-Power will be
      paid $2.0 million in contingent purchase price payments if sales, as defined,
      reach $15.0 million and an additional $4.0 million if sales reach $25.0 million
      on a cumulative basis through May 2007. During January 2006, the $2.0 million
      of
      contingent price consideration was earned by E-Power. Current Concepts will
      be
      paid 16% of sales, as defined, on the first $10.0 million of sales through
      May
      2007. During the years ended December 31, 2005, 2004 and 2003, the Company
      paid
      approximately $697,000, $354,000 and $209,000, respectively, in contingent
      purchase price payments to Current Concepts. The contingent purchase price
      payments are accounted for as additional purchase price and as an increase
      to
      covenants not to compete within intangible assets when such payment obligations
      are incurred.




F-20
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            Statements**




The
      changes in the carrying value of goodwill classified by geographic reporting
      units, net of accumulated depreciation, for the years ended December 31, 2005
      and 2004 are as follows:


Total
            
            Asia
            
            North
                America
            
            EuropeBalance,
                January 1, 2004
            
            $
            9,881,854
            
            $
            6,407,435
            
            $
            2,869,092
            
            $
            605,327Goodwill
                allocationrelated
                to acquisitions
            
            
            —
            
            
            —
            
            
            —
            
            
            —Balance,
                December 31, 2004
            
            
            9,881,854
            
            
            6,407,435
            
            
            2,869,092
            
            
            605,327Goodwill
                allocationrelated
                to acquisitions
            
            
            12,546,080
            
            
            —
            
            
            11,543,846
            
            
            1,002,234Balance,
                December 31, 2005
            
            $
            22,427,934
            
            $
            6,407,435
            
            $
            14,412,938
            
            $
            1,607,561





The
      components of intangible assets other than goodwill by geographic reporting
      unit
      are as follows:


December
                31, 2005Total
            
            Asia
            
            North
                AmericaGross
                Carrying
            
            Accumulated
            
            Gross
                Carrying
            
            Accumulated
            
            Gross
                Carrying
            
            AccumulatedAmount
            
            Amortization
            
            Amount
            
            Amortization
            
            Amount
            
            AmortizationPatents
                and Product Information
            
            $
            2,935,000
            
            $
            1,812,853
            
            $
            2,653,000
            
            $
            1,634,566
            
            $
            282,000
            
            $
            178,287Customer
                relationships
            
            
            1,160,000
            
            
            178,833
            
            
            —
            
            
            —
            
            
            1,160,000
            
            
            178,833Covenants
                not-to-compete
            
            
            5,021,034
            
            
            4,342,160
            
            
            4,221,034
            
            
            3,813,589
            
            
            800,000
            
            
            528,571$
            9,116,034
            
            $
            6,333,846
            
            $
            6,874,034
            
            $
            5,448,155
            
            $
            2,242,000
            
            $
            885,691




December
                31, 2004Total
            
            Asia
            
            North
                AmericaGross
                Carrying
            
            Accumulated
            
            Gross
                Carrying
            
            Accumulated
            
            Gross
                Carrying
            
            AccumulatedAmount
            
            Amortization
            
            Amount
            
            Amortization
            
            Amount
            
            AmortizationPatents
                and Product Information
            
            $
            2,935,000
            
            $
            1,338,765
            
            $
            2,653,000
            
            $
            1,188,654
            
            $
            282,000
            
            $
            150,111Covenants
                not-to-compete
            
            
            3,523,516
            
            
            2,428,069
            
            
            3,523,516
            
            
            2,428,069
            
            
            —
            
            
            —Supply
                agreement
            
            
            2,660,000
            
            
            2,660,000
            
            
            1,409,800
            
            
            1,409,800
            
            
            1,250,200
            
            
            1,250,200$
            9,118,516
            
            $
            6,426,834
            
            $
            7,586,316
            
            $
            5,026,523
            
            $
            1,532,200
            
            $
            1,400,311






F-21
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            Statements**





Estimated
      amortization expense for intangible assets for the next five years is as
      follows:


EstimatedYear
                Ending
            
            AmortizationDecember
                31,
            
            Expense2006
            
            $
            1,282,9012007
            
            
            675,2772008
            
            
            400,2872009
            
            
            293,5692010
            
            
            104,196




4. MARKETABLE
      SECURITIES





The
      Company has acquired a total of 4,600,000 shares of the common stock of a
      publicly-held company (“Merger Candidate”) at a total purchase price of
      $14,393,032. The Merger Candidate had a market capitalization of approximately
      $363 million as of February 23, 2006. These purchases are reflected on the
      Company’s consolidated statement of cash flows as purchases of marketable
      securities and are reflected on the Company’s consolidated balance sheet as
      marketable securities. These marketable securities are considered to be
      available for sale under SFAS No. 115, “Accounting for Certain Investments in
      Debt and Equity Securities”. Thus, as of December 31, 2005, the Company has
      recorded an unrealized gain, net of income taxes, of approximately $0.6 million
      which is included in other comprehensive income as stated in the consolidated
      statement of stockholders’ equity. In connection with this transaction, the
      Company is obligated to pay an investment banker’s advisory fee to a third party
      of 20% of the appreciation in the stock of the Merger Candidate, or $1 million,
      whichever is lower. As of December 31, 2005, the Company has accrued a fee
      in
      the amount of approximately $0.2 million. Such amount has been deferred within
      other assets. If the proposed acquisition of the Merger Candidate is
      consummated, the fee will be capitalized as part of the acquisition costs.
      Such
      amount will be expensed at such time as the Company deems the consummation
      of
      the proposed acquisition to be unsuccessful.




F-22
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            Statements**




The
      Company has acquired a total of 2,037,500 shares of the common stock of Artesyn
      Technologies, Inc. (“Artesyn”) at a total purchase price of $16,331,469. These
      purchases are reflected on the Company's consolidated statement of cash flows
      as
      purchases of marketable securities and are reflected on the Company's
      consolidated balance sheet as marketable securities. As of December 31, 2005
      and
      2004, the Company has recorded an unrealized gain, net of income taxes, of
      approximately $2.9 million and $4.0 million, which is included in other
      comprehensive income as stated in the consolidated statement of stockholders'
      equity. In connection with this transaction, the Company is obligated to pay
      an
      investment banker's advisory fee to a third party of 20% of the appreciation
      in
      the stock of Artesyn, or $1 million, whichever is lower. As of December 31,
      2005, the Company has accrued a fee in the amount of approximately $0.9 million.
      Such amount has been deferred within other assets. If the proposed acquisition
      of Artesyn is consummated, the fee will be capitalized as part of the
      acquisition costs. Such amount will be expensed at such time as the Company
      deems the consummation of the proposed acquisition to be unsuccessful. On
      February 2, 2006, Artesyn announced that it had entered into an agreement to
      be
      acquired by Emerson Network Power for $11.00 per share in cash. Artesyn has
      stated that the consummation of the agreement is subject to customary regulatory
      approvals and approval by Artesyn’s shareholders. Based on the current terms of
      the agreement, the Company expects to recognize a gain of approximately $3.2
      million, net of tax and investment banker’s advisory fees. Such gain will be
      recognized upon the closing of the transaction. The Company also expects to
      pay
      bonuses to key employees in connection with this transaction.





At
      December 31, 2005 and 2004, respectively, marketable securities have a cost
      of
      approximately $32,893,000 and $16,516,000, an estimated fair value of
      approximately $38,463,000 and $23,120,000 and gross unrealized gains of
      approximately $5,570,000 and $6,604,000. Such unrealized gains are included,
      net
      of tax, in other comprehensive income.





5. INVENTORIES





The
      components of inventories are as follows:


December
                31,2005
            
            2004Raw
                material
            
            $
            19,342,703
            
            $
            15,236,393Work
                in progress
            
            
            2,515,174
            
            
            1,607,052Finished
                goods
            
            
            11,089,226
            
            
            12,257,615$
            32,947,103
            
            $
            29,101,060






F-23
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            Statements**




6. IMPAIRMENT
          LOSS AND RESTRUCTURING CHARGES





Restructuring
      Charges





During
      the year ended December 31, 2005, the Company did not incur any severance costs.
      During the years ended December 31, 2004 and 2003, the Company incurred
      approximately $50,000 and $700,000, respectively, of severance costs. These
      expenses are included as a component of cost of sales and selling, general
      and
      administrative expenses on the accompanying Consolidated Statements of
      Operations.





Fixed
      Asset Impairment





During
      the year ended December 31, 2004, the Company wrote down fixed assets,
      principally machinery and equipment, with a net book value of $1,033,000 at
      its
      Far East manufacturing facilities. The Company considered these fixed assets
      to
      be surplus equipment which was replaced by equipment with more advanced
      technology.





7. PROPERTY,
      PLANT AND EQUIPMENT





Property,
      plant and equipment consist of the following:





December
                31,2005
            
            2004Land
            
            $
            3,348,788
            
            $
            3,274,641Buildings
                and improvements
            
            
            25,168,168
            
            
            23,858,419Machinery
                and equipment
            
            
            73,418,183
            
            
            66,945,194101,935,139
            
            
            94,078,254Less
                accumulated depreciation
            
            
            59,555,783
            
            
            52,833,495$
            42,379,356
            
            $
            41,244,759








F-24
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            Statements**




Depreciation
      expense for the years ended December 31, 2005, 2004, and 2003 was $7,537,000,
      $7,726,000 and $7,400,000, respectively.





During
      2005, property held for sale was reclassified from property, plant and equipment
      in the amount of $828,131 and $696,013, as of December 31, 2005 and 2004,
      respectively, to assets held for sale, a current asset on the accompanying
      consolidated balance sheets. The Company presently anticipates the sale to
      take
      place by June 30, 2006. The Company expects to reflect a gain on the sale but
      the amount can not be determined at this time.





8. INCOME
      TAXES





The
      provision for income taxes consists of the following:


Years
                Ended December 31,2005
            
            2004
            
            2003Current:Federal
            
            $
            4,590,000
            
            $
            3,524,000
            
            $
            1,004,000Foreign
            
            
            6,250,000
            
            
            5,234,000
            
            
            1,624,000State
            
            
            244,000
            
            
            (123,000
            )
            
            194,00011,084,000
            
            
            8,635,000
            
            
            2,822,000Deferred:Federal
                and state
            
            
            (1,420,000
            )
            
            (1,586,000
            )
            
            1,031,000Foreign
            
            
            (2,182,000
            )
            
            (3,400,000
            )
            
            560,000(3,602,000
            )
            
            (4,986,000
            )
            
            1,591,000$
            7,482,000
            
            $
            3,649,000
            
            $
            4,413,000








F-25
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            Statements**




A
      reconciliation of taxes on income computed at the federal statutory rate to
      amounts provided is as follows:


Years
                Ended December 31,2005
            
            2004
            
            2003Tax
                provisioncomputed
                at the Federalstatutory
                rate of 34%
            
            $
            9,423,000
            
            $
            9,646,000
            
            $
            6,180,000Increase
                (decrease) intaxes
                resulting from:Benefit
                relating to tax rate differential on foreignearnings
                to be repatriated in 2005-net (1)
            
            
            —
            
            
            (1,017,000
            )Repatriation
                of foreign earningsnet
                of foreign tax credit of $529,000
            
            
            3,100,000Different
                tax rates and permanentdifferences
                applicable toforeign
                operations
            
            
            (5,250,000
            )
            
            (3,380,000
            )
            
            (2,467,000
            )Utilization
                of foreign net operating losscarryforward
            
            
            —
            
            
            (165,000
            )Principally
                the utilization of research anddevelopment
                tax credits
            
            
            (630,000
            )
            
            (1,413,000
            )Reversal
                of a pre-acquisition tax benefit
            
            
            399,000Foreign
                valuation allowance
            
            
            —
            
            
            —
            
            
            571,000State
                (benefit) taxes, net of federal benefit
            
            
            161,000
            
            
            (81,000
            )
            
            128,000Other,
                net
            
            
            279,000
            
            
            59,000
            
            
            1,000$
            7,482,000
            
            $
            3,649,000
            
            $
            4,413,000


F-26
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              Statements**





(1)
            Under
                the American Jobs Creation Act of 2004 (the "Act"), the Company has
                repatriated earnings from controlled foreign corporations ("CFC's")
                in the
                amount of $70,560,000 in order to take advantage of the temporary
                85
                percent dividends received deduction for cash dividends in excess
                of the
                historical "base-period" average. This results in an effective federal
                tax
                rate of approximately 5.0%. The election to repatriate these CFC
                earnings
                expired on December 31, 2005 and the dividend proceeds must meet
                a number
                of criteria as outlined in the Act to be eligible for the favorable
                tax
                rate. In prior years, the Company provided deferred taxes of approximately
                $7,668,000 on a portion of its CFC earnings which management concluded
                would likely be repatriated. As a result of the favorable tax treatment
                afforded the repatriation of CFC earnings and management’s decision to
                repatriate such funds in 2005, the Company recorded a $6,326,000
                tax
                benefit in 2004 which results from the difference in tax rates between
                the
                Act and the tax rates previously provided on the portion of CFC earnings
                which were expected to be repatriated leaving deferred income taxes
                in the
                amount of approximately $1,342,000 recorded pertaining to such earnings
                to
                be repatriated. In light of the planned repatriation during 2004
                of CFC
                earnings in 2005, Management had identified certain domestic and
                foreign
                tax exposures relating to such operations. Such amount has been included
                in Income Taxes Payable in the accompanying consolidated balance
                sheet.
                Prior to the enactment of the Act, it was management’s intention to
                permanently reinvest the majority of the earnings of foreign subsidiaries
                in the expansion of its foreign operations. No earnings were repatriated
                during 2004 and 2003. Unrepatriated earnings, upon which U.S. income
                taxes
                have not been accrued, approximate $67.2 million at December 31,
                2005.
                Estimated income taxes related to unrepatriated foreign earnings
                are
                $20.2_million under the current tax law as the Act has expired.





The
      Company files income tax returns in all jurisdictions in which it has reason
      to
      believe it is subject to tax. Historically, the Company has been subject to
      examination by various taxing jurisdictions. To date, none of these examinations
      has resulted in any material additional tax. Nonetheless, any tax jurisdiction
      may contend that a filing position claimed by the Company regarding one or
      more
      of its transactions is contrary to that jurisdiction's laws or
      regulations.




F-27
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            Statements**




The
      types
      of temporary differences between the tax basis of assets and liabilities and
      their financial reporting amounts that give rise to the deferred tax liability
      and deferred tax asset and their approximate tax effects are as
      follows:




December
                31,2005
            
            2004Temporary
            
            
            
            TemporaryDifference
            
            Tax
                Effect
            
            Difference
            
            Tax
                EffectDeferred
                Tax Assets -non-current:United
                States net operating losscarryforward
            
            $
            4,316,000
            
            $
            1,640,000
            
            $
            —
            
            $
            —Restricted
                stock grants
            
            
            5,214,000
            
            
            1,472,000
            
            
            —
            
            
            —Depreciation
            
            
            (2,474,000
            )
            
            (134,000
            )
            
            —
            
            
            —Amortization
            
            
            972,000
            
            
            373,000
            
            
            —
            
            
            —Other
                accruals
            
            
            1,446,000
            
            
            550,000
            
            
            —
            
            
            —$
            9,474,000
            
            $
            3,901,000
            
            $
            —
            
            $
            —Deferred
                Tax Liability -current:Unremitted
                earnings offoreign
                subsidiaries notpermanently
                reinvested
            
            $
            —
            
            $
            —
            
            $
            25,560,000
            
            $
            1,342,000Unrealizedappreciation/
                depreciationin
                marketable securities
            
            
            5,661,000
            
            
            2,151,000
            
            
            6,604,000
            
            
            2,642,000Reserves
                and accruals
            
            
            (2,352,000
            )
            
            (739,000
            )
            
            (1,655,000
            )
            
            (662,000
            )$
            3,309,000
            
            $
            1,412,000
            
            $
            30,509,000
            
            $
            3,322,000Deferred
                Tax Liabilities-non-current:Depreciation
            
            $
            —
            
            $
            —
            
            $
            13,371,000
            
            $
            888,000Amortization
            
            
            —
            
            
            —
            
            
            (2,037,000
            )
            
            (815,000
            )Other
                temporary differences
            
            
            —
            
            
            —
            
            
            843,000
            
            
            337,000$
            —
            
            $
            —
            
            $
            12,177,000
            
            $
            410,000






F-28
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The
      Company was granted a ten year tax holiday in Macao which has an effective
      tax
      rate of 8% , which is 50% of the normal tax rate. Such holiday expired during
      2004. At December 31, 2005 the Company had $764,000 of net operating loss
      carry-forwards which expires December 31, 2006. During the year 2005, the
      Company’s benefits from net operating losses were not material. During the year
      ended December 31, 2004, the Company used $1.1 million of net operating loss
      carry-forwards, which resulted in a tax savings of approximately $165,000.
      During the year 2003 this holiday provided no benefit to the Company as the
      entity incurred losses.





The
      remaining net operating loss carry-forward of approximately $5.6 million expired
      in 2004. Correspondingly, the valuation allowance, which was established for
      this net operating loss carryforward, is no longer required. The acquisition
      of
      Galaxy resulted in Galaxy having a net operating loss carry forward of
      approximately $5.4 million. This net operating loss carry forward arose
      principally from the non-qualified dispositions of stock options and warrants
      and expires during 2024.





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 will commence
      during the first quarter of 2006. Sales will consist of products manufactured
      in
      the PRC. The MCO will not be subject to Macao corporation income taxes. It
      is
      not possible at this time to determine the tax impact on the Company regarding
      the establishment of this new entity.





9. DEBT





a. Short-term
      debt





Previously
      the Company had available one domestic line of credit of $10 million. During
      March 2005, the Company borrowed $8 million against the line of credit to
      partially finance the acquisition of Galaxy. The outstanding balance was paid
      off in its entirety on June 20, 2005. During July 2005, the Company amended
      its
      credit agreement to increase the line of credit to $20 million, which expires
      on
      July 21, 2008. During October 2005, the Company borrowed $4 million against
      the
      line of credit. The outstanding balance was paid off in its entirety during
      December, 2005. There was no balance outstanding as of December 31, 2005. The
      entire $20 million line of credit is available to the Company to borrow. The
      loan
      is collateralized with a first priority security interest in and lien on 65%
      of
      all the issued and outstanding shares of the capital stock of certain of the
      foreign subsidiaries of the Company and all other personal property and certain
      real property of the Company.





The
      Company’s Hong Kong subsidiary has an unsecured line of credit of approximately
      $2 million which was unused as of December 31, 2005. The line of credit expires
      May 31, 2006. Borrowing on the line of credit is guaranteed by the U.S. parent.
      The line of credit bears interest at a rate determined by the bank as the
      financing is extended.




F-29
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b. Long-term
      debt





On
      March
      21, 2003, the Company entered into a $10 million secured term loan, which was
      paid off in June 2005. The loan was used to partially finance the Company's
      acquisition of Insilco's Passive Components Group. This term loan facility
      is no
      longer available.





For
      the
      years ended December 31, 2005, 2004 and 2003, the Company recorded interest
      expense of approximately $325,000, $239,000 and $228,000, respectively.





See
      Note15 for information on unused credit facilities.





10. ACCRUED
      EXPENSES





Accrued
      expenses consist of the following:


Year
                Ended December 31,2005
            
            2004Sales
                commissions
            
            $
            1,812,135
            
            $
            1,431,169Investment
                banking commissions
            
            
            1,105,510
            
            
            1,000,000Subcontracting
                labor
            
            
            1,597,279
            
            
            1,624,963Salaries,
                bonuses andrelated
                benefits
            
            
            2,642,729
            
            
            3,480,213Other
            
            
            3,509,905
            
            
            2,757,231$
            10,667,558
            
            $
            10,293,576






F-30
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11. BUSINESS
      SEGMENT INFORMATION





The
      Company operates in one industry and has three reportable segments. The segments
      are geographic and include 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:




2005
            
            2004
            
            2003Revenue
                from unrelatedentities
                and countryof
                Company's domicile:North
                America
            
            $
            69,089,000
            
            $
            67,177,000
            
            $
            51,218,000Asia
            
            
            131,104,000
            
            
            109,011,000
            
            
            88,253,000Europe
            
            
            15,723,000
            
            
            13,834,000
            
            
            19,027,000$
            215,916,000
            
            $
            190,022,000
            
            $
            158,498,000Total
                Revenues:North
                America
            
            $
            80,836,000
            
            $
            76,979,000
            
            $
            63,033,000Asia
            
            
            151,992,000
            
            
            132,224,000
            
            
            114,025,000Europe
            
            
            16,967,000
            
            
            15,194,000
            
            
            12,076,000Less
                intergeographicrevenues
            
            
            (33,879,000
            )
            
            (34,375,000
            )
            
            (30,636,000
            )$
            215,916,000
            
            $
            190,022,000
            
            $
            158,498,000Income
                from Operations:North
                America
            
            $
            4,020,000
            
            $
            8,475,000
            
            $
            3,511,000Asia
            
            
            22,391,000
            
            
            15,805,000
            
            
            13,771,000Europe
            
            
            206,000
            
            
            631,000
            
            
            645,000$
            26,617,000
            
            $
            24,911,000
            
            $
            17,927,000Identifiable
                Assets:North
                America
            
            $
            150,807,000
            
            $
            92,515,000Asia
            
            
            95,358,000
            
            
            131,970,000Europe
            
            
            7,753,000
            
            
            3,409,000Less
                intergeographiceliminations
            
            
            (11,862,000
            )
            
            (10,117,000
            )$
            242,056,000
            
            $
            217,777,000Capital
                Expenditures:North
                America
            
            $
            1,328,000
            
            $
            736,000
            
            $
            829,000Asia
            
            
            6,322,000
            
            
            5,557,000
            
            
            1,911,000Europe
            
            
            96,000
            
            
            286,000
            
            
            379,000$
            7,746,000
            
            $
            6,579,000
            
            $
            3,119,000Depreciation
                and Amortizaionexpense:North
                America
            
            $
            2,526,000
            
            $
            1,928,000
            
            $
            1,775,000Asia
            
            
            7,364,000
            
            
            6,966,000
            
            
            6,399,000Europe
            
            
            214,000
            
            
            131,000
            
            
            201,000$
            10,104,000
            
            $
            9,025,000
            
            $
            8,375,000






F-31
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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 are sold to Asia for further processing. Income from operations
      represents gross profit less operating expenses.





Identifiable
      assets are those 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
      People's Republic of China in the middle of 1997. The territory of Macao became
      a SAR of the People’s Republic of China 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 China will affect the Company's contractual
      arrangements in China. Substantially all of the Company's manufacturing
      operations and approximately 38% of its identifiable assets are located in
      The
      People's Republic of China and its SARs of Hong Kong and Macao. Accordingly,
      events which may result from the expiration of such leases, as well as any
      change in the "Most Favored Nation" status granted to China by the U.S., could
      have a material adverse effect on the Company.





The
      Company's research and development facilities are located in California,
      Massachusetts, Hong Kong, China and the United Kingdom. Research and development
      costs, which are expensed as incurred, amounted to $7.3 million in 2005, $7.3
      million in 2004 and $8.4 million in 2003. The Company closed its Indiana
      facility during the second quarter of 2003.





The
      Company had sales to individual customers in excess of ten percent of
      consolidated net sales as follows in 2005, 2004 and 2003: The amount and
      percentages of the Company's sales to an individual customer each year were
      $32,844,000 (15.2%) in 2005, $22,062,000 (11.6%) in 2004 and $22,470,000 (14.2%)
      in 2003. The loss of such customers would have a material adverse effect on
      the
      Company's consolidated results of operations, financial position and cash flows.




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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 is made with Company stock purchased in the open market. The
      expense for the years ended December 31, 2005, 2004 and 2003 amounted to
      approximately $437,000, $404,000 and $247,000, respectively. As of December
      31,
      2005, the plans owned 18,697 and 132,977 shares of Bel Fuse Inc. Class A and
      Class B common stock, respectively.





The
      Company's Far East subsidiaries 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 may contribute an
      amount up to 7% of eligible salary, as determined by Hong Kong government
      regulations, in cash or Company stock. The expense for the years ended December
      31, 2005, 2004 and 2003 amounted to approximately $482,000, $447,000 and
      $631,000, respectively. As of December 31, 2005, 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 supplemental retirement and death benefits. The Plan was established
      by the Company in 2002. Employees are selected at the sole discretion of the
      Board of Directors of the Company to participate in the Plan. The Plan is
      unfunded. The Company utilizes life insurance to partially cover its obligations
      under the Plan. 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, 2005,
      2004 and 2003 amounted to approximately $699,000, $509,000 and $428,000,
      respectively.




F-33
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The
      following provides a reconciliation of benefit obligations, the funded status
      of
      the SERP and a summary of significant assumptions:


December
                31,
            
            2005
            
            2004Change
                in benefit obligation:Projected
                benefit obligation at beginning of year
            
            $
            2,890,113
            
            $
            2,637,902Service
                cost
            
            
            331,942
            
            
            221,981Interest
                cost
            
            
            211,920
            
            
            145,085Plan
                amendments
            
            
            444,684
            
            
            —Benefits
                paid
            
            
            (37,500
            )
            
            —Actuarial
                (gains) losses
            
            
            635,137
            
            
            (114,855
            )Projected
                benefit obligation at end of year
            
            $
            4,476,296
            
            $
            2,890,113Funded
                status of plan:Under
                funded status
            
            $
            (4,476,296
            )
            $
            (2,890,113
            )Unrecognized
                net loss
            
            
            869,673
            
            
            259,218Unrecognized
                prior service costs
            
            
            1,811,297
            
            
            1,497,253Accrued
                pension cost
            
            $
            (1,795,326
            )
            $
            (1,133,642
            )Change
                in plan assets:Fair
                value of plan assets, beginning of year
            
            $
            —
            
            $
            —Company
                contributions
            
            
            37,500
            
            
            —Benefit
                paid
            
            
            (37,500
            )
            
            —Fair
                value of plan assets, end of year
            
            $
            —
            
            $
            —Balance
                sheet amounts:Accrued
                benefit liability
            
            $
            3,450,688
            
            $
            2,261,583Intangible
                asset
            
            
            1,655,362
            
            
            1,127,941




The
                components of SERP expense are as follows:December
                31,
            
            2005
            
            2004
            
            2003Service
                cost
            
            $
            331,942
            
            $
            221,981
            
            $
            217,875Interest
                cost
            
            
            211,920
            
            
            145,085
            
            
            104,719Net
                amortization and deferral
            
            
            155,322
            
            
            142,363
            
            
            105,110Total
                SERP expense
            
            $
            699,184
            
            $
            509,429
            
            $
            427,704Assumption
                percentages:Discount
                rate
            
            
            5.50
            %
            
            5.50
            %
            
            5.50
            %Rate
                of compensation increase
            
            
            3.00
            %
            
            3.00
            %
            
            4.00
            %





The
      accumulated benefit obligation for the SERP was $3,450,688 and $2,261,583 as
      of
      December 31, 2005 and 2004.




F-34
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13. STOCK
      INCENTIVE PLAN





*Incentive
      Stock Options*





The
      Company has a Qualified Stock Option Plan (the "Plan") which provides for the
      granting of "Incentive Stock Options" to key employees within the meaning of
      Section 422 of the Internal Revenue Code of 1986, as amended. The Plan provides
      for the issuance of 2,400,000 common shares. Substantially all options
      outstanding 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. The exercise price of the 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. Accordingly, no compensation cost has been recognized for the
      stock options awarded. An option may not be exercised within one year from
      the
      date of grant, and in general, no option will be exercisable after five years
      from the date granted. See Note 1 - New Financial Accounting Standards for
      changes in accounting for stock options which will be effective during
      2005.





Information
      regarding the Company’s Stock Option Plan for 2005, 2004, and 2003 is as
      follows:


2005
            
            2004
            
            2003Weighted-
            
            
            
            Weighted-
            
            
            
            Weighted-Average
            
            
            
            Average
            
            
            
            AverageExercise
            
            
            
            Exercise
            
            
            
            ExerciseShares
            
            Price
            
            Shares
            
            Price
            
            Shares
            
            PriceOptions
                out-standing,
                begin-ning
                of year
            
            
            495,289
            
            $
            23.17
            
            
            712,600
            
            $
            21.61
            
            
            759,238
            
            $
            19.23Options
                exercised
            
            
            (200,276
            )
            $
            20.50
            
            
            (200,911
            )
            $
            19.37
            
            
            (224,638
            )
            $
            11.48Options
                granted
            
            
            —
            
            $
            —
            
            
            24,000
            
            $
            37.00
            
            
            200,000
            
            $
            18.89Options
                cancelled
            
            
            (9,000
            )
            $
            27.29
            
            
            (40,400
            )
            $
            22.71
            
            
            (22,000
            )
            $
            19.00Options
                out-standing,
                endof
                year
            
            
            286,013
            
            $
            24.96
            
            
            495,289
            
            $
            23.17
            
            
            712,600
            
            $
            21.61Options
                pricerange
                at endof
                year
            
            $
            18.89
                to $37.00
            
            
            
            
            $
            17.00
                to $37.00
            
            
            
            
            $
            15.38
                to $29.50Options
                pricerange
                forexercisedshares
            
            $
            17.00
                to $29.50
            
            
            
            
            $
            15.38
                to $29.50
            
            
            
            
            $
            5.75
                to $19.52Options
                availablefor
                grant at endof
                year
            
            
            810,985
            
            
            
            
            
            954,385
            
            
            
            
            
            937,985Weighted-average
                fairvalue
                of optionsgranted
                duringthe
                year
            
            $
            —
            
            
            
            
            $
            8.66
            
            
            
            
            $
            8.03






F-35
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The
      following table summarizes information about fixed-price stock options
      outstanding at December 31, 2005:





Weighted-Number
                Out-
            
            Average
            
            Weighted
            
            Number
            
            Weighted-Range
                of
            
            standing
                at
            
            Remaining
            
            Average
            
            Exercisable
                at
            
            AverageExercise
            
            December
                31,
            
            Contractual
            
            Exercise
            
            December
                31,
            
            ExercisePrices
            
            2005
            
            Life
            
            Price
            
            2005
            
            Price$29.50
            
            
            120,817
            
            
            —
            
            $
            29.50
            
            
            60,817
            
            $
            29.50$19.52-$22.25
            
            
            38,200
            
            
            1
                Year
            
            $
            21.29
            
            
            22,700
            
            $
            21.29$18.89
            
            
            106,996
            
            
            2
                Years
            
            $
            18.89
            
            
            21,996
            
            $
            18.89$37.00
            
            
            20,000
            
            
            3
                Years
            
            $
            37.00
            
            
            5,000
            
            $
            37.00286,013
            
            
            
            
            
            
            
            
            110,513





*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 Stock Option plan. 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 five-year periods from the
      respective award dates, as adjusted for forfeitures of unvested awards. Deferred
      stock-based compensation expense of $3.6 million associated with unearned shares
      under this plan as of December 31, 2005, is reported within Stockholders' equity
      on the Company's consolidated balance sheets, net of deferred tax benefit.
      Pretax compensation expense was $248,131 for the year ended December 31,
      2005.





Through
      December 31, 2005, 152,400 shares, net of cancellations, have been awarded
      under
      this plan and all shares are unvested.





14. COMMON
      STOCK





During
      2000, the Board of Directors of the Company authorized the purchase of up to
      ten
      percent (10%) of the Company’s outstanding Class B common shares. As of December
      31, 2005, the Company had purchased and retired 23,600 Class B common shares
      at
      a cost of approximately $808,000 which reduced the number of Class B common
      shares outstanding.




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There
      are
      no contractual restrictions on the Company's ability to pay dividends provided
      the Company continues to comply with the financial tests in its credit
      agreement. On February 2, 2005, May 2, 2005, August 1, 2005, and November 1,
      2005 the Company paid a $0.05 per share dividend to all shareholders of record
      of Class B Common Stock in the total amount of $433,450, $437,175, $439,450,
      and
      $442,356, respectively. On February 2, 2005, May 2, 2005, August 1, 2005 and
      November 1, 2005 the Company paid a $0.04 per share dividend to all shareholders
      of record of Class A Common Stock in the total amount of $107,735, $107,735,
      $107,735 and $107,735, respectively. On February 2, 2004, May 2, 2004, August
      2,
      2004, and November 2, 2004 the Company paid a $0.05 per share dividend to all
      shareholders of record of Class B Common Stock in the total amount of $422,474,
      $424,449, $431,470, and $432,406, respectively. During May 2004 the Company
      paid
      a dividend on Class B common stock in the amount of $26,860 in connection with
      a
      shortfall of prior payments. On February 2, 2004, May 2, 2004, August 2, 2004,
      and November 2, 2004 the Company paid a $0.04 per share dividend to all
      shareholders of record of Class A Common Stock in the total amount of $107,641,
      $107,641, $107,678, and $107,694, respectively.





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:


Years
                EndingDecember
                31,2006
            
            $
            1,473,0002007
            
            
            745,0002008
            
            
            357,0002009
            
            
            318,0002010
            
            
            394,000$
            3,287,000




Rental
      expense was approximately $1,624,000, $1,433,000 and $1,450,000 for the years
      ended December 31, 2005, 2004, and 2003, respectively.




F-37
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            to Table of Contents**
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            to Financial
            Statements**





Facilities





The
      Company is constructing a 117,000 square foot manufacturing facility in
      Zhongshan City, PRC for approximately $2.3 million including improvements.
      As of
      December 31, 2005 the Company has paid $1.3 million on the construction.





Legal
      Proceedings





The
      Company is a plaintiff in a lawsuit captioned Bel Fuse Inc., a New Jersey
      corporation, and Bel Power, Inc., a Massachusetts corporation, v. Andrew
      Ferencz, Gregory Zovonar, Bernhard Schroter, EE2GO, Inc., a Massachusetts
      corporation, Howard E. Kaepplein and William Ng, Defendants brought in the
      Supreme Court of the Commonwealth of Massachusetts. The Company was granted
      injunctive relief and is seeking damages against the former stockholders of
      Galaxy Power, Inc, the Company’s recent acquisition, and key employees of Galaxy
      and a corporation formed by some or all of the individual defendants. The
      Company has alleged that the defendants violated their written non-competition,
      non-disclosure and non-solicitation agreements, diverted business and usurped
      substantial business opportunities with key customers, misappropriated
      confidential information and trade secrets, and harmed the Company’s business.





The
      Company is a defendant in a lawsuit captioned Murata Manufacturing Company,
      Ltd.
      v. Bel Fuse Inc et al and brought in Illinois Federal District Court. Plaintiff
      claims that its patent covers all of the Company's modular jack products. That
      party had previously advised the Company that it was willing to grant a
      non-exclusive license to the Company under the patent for a 3% royalty on all
      future gross sales of ICM products; payment of a lump sum of 3% of past sales
      including sales of applicable Insilco products; an annual minimum royalty of
      $500,000; payment of all attorney fees; and marking of all licensed ICM's with
      the third party's patent number. The Company is also a defendant in a lawsuit,
      captioned Regal Electronics, Inc. v. Bel Fuse Inc. and brought in California
      Federal District Court. Plaintiff claims that its patent covers certain of
      the
      Company's modular jack products. That party had previously advised the Company
      that it was willing to grant a non transferable license to the Company for
      an up
      front fee of $500,000 plus a 6% royalty on future sales. The District Court
      has
      granted summary judgment in the Company's favor dismissing Regal Electronics'
      infringement claims, while at the same time the Court dismissed the Company's
      invalidity counterclaim against Regal Electronics. As of the date hereof, the
      Company has not been advised as to whether Regal will appeal the Court's
      rejection of its infringement claims. The Company believes that none of its
      products are covered by these patents and intends to vigorously defend its
      position and no accrual has been provided in the accompanying consolidated
      financial statements.




F-38
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            Statements**





The
      Company cannot predict the outcome of these matters; 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.





The
      Company is not a party to any other legal proceeding, the adverse outcome of
      which is expected to have a material adverse effect on the Company's
      consolidated financial condition or results of operations.





During
      the year ended December 31, 2004, the Company settled an arbitration proceeding
      related to a 1998 acquisition. The Company received $2,935,000 (net of $65,000
      of related legal expenses incurred during the period) pursuant to that
      settlement.





16.
            SUBSEQUENT
                EVENT





On
      February 17, 2006, a fire resulted in the temporary closure of the Company’s
      leased manufacturing facility in San Cristobal, Dominican Republic. Management
      is implementing a recovery plan that may include temporarily shifting some
      production to other Company facilities. The Company maintains insurance for
      damage to this facility and some of its contents, as well as for business
      interruption. The Company does not believe it has adequate insurance to cover
      its entire loss. The Company estimates that the Dominican Republic facility
      was
      responsible for approximately 4% of the Company’s worldwide revenues in 2005.
      The facility contained property, equipment and inventory with a net book value
      of approximately $2.3 million at the time of the fire. After insurance proceeds,
      the Company estimates an out of pocket charge of approximately
      $1,000,000.




F-39
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            Statements**




**CONDENSED
                SELECTED QUARTERLY FINANCIAL
                DATA****(Unaudited)**Total
                YearQuarter
                Ended
            
            EndedMarch
                31,
            
            June
                30,
            
            September
                30,
            
            December
                31,
            
            December
                31,2005
            
            2005
            
            2005
            
            2005
            
            2005Net
                sales
            
            $
            45,438,285
            
            $
            57,545,421
            
            $
            56,247,745
            
            $
            56,684,305
            
            $
            215,915,756Gross
                profit
            
            
            12,749,474
            
            
            16,853,324
            
            
            15,827,945
            
            
            14,338,289
            
            
            59,769,032Net
                earnings
            
            
            4,313,365
            
            
            6,668,675
            
            
            5,986,397
            
            
            3,264,840
            
            
            20,233,277Earningsper
                share-
                basic (1)
            
            $
            0.38
            
            $
            0.58
            
            $
            0.52
            
            $
            0.28
            
            $
            1.76Earningsper
                share -diluted
                (1)
            
            $
            0.38
            
            $
            0.58
            
            $
            0.52
            
            $
            0.28
            
            $
            1.75




Total
                YearQuarter
                Ended
            
            EndedMarch
                31,
            
            June
                30,
            
            September
                30,
            
            December
                31,
            
            December
                31,2004
            
            2004
            
            2004
            
            2004
            
            2004Net
                sales
            
            $
            42,357,023
            
            $
            48,390,242
            
            $
            49,985,626
            
            $
            49,289,062
            
            $
            190,021,953Gross
                profit
            
            
            12,566,009
            
            
            15,194,241
            
            
            14,977,954
            
            
            14,507,445
            
            
            57,245,649Net
                earnings
            
            
            4,654,731
            
            
            7,145,253
            
            
            6,894,347
            
            
            6,027,258
            
            
            24,721,589Earningsper
                share-
                basic (1)
            
            $
            0.42
            
            $
            0.64
            
            $
            0.61
            
            $
            0.52
            
            $
            2.19Earningsper
                share -diluted
                (1)
            
            $
            0.41
            
            $
            0.63
            
            $
            0.60
            
            $
            0.51
            
            $
            2.15





(1)
            Quarterly
                amounts of earnings per share may not agree to the total for the
                year due
                to rounding.






F-40
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            Statements**




BEL
                FUSE INC. AND SUBSIDIARIESSCHEDULE
                II - VALUATION AND QUALIFYING
                ACCOUNTS




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
            
            
            
            (describe)(a)
            
            of
                periodYear
                ended December 31, 2005Allowance
                for doubtfulaccounts
            
            $
            1,610,000
            
            $
            275,000
            
            $
            25,000
            
            
            (a
            )
            $
            803,000
            
            $
            1,107,000Allowance
                for excess andobsolete
                inventory
            
            $
            5,471,000
            
            $
            867,000
            
            $
            475,000
            
            
            (c
            )
            $
            1,796,000
            
            $
            5,017,000Year
                ended December 31, 2004Allowance
                for doubtfulaccounts
            
            $
            1,976,000
            
            $
            233,000
            
            $
            65,000
            
            
            (a
            )
            $
            664,000
            
            $
            1,610,000Allowance
                for excess andobsolete
                inventory
            
            $
            5,679,000
            
            $
            1,250,000
            
            $
            43,000
            
            
            (c
            )
            $
            1,501,000
            
            $
            5,471,000Year
                ended December 31, 2003Allowance
                for doubtfulaccounts
            
            $
            945,000
            
            $
            (77,000
            )
            $
            2,308,000
            
            
            (b
            )
            $
            1,200,000
            
            $
            1,976,000Allowance
                for excess andobsolete
                inventory
            
            $
            3,136,000
            
            $
            863,000
            
            $
            3,320,000
            
            
            (b
            )
            $
            1,640,000
            
            $
            5,679,000


(a)
              Write
                  offs.


(b)
                For
                    the year ended 2003, these amounts represent the reserves established
                    at
                    date of acquisition of the PassiveComponents
                    Group of Insilco Technologies,
                    Inc.
 (c)
              For
                  the year ended 2004 these amounts represent foreign exchange rate
                  changes.





S-1


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        Statements**


Item
              9.
            Changes
                in and Disagreements with Accountants on Accounting and
                Financial Disclosures.





Not
      applicable





Item
              9A.
            Controls
                and
                Procedures





Evaluation
      of Disclosure Controls and Procedures





During
      the fourth quarter of 2005, the Company’s management, including the principal
      executive officer and principal financial officer, evaluated the Company’s
      disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934) related to the recording,
      processing, summarization, and reporting of information in the Company’s
      periodic reports that the Company files with the SEC. These disclosure controls
      and procedures have been designed to ensure that material information relating
      to the Company, including its subsidiaries, is made known to the Company’s
      management, including these officers, by other of the Company’s employees, and
      that this information is recorded, processed, summarized, evaluated, and
      reported, as applicable, within the time periods specified in the SEC’s rules
      and forms. Due to the inherent limitations of control systems, not all
      misstatements may be detected. These inherent limitations include the realities
      that judgments in decision-making can be faulty and that breakdowns can occur
      because of simple error or mistake. Additionally, controls can be circumvented
      by the individual acts of some persons, by collusion of two or more people,
      or
      by management override of the control. The Company’s controls and procedures can
      only provide reasonable, not absolute, assurance that the above objectives
      have
      been met.




Based
      on
      their evaluation as of December 31, 2005, the Company’s principal executive
      officer and principal financial officer have concluded that the Company’s
      disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure
      that the information required to be disclosed by the Company in the reports
      that
      the Company files or submits under the Securities Exchange Act of 1934 is
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and forms.




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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, 2005.




Our
      management’s assessment of the effectiveness of our internal control over
      financial reporting as of December 31, 2005 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in
      their
      report which is included herein.




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Changes
      in Internal Controls Over Financial Reporting




There
      have been no changes in the Company’s internal control over financial reporting
      that occurred during the last fiscal quarter to which this Annual Report on
      Form
      10-K relates that have materially affected, or are reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.





Item
              9b.
            Other
                Information





Not
      applicable.




Item
              10.
            Directors
                and Executive Officers of the
                Registrant





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2006 annual meeting of shareholders that
      is
      responsive to the information required with respect to this item.





The
      registrant has adopted a code of ethics for its directors, executive officers
      and all other senior financial personnel. The Registrant will make copies of
      its
      code of ethics available to investors upon request. Any such request should
      be
      sent by mail to Bel Fuse Inc., 206 Van Vorst Street, Jersey City, NJ 07302
      Attn:
      Colin Dunn or should be made by telephone by calling Colin Dunn at 201-432-0463.





Item
              11.
            Executive
                Compensation





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2006 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 Related Shareholder
                Matters





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2006 annual meeting of shareholders that
      is
      responsive to the information required with respect to this Item.





Item
              13.
            Certain
                Relationships and Related
                Transactions





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2006 annual meeting of shareholders that
      is
      responsive to the information required with respect to this Item.





Item
              14.
            Principal
                Accountant Fees and
                Services





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2006 annual meeting of shareholders that
      is
      responsive to the information required with respect to this Item.





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            Statements**




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-1Consolidated
                  Balance Sheets as of December 31, 2005 and 2004
              F-2
                  - F-3Consolidated
                  Statements of Operations for Each of the Three Years in the Period
                  Ended
                  December 31, 2005
              F-4Consolidated
                  Statements of Stockholders' Equity for Each of the Three Years
                  in the
                  Period Ended December 31, 2005
              F-5
                  - F-6Consolidated
                  Statements of Cash Flows for Each of the Three Years in the Period
                  Ended
                  December 31, 2005
              F-7
                  - F-9Notes
                  to Consolidated Financial Statements
              F-
                  10 - F-39Selected
                  Quarterly Financial Data - Years Ended December 31, 2005 and 2004
                  (Unaudited)
              F-402.
              Financial
                  statement schedules filed as part of this report:Schedule
                  II: Valuation and Qualifying Accounts
              S-1All
                  other schedules are omitted because they are inapplicable, not
                  required or
                  the information is included in the consolidated financial statements
                  or
                  notes thereto.






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(c)
            Exhibits





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
            Contract
                dated March 16, 1990 between Accessorios Electronicos (Bel Fuse Macau
                Ltd.) and the Government of Macao. Incorporated by reference to Exhibit
                10.2 of the Company's annual report on Form 10-K for the year ended
                December 31, 1994.





10.3
            Loan
                agreement dated February 14, 1990 between Bel Fuse, Ltd. (as lender)
                and
                Luen Fat Lee Electronic Factory (as borrower). Incorporated by reference
                to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the
                year
                ended December 31, 1995.





10.4
            Stock
                Option Plan. Incorporated by reference to Exhibit 28.1 of the Company's
                Registration Statement on Form S-8 (Registration No.333-89376) filed
                with
                the Securities and Exchange Commission on May 29,
                2002.




10.5
            Amended
                and Restated Credit and Guarantee Agreement, dated as of March 21,
                2003,
                by and among Bel Fuse Inc., as Borrower, the Subsidiary Guarantors
                party
                thereto and The Bank of New York, as Lender. Incorporated by reference
                to
                Exhibit 10.7 of the Company’s Form 10-K for the year ended December 31,
                2002.




10.6
            Amendment
                No. 1 dated as of July 26, 2005, to the Registrant's Amended and
                Restated
                Credit and Guarantee Agreement dated as of March 21, 2003. Incorporated
                by
                Reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
                dated August 1, 2005.






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            Statements**




Item
                15.
              Exhibits,
                  Financial Statement Schedules and Reports onForm
                  8-K(continued)





Exhibit
      No.:





10.7
            Agreement
                and Plan of Merger dated as of March 4, 2005 by and among Bel Fuse,
                Inc.,
                Bel Westboro, Inc. and Galaxy Power, Inc. Incorporated by reference
                to
                exhibit 2.1 of the Company's Form 8-K dated March 7,
                2005.





10.8
            Contract
                for Purchase and Sale of Real Estate dated July 15, 2004 between
                Bel Fuse
                Inc. and Fields Development Group Co .Incorporated by reference to
                Exhibit
                10.9 of the Company’s Form 10-K for the year ended December 31,
                2004.





11.1
            A
                statement regarding the computation of earnings per share is omitted
                because such computation can be clearly determined from the material
                contained in this Annual Report on Form
                10-K.





22.1
            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.







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            Statements**





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.**Dated: March
                15, 2006
              By:
              /s/ DANIEL
                BERNSTEINName:  
                  Daniel Bernstein
                Title:    
                  President, Chief Executive Officer and
                  Director


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 Executive Officer and Director
            
            March
                15, 2006Daniel
                Bernstein/s/
                Howard Bernstein
            
            Director
            
            March
                15, 2006Howard
                B. Bernstein/s/
                Robert H. Simandl
            
            Director
            
            March
                15, 2006Robert
                H. Simandl/s/
                Peter Gilbert
            
            Director
            
            March
                15, 2006Peter
                Gilbert/s/
                John Tweedy
            
            Director
            
            March
                15, 2006John
                Tweedy/s/
                John Johnson
            
            Director
            
            March
                15, 2006John
                Johnson


/s/
                Avi Eden
            
            Director
            
            March
                15, 2006Avi
                Eden/s/
                Colin Dunn
            
            Vice-President
                - Finance and SecretaryColin
                Dunn
            
            
            
            March
                15, 2006




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