UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-K
  (Mark
        One)
 
 x
              **ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
 
 For
        the
        fiscal year ended  December
        31, 2007
  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 StreetJersey 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.
 oYesxNo
 
 Indicate
        by checkmark if the registrant is not required to file reports to Section
        13 or
        15(d) f the Act.
oYesxNo
 
 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.  xYeso No
  Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
        be contained, to the best of registrant's knowledge, in definitive proxy
        or
        information statements incorporated by reference in Part III of this Form
        10-K
        or any amendment to this Form 10-K. o
  Indicate
        by checkmark whether the registrant is a large accelerated filer, an accelerated
        filer, a non-accelerated filer or a small reporting company. See definition
        of
“large accelerated filer”, “accelerated filer” and “small reporting company” in
        Rule 12b-2 of the Securities Exchange Act of 1934.
 
 Large
                  accelerated filer o
              Accelerated
                  filer x
              Non-accelerated
                  filer o
              Small reporting company o(Do
                  not check if a small
                reporting
                  company)
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 oYesx No
 
 The
        aggregate market value of the voting and non-voting common equity of the
        registrant held by non-affiliates (for this purpose, persons and entities
        other
        than executive officers and directors) of the registrant, as of the last
        business day of the registrant's most recently completed second fiscal quarter
        (June 30, 2007), was $377.9 million.
 
 Number
        of
        shares of Common Stock outstanding as of March 10, 2008: 2,533,437 Class
        A
        Common Stock; 9,284,127 Class B Common Stock
 
 Documents
        incorporated by reference:
 
 Bel
        Fuse
        Inc.'s Definitive Proxy Statement for the 2008 Annual Meeting of Stockholders
        is
        incorporated by reference into Part III.
  
 BEL
                    FUSE INC.INDEX
  Forward
                  Looking Information
                PagePart
                    IItem
                    1.
                Business
                1Item
                    1A.
                Risk
                    Factors
                9Item
                    1B.
                Unresolved
                    Staff Comments
                14Item
                    2.
                Properties
                14Item
                    3.
                Legal
                    Proceedings
                16Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                18Part
                    IIItem
                    5.
                Market
                    for Registrant's Common Equity,Related
                    Stockholder Matters and Issuer Purchases of Equity
                    Securities
                19Item
                    6.
                Selected
                    Financial Data
                22Item
                    7.
                Management's
                    Discussion and Analysis of FinancialCondition
                    and Results of Operations
                24Item
                    7A.
                Quantitative
                    and Qualitative Disclosures About Market Risk
                45Item
                    8.
                Financial
                    Statements and Supplementary Data
                45Item
                    9.
                Changes
                    in and Disagreements With Accountantson
                    Accounting and Financial Disclosure
                46Item
                    9A.
                Controls
                    and Procedures
                46Item
                    9B.
                Other
                    Information
                48Part
                    IIIItem
                    10.
                Directors,
                    Executive Officers and Corporate Governance
                48Item
                    11.
                Executive
                    Compensation
                48Item
                    12.
                Security
                    Ownership of Certain Beneficial Ownersand
                    Management and Related Stockholder Matters
                48
  
  BEL
                    FUSE INC.INDEX
                    (Con't)PagePart
                    III (Con't)Item
                    13.
                Certain
                    Relationships and Related Transactions,and
                    Director Independence
                48Item
                    14.
                Principal
                    Accounting Fees and Services
                48Part
                    IVItem
                    15.
                Exhibits,
                    Financial Statement Schedules
                49Signatures
                52
  *
          Page
          F-1 follows page 45
  FORWARD
        LOOKING INFORMATION
 
 The
        Company’s quarterly and annual operating results are affected by a wide variety
        of factors that could materially and adversely affect revenues and
        profitability, including the risk factors described in Item 1A of the Company's
        Annual Report on Form 10-K. As a result of these and other factors, the Company
        may experience material fluctuations in future operating results on a quarterly
        or annual basis, which could materially and adversely affect its business,
        financial condition, operating results, and stock prices. Furthermore, this
        document and other documents filed by the Company with the Securities and
        Exchange Commission (the “SEC”) contain certain forward-looking statements under
        the Private Securities Litigation Reform Act of 1995 (“Forward-Looking
        Statements”) with respect to the business of the Company. These Forward-Looking
        Statements are subject to certain risks and uncertainties, including those
        mentioned above, and those detailed in Item 1A of this Annual Report on Form
        10-K, which could cause actual results to differ materially from these
        Forward-Looking Statements. The Company undertakes no obligation to publicly
        release the results of any revisions to these Forward-Looking Statements
        which
        may be necessary to reflect events or circumstances after the date hereof
        or to
        reflect the occurrence of unanticipated events. An investment in the Company
        involves various risks, including those mentioned above and those which are
        detailed from time to time in the Company’s SEC filings.
 
 PART
        I
 
 Item
        1. Business
 
 General
 
 Bel
        Fuse
        Inc. ("Bel" or the "Company") is a leading producer of electronic products
        that
        help make global connectivity a reality. The Company is primarily engaged
        in the
        design, manufacture and sale of products used in networking, telecommunications,
        high speed data transmission and consumer electronics. Products include
        magnetics (discrete components, power transformers and MagJack ® s),
        modules (DC-DC converters, integrated analog front-end modules and custom
        designs, circuit protection (miniature, micro and surface mount fuses) and
        interconnect devices (passive jacks, plugs and cable assemblies). While
        these products are deployed primarily in the computer, networking and
        telecommunication industries, Bel’s portfolio of products also finds application
        in the automotive, medical and consumer electronics markets. These products
        are
        designed to protect, regulate, connect, isolate or manage a variety of
        electronic circuits.
 
 With
        over
        58 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-
  The
        Company, which is organized under New Jersey law, operates in one industry
        with
        three geographic reporting segments as defined in Statement of Financial
        Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
        and
        Related Information". Bel’s principal executive offices are located at 206 Van
        Vorst Street, Jersey City, New Jersey 07302; (201) 432-0463. The Company
        operates other facilities in North America, Europe and Asia and trades on
        the
        NASDAQ Global Select Market (BELFA and BELFB). For information regarding
        Bel's
        three geographic reporting units, see Note
        11 of the
        Notes to Consolidated Financial Statements.
 
 The
        terms
“Company” and “Bel” as used in this Annual Report on Form 10-K 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 and common mode chokes) used in
        networking, telecommunications and broadband applications. These magnetic
        devices condition, filter and isolate the signal as it travels through network
        equipment helping to ensure accurate data/voice/video transmission. Bel’s
        magnetic components are also used in the consumer electronics
        marketplace.
 
 Power
        transformer products include standard and custom designs produced by the
        Company’s Signal Transformer division. Manufactured for use in alarm, security
        and medical products, these devices are designed to comply with the
        international safety standards governing transformers including UL, CSA,
        IEC,
        TUV and VDE.
 
 Marketed
        under the MagJack ® brand,
        Bel’s connectors with integrated magnetics provide the signal conditioning,
        electromagnetic interference suppression and signal isolation previously
        performed by multiple discrete magnetics.
 
 Modules
  ·
              Power
                  conversion modules
 ·
              Integrated
                  modules
 
 Bel’s
        Power conversion products include standard and custom isolated and non-isolated
        DC-DC converters designed specifically to power low voltage silicon devices.
        The
        need for converting one DC voltage to another is growing rapidly as developers
        of integrated circuits commonly adjust the supply voltage as a means of
        optimizing device performance. The DC-DC converters are used in data networking
        equipment, distributed power architecture and telecommunication devices,
        as well
        as computers and peripherals.
  -2-
 
 The
        Company develops highly integrated, IC-compatible modules for broadband,
        home
        networking and telecommunication applications. These modules eliminate the
        need
        for several discrete components by providing enhanced functionality in a
        single,
        compact device.
 
 The
        Company continues to pursue market opportunities where it can supply customized,
        value-added modules that capitalize on the Company’s manufacturing capabilities
        in surface mount assembly, automatic winding, hybrid fabrication and component
        encapsulation.
 
 Circuit
        Protection
  ·
              Miniature
                  fuses
 ·
              Surface
                  mount PTC devices and fuses
 ·
              Radial
                  PTC devices and micro fuses
 
 The
        Company's circuit protection products include board level fuses (miniature,
        micro and surface mount) and Polymeric PTC (Positive Temperature Coefficient)
        devices, designed for the global electronic and telecommunication markets.
        Fuses
        and PTC devices prevent currents in an electrical circuit from exceeding
        certain
        predetermined levels, acting as a safety valve to protect expensive components
        from damage by cutting off high currents before they can generate enough
        heat to
        cause smoke or fire. Additionally, PTC devices are resettable and do not
        have to
        be replaced before normal operation of the end product can resume.
 
 While
        the
        Company continues to manufacture traditional fuse types, its surface mount
        chip
        fuses are used in space-critical applications such as mobile phones and
        computers. Like all of Bel's fuse products, the chip fuses comply with RoHS6
        standards for the elimination of lead and other hazardous materials.
 
 The
        Company's circuit protection devices are used extensively in products such
        as
        televisions, consumer electronics, power supplies, computers, telephones
        and
        networking equipment.
 
 Interconnect
  ·
              Passive
                  jacks
 ·
              Plugs
 ·
              Cable
                  assemblies
 
 The
        Company has a comprehensive line of modular connectors including RJ45 and
        RJ11
        passive jacks, plugs and cable assemblies. Passive jacks serve primarily
        as the
        connectivity device in networking equipment such as routers, hubs, switches
        and
        patch panels. Modular plugs and cable assemblies are utilized within the
        structured cabling system, often referred to as premise wiring. The Company’s
        connector products are designed to meet all major performance standards for
        Category 5e, 6, 6a and Category 7a compliant devices used within Gigabit
        Ethernet and 10Gigabit Ethernet networks.
  -3-
  The
        following table describes, for each of Bel's product groups, the principal
        functions and applications associated with such product groups.
 **Product
                    Group**
                
                **Function**
                
                **Applications****Magnetics**Discrete
                    Components
                
                Condition,
                    filter and isolate the electronic signal to ensure accurate
                    data/voice/video transmission.
                
                Network
                    switches, routers, hubs and PCs used in 10/100/1000 Gigabit Ethernet,
                    Power over Ethernet (PoE), 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 Connectors
                
                Condition,
                    filter and isolate the electronic signal to ensure accurate
                    data/voice/video transmission and provide RJ45 and USB
                    connectivity.
                
                Network
                    switches, routers, hubs and PCs used in 10/100/1000 Gigabit Ethernet,
                    Power over Ethernet (PoE), home networking and cable modem
                    applications.**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
                    Modules
                
                Condition,
                    filter and isolate the electronic signal to ensure accurate
                    data/voice/video transmission.
                
                Broadband,
                    home networking and telecom equipment supporting ISDN, T1E1 and
                    DSL
                    technologies.**Circuit
                    Protection**Miniature
                    Fuses
                
                Protects
                    devices by preventing current in an electrical circuit from exceeding
                    acceptable levels.
                
                Power
                    supplies, electronic ballasts and consumer electronics.Surface
                    mount PTC devices and fuses
                
                Protects
                    devices by preventing current in an electrical circuit from exceeding
                    acceptable levels. PTC devices can be reset to resume
                    functionality.
                
                Cell
                    phone chargers, consumer electronics, power supplies and set
                    top
                    boxes.Radial
                    PTC devices and micro fuses
                
                Protects
                    devices by preventing current in an electrical circuit from exceeding
                    acceptable levels. PTC devices can be reset to resume
                    functionality.
                
                Cell
                    phones, mobile computers, IC and battery protection, power supplies
                    and
                    telecom line cards.**Interconnect**Passive
                    Jacks
                
                RJ45
                    and RJ11 connectivity for data/voice/video transmission.
                
                Network
                    routers, hubs, switches and patch panels deployed in Category
                    5e, 6, 6a
                    and 7a cable systems.Plugs
                
                RJ45
                    and RJ11 connectivity for data/voice/video transmission.
                
                Network
                    routers, hubs, switches and patch panels deployed in Category
                    5e, 6, 6a
                    and 7a cable systems.Cable
                    Assemblies
                
                RJ45
                    and RJ11 connectivity for data/voice/video transmission.
                
                Structured
                    Category 5e, 6, 6a and 7a cable systems (premise
                    wiring).
  -4-
  Acquisitions
 
 Acquisitions
        have played a critical role in the growth of Bel and the expansion of both
        its
        product portfolio and its customer base. Furthermore, acquisitions continue
        to
        be a key element in the Company’s growth strategy. As part of the Company’s
        acquisition strategy, it may ,
        from
        time to time, purchase equity positions in companies that are potential merger
        candidates. The Company frequently evaluates possible merger candidates that
        would provide an expanded product and technology base that will allow the
        Company to further penetrate its strategic customers and/or an opportunity
        to
        reduce overall operating expense as a percentage of revenue. Bel also looks
        at
        whether the merger candidates are positioned to take advantage of the Company's
        low cost manufacturing facilities; and whether a cultural fit will allow
        the
        acquired company to be integrated smoothly and efficiently.
 
 For
        information regarding the Company’s acquisitions of Netwatch s.r.o. and Galaxy
        Power Inc. (“Galaxy”) in 2005, see the Liquidity and Capital Resources section
        in Item 7 of this Annual Report on Form 10-K.
  As
        of
        December 31, 2007, the Company owned a total of 1,840,919 shares, or
        approximately 1.9% of the
        outstanding shares ,
        of the
        common stock of Toko, Inc. (“Toko”) at a total cost of $5.6 million. Toko had a
        market capitalization of approximately $172.9 million as of December 31,
        2007.
        These shares are reflected on the Company’s consolidated balance sheets as
        marketable securities. These marketable securities are considered to be
        available for sale under Statement of Financial Accounting Standards (“SFAS”)
        No. 115, “Accounting for Certain Investments in Debt and Equity Securities”.
        Thus, as of December 31, 2007, the Company has recorded an unrealized loss,
        net
        of income tax benefit, of approximately $1.5 million which is included in
        accumulated other comprehensive loss in stockholders’ equity. The Company’s
        investment in Toko has been in an unrealized loss position for less than
        twelve
        months. In accordance with Financial Accounting Standards Board (“FASB”) Staff
        Position Nos. FAS 115-1 and FAS 124-1 “The Meaning of Other-Than-Temporary
        Impairment and Its Application to Certain Investments”, the Company periodically
        reviews its marketable securities and determines whether the investments
        are
        other-than-temporarily impaired. The Company reviewed various factors in
        making
        its determination, including volatility of the Toko share price over the
        last
        year, Toko’s recent financial results and the Company’s intention and ability to
        hold the investment. The Toko share price has been extremely volatile over
        the
        last year, ranging from $1.22 - $4.20 (the Company’s cost basis in its remaining
        shares of Toko stock is $3.07 per share). As discussed below, in the second
        quarter of 2007, a gain was recognized on the disposition of the majority
        of the
        Company’s holdings of Toko stock. Toko recently issued its financial results for
        the quarter ended December 31, 2007 and it showed a quarter over quarter
        increase in sales of 5.6% as compared to the fourth quarter of 2006 and
        increased profitability. The Company has the intention and the ability to
        hold
        the investment until it is in a gain position. As a result of these factors,
        management believes that the investment in Toko is not other-than-temporarily
        impaired.
  -5-
 
 During
        April 2007, the Company sold 4,034,000 shares of common stock of Toko on
        the
        open market which resulted in a gain of approximately $2.5 million, net of
        investment banker fees and other expenses in the amount of $0.8 million.
        The
        Company accrued bonuses of $0.5 million in connection with this gain which
        were
        paid in January 2008. For financial statement purposes approximately $0.4
        million and $0.1 million has been classified within cost of sales and selling,
        general and administrative expenses, respectively.
 
 During
        2004, the Company acquired a total of 2,037,500 shares of the common stock
        of
        Artesyn Technologies, Inc. (“Artesyn”) at a total purchase price of $16.3
        million. On April 28, 2006, Artesyn was acquired by Emerson Network Power
        for
        $11.00 per share in cash. During the second quarter of 2006, in connection
        with
        the Company's sale of its Artesyn common stock, the Company recognized a
        gain of
        approximately $5.2 million, net of investment banker advisory fees of $0.9
        million. The Company accrued bonuses of $1.0 million in connection with the
        gain. For financial statement purposes approximately $0.3 million and $0.7
        million was classified within cost of sales and selling, general and
        administrative expenses, respectively, and was paid to key employees in January
        2007.
  On
        February 25, 2008, the Company announced that it had acquired 4,370,052 shares
        of Power-One, Inc. (“Power-One”) common stock representing, to the Company’s
        knowledge, 5% of Power-One’s outstanding common stock, at a total purchase price
        of $10.1 million. Power-One’s common stock is quoted on the NASDAQ Global
        Market. Power-One is a designer and manufacturer of power conversion and
        power
        management products.
 
 Sales
        and
        Marketing
 
 The
        Company sells its products to customers throughout North America, Western
        Europe
        and Asia. Sales are made through one of three channels: direct strategic
        account
        managers, regional sales managers working with independent sales representative
        organizations or authorized distributors. Bel's strategic account managers
        are
        assigned to handle major accounts requiring global coordination.
 
 Independent
        sales representatives and authorized distributors are overseen by the Company's
        sales management personnel located throughout the world. As of December 31,
        2007, the Company had a sales and support staff of 50 persons that supported
        a
        network of 82 sales representative organizations and non-exclusive distributors.
        The Company has written agreements with all of its sales representative organizations and
        major distributors. These written agreements, terminable on short notice
        by
        either party, are standard in the industry.
 
 Sales
        support functions have also been established and located in Bel international
        facilities to provide timely, efficient support for customers. This supplemental
        level of service, in addition to first-line sales support, enables the Company
        to be more responsive to customers ’ needs on
        a global level. The Company’s marketing capabilities include product management
        which drives new product development, application engineering for technical
        support and marketing communications. Product marketing managers facilitate
        technical partnerships for engineering development of IC-compatible components
        and modules.
  -6-
 
 Research
        and Development
 
 The
        Company’s engineering groups are strategically located around the world to
        facilitate communication with and access to customers’ engineering personnel.
        This collaborative approach enables partnerships with customers for technical
        development efforts. On occasion, Bel executes non-disclosure agreements
        with
        customers to help develop proprietary, next generation products destined
        for
        rapid deployment.
 
 The
        Company also sponsors membership in technical organizations that allow Bel’s
        engineers to participate in developing standards for emerging technologies.
        It
        is management’s opinion that this participation is critical in establishing
        credibility and a reputable level of expertise in the marketplace, as well
        as
        positioning the Company as an industry leader in new product
        development.
 
 Research
        and development costs are expensed as incurred, and are included in cost
        of
        sales. Generally, research and development is performed internally for the
        benefit of the Company. Research and development costs include salaries,
        building maintenance and utilities, rents, materials, administration costs
        and
        miscellaneous other items. Research and development expenses for the years
        ended
        December 31, 2007, 2006 and 2005 amounted to $7.2 million, $6.6 million and
        $7.3
        million, respectively. The increase in 2007 compared to 2006 was attributable
        to
        various factors including an increase in headcount at the Hangzhou research
        and
        development facility related to the DC-DC power products, an unfavorable
        change
        in associated exchange rates for research and development expenses in the
        PRC
        and United Kingdom, and general wage increases at the various research and
        development facilities. The decrease from 2005 to 2006 is principally attributed
        to less research and development costs in the United States due to the
        consolidation of the Bel Power and Galaxy facilities in Massachusetts. This
        was
        offset in part by increased expenses at the Company’s PRC research and
        development facility which has a lower cost structure.
 
 Competition
 
 The
        Company operates in a variety of markets all of which are highly competitive.
        There are numerous independent companies and divisions of major companies
        that
        manufacture products that are competitive with one or more of Bel’s products.
 
 The
        Company's ability to compete is dependent upon several factors including
        product
        performance, quality, reliability, depth of product line, customer service,
        technological innovation, design, delivery time and price. Overall financial
        stability and global presence also play a role and give Bel a favorable position
        in relation to many of its competitors. Management intends to maintain a
        strong
        competitive posture in the Company's markets by continued expansion of the
        Company’s product lines and ongoing investment in research, development and
        manufacturing resources.
  -7-
 
 Associates
 
 As
        of
        December 31, 2007, the Company had 1,948 full-time associates. The Company
        employed 697 people at its North American facilities, 1,175 people at its
        Asian
        facilities and 76 people at its European facilities, excluding workers supplied
        by independent contractors. The Company's manufacturing facility in New York
        is
        represented by a labor union and all factory workers in the PRC are represented
        by unions. At December 31, 2007, 36 of our workers in the New York facility
        were
        covered by a collective bargaining agreement, which expires on March 31,
        2009.
        The Company believes that its relations with its associates are
        satisfactory.
 
 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 typically manufactures products against firm orders and projected
        usage
        by customers. Cancellation and return arrangements are either negotiated
        by the
        Company on a transactional basis or contractually determined. The Company's
        backlog of orders as of February 29, 2008 was approximately $73.7 million,
        as
        compared with a backlog of $47.1 million as of February 28, 2007. Management
        expects that all of the Company's backlog as of February 29, 2008 will be
        shipped by December 31, 2008. Such expectation constitutes a Forward-Looking
        Statement. Factors that could cause the Company to fail to ship all such
        orders
        by year-end include unanticipated supply difficulties, changes in customer
        demand and new customer designs. The Company's major customers have negotiated
        reduced lead times on purchase orders with the goal of reducing their
        inventories. Accordingly, backlog may not be a
        reliable indicator of the timing of future sales. See Item 1A of this Annual
        Report- "Risk Factors - Our backlog figures may not be reliable indicators."
  -8-
 
 Intellectual
        Property
 
 The
        Company has been granted a number of patents in the U.S., Europe and Asia
        and
        has additional patent applications pending relating to its products. While
        the
        Company believes that the issued patents are defendable and that the pending
        patent applications relate to patentable inventions, there can be no assurance
        that a patent will be obtained from the applications or that its existing
        patents can be successfully defended. It is management's opinion that the
        successful continuation and operation of the Company's business does not
        depend
        upon the ownership of patents or the granting of pending patent applications,
        but upon the innovative skills, technical competence and marketing and
        managerial abilities of its personnel. The patents have a life of seventeen
        years from the date of issue or twenty years from filing of patent applications.
        The Company's existing patents expire on various dates from August 25, 2009
        to
        February 15, 2021.
 
 The
        Company utilizes registered trademarks in the U.S., Europe and Asia to identify
        various products that it manufactures. The trademarks survive as long as
        they
        are in use and the registrations of these trademarks are renewed.
 
 Available
        Information
 
 The
        Company maintains a website at www.belfuse.com where it
        makes available the proxy statements, press releases and reports on Form
        4, 8-K,
        10-K and 10-Q that it and its insiders file with the SEC. These forms are
        made
        available as soon as reasonably practicable after such material is
        electronically filed with or furnished to the SEC. Press releases are also
        issued via electronic transmission to provide access to the Company’s financial
        and product news. In addition, the Company provides notification of and access
        to voice and Internet broadcasts of its quarterly and annual results.
 
 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.
  -9-
 
 ***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 order from multiple sources to
        ensure
        timely delivery when backlog is particularly long. Customers often cancel
        orders
        when business is weak and inventories are excessive. Therefore, we cannot
        be
        certain that the amount of our backlog equals or exceeds the level of orders
        that will ultimately be delivered. Our results of operations could be adversely
        impacted if customers cancel a material portion of orders in our
        backlog.
 
 ***There
        are several factors which can cause us to lower our
        prices.***
 
 a) The
        average selling prices for our products tend to decrease rapidly over their
        life
        cycle, and customers are increasingly putting pressure on suppliers to lower
        prices. Our profits suffer if we are not able to reduce our costs of production
        or induce technological innovations as sales prices decline.
 
 b) Any
        drop
        in demand or increase in supply of our products due to the overcapacity of
        our
        competitors could cause a dramatic drop in our average sales prices causing
        a
        decrease in our gross margins.
 
 c) Increased competition from low cost suppliers around the world has put further pressures
        on pricing. We continually strive to lower our costs,
        negotiate better pricing for components and raw materials and improve our
        operating efficiencies. Profit margins will be materially and adversely impacted
        if we are not able to reduce our costs of production or introduce technological
        innovations as sales prices decline.
 
 ***We
        are dependent on our ability to develop new products.***
 
 Our
        future operating results are dependent, in part, on our ability to develop,
        produce and market new and more technologically advanced products. There
        are
        numerous risks inherent in this process, including the risks that we will
        be
        unable to anticipate the direction of technological change or that we will
        be
        unable to timely develop and bring to market new products and applications
        to
        meet customers’ changing needs.
 
 ***Our
        acquisitions may not produce the anticipated results.***
 
 A
        significant portion of our growth is from acquisitions. We cannot assure
        you
        that we will identify or successfully complete transactions with suitable
        acquisition candidates in the future. If an acquired business fails to operate
        as anticipated or cannot be successfully integrated with our other businesses,
        our results of operations, enterprise value, market value and prospects could
        all be materially and adversely affected.
 
 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.
  -10-
  Our
        strategy also focuses on the reduction of selling, general and administrative
        expenses through the integration or elimination of redundant sales facilities
        and administrative functions at acquired companies. Our inability to achieve
        these goals could have a material and adverse effect on our results of
        operations.
 
 If
        we
        were to undertake a substantial acquisition for cash, the acquisition would
        likely need to be financed in part through bank borrowings or the issuance
        of
        public or private debt or equity. If we borrow money to finance acquisitions,
        this would likely decrease our ratio of earnings to fixed charges and adversely
        affect other leverage criteria and could result in the imposition of material
        restrictive covenants. Under our existing credit facility, we are required
        to
        obtain our lenders’ consent for certain additional debt financing, 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 six countries around the world outside the United States, and
        approximately 70% of our revenues during 2007 were derived from sales to
        customers outside the United States. Some of the countries in which we operate
        have in the past experienced and may continue to experience political, economic,
        medical epidemic and military instability or unrest. These conditions could
        have
        a material and adverse impact on our ability to operate in these regions
        and,
        depending on the extent and severity of these conditions, could materially
        and
        adversely affect our overall financial condition and operating results.
 
 Although
        our operations have traditionally been largely transacted in U.S. dollars
        or
        U.S. dollar linked currencies, recent world financial instability may cause
        additional foreign currency risks in the countries we operate in. The decoupling
        of the Chinese Yuan from the U.S. dollar has and will continue to increase
        financial risk.
 
 Other
        risks inherent in doing trade internationally include: expropriation and
        nationalization, trade restrictions, transportation delays, and changes in
        United States laws that may inhibit or restrict our ability to manufacture
        in or
        sell to any particular country. For information regarding risks associated
        with
        our presence in Hong Kong 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.
  -11-
 
 ***We
        may experience labor unrest.***
 
 As
        we
        implement transfers of certain of our operations, we may experience strikes
        or
        other types of labor unrest as a result of lay-offs or termination of employees
        in higher labor cost countries .
        Our
        manufacturing facility in New York is represented by a labor union and all
        factory workers in the PRC are represented by unions.
 
 ***We
        may experience labor shortages.***
 
 Government
        economic, social and labor policies in the PRC may cause shortages of factory
        labor in areas where we have our products manufactured.
 
 ***Our
        results of operations may be materially and adversely impacted by environmental
        and other regulations.***
 
 Our
        manufacturing operations, products and/or product packaging are subject to
        environmental laws and regulations governing air emissions, wastewater
        discharges, the handling, disposal and remediation of hazardous substances,
        wastes and certain chemicals used or generated in our manufacturing processes,
        employee health and safety labeling or other notifications with respect to
        the
        content or other aspects of our processes, products or packaging, restrictions
        on the use of certain materials in or on design aspects of our products or
        product packaging and responsibility for disposal of products or product
        packaging. More stringent environmental regulations may be enacted in the
        future, and we cannot presently determine the modifications, if any, in our
        operations that any such future regulations might require, or the cost of
        compliance with these regulations.
 
 ***Our
        results may vary substantially from period to period.***
 
 Our
        revenues and expenses may vary significantly from one accounting period to
        another accounting period due to a variety of factors, including customers'
        buying decisions, our product mix and general market and economic conditions.
        Such variations could significantly impact our stock price.
 
 ***A
        shortage of availability or an increase in the cost of raw materials and
        components and our ability to procure high quality raw materials at cost
        effective prices may negatively impact profit
        margins.***
 
 Our
        results of operations may be adversely impacted by difficulties in obtaining
        raw
        materials, supplies, power, labor, natural resources and any other items
        needed
        for the production of our products, as well as by the effects of quality
        deviations in raw materials and the effects of significant fluctuations in the prices on existing
        inventories and purchase commitments for these materials. Many of these materials and components are produced by a limited
        number of suppliers and may be constrained by supplier capacity.
 
 As
        product life cycles shorten and during periods of market slowdowns, the risk
        of materials **** obsolescence
        increases and this may **** materially
        and adversely impact our financial results.
  -12-
 ***Rapid
        shifts in demand for various products may cause some of our inventory of
        raw
        materials, components or finished goods to become obsolete.***
 
 The
        life
        cycles and demand for our products are directly linked to the life cycles
        and
        demand for the end products into which they are designed. Rapid shifts in
        the
        life cycles or demand for these end products due to technological shifts,
        economic conditions or other market trends may result in material amounts
        of
        inventory of either raw materials or finished goods becoming obsolete. While
        the
        Company works diligently to manage inventory levels, rapid shifts in demand
        may
        result in obsolete or excess inventory and **** materially impact
        financial results.
 
 ***A
        loss of the services of the Company’s executive officers or other skilled
        associates could negatively impact our operations and
        results.***
 
 The
        success of the Company’s operations is largely dependent upon the performance of
        its executive officers, managers, engineers and sales people. Many of these
        individuals have a significant number of years of experience within the Company
        and/or the industry in which we compete and would be extremely difficult
        to
        replace. The loss of the services of any of these associates may materially
        and
        adversely impact our results of operations if we are unable to replace them
        in a
        timely manner.
 
 ***Our
        stock price, like that of many technology companies, has been and may continue
        to be volatile.***
 
 The
        market price of our common stock may fluctuate as a result of variations
        in our
        quarterly operating results and other factors beyond our control. These
        fluctuations may be exaggerated if the trading volume of our common stock
        is
        low. In addition, the market price of our common stock may rise and fall
        in
        response to a variety of factors, including:
 
 ·
              announcements
                  of technological or competitive
                  developments;
 ·
              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 **** and **** adversely
        affect our business.
  -13-
 
 We
        may be
        sued by third parties for alleged infringement of their proprietary rights
        and
        we may incur defense costs and possibly royalty obligations or lose the right
        to
        use technology important to our business.
 
 From
        time
        to time, we receive claims by third parties asserting that our products violate
        their intellectual property rights. Any intellectual property claims, with
        or
        without merit, could be time consuming and expensive to litigate or settle
        and
        could divert management attention from administering our business. A third
        party
        asserting infringement claims against us or our customers with respect to
        our
        current or future products may materially **** and adversely affect us by, for example, causing us to enter into costly royalty
        arrangements or forcing us to incur settlement or litigation costs.
 
 ***Our
        investments in marketable securities could have a negative impact on our
        profitability.***
 
 As
        part
        of our acquisition strategy, we have, from time to time, acquired equity
        positions in companies that could be attractive acquisition candidates or
        could
        otherwise be potential co-venturers in potential business transactions with
        us.
        As a result of market declines occurring subsequent to our investments, our
        profitability could suffer as a result of losses that we may be required
        to
        recognize. We currently are monitoring our investments in Toko and in the
        Columbia Strategic Cash Portfolio as a result of recent market declines.
        See
        Item 7A - “Quantitative and Qualitative Disclosures About Market
        Risk”.
 
 Item
        1B.
        Unresolved Staff Comments
 
 Not
        applicable.
 
 Item
        2.   Properties
 
 The
        Company is headquartered in Jersey City, New Jersey where it currently owns
        53,000 square
        feet of office and warehouse space. During
        May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
        for $6.0 million. The Company had previously estimated that approximately
        $0.8
        million of the proceeds would be payable to the State of New Jersey as a
        portion
        of the property is subject to tideland claims. In December 2007, the Tidelands
        Resource Council voted to approve the Bureau of Tideland’s Management’s
        recommendation for a Statement of No Interest. As final approval of the
        Statement of No Interest is still pending, the Company has continued to defer
        the estimated gain on sale of the land, in the amount of $4.6 million. The
        Company anticipates resolution of this sale, release of the escrow and
        corresponding guarantees and recognition of the gain during fiscal 2008.
        Of the
        $6.0 million sales price, the Company received cash of $1.5 million before
        closing costs, and $4.6 million (including interest) is being held in escrow
        pending final resolution of the State of New Jersey tideland claim and certain
        environmental costs the Company is liable for in the maximum amount of
        approximately $0.4 million. As the timing of the release of the escrow of
        $4.6 million
        is not under the Company’s control, it has been classified in non-current assets
        as restricted cash and the deferred gain of $4.6 million has been classified
        in
        deferred gain on the sale of property in the Consolidated Balance Sheet as
        of
        December 31, 2007. Additionally, the Company realized a $5.5 million pre-tax
        gain from the sale of property, plant and equipment in Hong Kong and Macao
        during the year ended December 31, 2007.
 -14-
 
 The
        Company operated 12 manufacturing facilities in 6 countries as of December
        31,
        2007. An additional 117,000 square foot manufacturing facility has been
        constructed in the PRC to meet customer demand. This manufacturing facility
        was
        completed during November 2006 and was operational by December 31, 2006.
 
 The
        following is a list of the locations of the Company's principal manufacturing
        facilities at December 31, 2007.
 Location
                
                Approximate
                  Square
                    Feet
                
                Owned/
                  Leased
                
                Percentage
                  Used
                    for
                  ManufacturingDongguan,
                    People'sRepublic
                    of China
                
                
                346,000
                
                
                Leased
                
                
                61
                %Zhongshan,
                    People'sRepublic
                    of China
                
                
                365,000
                
                
                Leased
                
                
                67
                %Zhongshan,
                    People'sRepublic
                    of China
                
                
                117,000
                
                
                Owned
                
                
                100
                %Zhongshan,
                    People'sRepublic
                    of China
                
                
                78,000
                
                
                Owned
                
                
                100
                %Hong
                    Kong
                
                
                43,000
                
                
                Owned
                
                
                7
                %Praha,
                    Czech Republic
                
                
                4,800
                
                
                Leased
                
                
                11
                %Louny,
                    Czech Republic
                
                
                11,000
                
                
                Owned
                
                
                75
                %Dominican
                    Republic
                
                
                41,000
                
                
                Leased
                
                
                85
                %Cananea,
                    Mexico
                
                
                28,000
                
                
                Leased
                
                
                65
                %Inwood,
                    New York
                
                
                39,000
                
                
                Owned
                
                
                40
                %Glen
                    Rock, Pennsylvania
                
                
                74,000
                
                
                Owned
                
                
                60
                %Westboro,
                    MA
                
                
                22,000
                
                
                Leased
                
                
                85
                %1,168,800
  Of
        the
        space described above, 125,000 square feet is used for engineering, warehousing,
        sales and administrative support functions at various locations and 250,000
        square feet is used for dormitories, canteen and other employee related
        facilities in the PRC.
  -15-
 
 The
        Territory of Hong Kong became a Special Administrative Region (“SAR”) of the PRC
        during 1997. The territory of Macao became a SAR of the PRC at the end of
        1999.
        Management cannot presently predict what future impact, if any, this will
        have
        on the Company or how the political climate in the PRC and the Dominican
        Republic will affect its contractual arrangements in the PRC or labor
        relationships in the Dominican Republic. A significant portion of the Company's
        manufacturing operations and approximately 42% of its identifiable assets
        are
        located in Asia. Accordingly, events resulting from any change in the "Most
        Favored Nation" status granted to the PRC by the U.S. could have a
        material and adverse
        effect on the Company.
 
 Approximately
        32% of the 1.3 million square feet the Company occupies is owned while the
        remainder is leased. See Note
        15 of the
        Notes to Consolidated Financial Statements for additional information pertaining
        to leases.
 
 Item
        3.  Legal
        Proceedings
 
 The
        Company is a defendant in a lawsuit captioned Synqor, Inc. v. Artesyn
        Technologies, Inc., Astec America, Inc., Emerson Network Power, Inc., Emerson
        Electric Co., Bel Fuse Inc., Cherokee International Corp., Delta Electronics,
        Inc., Delta Products Corp., Murata Electronics North America, Inc., Murata
        Manufacturing Co., Ltd., Power-One, Inc., Tyco Electronics Corp. and Tyco
        Electronics Ltd. brought in the United States District Court, Eastern District
        of Texas in November 2007. Plaintiff claims the Company infringed its patents
        covering certain power products. Synqor is seeking unspecified damages. The
        Company filed an Answer to Synqor’s complaint, denying the allegations of
        infringement and asserting invalidity of the patents.
 
 The
        Company is a defendant in a lawsuit captioned Halo Electronics, Inc. (“Halo”) v.
        Bel Fuse Inc., Pulse Engineering, Inc. and Technitrol, Inc. brought in Nevada
        Federal District Court. Plaintiff claims that the Company has infringed its
        patents covering certain surface mount discrete magnetic products made by
        the
        Company. Halo is seeking unspecified damages, which it claims should be trebled.
        In December 2007, this case was dismissed by the Nevada Federal District
        Court
        for lack of personal jurisdiction. Halo then re-filed this suit in the Northern
        California Federal District Court, captioned Halo Electronics, Inc. v. Bel
        Fuse
        Inc., Elec & Eltek (USA) Corporation, Wurth Electronics Midcom, Inc., and
        Xfmrs, Inc.
 
 The
        Company is a plaintiff in a lawsuit captioned Bel Fuse Inc. v. Halo Electronics,
        Inc. brought in the United States District Court of New Jersey during May
        2007.
        The Company claims that Halo has infringed a patent covering certain integrated
        connector modules made by Halo. The Company is seeking unspecified damages
        plus
        interest, costs and attorney fees.
 
 The
        Company and two of its officers were defendants in a wrongful termination
        lawsuit brought in the District Court of Frankfurt am Main, Germany by a
        former
        employee at a foreign subsidiary of the Company. During July 2007, this lawsuit
        was settled for approximately $0.5 million. The Company had provided for
        this
        liability in its financial statements prior to the settlement.
  -16-
 
 The
        Company is a plaintiff in a lawsuit captioned Bel Fuse Inc. and Bel Power,
        Inc.
        v. Andrew Ferencz, Gregory Zvonar, Bernhard Schroter, EE2GO, Inc., Howard
        E.
        Kaepplein and William Ng, brought in the Superior Court of the Commonwealth
        of
        Massachusetts. The Company was granted injunctive relief and is seeking damages
        against the former stockholders of Galaxy Power, Inc., key employees of Galaxy
        and a corporation formed by some or all of the individual defendants. The
        Company 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.
 
 In
        a
        related matter, the Company is a defendant in a lawsuit captioned Robert
        Chimielnski, P.C. on behalf of the stockholder representatives and the former
        stockholders of Galaxy Power, Inc. v. Bel Fuse Inc. et al. brought in the
        Superior Court of the Commonwealth of Massachusetts. This complaint for damages
        and injunctive relief is based on an alleged breach of contract and other
        allegedly illegal acts in a corporate context arising out of the Company’s
        objection to the release of nearly $2.0 million held in escrow under the
        terms
        of the stock purchase agreement between Galaxy and the Company.
 
 The
        Company is a defendant in a lawsuit captioned Murata Manufacturing Company,
        Ltd.
        v. Bel Fuse Inc. et al, brought in Illinois Federal District Court. Plaintiff
        claims that its patent covers all of the Company's modular jack products.
        That
        party had previously advised the Company that it was willing to grant a
        non-exclusive license to the Company under the patent for a 3% royalty on
        all
        future gross sales of ICM products; payment of a lump sum of 3% of past sales
        including sales of applicable Insilco products; an annual minimum royalty
        of
        $.05 million; payment of all attorney fees; and marking of all licensed ICM's
        with the third party's patent number. The Company is also a defendant in
        a
        lawsuit, captioned Regal Electronics, Inc. v. Bel Fuse Inc., 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 $0.5 million plus a 6% royalty on future
        sales. The District Court has granted summary judgment in the Company's favor
        dismissing Regal Electronics' infringement claims, while at the
        same
        time dismissing the Company's invalidity counterclaim against Regal Electronics.
        Regal has appealed the Court's rejection of its infringement claims to the
        U.S.
        Court of Appeals. The case was heard on February 6, 2007 and the U.S. Court
        of
        Appeals upheld the District Court’s ruling in favor of the Company.
 
 The
        Company cannot predict the outcome of the unresolved 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. As of December 31, 2007, no amounts have been accrued in
        connection with these lawsuits, as the amounts are not determinable.
 
 The
        Company is not a party to any other legal proceeding, the adverse outcome
        of
        which is likely to
        have a
        material adverse effect on the Company's consolidated financial condition
        or
        results of operations.
  -17-
  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 2007.
 -18-
  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 Global Select Market. The following
        table sets forth the high and low closing sales price range (as reported
        by The
        Nasdaq Stock Market Inc.) for the Common Stock on NASDAQ for each quarter
        during
        the past two years.
 
 Class
                  A
              
              Class
                  A
              
              Class
                  B
              
              Class
                  BHigh
              
              Low
              
              High
              
              LowYear
                  Ended December 31, 2006First
                  Quarter
              
              $
              34.50
              
              $
              24.59
              
              $
              40.16
              
              $
              31.83Second
                  Quarter
              
              
              29.00
              
              
              25.75
              
              
              34.85
              
              
              29.24Third
                  Quarter
              
              
              31.25
              
              
              24.95
              
              
              37.61
              
              
              29.49Fourth
                  Quarter
              
              
              32.95
              
              
              25.99
              
              
              37.92
              
              
              30.90Year
                  Ended December 31, 2007First
                  Quarter
              
              
              38.11
              
              
              27.36
              
              
              38.71
              
              
              31.22Second
                  Quarter
              
              
              39.47
              
              
              34.10
              
              
              39.88
              
              
              33.42Third
                  Quarter
              
              
              38.17
              
              
              32.60
              
              
              36.59
              
              
              29.55Fourth
                  Quarter
              
              
              38.08
              
              
              31.81
              
              
              36.19
              
              
              27.19
 
 The
        Common Stock is reported under the symbols BELFA and BELFB in the NASDAQ
        Global
        Select Market. Effective April 7, 2008, the NASDAQ will be converting the
        format
        of all 5-character trading symbols. As such, the Company’s Common Stock will be
        reported under the symbols BELF.A and BELF.B after such date.
  -19-
 
 (b) Holders
 
 As
        of
        February 29, 2008 there were 81 registered shareholders of the Company's
        Class A
        Common Stock and 334 registered shareholders of the Company’s Class B Common
        Stock. The Company estimates that there were 1,037 beneficial shareholders
        of
        the Company’s Class A Common Stock and 2,480 beneficial shareholders of the
        Company’s Class B Common Stock as of February 29, 2008.
 
 (c) Dividends
 
 There
        are
        no contractual restrictions on the Company's ability to pay dividends provided
        the Company is not in default immediately before such payment and after giving
        effect to such payment. On February 1, 2007, May 1, 2007 and August 1, 2007
        the
        Company paid a $0.05 per share dividend to all shareholders of record of
        Class B
        Common Stock in the total amount of $0.5 million, $0.5 million and $0.5 million,
        respectively. On February 1, 2007, May 1, 2007 and August 1, 2007 the Company
        paid a $0.04 per share dividend to all shareholders of record of Class A
        Common
        Stock in the total amount of $0.1 million, $0.1 million and $0.1 million,
        respectively. During July 2007 the Board of Directors of the Company authorized
        an increase in the dividends by $.02 per share per quarter for both Class
        A and
        B common shares effective with the November 2007 dividend payment. As a result,
        on November 1, 2007, the Company paid a $0.06 and $0.07 per share dividend
        to
        all shareholders of record at October 15, 2007 of Class A and Class B Common
        Stock , **** respectively, in
        the total amount
        of $0.2 million and $0.6 million, respectively. On February 1, 2006, May
        1,
        2006, August 1, 2006 and November 1, 2006 the Company paid a $0.05 per share
        dividend to all shareholders of record of Class B Common Stock in the total
        amount of $0.4 million, $0.4 million, $0.4 million and $ 0.5
        million, respectively. On February 1, 2006, May 1, 2006, August 1, 2006 and
        November 1, 2006 the Company paid a $0.04 per share dividend to all shareholders
        of record of Class A Common Stock in the total amount of $0.1 million, $0.1
        million, $0.1 million and $0.1 million, respectively.
 
 On
        February 1, 2008 the Company paid a $0.06 and $0.07 per share dividend to
        all
        shareholders of record at January 15, 2008 of Class A and Class B Common
        Stock , **** respectively, in
        the total amount
        of $0.2 million and $0.6 million, respectively. The Company currently
        anticipates paying these dividends in the future.
  -20-


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





Equity
      Compensation Plan Information


Plan
                  Category
              
              Number
                  of Securities to be
                Issued
                  Upon Exercise of
                Outstanding
                  Options,
                Warrants
                  and Rights
              
              Weighted
                  Average Exercise
                Price
                  of Outstanding Options,
                Warrants
                  and Rights
              
              Number
                  of Securities Remaining
                Available
                  for Future Issuance
                Under
                  Equity Compensation
                Plans
                  (Excluding Securities
                Reflected
                  in Column (a))(a)
              
              (b)
              
              (c)Equity
                  compensation plans approvedby
                  security holders
              
              
              70,000
              
              $
              28.42
              
              
              816,285Equity
                  compensation plans notapproved
                  by security holders
              
              
              -
              
              
              -
              
              
              -Totals
              
              
              70,000
              
              $
              28.42
              
              
              816,285




(e)
            Issuer
                Purchases of Equity Securities





Issuer
      purchases of shares of the Company’s Class A Common Stock were as follows for
      the three month period ended December 31, 2007:




Period
              
              Total
                  Number of Shares Purchased
              
              Average
                  Price Paid per Share
              
              Total
                  Number of Shares Purchased as Part of Publicly Announced Plans
                  or Programs
                  (a)
              
              Maximum
                  Number of Shares that May Yet Be Purchased Under the Plans or
                  ProgramsOctober
                  1, 2007 - October 31, 2007
              
              
              21,071
              
              $
              36.18
              
              
              21,071
              
              
              121,880November
                  1, 2007 - November 30, 2007
              
              
              10,595
              
              
              34.31
              
              
              10,595
              
              
              110,225December
                  1, 2007 - December 31, 2007
              
              
              14,267
              
              
              33.81
              
              
              14,267
              
              
              94,531Totals
              
              
              45,933
              
              $
              35.01
              
              
              45,933
              
              
              94,531
  (a)
                These
                    share repurchases were made as part of a plan authorized by the
                    Board of
                    Directors during 2000 whereby
                    the Company is authorized to purchase up to 10% of the Company's
                    outstanding common shares.


As
      of
      December 31, 2007, the Company had cumulatively purchased and retired 23,600
      shares of the Company’s Class B Common Stock. No shares of Class B common stock
      were repurchased during the year ended December 31, 2007. The maximum number
      of
      shares that may yet be purchased under the plan as of October 31, 2007, November
      30, 2007 and December 31, 2007 were 905,198, 905,063 and 905,063,
      respectively.




-21-





Item
        6.
        Selected Financial Data


Years
                  Ended December 31,2007
              
              2006
              
              2005
                  (a)
              
              2004
              
              2003
                  (a)(In
                  thousands of dollars, except per share data)Selected
                  Statements of Operations Data:Net
                  sales
              
              $
              259,137
              
              $
              254,933
              
              $
              215,916
              
              $
              190,022
              
              $
              158,498Cost
                  of sales
              
              
              203,007
              
              
              192,985
              
              
              156,147
              
              
              132,776
              
              
              113,813Selling,
                  general andadministrative
                  expenses
              
              
              36,117
              
              
              37,800
              
              
              33,152
              
              
              31,302
              
              
              26,757Gain
                  on sale of property, plant and equipment
              
              
              (5,499
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Casualty
                  loss/fixed asset impairment (c) (d)
              
              
              -
              
              
              1,030
              
              
              -
              
              
              1,033
              
              
              -Interest
                  income - net
              
              
              4,046
              
              
              2,780
              
              
              1,098
              
              
              525
              
              
              249Gain
                  on sale of marketable securities, net ofimpairment
              
              
              2,146
              
              
              5,150
              
              
              -
              
              
              -
              
              
              -Lawsuit
                  proceeds (b)
              
              
              -
              
              
              -
              
              
              -
              
              
              2,935
              
              
              -Earnings
                  before provisionfor
                  income taxes
              
              
              31,704
              
              
              31,048
              
              
              27,715
              
              
              28,371
              
              
              18,177Income
                  tax provision
              
              
              5,368
              
              
              5,845
              
              
              7,482
              
              
              3,649
              
              
              4,413Net
                  earnings
              
              
              26,336
              
              
              25,203
              
              
              20,233
              
              
              24,722
              
              
              13,764Earnings
                  per Class A commonshare
                  - basic
              
              
              2.11
              
              
              2.03
              
              
              1.67
              
              
              2.10
              
              
              1.15Earnings
                  per Class A commonshare
                  - diluted
              
              
              2.11
              
              
              2.03
              
              
              1.67
              
              
              2.10
              
              
              1.15Earnings
                  per Class B commonshare
                  - basic
              
              
              2.25
              
              
              2.16
              
              
              1.79
              
              
              2.22
              
              
              1.28Earnings
                  per Class B commonshare
                  - diluted
              
              
              2.24
              
              
              2.15
              
              
              1.77
              
              
              2.16
              
              
              1.27Cash
                  dividends declared perClass
                  A common share
              
              
              0.20
              
              
              0.16
              
              
              0.16
              
              
              0.16
              
              
              0.08Cash
                  dividends declared perClass
                  B common share
              
              
              0.24
              
              
              0.20
              
              
              0.20
              
              
              0.20
              
              
              0.20




As
                  of December 31,2007
              
              2006
              
              2005
              
              2004
              
              2003(In
                  thousands of dollars, except per share data and
                  percentages)Selected
                  Balance Sheet Data and Ratios:Working
                  capital
              
              $
              173,171
              
              $
              144,677
              
              $
              128,203
              
              $
              127,624
              
              $
              102,370Total
                  assets
              
              
              293,860
              
              
              268,497
              
              
              242,056
              
              
              217,777
              
              
              181,817Long
                  term debt
              
              
              -
              
              
              -
              
              
              -
              
              
              6,500
              
              
              8,500Stockholders'
                  equity
              
              
              244,527
              
              
              222,150
              
              
              201,577
              
              
              178,461
              
              
              146,855Return
                  on averagetotal
                  assets (e)
              
              
              9.34
              %
              
              9.65
              %
              
              8.83
              %
              
              12.37
              %
              
              7.95
              %Return
                  on averagestockholders'equity
                  (e)
              
              
              11.30
              %
              
              11.81
              %
              
              10.75
              %
              
              15.20
              %
              
              9.93
              %




(a)
            See
                Item 1 for information regarding the acquisitions during 2005 of
                Galaxy
                and Netwatch.
                Further,during
                2003,the
                Company acquiredAdvanced
                Power Components plc (“APC”)****and
                the Passive Components Group of InsilcoTechnologies, Inc.
                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.




-22-




(b)
            The
                Company was a party to an arbitration proceeding related to the
                acquisition of its Telecom Components business in 1998. The Company
                asserted that the seller breached the terms of a related Global
                Procurement Agreement dated October 2, 1998 and sought damages related
                thereto. During December 2004, the Company and the seller settled
                this
                matter. The settlement resulted in a payment to the Company and an
                unconditional release by the seller of all counterclaims against
                the
                Company. The net gain of $2.9 million from the settlement is included
                in
                the Company’s consolidated statement of operations for the year ended
                December 31, 2004.





(c)
            During
                2006, theCompany
                incurred a loss of $1.0 million as a result of a fire at its leased
                manufacturing facility in the Dominican Republic.
                The loss wasfor raw materials and equipment in excess of estimated insurance
                proceeds.
                The production at this facility was substantially restored during
                July
                2006.





(d)
            During
                the year ended December 31, 2004 the Company wrote down fixed assets,
                principally machinery and equipment, with a net book value of
                $1.0
                million,at
                its Asia manufacturing facilities. The Company considered these fixed
                assets to be surplus equipment which was replaced by equipment with
                more
                advanced technology.





(e)
            Returns
                on average total assets and stockholders’ equity are computed for any year
                by dividing net income for such year by the average balances of total
                assets or stockholders’ equity on the last day of each quarter during such
                year and on the last day of the immediately preceding
                year.





-23-




Item
      7.
      Management’s Discussion and Analysis of Financial Condition and Results
      of Operations





The
      following discussion and analysis should be read in conjunction with the
      Company’s consolidated financial statements and the notes related thereto. The
      discussion of results, causes and trends should not be construed to  imply any
      conclusion that such results, causes or trends will necessarily continue in
      the
      future.





Critical
      Accounting Policies





The
      Company’s discussion and analysis of its financial condition and results of
      operations are based upon the Company’s consolidated financial statements, which
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America. The preparation of these financial statements
      requires the Company to make estimates and judgments that affect the reported
      amounts of assets, liabilities, revenues and expenses, and related disclosure
      of
      contingent assets and liabilities. On an on-going basis, the Company evaluates
      its estimates, including those related to product returns, bad debts,
      inventories, intangible assets, investments, SERP expense, income taxes and
      contingencies and litigation. The Company bases its estimates on historical
      experience and on various other assumptions that are believed to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





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





Allowance
      for Doubtful Accounts





The
      Company maintains allowances for doubtful accounts for estimated losses from
      the
      inability of its customers to make required payments. The Company determines
      its
      reserves by both specific identification of customer accounts where appropriate
      and the application of historical loss experience to non-specific accounts.
      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.




-24-




Inventory





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





Goodwill
      and Intangible Assets





The
      assets and liabilities of acquired businesses are recorded under the purchase
      method of accounting at their estimated fair values at the dates of acquisition.
      Goodwill represents costs in excess of fair values assigned to the underlying
      net assets of acquired businesses.





Goodwill
      and intangible assets deemed to have indefinite lives are not amortized, but
      are
      subject to annual impairment testing. The identification and measurement of
      goodwill impairment involves the estimation of the fair value of geographic
      reporting units. The estimates of fair value of geographic reporting units
      are
      based on the best information available as of the date of the assessment, which
      primarily incorporate management assumptions about expected future cash flows
      and contemplate other valuation techniques. Future cash flows can be affected
      by
      changes in industry or market conditions or the rate and extent to which
      anticipated synergies or cost savings are realized with newly acquired entities.
      There can be no assurances that goodwill impairments will not occur in the
      future. See Note
      3 to the
      Consolidated Financial Statements for further discussion.




Income
      Taxes





Income
      taxes are accounted for under Statement of Financial Accounting Standards
      (“SFAS”) No. 109, “Accounting for Income Taxes.” In accordance with SFAS No.
      109, deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      bases, as measured by enacted tax rates that are expected to
      be in
      effect in the periods when the deferred tax assets and liabilities are expected
      to be settled or realized. Significant judgment is required in determining
      the
      worldwide provisions for income taxes. Valuation allowances are provided for
      deferred tax assets where it is considered more likely than not that the Company
      will not realize the benefit of such asset. In the ordinary course of a global
      business, the ultimate tax outcome is uncertain for many transactions. Effective
      January 1, 2007, uncertain tax positions are accounted for in accordance with
      FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN
      48”). It is the Company’s policy to establish provisions for taxes that may
      become payable in future years as a result of an examination by tax authorities.
      The Company establishes the provisions based upon management’s assessment of
      exposure associated with permanent tax differences and tax credits applied
      to
      temporary difference adjustments. The tax provisions are analyzed periodically
      (at least quarterly) and adjustments are made as events occur that warrant
      adjustments to those provisions. FIN 48
      requires significant judgment in determining what constitutes an individual
      tax
      position as well as assessing the outcome of each tax position. Changes in
      judgment as to recognition or measurement of tax positions can materially affect
      the estimate of the effective tax rate and, consequently, affect our operating
      results.




-25-




Revenue
      Recognition





The
      Company recognizes revenue in accordance with the guidance contained in SEC
      Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”
and other relevant accounting literature. Revenue is recognized when the product
      has been delivered and title and risk of loss have passed to the customer,
      collection of the resulting receivable is deemed reasonably assured by
      management, persuasive evidence of an arrangement exists and the sale price
      is
      fixed and determinable.





Historically
      the Company has been successful in mitigating the risks associated with its
      revenue. Some issues relate to product warranty, credit worthiness of its
      customers and concentration of sales among a few major customers.





The
      Company is not contractually obligated to accept returns from non-distributor
      customers except for defective product or in instances where the product does
      not meet the Company’s quality specifications. If these conditions existed, the
      Company would be obligated to repair or replace the defective product or make
      a
      cash settlement with the customer. Distributors generally have the right to
      return up to 5% of their purchases over the previous three to six months and
      are
      obligated to purchase an amount at least equal to the return. If the Company
      terminates a distributor, the Company is obligated to accept as a return all
      of
      the distributor’s inventory from the Company. The Company accrues an estimate
      for anticipated returns based on historical experience at the time revenue
      is
      recognized and adjusts such estimate as specific anticipated returns are
      identified. If a distributor terminates its relationship with the Company,
      the
      Company is not obligated to accept any inventory returns.





The
      Company has a significant amount of sales with several customers, including
      one
      major customer with sales of $40.3 million (15.6%) in 2007. 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.




-26-




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.





Our
      revenues are primarily driven by the designs of our products for customer
      applications and by working closely with our customer’s engineering staffs and
      aligning them with the industry standards committees and various integrated
      circuit (IC) manufacturers.





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 an increased wage structure in Asia have contributed to increases in manufacturing
      costs .
      Effective September 1, 2006, local PRC authorities implemented a new revised
      standard work week, and new minimum wages and overtime rates, for areas where
      our factories are located .





The
      Company’s sales increased by $4.2 million or 1.6% from 2006 to 2007. The
      increase in sales is primarily due to an increase in the Company’s power
      products revenue by $16.3 million from 2006 to 2007. The Company’s power
      products used mainly in data storage and super computer applications that had
      been in the design phase for the past two years went into production at large
      OEM customers in 2007, driving this increase in sales from 2006. This was offset
      by a decrease in ICM sales of $12.3 million from 2006 to 2007 as a result of
      the
      Company’s de-emphasizing certain lower margin business.





Gross
      profit margins were lower during 2007 compared to 2006, principally due to
      a
      change in the mix of product sales. Sales of the Company’s module products have
      increased by $20.7 million in 2007 as compared to 2006. While
      these products are strategic to Bel’s growth and important to total earnings,
      they return lower gross profit percentage margins as a larger percentage of
      their bills of material are purchased components. As these sales continue to
      increase, the Company’s average gross profit percentage will likely decrease
      unless offset by increased sales of higher margin products.





On
      January 1, 2007, the Company implemented FASB Interpretation No. 48 “Accounting
      for Uncertainty in Income Taxes”, (“FIN 48”) which resulted in no adjustment in
      the liability for uncertain tax positions. During the year ended December 31,
      2007, the expense for uncertain tax positions, including penalties and interest,
      was $0.6 million.




-27-




During
      2007, the Company incurred severance and related expenses of approximately
      $0.8
      million; wrote off approximately $0.1 million in deferred financing fees related
      to a credit facility no longer available because of a change in the Company’s
      banking relationship; incurred stock based compensation expense of $1.5 million;
      accrued $0.5 million of interest and penalties in connection with uncertain
      tax
      positions; and experienced a $1.0 million reduction in amortization of
      intangibles compared to 2006 due to certain intangibles becoming fully
      amortized. Additionally, the Company realized a pretax gain from the sale of
      real estate in the amount of $5.5 million and a pretax gain from the sale of
      Toko common shares in the amount of $2.5 million.




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 31,2007
              
              2006
              
              2005Net
                  sales
              
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %Cost
                  of sales
              
              
              78.3
              
              
              75.7
              
              
              72.3Selling,
                  general andadministrative
                  expenses
              
              
              13.9
              
              
              14.8
              
              
              15.4Gain
                  on sale of property, plantand
                  equipment
              
              
              (2.1
              )
              
              -
              
              
              -Casualty
                  loss
              
              
              -
              
              
              0.4
              
              
              -Interest
                  expense and other costs(interest
                  income)
              
              
              (1.6
              )
              
              (1.1
              )
              
              (0.5
              )Gain
                  on sale of marketablesecurities,
                  net of impairment charge
              
              
              (0.8
              )
              
              (2.0
              )
              
              -Earnings
                  before provision forincome
                  taxes
              
              
              12.2
              
              
              12.2
              
              
              12.8Income
                  tax provision
              
              
              2.1
              
              
              2.3
              
              
              3.5Net
                  earnings
              
              
              10.2
              
              
              9.9
              
              
              9.4




-28-




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




Increase
                    (Decrease) from
                  Prior
                    Period2007
                    compared
                  with
                    2006
                
                2006
                    compared
                  with
                    2005Net
                    sales
                
                
                1.6
                %
                
                18.1
                %Cost
                    of sales
                
                
                5.2
                
                
                23.6Selling,
                    general and administrative expenses
                
                
                (4.5
                )
                
                14.0Net
                    earnings
                
                
                4.5
                
                
                24.6




Sales





Net
      sales
      increased by $4.2 million or 1.6% from $254.9 million during 2006 to $259.1
      million during 2007. The
      increase in sales is primarily due to an increase in the Company’s power
      products revenue by $16.3 million from 2006 to 2007. The Company’s power
      products used mainly in data storage and super computer applications that had
      been in the design phase for the past two years went into production at large
      OEM customers in 2007, driving this increase in sales from 2006. This was offset
      by a decrease in ICM sales of $12.3 million from 2006 to 2007 as a result of
      the
      Company’s de-emphasizing certain lower margin business.





The
      significant components of the Company's revenues for 2007 were magnetic products
      of $125.5 million (as compared with $141.5 million during 2006), interconnect
      products of $44.3 million (as compared with $44.5 million during 2006), module
      products of $70.2 million (as compared with $49.5 million during 2006), and
      circuit protection products of $19.1 million (as compared with $19.4 million
      during 2006.)





Based
      in
      part on conflicting opinions the Company received from customers and competitors
      in the electronics industry pertaining to revenue growth during 2007, the
      Company cannot predict with any degree of certainty sales revenue for 2008.
      Although the Company's backlog has been stable, the Company feels that such
      backlog 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% (15.6%) of total sales
      during the year ended December 31, 2007. The loss of this customer could have
      a
      material adverse effect on the Company's results of operations, financial
      position and cash flows.





-29-




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 by 18.1% from $215.9 million during the year ended December 31, 2005
      to $254.9 million during the year ended December 31, 2006. The Company
      attributes the increase to increased module sales of $21.3 million of which
      $3.4
      million is attributable to the acquisition of Galaxy, which was included in
      our
      sales for a full year in 2006 as compared with nine months in 2005, strong
      demand for interconnect products resulting in an increase of $3.8 million in
      such sales, of which $1.2 million is attributable to the acquisition of
      Netwatch **,** and
      strong demand for magnetic sales resulting in an increase of $14.3 million
      in
      such sales, while circuit protection sales decreased by $0.4 million. Bel had
      an
      organic sales increase of 16.0% for the year.





The
      significant components of the Company's revenues for the year ended December
      31,
      2006 were magnetic products of $141.5 million (as compared with $127.2 million
      during the year ended December 31, 2005), interconnect products of $44.5 million
      (as compared with $40.7 million during the year ended December 31, 2005), module
      products of $49.5 million (as compared with $28.2 million during the year ended
      December 31, 2005) and circuit protection products of $19.4 million (as compared
      with $19.8 million during the year ended December 31, 2005).





During
      the fourth quarter of 2006, the Company experienced a decrease in sales compared
      to the third quarter of 2006 of approximately $12.7 million across almost all
      product lines. The Company attributes the decrease in sales to increased
      customer inventories and uncertainty by customers relating to inventory
      management practices related to the annual first quarter of 2007 Lunar New
      Year
      factory closedowns.





Cost
      of Sales





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




-30-




Cost
      of
      sales as a percentage of net sales increased from 75.7% during the year ended
      December 31, 2006 to 78.3% during the year ended December 31, 2007. The increase
      in the cost of sales percentage is primarily attributable to the
      following:





·
            The
                Company established a $1.2 million warranty accrual for a defective
                part,
                including a $0.4 million inventory write-off of materials on hand
                related
                to this matter which are deemed to be
                unusable.





·
            The
                Company incurred a 4.5% increase in material costs as a percentage
                of net
                sales. The increase in raw material costs is principally related
                to
                increased manufacturing of value-added products, which have a higher
                raw
                material content than the Company’s other products, increased costs for
                raw materials such as copper, gold and plastic resin and increased
                transportation costs. Since the majority of the manufacturing is
                conducted
                in Asia, the increased material costs negatively impact the Company’s
                operating profits in Asia.





·
            The
                Company is currently paying higher wage rates and benefits to its
                production workers in the PRC than it paid in prior periods. These
                higher
                rates and benefits are reflected in the Company’s cost of sales and result
                from new labor regulations and a continuing tightening of the labor
                market.





·
            Sales
                of the Company’s DC-DC power products have increased by $16.3 million in
                2007 compared to 2006. While these products are strategic to Bel’s growth
                and important to total earnings, they return lower gross profit percentage
                margins as a larger percentage of their bills of materials are purchased
                components. As these sales continue to increase, the Company’s average
                gross profit percentage will likely decrease.





Included
      in cost of sales are research and development expenses of $7.2 million and
      $6.6
      million for the years ended December 31, 2007 and 2006, respectively. The
      increase in 2007 compared to 2006 was attributable to various factors including
      an increase in headcount at the Hangzhou research and development facility
      related to the DC-DC power products, an unfavorable change in associated
      exchange rates for research and development expenses in the PRC and United
      Kingdom, and general wage increases at the various research and development
      facilities.





Cost
      of
      sales as a percentage of net sales increased from 72.3% during the year ended
      December 31, 2005 to 75.7% during the year ended December 31, 2006. The increase
      in the cost of sales percentage is primarily attributable to the same factors
      that led to the increase in the cost of sales as a percentage of net sales
      from
      2006 to 2007, with the exception of the 2007 warranty accrual.




Included
      in cost of sales are research and development expenses of $6.6 million and
      $7.3
      million for the years ended December 31, 2006 and 2005, respectively .
      The
      principal reason for the decrease is less research and development in the United
      States due to the consolidation of the Bel Power and the Galaxy facilities
      in
      Massachusetts.  This
      was
      offset in part by increased expenses at the Company’s PRC research and
      development facility which has a lower cost structure.




-31-




Selling,
      General and Administrative Expenses





The
      percentage relationship of selling, general and administrative expenses to
      net
      sales decreased from 14.8% during the year ended December 31, 2006 to 13.9%
      during the year ended December 31, 2007. The decrease in selling, general and
      administrative expense for the year ended December 31, 2007 compared to the
      year
      ended December 31, 2006 was approximately $1.7 million. The decrease is
      principally attributed to the following:





·
            Legal
                and professional fees decreased by $1.0 million from 2006 principally
                due
                to the implementation of an internal audit and SOX function which
                reduced
                audit and external consultant fees
                significantly.





·
            A
                reduction in depreciation and amortization expense of $0.7 million
                was
                primarily due to lower amortization of intangibles due to certain
                intangibles becoming fully
                amortized.





·
            Sales
                commissions decreased by $0.3 million during 2007, due to higher
                sales
                volume in house accounts during 2007 as compared to 2006. In addition,
                there was a $0.2 million reduction in travel and tradeshow expenses
                in
                2007.





·
            Offsetting
                these factors in part, administrative salaries and related benefits
                increased by $0.5 million as a result of increased bonus expense
                in 2007.
                During the fourth quarter of 2007, the Company modified its bonus
                structure for 2008 such that bonuses are now earned based on performance
                and service during the fourth quarter of the previous calendar year
                and
                the first three quarters of the current calendar year, as opposed
                to the
                prior structure whereby it was based on performance and service of
                the
                four calendar quarters of the current year. This resulted in the
                Company
                recording bonus expense in 2007 for the 2007 calendar year, plus
                an
                additional accrual for the first quarter of the 2008 bonus period.
                Such
                additional accrual amounted to approximately $0.5 million in the
                fourth
                quarter of 2007.





The
      percentage relationship of selling, general and administrative expenses to
      net
      sales decreased from 15.4% during the year ended December 31, 2005 to 14.8%
      during the year ended December 31, 2006, in part as a result of the Company's
      ability to leverage general and administrative expenses over a larger revenue
      base. The $4.6
      million increase in the dollar amount of such expenses included increased selling expenses of approximately $1.4 million, including $.2 million
      in Bel Power related expenses. The $3.2
      million increase in general and administrative expenses included  $1.0
      million related to Bel Power, additional salaries, wages and bonuses of $2.3
      million ,
      principally attributable to the $1.0 million bonus approved by the Board of
      Directors in connection with the gain from the sale of Artesyn stock, additional
      stock compensation expense of $.8 million, partially arising from the Company’s
      implementation of SFAS No. 123 ( R )
      during
      2006 (See below and Notes 1 and 10 of the Notes to the Company’s Consolidated
      Financial Statements), and additional professional fees of $1.0 million
      principally related to Sarbanes - Oxley
      compliance and legal expenses in connection with various lawsuits in
      which the
      Company is involved .
      These
      increases were offset in part by other net decreases in several expense accounts
      totaling $1.9 million.




-32-




Interest
      Income





Interest
      income earned on cash and cash equivalents increased by approximately $1.3
      million during the year ended December 31, 2007, as compared to the year ended
      December 31, 2006. Interest
      income earned on cash and cash equivalents increased by approximately $1.4
      million during the year ended December 31, 2006 as compared to the year ended
      December 31, 2005. The
      increases in both 2007 and 2006 were due primarily to increased balances of
      cash
      and cash equivalent balances and marketable securities and increased yields
      on
      such balances.





Interest
      Expense and Other Costs





Interest
      expense and other costs amounted to $0.1 million during the year ended December
      31, 2007 related primarily to the write off of financing expenses incurred
      in
      connection with the Company’s credit facility. During
      the year ended December 31, 2006, interest expense amounted to $0.1 million,
      representing financing expenses related to the Company's credit facility in
      the
      United States.





During
      the year ended December 31, 2005, the interest expense of $0.3 million related
      to a $10 million term loan 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.





Gain
      on Sale of Property, Plant and Equipment





During
      the year ended December 31, 2007, the Company realized gains from the sale
      of
      property, plant and equipment in Hong Kong and Macao in the amount of $5.5
      million. The sale of the Company's real estate in Macao reflects the Company's
      decision to cease manufacturing in Macao and to consolidate manufacturing in
      larger more efficient facilities. During the fourth quarter of 2007 the Company
      ceased manufacturing in a small plant in the PRC.




Gain
      on Sale of Marketable Securities, net of Impairment Charge





During
      the year ended December 31, 2007, the Company realized gains from the sale
      of
      Toko common stock in the amount of $2.5 million, offset by an
      other-than-temporary impairment charge of $0.3 million related to its investment
      in the Columbia Strategic Cash Portfolio. See the Liquidity and Capital
      Resources section of Item 7. During the year ended December 31, 2006, the
      Company realized a gain principally from the sale of Artesyn common stock in
      the
      amount of $5.2 million.




-33-




Casualty
      Loss





During
      2006, the Company
      incurred a $1.0 million pre-tax casualty loss as a result of a fire at its
      leased manufacturing facility in the Dominican Republic .
      The
      loss was for raw
      materials and equipment in excess of estimated insurance proceeds. The
      production at this facility was substantially restored during July 2006.





Provision
      for Income
      Taxes




The
      provision for income taxes for the year ended December 31, 2007 was $5.4 million
      compared to a $5.8 million provision for the year ended December 31, 2006.
      The
      Company's earnings before income taxes for the year ended December 31, 2007
      are
      approximately $0.7 million higher than in 2006. The Company’s effective tax
      rate, the income tax provision as a percentage of earnings before provision
      for
      income taxes, was 16.9% and 18.8% for the years ended December 31, 2007 and
      December 31, 2006, respectively. During 2007 certain statutes of limitations
      expired, which resulted in a reversal of certain liabilities for uncertain
      tax
      positions in the amount of $1.4 million. During 2007 a tax assessment was paid
      to the Inland Revenue Department (“IRD”) in Hong Kong in the amount of $3.8
      million, which resulted in a reduction in the Company’s liability for uncertain
      tax positions in the amount of $3.8 million. The payment of this Hong Kong
      IRD
      assessment resulted in higher foreign tax credits being available for U.S.
      tax
      purposes. This resulted in a $0.7 million reduction in the Company’s liability
      for uncertain tax positions during the year ended December 31, 2007.
      Additionally, there were certain changes in estimates for prior year taxes,
      upon
      finalization of 2006 tax returns.





The
      provision for income taxes for the year ended December 31, 2006 was $5.8 million
      compared to $7.5 million during the year ended December 31, 2005. The Company's
      earnings before income taxes for the year ended December 31, 2006 were approximately $3.3 million higher than in 2005. During the year ended December
      31, 2006, the Company incurred lower taxes of approximately $1.7 million
      principally as a result of lower foreign taxes in Asia due to the implementation
      by the Company of its Macao Commercial Offshore Company (“MCO”), which is not
      subject to Macao corporate income taxes. This was offset in part by higher
      United States taxes resulting principally from the gain from the sale of
      marketable securities (Artesyn). This had an impact of reducing the effective
      tax rate from 27.0% for the year ended December 31, 2005 to 18.8% for the year
      ended December 31, 2006 (measured by reflecting the tax provision as a
      percentage of earnings before provision for income taxes). Additionally, during
      the year ended December 31, 2005, the Company repatriated $70.6 million of
      foreign earnings which resulted in higher taxes of $3.1 million during the
      year
      ended December 31, 2005.





The
      Company has the majority of its products manufactured on the mainland of the
      People’s Republic of China (“PRC”), and has not been subject to corporate income
      tax on manufacturing services provided by third parties in the PRC. The Company
      no longer conducts manufacturing activities in Hong Kong or Macau. Hong Kong
      imposes corporate income tax at a rate of 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.




-34-




Macao
      currently has a statutory maximum corporate income tax rate of 12 percent.
      Since
      most of the Company's operations are conducted in Asia, the majority of its
      profits are sourced in these three jurisdictions in Asia. Accordingly, the
      profits earned in the U.S. are comparatively small in relation to its profits
      earned in Asia. Therefore, there is generally a significant difference between
      the statutory U.S. tax rate and the Company's effective tax rate.





During
      2005, the Company was granted an offshore operating license from the government
      of Macao to set up an 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 commenced during the first quarter of
      2006.
      Sales consist of products manufactured in the PRC. The MCO is not subject to
      Macao corporate income taxes.





The
      Company has historically followed a practice of reinvesting a portion of the
      earnings of foreign subsidiaries in the expansion of its foreign operations.
      If
      the unrepatriated earnings were distributed to the parent corporation rather
      than reinvested in Asia, such funds would be subject to United States Federal
      income taxes. During the year ended December 31, 2005, management repatriated
      foreign earnings of approximately $70.6 million which were 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.





The
      Company’s policy is to recognize interest and penalties related to uncertain tax
      positions as a component of the current provision for income taxes. During
      the
      year ended December 31, 2007, the Company recognized approximately $0.5 million
      in interest and penalties in the Consolidated Statement of Operations. The
      Company has approximately $1.8 million accrued for the payment of interest
      and
      penalties at December 31, 2007, which is included in both income taxes payable
      and liability for uncertain tax positions in the consolidated balance
      sheet.





The
      Internal Revenue Service (“IRS”) commenced an examination of the Company’s U.S.
      income tax returns for 2004 and reviewed 2003 and 2005 during the fourth quarter
      of 2006. During April 2007, the IRS wrote a preliminary letter to the Company
      accepting the tax return as originally filed for 2004.





The
      Company is currently being audited by the State of New Jersey, Department of
      the
      Treasury, Division of Taxation (“New Jersey”) for the years ended December 31,
      2003 through 2006. This examination is in its early stages and to date no
      adjustments have been proposed by New Jersey.





During
      February 2008, the Company received correspondence from the State of California
      Franchise Tax Board. They are requesting copies of U.S. federal income tax
      returns for the years 2005 and 2006 for further analysis to determine if the
      tax
      returns will be selected for audit.




-35-




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. However, the Chinese Renminbi has appreciated in value significantly
      during 2007 and 2006. Further appreciation of the Renminbi would result in
      the
      Company’s incurring higher costs for all expenses incurred in the PRC.
      Commencing with the Company’s acquisition of its Passive Components Group in
      2005, 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 a currency
      exchange loss of ($0.2) million for the year ended December 31, 2006, which was
      charged to expense, and approximately $1.0 million, $0.4 million and ($0.7)
      million for the years ended December 31, 2007, 2006 and 2005, respectively, in
      unrealized exchange gains (losses) relating to the translation of foreign
      subsidiary financial statements which are included in accumulated other
      comprehensive income. Realized currency gains (losses) during the years ended
      December 31, 2007 or 2005 were not material. Any change in the linkage of the
      U.S. Dollar and the Hong Kong Dollar or the Macao Pataca could have a material
      effect on the Company's consolidated financial position or results of
      operations.





Liquidity
      and Capital Resources





Historically,
      the Company has financed its capital expenditures primarily through cash flows
      from operating activities and has
      financed acquisitions both through cash flows from operating activities and
      borrowings . Management believes that the cash flow from operations after payments of
      dividends combined with its existing capital base and the Company's available
      lines of credit, will be sufficient to fund its operations for at least the
      next
      twelve months. Such statement constitutes a Forward Looking Statement. Factors
      which could cause the Company to require additional capital include, among
      other
      things, a softening in the demand for the Company’s existing products, an
      inability to respond to customer demand for new products, potential acquisitions
      requiring substantial capital, future expansion of the Company's operations
      and
      net losses that would result in net cash being used in operating, investing
      and/or financing activities which result in net decreases in cash and cash
      equivalents. Net losses may result in the loss of domestic and foreign credit
      facilities and preclude the Company from raising debt or equity financing in
      the
      capital markets on
      affordable terms or otherwise .




-36-





As
      of
      December 31, 2006, a $20 million line of credit was available to the Company
      to
      borrow. The loan was collateralized
      with a first
      priority security interest in 100% of the issued and outstanding shares of
      the
      capital stock of the Company's material domestic subsidiaries and 65% of all
      the
      issued and outstanding shares of the capital stock of certain of the foreign
      subsidiaries of the Company. During February 2007, the Company entered into
      a
      new unsecured credit agreement in the amount of $20 million, which expires
      on
      July 21, 2008. There was no balance outstanding as of December 31, 2007. At
      that
      date, the entire $20 million line of credit was available to the Company to
      borrow. The loan bears interest at LIBOR plus 0.75% to 1.25% based on certain
      financial statement ratios maintained by the Company.





The
      Company's Hong Kong subsidiary had an unsecured line of credit of approximately
      $2 million ,
      which
      was unused at December 31, 2007. The
      line
      of credit expires during July 2008. Borrowing on the line of credit was
      guaranteed by the U.S. parent. The line of credit bears interest at a rate
      determined by the bank as the financing is extended.




For
      the
      years ended December 31, 2007, 2006 and 2005,  the
      Company recorded interest expense of approximately $0.1 million, $0.1 million
      and $0.3 million, respectively.




For
      information regarding further commitments under the Company’s operating leases,
      see Note 15 of the Notes to the
      Company’s consolidated financial statements.





The
      Company completed construction of a 117,000 square foot manufacturing facility,
      during November 2006, in Zhongshan City, PRC for approximately $1.3 million.





During
      May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
      for $6.0 million. The Company had previously estimated that approximately $0.8
      million of the proceeds would be payable to the State of New Jersey as a portion
      of the property is subject to tideland claims. In December 2007, the Tidelands
      Resource Council voted to approve the Bureau of Tideland’s Management’s
      recommendation for a Statement of No Interest. As final approval of the
      Statement of No Interest is still pending, the Company has continued to defer
      the estimated gain on sale of the land, in the amount of $4.6 million. Of the
      $6.0 million sales price, the Company received cash of $1.5 million before
      closing costs, and $4.6 million (including interest) is being held in escrow
      pending final resolution of the State of New Jersey tideland claim and certain
      environmental costs the Company is liable for in the maximum amount of $0.4
      million. The Company anticipates resolution of this sale, release of the escrow
      and corresponding guarantees and recognition of the gain during fiscal 2008.
      As
      the timing of the release of the escrow of $4.6 million is not under the
      Company’s control, it has been classified in non-current assets as restricted
      cash and the deferred gain of $4.6 million has been classified in deferred
      gain
      on the sale of property in the Consolidated Balance Sheet as of December 31,
      2007. Additionally, the Company realized a $5.5 million pre-tax gain from the
      sale of property, plant and equipment in Hong Kong and Macao during the year
      ended December 31, 2007.




-37-




At
      December 31, 2007, the Company has an investment consisting of a private
      placement of units of beneficial interest in the Columbia Strategic Cash
      Portfolio (the “Columbia Portfolio”), which is an enhanced cash fund sold as an
      alternative to money-market funds. Since June 2007, the Company has invested
      a
      portion of its cash balances on hand in this fund; during the second and third
      quarters of 2007, the amounts were appropriately classified as cash equivalents
      in the consolidated balance sheet as the fund was considered both short-term
      and
      highly liquid in nature. These investments are subject to credit, liquidity,
      market and interest rate risk. For example, the Columbia Portfolio includes
      investments in certain asset backed securities and structured investment
      vehicles that are collateralized by sub-prime mortgage securities or related
      to
      mortgage securities, among other assets. As a result of adverse market
      conditions that have unfavorably affected the fair value and liquidity
      availability of collateral underlying the Columbia Portfolio, the Columbia
      Portfolio was overwhelmed with withdrawal requests from investors and it was
      closed with a restriction placed upon the cash redemption ability of its holders
      in the fourth quarter of 2007. At
      that
      time, the Company had $25.7 million invested in this fund, including $0.7
      million of reinvested interest. As
      such,
      the Company redesignated the Columbia Portfolio units from cash equivalents
      to
      short-term investments or long-term investments based upon the liquidation
      schedule provided by the fund in the accompanying consolidated balance sheet
      as
      of December 31, 2007.





On
      December 21, 2007, the Company received a cash payment of $2.3 million as
      redemption for 2,311,635 shares (9%). A realized loss of less than $0.1 million
      was recorded and is included in Gain on Sale of Marketable Securities, net
      in
      the accompanying Statement of Operations for the year ended December 31, 2007.
      At December 31, 2007, the closing net asset value (“NAV”) of the Columbia
      Portfolio was $0.9874. Subsequent to the Company’s December 31, 2007 year end
      and through February 29, 2008, the Company has received additional cash
      redemptions of $7.8 million at approximately $.9857 per unit.





As
      a
      result of these circumstances, the Company deemed a portion of its carrying
      value in the Columbia Portfolio to be other-than-temporarily impaired at
      December 31, 2007. Accordingly, the Company wrote down the carrying value of
      the
      investments to their then current market value at December 31, 2007 and the
      reduction in value of $0.3 million was recorded as an impairment charge during
      the fourth quarter of 2007. This is included in the accompanying Consolidated
      Statement of Operations for the year ended December 31, 2007. Information and
      the markets relating to these investment remain dynamic, and there may be
      further declines in the value of these investments, the value of the collateral
      held by these entities, and the liquidity of the Company’s investments. To the
      extent the Company determines there is a further decline in fair value, the
      Company may recognize additional impairment charges in future periods up to
      the
      aggregate amount of these investments.




-38-




As
      of
      December 31, 2007, the Company owned a total of 1,840,919 shares, or
      approximately 1.9% of the
      outstanding shares ,
      of the
      common stock of Toko, Inc. (“Toko”) at a total cost of $5.6 million. Toko had a
      market capitalization of approximately $172.9 million as of December 31, 2007.
      These shares are reflected on the Company’s consolidated balance sheets as
      marketable securities. These marketable securities are considered to be
      available for sale under SFAS No. 115, “Accounting for Certain Investments in
      Debt and Equity Securities”. Thus, as of December 31, 2007, the Company has
      recorded an unrealized loss, net of income tax benefit, of approximately $1.5
      million which is included in accumulated other comprehensive loss in
      stockholders’ equity. The Company’s investment in Toko has been in an unrealized
      loss position for less than twelve months. In accordance with FASB Staff
      Position Nos. FAS 115-1 and FAS 124-1 “The Meaning of Other-Than-Temporary
      Impairment and Its Application to Certain Investments”, the Company periodically
      reviews its marketable securities and determines whether the investments are
      other-than-temporarily impaired. The Company reviewed various factors in making
      its determination, including volatility of the Toko share price over the last
      year, Toko’s recent financial results and the Company’s intention and ability to
      hold the investment. The Toko share price has been extremely volatile over
      the
      last year, ranging from $1.22 - $4.20 (the Company’s cost basis in its remaining
      shares of Toko stock is $3.07 per share). As discussed below, in the second
      quarter of 2007, a gain was recognized on the disposition of the majority of
      the
      Company’s holdings of Toko stock. Toko recently issued its financial results for
      the quarter ended December 31, 2007 and it showed a quarter over quarter
      increase in sales of 5.6% as compared to the fourth quarter of 2006 and
      increased profitability. The Company has the intention and the ability to hold
      the investment until it is in a gain position. As a result of these factors,
      management believes that the investment in Toko is not other-than-temporarily
      impaired.





During
      April 2007, the Company sold 4,034,000 shares of common stock of Toko on the
      open market which resulted in a gain of approximately $2.5 million, net of
      investment banker fees and other expenses in the amount of $0.8 million. The
      Company accrued bonuses of $0.5 million in connection with this gain which
      were
      paid in January 2008. For financial statement purposes approximately $0.4
      million and $0.1 million has been classified within cost of sales and selling,
      general and administrative expenses, respectively.





During
      2004, the Company acquired a total of 2,037,500 shares of the common stock
      of
      Artesyn Technologies, Inc. (“Artesyn”) at a total purchase price of $16.3
      million. On April 28, 2006, Artesyn was acquired by Emerson Network Power for
      $11.00 per share in cash. During the second quarter of 2006, in connection
      with
      the Company's sale of its Artesyn common stock, the Company recognized a gain
      of
      approximately $5.2 million, net of investment banker advisory fees of $0.9
      million. The Company accrued bonuses of $1.0 million in connection with the
      gain. For financial statement purposes approximately $0.3 million and $0.7
      million was classified within cost of sales and selling, general and
      administrative expenses, respectively, and was paid to key employees in January
      2007.




-39-


On
      February 25, 2008, the Company announced that it had acquired 4,370,052 shares
      of Power-One, Inc. (“Power-One”) common stock representing, to the Company’s
      knowledge, 5% of Power-One’s outstanding common stock, at a total purchase price
      of $10.1 million. Power-One’s common stock is quoted on the NASDAQ Global
      Market. Power-One is a designer and manufacturer of power conversion and power
      management products.





During
      2000, the Board of Directors of the Company authorized the purchase of up to
      ten
      percent of the Company’s outstanding common shares. As of December 31, 2007, the
      Company had purchased and retired 23,600 Class B common shares at a cost of
      approximately $.8 million and had purchased and retired 160,033 Class A common
      shares at a cost of approximately $5.7 million. No shares of Class B common
      stock were repurchased during the year ended December 31, 2007 and 160,033
      Class
      A shares were repurchased during the year ended December 31, 2007. During
      January 2008, the Company purchased an additional 12,207 Class A common shares
      at a cost of $0.4 million.





During
      July 2007 the Board of Directors of the Company authorized an increase in the
      dividends by $.02 per share per quarter for both Class A and B common shares
      effective with the November 2007 dividend payment. As such, on November 1,
      2007,
      the Company paid a $0.06 and $0.07 per share dividend to all shareholders of
      record at October 15, 2007 of Class A and Class B Common Stock , **** respectively, in
      the total amount
      of $0.2 million and $0.6 million, respectively.




During
      the year ended December 31, 2007, the Company's cash and cash equivalents
      increased by $7.1 million, reflecting approximately $19.8 million provided
      by
      operating activities (principally as a result of net income of $26.3 million
      and
      depreciation and amortization expense of $7.9 million offset principally by
      $7.6
      million from gains on sale of marketable securities and property, plant and
      equipment and changes in deferred income taxes of $2.0 million), offset by
      approximately $6.5 million used in investing activities (primarily as a result
      of the redesignation of the Columbia Portfolio funds of $25.7 million from
      a
      cash equivalent to an investment, $11.8 million used for purchases of marketable
      securities and $9.2 million for the purchase of property, plant and equipment
      offset, in part, by $26.7 million from the sale of marketable securities and
      $11.3 million from the sale of property, plant and equipment) and approximately
      $6.6 million used in financing activities (principally reflecting $5.7 million
      for the repurchase of the Company’s common stock and $2.5 million for payments
      of dividends, partially offset by $1.5 million from the exercise of stock
      options).





During
      the year ended December 31, 2006, the Company's cash and cash equivalents
      increased by approximately $24.8 million, reflecting approximately $19.0
      million provided by operating activities (principally as a result of net income
      of $25.2 million and depreciation and amortization expense of $9.0 million
      offset in part by a gain on the sale of marketable securities of $5.1 million),
      proceeds of $ 24.5
      million from the
      sale of marketable securities and
      proceeds of $3.2 million from the exercise of stock options ,
      offset
      in part by  expenditures
      of  $9.4
      million for the purchase of property, plant and equipment, $ 7.0
      million used principally for acquisitions, $ 3.6
      million for the purchase of marketable securities and $2.2
      million for payments of dividends.




-40-




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,
      $ 18.0
      million for the purchase of marketable securities, $7.7 million
      for the purchase of property, plant and equipment, 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.





Cash
      and
      cash equivalents, marketable securities, short-term investments and accounts
      receivable comprised approximately 54.4% and 50.7% of the
      Company's total assets at December 31, 2007 and December 31, 2006, respectively.
      The Company's current ratio (i.e., the ratio of current assets to current
      liabilities) was 6.2 to 1 and 4.5 to 1 at December 31, 2007 and December 31,
      2006, respectively.




Accounts
      receivable, net of allowances, were $52.2 million at December 31, 2007, as
      compared with $43.8 million at December 31, 2006. The increase in accounts
      receivable is primarily due to a 14.5% increase in fourth quarter sales for
      2007
      as compared to 2006. The Company’s days sales outstanding (DSO) has remained
      consistent from last year. Inventories were $39.0 million at December 31, 2007,
      as compared with $46.3 million at December 31, 2006. Inventory levels at
      December 31, 2007 were lower due to high demand leading up to the Lunar New
      Year
      holidays in the PRC. Short-term investments were $20.5 million at December
      31,
      2007 as compared with $0 at December 31, 2006. This increase relates to the
      redesignation of the Company’s investment in the Columbia Portfolio from a cash
      equivalent to an investment as previously discussed in this section. Income
      taxes payable was $4.0 million at December 31, 2007 as compared with $11.1
      million at December 31, 2006. With the adoption of FIN 48, a portion of the
      income taxes payable which related to the liability for uncertain tax positions
      was reclassified to a long-term liability.




-41-




The
      following table sets forth at December 31, 2007 the amounts of payments due
      under specific types of contractual obligations, aggregated by category of
      contractual obligation, for the time periods described below. This table
      excludes liabilities recorded relative to uncertain income tax positions under
      FIN 48, amounting to $2.3 million included in income taxes payable and $6.9
      million included in liability for uncertain tax positions, as of December 31,
      2007, due to the uncertain timing of the resolution of such
      matters.




Payments
                  due by periodContractual
                  Obligations
              
              Total
              
              Less
                  than 1 year
              
              1-3
                years
              
              3-5
                years
              
              More
                  than
                5
                  yearsCapital
                  expenditure obligations
              
              $
              4,546
              
              $
              4,546
              
              $
              -
              
              $
              -
              
              $
              -Operating
                  leases
              
              
              5,255
              
              
              1,595
              
              
              1,899
              
              
              1,317
              
              
              444Raw
                  material purchase obligations
              
              
              22,309
              
              
              22,309
              
              
              -
              
              
              -
              
              
              -Total
              
              $
              32,110
              
              $
              28,450
              
              $
              1,899
              
              $
              1,317
              
              $
              444




The
      Company is required to pay SERP obligations at the occurrence of certain events.
      As of December 31, 2007, the SERP had an unfunded benefit obligation of
      approximately $1.2 million, net of deferred income tax benefit. The gross
      minimum pension obligation and unfunded benefit obligation in the amount of
      $4.7
      million is included in long-term liabilities as an unfunded pension obligation
      on the Company’s consolidated balance sheet. Included in other assets at
      December 31, 2007 are marketable securities with an estimated value of $4.9
      million, which have been designated by the Company to be utilized to fund the
      Company’s SERP obligations.





Other
      Matters





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




-42-




New
      Financial Accounting Standards





In
      July
      2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in
      Income Taxes” ("FIN 48"). The interpretation requires a two step approach for
      recognizing and measuring tax benefits based on a recognition threshold of
“more
      likely than not”. The FASB also requires explicit disclosures about
      uncertainties in tax positions including a detailed rollforward of tax benefits
      that do not qualify for financial statement recognition. The adoption of FIN
      48
      is effective for fiscal years beginning after December 15, 2006. On January
      1,
      2007, the Company implemented FIN 48. At that date, the Company’s liability for
      uncertain tax positions amounted to $12.4 million, of which $7.2 million was
      classified as a noncurrent liability and the remainder was classified as a
      current liability as a component of income tax payable. There was no charge
      to
      equity upon adoption. For additional information regarding the accounting
      treatment and effect of FIN 48, see Note 8 of Notes to the Consolidated
      Financial Statements.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Post Retirement Plans”, an amendment of FASB
      Statements No. 87, 88, 106 and 132(R). SFAS 158 requires employers to recognize
      their defined benefit plans’ overfunded or underfunded status in their balance
      sheets, requires employers to measure plan assets and plan obligations as of
      the
      balance sheet date, immediately recognize any remaining transition obligation
      currently being deferred, and recognize actuarial gains and losses through
      other
      comprehensive income. The statement is effective for fiscal years ending after
      December 15, 2006. For additional information regarding the accounting treatment
      and effect on the Consolidated Balance Sheet of SFAS No. 158, see Note
      12 of Notes
      to the Consolidated Financial Statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
      enhances existing guidance for measuring assets and liabilities using fair
      value. This Standard provides a single definition of fair value, together with
      a
      framework for measuring it, and requires additional disclosure about the use
      of
      fair value to measure assets and liabilities. SFAS No. 157, as amended by FASB
      Staff Position 157-2, is effective for financial statements issued for fiscal
      years beginning after November 15, 2008, and interim periods within those fiscal
      years. The Company does not believe that SFAS No. 157 will have a material
      impact on its financial statements.





In
      February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option
      for Financial Assets and Financial Liabilities”, providing companies with an
      option to report selected financial assets and liabilities at fair value. The
      Standard’s objective is to reduce both complexity in accounting for financial
      instruments and the volatility in earnings caused by measuring related assets
      and liabilities differently. It also requires entities to display the fair
      value
      of those assets and liabilities for which the Company has chosen to use fair
      value on the face of the balance sheet. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. The Company does not believe that SFAS 159
      will have a material impact on its financial statements.




-43-




In
      June
      2007, the Emerging Issues Task Force of the FASB issued EITF Issue No. 07-3,
      "Accounting for Nonrefundable Advance Payments for Goods or Services Received
      for Use in Future Research and Development Activities," which is effective
      for
      calendar year companies on January 1, 2008. The Task Force concluded that
      nonrefundable advance payments for goods or services that will be used or
      rendered for future research and development activities should be deferred
      and
      capitalized. Such amounts should be recognized as an expense as the related
      goods are delivered or the services are performed, or when the goods or services
      are no longer expected to be provided. The Company is currently assessing the
      potential impact of implementing this standard.





In
      December 2007, the FASB issued SFAS 141(R), which replaces SFAS 141 “Business
      Combinations”. This Statement is intended to improve the relevance, completeness
      and representational faithfulness of the information provided in financial
      reports about the assets acquired and the liabilities assumed in a business
      combination. This Statement requires an acquirer to recognize the assets
      acquired, the liabilities assumed, and any noncontrolling interest in the
      acquiree at the acquisition date, measured at their fair values as of that
      date,
      with limited exceptions specified in the Statement. Under SFAS 141(R),
      acquisition-related costs, including restructuring costs, must be recognized
      separately from the acquisition and will generally be expensed as incurred.
      That
      replaces SFAS 141’s cost-allocation process, which required the cost of an
      acquisition to be allocated to the individual assets acquired and liabilities
      assumed based on their estimated fair values. SFAS 141(R) shall be applied
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual report period beginning on or after
      December 15, 2008. The Company will implement this Statement in
      2009.





In
      December 2007, the FASB issued SFAS No. 160 (“SFAS 160”) “Noncontrolling
      Interests in Consolidated Financial Statements”, which is effective on January
      1, 2009 for calendar year companies. SFAS 160 amends ARB 51 to establish
      accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. It also amends certain
      of ARB 51’s consolidation procedures for consistency with the requirements of
      SFAS 141(R ).
      The
      Company does not believe that SFAS 160 will have a material impact on its
      financial statements.




-44-




Item
      7A. Quantitative
      and Qualitative Disclosures About Market Risk





Fair
      Value of Financial Instruments — The estimated fair values of financial
      instruments have been determined by the Company using available market
      information and appropriate valuation methodologies.




The
      Company has not entered into, and does not expect to enter into, financial
      instruments for trading or hedging purposes. The Company does not currently
      anticipate entering into interest rate swaps and/or similar
      instruments.





The
      Company's carrying values of cash, marketable securities, accounts receivable,
      accounts payable and accrued expenses are a reasonable approximation of their
      fair value. At
      December 31, 2007, two of the Company’s investments - the Company’s investment
      in Toko stock and the Company’s investment in the Columbia Strategic Cash
      Portfolio (the “Columbia Portfolio”) have been subject to recent market declines
      and if this trend continues, it could have a negative impact on the Company’s
      results of operations. If the per share fair market value of the remaining
      1.8
      million shares of Toko stock were to decrease by $0.18 per share (10% of the
      December 31, 2007 Toko stock price), this would result in an additional
      unrealized loss of $0.3 million. This investment has been in a loss position
      since April 2007. While the Company has the ability and intent to hold the
      stock
      for an indefinite period of time, if the stock price does not regain a positive
      position within the next three to six months, this investment may be deemed
      other-than-temporarily impaired. This would result in recognition of a realized
      loss on the Toko investment (the associated pre-tax unrealized loss at December
      31, 2007 is $2.4 million). The Company’s investment in the Columbia portfolio
      has also been sensitive to the recent market decline. In December 2007, the
      Company was notified that its $25.7 million investment in the Columbia Portfolio
      was being liquidated and that the fund was converting from a fixed net asset
      value (“NAV”) to a floating NAV, which resulted in the Company’s recording a
      $0.3 million impairment charge. See Note 4 of the Notes to the Company’s
      Consolidated Financial Statements. As of December 31, 2007, the Company has
      a
      total of $23.1 million invested in the Columbia portfolio. If the NAV were
      to
      decline by 0.0987 (10% of the NAV of $0.9874 at December 31, 2007), the net
      impact to the Company’s results of operations and cash flows would be a decrease
      of income before provision for income taxes and cash flows from operating
      activities of approximately $2.3 million.





The
      Company enters into transactions denominated in U.S. Dollars, Hong Kong Dollars,
      the Macao Pataca, the Chinese Renminbi, Euros, British Pounds and the Czech
      Koruna. Fluctuations in the U.S. dollar exchange rate against these currencies
      could significantly impact the Company's consolidated results of
      operations.





The
      Company believes that a change in interest rates of 1% or 2% would not have
      a
      material effect on the Company's consolidated statement of operations or balance
      sheet.





Item
      8. Financial
      Statements and Supplementary Data





See
      the
      consolidated financial statements listed in the accompanying Index to
      Consolidated Financial Statements for the information required by this
      item.




-45-


BEL
                  FUSE INC.INDEXFinancial
                  Statements
              
              PageReport
                  of Independent RegisteredPublic
                  Accounting Firm
              
              F-1
                  - F-2Consolidated
                  Balance Sheets as ofDecember
                  31, 2007 and 2006
              
              F-3
                  - F-4Consolidated
                  Statements of Operations for Eachof
                  the Three Years in the Period EndedDecember
                  31, 2007
              
              F-5Consolidated
                  Statements of Stockholders' Equityfor
                  Each of the Three Years in the Period EndedDecember
                  31, 2007
              
              F-6
                  - F-7Consolidated
                  Statements of Cash Flows forEach
                  of the Three Years in the Period EndedDecember
                  31, 2007
              
              F-8
                  - F-10Notes
                  to Consolidated Financial Statements
              
              F-11
                  - F-44Condensed
                  Selected Quarterly Financial Data -Years
                  Ended December 31, 2007 and 2006(Unaudited)
              
              F-45







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, 2007 and 2006, and the related
      consolidated statements of operations, stockholders' equity and cash flows
      for
      each of the three years in the period ended December 31, 2007. Our audits also
      included the financial statement schedule listed in the Index at Item 15. We
      also have audited the Company’s internal control over financial reporting as of
      December 31, 2007, based on criteria established in *Internal
      Control—Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway
      Commission. **** The
      Company's management is responsible for these financial statements and financial
      statement schedule, for maintaining effective internal control over financial
      reporting, and for its assessment of the effectiveness of internal control
      over
      financial reporting included in the accompanying management’s report on internal
      control over financial reporting.  Our responsibility is to express an
      opinion on these financial statements and financial statement schedule, and
      an
      opinion on the Company's internal control over financial reporting based on
      our
      audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require that
      we plan and perform the audit to obtain reasonable assurance about whether
      the
      financial statements are free of material misstatement and whether effective
      internal control over financial reporting was maintained in all material
      respects.  Our audits of the financial statements included examining, on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, and evaluating the overall financial statement
      presentation. **** Our
      audit
      of internal control over financial reporting included obtaining an understanding
      of internal control over financial reporting, assessing the risk that a material
      weakness exists, testing and evaluating the design and operating effectiveness
      of internal control based on the assessed risk. Our audits also included
      performing such other procedures as we considered necessary in the
      circumstances.  We believe that our audits provide a reasonable basis for
      our opinions.




A
      company's internal control over financial reporting is a process designed by,
      or
      under the supervision of, the company's principal executive and principal
      financial officers, or persons performing similar functions, and effected by
      the
      company's board of directors, management, and other personnel to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles.  A company's internal control
      over financial reporting includes those policies and procedures that (1) pertain
      to the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in 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.




F-1




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Bel Fuse Inc. and
      subsidiaries as of December 31, 2007 and 2006, and the results of their
      operations and their cash flows for each of the three years in the period ended
      December 31, 2007, in conformity with accounting principles generally accepted
      in the United States of America.  Also, in our opinion, such financial
      statement schedule, when considered in relation to the basic consolidated
      financial statements taken as a whole, present fairly, in all material respects,
      the information set forth therein. Also, in our opinion, the Company maintained,
      in all material respects, effective internal control over financial reporting
      as
      of December 31, 2007, based on the criteria established in *Internal
      Control—Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission.




As
      discussed in Note 1 and Note 8 to the consolidated financial statements, the
      Company adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income
      Taxes” effective January 1, 2007. In addition, as discussed in Note 1 to the
      consolidated financial statements, the Company adopted Statement of Financial
      Accounting Standards (“SFAS”) No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106 and 132(R),” effective December 31, 2006 and SFAS No. 123(R),
“Share-Based Payment,” effective January 1, 2006.




*DELOITTE
      & TOUCHE LLP*




New
      York,
      New York


March
      14,
      2008




F-2




**BEL
        FUSE INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEETS**
 **(dollars
        in thousands)**
  December
                  31,2007
              
              2006**ASSETS**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              83,875
              
              $
              76,761Marketable
                  securities
              
              
              3,273
              
              
              15,576Short-term
                  investment
              
              
              20,542
              
              
              -Accounts
                  receivable - less allowance for doubtfulaccounts
                  of $977 and $1,087 at December 31,2007
                  and 2006, respectively
              
              
              52,217
              
              
              43,766Inventories
              
              
              39,049
              
              
              46,297Prepaid
                  expenses and other currentassets
              
              
              1,446
              
              
              1,382Refundable
                  income taxes
              
              
              3,168
              
              
              -Deferred
                  income taxes
              
              
              2,661
              
              
              1,666Assets
                  held for sale
              
              
              -
              
              
              848Total
                  Current Assets
              
              
              206,231
              
              
              186,296Property,
                  plant and equipment - net
              
              
              41,113
              
              
              44,289Restricted
                  cash
              
              
              4,553
              
              
              -Long-term
                  investment
              
              
              2,536
              
              
              -Deferred
                  income taxes
              
              
              4,364
              
              
              3,425Intangible
                  assets - net
              
              
              1,181
              
              
              1,892Goodwill
              
              
              28,447
              
              
              28,117Other
                  assets
              
              
              5,435
              
              
              4,478TOTAL
                  ASSETS
              
              $
              293,860
              
              $
              268,497See
                  notes to consolidated financial
                  statements.




F-3


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS****(dollars
                  in thousands, except share and per share data)**December
                  31,2007
              
              2006**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Accounts
                  payable
              
              $
              16,145
              
              $
              17,245Accrued
                  expenses
              
              
              12,113
              
              
              12,713Income
                  taxes payable
              
              
              4,007
              
              
              11,094Dividends
                  payable
              
              
              795
              
              
              567Total
                  Current Liabilities
              
              
              33,060
              
              
              41,619Long-term
                  Liabilities:Deferred
                  gain on sale of property
              
              
              4,645
              
              
              -Liability
                  for uncertain tax positions
              
              
              6,930
              
              
              -Minimum
                  pension obligation andunfunded
                  pension liability
              
              
              4,698
              
              
              4,728Total
                  Long-term Liabilities
              
              
              16,273
              
              
              4,728Total
                  Liabilities
              
              
              49,333
              
              
              46,347Commitments
                  and ContingenciesStockholders'
                  Equity:Preferred
                  stock, no par value, authorized 1,000,000shares;
                  none issued
              
              
              -
              
              
              -Class
                  A common stock, par value $.10 per share -authorized
                  10,000,000 shares; outstanding2,545,644
                  and 2,702,677 shares, respectively(net
                  of 1,072,770 treasury shares)
              
              
              255
              
              
              270Class
                  B common stock, par value $.10 per share -authorized
                  30,000,000 shares; outstanding9,286,627
                  and 9,167,665 shares, respectively(net
                  of 3,218,310 treasury shares)
              
              
              929
              
              
              917Additional
                  paid-in capital
              
              
              29,107
              
              
              31,826Retained
                  earnings
              
              
              214,580
              
              
              190,953Accumulated
                  other comprehensive loss
              
              
              (344
              )
              
              (1,816
              )Total
                  Stockholders' Equity
              
              
              244,527
              
              
              222,150TOTAL
                  LIABILITIES ANDSTOCKHOLDERS'
                  EQUITY
              
              $
              293,860
              
              $
              268,497See
                  notes to consolidated financial
                  statements.




F-4


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF OPERATIONS****(dollars
                  in thousands, except share and per share data)**Years
                  Ended December 31,2007
              
              2006
              
              2005Net
                  Sales
              
              $
              259,137
              
              $
              254,933
              
              $
              215,916Costs
                  and expenses:Cost
                  of sales
              
              
              203,007
              
              
              192,985
              
              
              156,147Selling,
                  general and administrative
              
              
              36,117
              
              
              37,800
              
              
              33,152Gain
                  on sale of property, plant and equipment
              
              
              (5,499
              )
              
              -
              
              
              -Casualty
                  loss
              
              
              -
              
              
              1,030
              
              
              -233,625
              
              
              231,815
              
              
              189,299Income
                  from operations
              
              
              25,512
              
              
              23,118
              
              
              26,617Interest
                  expense and other costs
              
              
              (123
              )
              
              (71
              )
              
              (325
              )Gain
                  on sale of marketable securities, net of impairment
              
              
              2,146
              
              
              5,150
              
              
              -Interest
                  income
              
              
              4,169
              
              
              2,851
              
              
              1,423Earnings
                  before provision for income taxes
              
              
              31,704
              
              
              31,048
              
              
              27,715Income
                  tax provision
              
              
              5,368
              
              
              5,845
              
              
              7,482Net
                  earnings
              
              $
              26,336
              
              $
              25,203
              
              $
              20,233Earnings
                  per shareEarnings
                  per Class A common shareBasic
              
              $
              2.11
              
              $
              2.03
              
              $
              1.67Diluted
              
              $
              2.11
              
              $
              2.03
              
              $
              1.67Weighted
                  average Class A common sharesoutstanding
                  - basic
              
              
              2,637,409
              
              
              2,702,677
              
              
              2,702,677Weighted
                  average Class A common sharesoutstanding
                  - diluted
              
              
              2,637,409
              
              
              2,702,677
              
              
              2,702,677Earnings
                  per Class B common shareBasic
              
              $
              2.25
              
              $
              2.16
              
              $
              1.79Diluted
              
              $
              2.24
              
              $
              2.15
              
              $
              1.77Weighted
                  average Class B common sharesoutstanding
                  - basic
              
              
              9,244,198
              
              
              9,104,897
              
              
              8,807,498Weighted
                  average Class B common sharesoutstanding
                  - diluted
              
              
              9,266,016
              
              
              9,149,445
              
              
              8,890,581See
                  notes to consolidated financial
                  statements.




F-5


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS' EQUITY****(dollars
                  in thousands)**AccumulatedCompre-
              
              
              
              Other
              
              Class
                  A
              
              Class
                  B
              
              Additional
              
              Stock-hensive
              
              Retained
              
              Comprehensive
              
              Common
              
              Common
              
              Paid-In
              
              BasedTotal
              
              Income
              
              Earnings
              
              Income
                  (loss)
              
              Stock
              
              Stock
              
              Capital
              
              CompensationBalance,
                  January 1, 2005
              
              $
              178,461
              
              
              
              
              $
              149,949
              
              $
              5,387
              
              $
              270
              
              $
              866
              
              $
              21,989
              
              
              -Exercise
                  of stock options
              
              
              4,116
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              20
              
              
              4,096Tax
                      benefits arising from the disposition of non-qualified incentive
                      stock
                      options
              
              
              430
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              430
              
              
              -Cash
                      dividends declared on Class A common stock
              
              
              (431
              )
              
              
              
              
              (431
              )Cash
                      dividends declared on Class B common stock
              
              
              (1,760
              )
              
              
              
              
              (1,760
              )Issuance
                  of restricted common stock
              
              
              5,214
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              15
              
              
              5,199Deferred
                  stock-based compensation
              
              
              (3,742
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (3,742
              )Currency
                  translation adjustment
              
              
              (669
              )
              $
              (669
              )
              
              
              
              
              (669
              )Change
                      in unrealized gain or loss on marketable securities - net of
                      taxes
              
              
              (454
              )
              
              (454
              )
              
              
              
              
              (454
              )Stock-based
                  compensation expense
              
              
              179
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              179Net
                  earnings
              
              
              20,233
              
              
              20,233
              
              
              20,233Comprehensive
                  income
              
              
              
              
              $
              19,110Balance,
                  December 31, 2005
              
              
              201,577
              
              
              
              
              
              167,991
              
              
              4,264
              
              
              270
              
              
              901
              
              
              31,714
              
              
              (3,563
              )Exercise
                  of stock options
              
              
              3,187
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14
              
              
              3,173Tax
                      benefits arising from the disposition of non-qualified incentive
                      stock
                      options
              
              
              336
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              336
              
              
              -Cash
                      dividends declared on Class A common stock
              
              
              (431
              )
              
              
              
              
              (431
              )Cash
                      dividends declared on Class B common stock
              
              
              (1,810
              )
              
              
              
              
              (1,810
              )Issuance
                  of restricted common stock
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2
              
              
              (2
              )Deferred
                  stock-based compensation
              
              
              (1,403
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,403
              )
              
              -Currency
                  translation adjustment
              
              
              387
              
              $
              387
              
              
              
              
              
              387Change
                    in unrealized gain or loss on marketable securities - net of
                    taxes
              
              
              (4,820
              )
              
              (4,820
              )
              
              
              
              
              (4,820
              )Stock-based
                  compensation expense
              
              
              1,571
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,571
              
              
              -Adoption
                  of SFAS No. 123 (R)
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,563
              )
              
              3,563Unfunded
                    SERP liability-net of taxes upon adoption of SFAS No.
                    158
              
              
              (1,647
              )
              
              
              
              
              
              
              
              (1,647
              )Net
                  earnings
              
              
              25,203
              
              
              25,203
              
              
              25,203Comprehensive
                  income
              
              
              
              
              $
              20,770Balance,
                  December 31, 2006
              
              
              222,150
              
              
              
              
              
              190,953
              
              
              (1,816
              )
              
              270
              
              
              917
              
              
              31,826
              
              
              -See
                  notes to consolidated financial
                  statements.




F-6


**BEL
                  FUSE INC. AND SUBSIDIARIES**
                **CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS' EQUITY**
                **(dollars
                  in thousands)**
 AccumulatedCompre-
                
                
                
                Other
                
                Class
                    A
                
                Class
                    B
                
                Additionalhensive
                
                Retained
                
                Comprehensive
                
                Common
                
                Common
                
                Paid-InTotal
                
                Income
                
                Earnings
                
                Income
                    (loss)
                
                Stock
                
                Stock
                
                CapitalBalance,
                    December 31, 2006
                
                $
                222,150
                
                
                
                
                $
                190,953
                
                $
                (1,816
                )
                $
                270
                
                $
                917
                
                $
                31,826Exercise
                    of stock options
                
                
                1,452
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                6
                
                
                1,446Tax
                    benefits arising from the dispositionof
                    non-qualified incentive stock options
                
                
                149
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                149Cash
                    dividends declared on Class Acommon
                    stock
                
                
                (534
                )
                
                
                
                
                (534
                )Cash
                    dividends declared on Class Bcommon
                    stock
                
                
                (2,175
                )
                
                
                
                
                (2,175
                )Issuance
                    of restricted common stock
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7
                
                
                (7
                )Termination
                    of restricted common stock
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1
                )
                
                1Repurchase/retirement
                    of Class Acommon
                    stock
                
                
                (5,733
                )
                
                
                
                
                
                
                
                
                
                
                (15
                )
                
                
                
                
                (5,718
                )Currency
                    translation adjustment
                
                
                960
                
                
                960
                
                
                
                
                
                960Unrealized
                    holding gains on marketablesecurites
                    arising during the year, net of taxes
                
                
                2,077
                
                
                2,077
                
                
                
                
                
                2,077Reclassification
                    adjustment for gainsincluded
                    in net earnings, net of taxes
                
                
                (2,058
                )
                
                (2,058
                )
                
                
                
                
                (2,058
                )Stock-based
                    compensation expense
                
                
                1,410
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,410Change
                    in unfunded SERP liability,net
                    of taxes
                
                
                493
                
                
                493
                
                
                
                
                
                493Net
                    earnings
                
                
                26,336
                
                
                26,336
                
                
                26,336Comprehensive
                    income
                
                
                
                
                $
                27,808Balance,
                    December 31, 2007
                
                $
                244,527
                
                
                
                
                $
                214,580
                
                $
                (344
                )
                $
                255
                
                $
                929
                
                $
                29,107
  
 See
                  notes to consolidated financial
                  statements.


F-7


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(dollars
                  in thousands)**Years
                  Ended December 31,2007
              
              2006
              
              2005Cash
                  flows from operating activities:Net
                  earnings
              
              $
              26,336
              
              $
              25,203
              
              $
              20,233Adjustments
                  to reconcile net income to netcash
                  provided by operating activities:Depreciation
                  and amortization
              
              
              7,921
              
              
              9,027
              
              
              10,104Casualty
                  loss
              
              
              -
              
              
              1,030
              
              
              -Stock-based
                  compensation
              
              
              1,465
              
              
              1,571
              
              
              248Excess
                  tax benefits from share-basedpayment
                  arrangements
              
              
              (149
              )
              
              (336
              )
              
              -Gain
                  on sale of marketable securities, net ofimpairment
                  charge in 2007 of $294
              
              
              (2,146
              )
              
              (5,150
              )
              
              -Gain
                  on sale of property, plant and equipment
              
              
              (5,499
              )
              
              -
              
              
              -Other,
                  net
              
              
              207
              
              
              678
              
              
              1,464Deferred
                  income taxes
              
              
              (2,039
              )
              
              (988
              )
              
              (3,602
              )Changes
                  in operating assetsand
                  liabilities (net of acquisitions)
              
              
              (6,250
              )
              
              (12,003
              )
              
              2,825Net
                  Cash Provided byOperating
                  Activities
              
              
              19,846
              
              
              19,032
              
              
              31,272Cash
                  flows from investing activities:Purchase
                  of property, plant and equipment
              
              
              (9,169
              )
              
              (9,364
              )
              
              (7,746
              )Purchase
                  of intangible asset
              
              
              (100
              )
              
              -
              
              
              -Purchase
                  of marketable securities
              
              
              (11,801
              )
              
              (3,634
              )
              
              (17,999
              )Redesignation
                  of cash equivalent toinvestment
                  (Note 4)
              
              
              (25,684
              )
              
              -
              
              
              -Redemption
                  of investment
              
              
              2,284
              
              
              -
              
              
              -Payment
                  of investment banking advisory fee
              
              
              -
              
              
              (300
              )
              
              -Payment
                  for acquisitions - net of cash acquired
              
              
              -
              
              
              (6,961
              )
              
              (20,807
              )Proceeds
                  from sale of marketable securities
              
              
              26,647
              
              
              24,490
              
              
              1,622Proceeds
                  from sale of property, plant and equipment
              
              
              11,332
              
              
              -
              
              
              253Net
                  Cash (Used in) Provided byInvesting
                  Activities
              
              
              (6,491
              )
              
              4,231
              
              
              (44,677
              )See
                  notes to consolidated financial
                  statements.




F-8


**BEL
                  FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (Continued)****(dollars
                  in thousands)**Years
                  Ended December 31,2007
              
              2006
              
              2005Cash
                  flows from financing activities:Proceeds
                  from borrowings
              
              
              -
              
              
              -
              
              
              12,000Loan
                  repayments
              
              
              -
              
              
              -
              
              
              (19,361
              )Proceeds
                  from exercise of stock options
              
              
              1,452
              
              
              3,187
              
              
              4,116Dividends
                  paid to common shareholders
              
              
              (2,473
              )
              
              (2,223
              )
              
              (2,183
              )Purchase
                  and retirement of Class Acommon
                  stock
              
              
              (5,733
              )
              
              -
              
              
              -Excess
                  tax benefits from share-basedpayment
                  arrangements
              
              
              149
              
              
              336
              
              
              -Net
                  Cash (Used In) Provided byFinancing
                  Activities
              
              
              (6,605
              )
              
              1,300
              
              
              (5,428
              )Effect
                  of exchange rate changes on cash
              
              
              364
              
              
              200
              
              
              (367
              )Net
                  Increase (decrease) inCash
                  and Cash Equivalents
              
              
              7,114
              
              
              24,763
              
              
              (19,200
              )Cash
                  and Cash Equivalents-
                  beginning of year
              
              
              76,761
              
              
              51,998
              
              
              71,198Cash
                  and Cash Equivalents-
                  end of year
              
              $
              83,875
              
              $
              76,761
              
              $
              51,998Changes
                  in operating assetsand
                  liabilities (net of acquisitions) consist of:Increase
                  in accountsreceivable
              
              $
              (7,934
              )
              $
              (4,280
              )
              $
              (2,638
              )Decrease
                  (increase) in inventories
              
              
              7,482
              
              
              (13,501
              )
              
              (1,145
              )(Increase)
                  decrease in prepaid expensesand
                  other current assets
              
              
              (1
              )
              
              288
              
              
              809Increase
                  in other assets
              
              
              (1,135
              )
              
              (499
              )
              
              (384
              )(Decrease)
                  increase in accounts payable
              
              
              (1,184
              )
              
              2,658
              
              
              3,630(Decrease)
                  increase in income taxes
              
              
              (3,194
              )
              
              1,590
              
              
              3,072(Decrease)
                  increase inaccrued
                  expenses
              
              
              (284
              )
              
              1,741
              
              
              (519
              )$
              (6,250
              )
              $
              (12,003
              )
              $
              2,825See
                  notes to consolidated financial
                  statements.
 
 F-9
 **BEL
                    FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS (Concluded)****(dollars
                    in thousands)**Year
                    Ended December 31,2007
                
                2006
                
                2005Supplementary
                    information:Cash
                    paid during the year for:Income
                    taxes
                
                $
                10,809
                
                $
                4,451
                
                $
                6,578Interest
                
                $
                -
                
                $
                71
                
                $
                325Details
                    of acquisitions:Fair
                    value of assets acquired (excludingcash
                    acquired of $312 in 2005)
                
                $
                -
                
                $
                -
                
                $
                6,077Intangibles
                
                
                -
                
                
                447
                
                
                2,658Goodwill
                
                
                -
                
                
                6,000
                
                
                12,546-
                
                
                6,447
                
                
                21,281Amounts
                    paid (held back) onacquisition
                    payment
                
                
                -
                
                
                514
                
                
                (474
                )Cash
                    paid for acquisitions
                
                $
                -
                
                $
                6,961
                
                $
                20,807See
                    notes to consolidated financial
                    statements.




F-10




BEL
      FUSE
      INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS




AS
      OF AND
      FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005




1.  DESCRIPTION
      OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





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





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





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





CASH
      EQUIVALENTS - Cash
      equivalents include short-term investments in U.S. treasury bills and commercial
      paper with an original maturity of three months or less when purchased. At
      December 31, 2007 and December 31, 2006, cash equivalents approximated $33.4
      million and $35.8 million, respectively.





MARKETABLE
      SECURITIES - The
      Company generally classifies its equity securities as "available for sale",
      and
      accordingly, reflects unrealized gains and losses, net of deferred income taxes,
      as a component of accumulated other comprehensive income. In
      accordance with Financial Accounting Standards Board (“FASB”) Staff Position
      Nos. FAS 115-1 and FAS 124-1 “The Meaning of Other-Than-Temporary Impairment and
      Its Application to Certain Investments” (“FSP 115-1”), the Company periodically
      reviews its marketable securities and determines whether the investments are
      other-than-temporarily impaired. If the investments are deemed to be
      other-than-temporarily impaired, the investments are written down to their
      then
      current fair market value. See Note 4 for further discussion regarding an
      impairment charge taken in the fourth quarter of 2007.





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





F-11





ACQUISITION
      EXPENSES - The
      Company currently capitalizes all direct costs associated with proposed
      acquisitions. If the proposed acquisition is consummated, such costs will be
      included as a component of the overall cost of the acquisition. Such costs
      are
      expensed at such time as the Company deems the consummation of a proposed
      acquisition to be unsuccessful. Effective January 1, 2009, acquisition-related costs, including restructuring
      costs, will be recognized separately from the acquisition and will generally
      be
      expensed as incurred in accordance with Statement of Financial Accounting
      Standards (“SFAS”) No. 141(R), “Business Combinations”.




FOREIGN
      CURRENCY TRANSLATION - The
      functional currency for some foreign operations is the local currency. Assets
      and liabilities of foreign operations are translated at exchange rates as of
      the
      balance sheet date, and income, expense and cash flow items are translated
      at
      the average exchange rate for the applicable period. Translation adjustments
      are
      recorded in Other Comprehensive Income. The U.S. Dollar is used as the
      functional currency for certain foreign operations that conduct their business
      in U.S. Dollars. Realized
      foreign currency losses were ($0.2) million for the year ended December 31,
      2006, and have been expensed as a component of selling, general and
      administrative expense in the consolidated statement of operations. Realized
      foreign currency gains (losses) for the years ended December 31, 2007 or 2005
      were not material.





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





The
      Company places its temporary cash investments with quality financial
      institutions and commercial issuers of short-term paper and, by policy, limits
      the amount of credit exposure in any one financial instrument. In December
      2007,
      the Company was notified that a $25.7 million investment in the Columbia
      Strategic Cash Portfolio was being liquidated and the fund was converting from
      a
      fixed net asset value (NAV) to a floating NAV. As a result, the Company recorded
      a $0.3 million impairment charge in the fourth quarter of 2007. See Note 4
      for
      additional information regarding this liquidation.





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





F-12


REVENUE
      RECOGNITION - The
      Company recognizes revenue in accordance with the guidance contained in SEC
      Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
      Statements". Revenue is recognized when the product has been delivered and
      title
      and risk of loss has passed to the customer, collection of the resulting
      receivable is deemed reasonably assured by management, persuasive evidence
      of an
      arrangement exists and the sales price is fixed and determinable. Substantially
      all of the Company's shipments are FCA (free carrier) which provides for title
      to pass upon delivery to the customer's freight carrier. Some product is shipped
      DDP/DDU with title passing when the product arrives at the customer's dock.
      DDP
      is defined as Delivered Duty Paid by the Company and DDU is Delivered Duty
      Unpaid by the Company.





For
      certain customers, the Company provides consigned inventory, either at the
      customer’s facility or at a third party warehouse. Sales of consigned inventory
      are recorded when the customer withdraws inventory from consignment **.** During
      all periods in 2007, 2006 and 2005, inventory on consignment was
      immaterial.





The
      Company typically has a twelve-month warranty policy for workmanship defects.
      During June 2007, the Company established a warranty accrual related to certain
      defective parts sold to a customer primarily within the same quarter, which
      the
      Company is replacing, in the amount of approximately $1.2 million, which
      included a $0.4 million inventory write off of inventory on hand. Such accrual
      has been classified within cost of sales. As of December 31, 2007, the Company
      has a remaining warranty accrual related to these defective parts in the amount
      of $0.9 million. The Company believes that this liability will be utilized
      in
      2008. As the Company has not historically had significant warranty claims,
      no
      general reserves for warranties have been established.





The
      Company is not contractually obligated to accept returns except for defective
      product or in instances where the product does not meet the customer's quality
      specifications. However, the Company may permit its customers to return product
      for other reasons. In these instances, the Company would generally require
      a
      significant cancellation penalty payment by the customer. The Company estimates
      such returns, where applicable, based upon management's evaluation of historical
      experience, market acceptance of products produced and known negotiations with
      customers. Such estimates are deducted from sales and provided for at the time
      revenue is recognized.





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





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-13





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





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




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





Effective
      January 1, 2007, uncertain tax positions are accounted for in accordance with
      FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes.” See
      Note 8 for further discussion.





EARNINGS
      PER SHARE - The
      Company utilizes the two-class method to report its earnings per share. The
      two-class method is an earnings allocation formula that determines earnings
      per
      share for each class of common stock according to dividends declared and
      participation rights in undistributed earnings. The Company’s Certificate of
      Incorporation, as amended, states that Class B common shares are entitled to
      dividends at least 5% greater than dividends paid to Class A common shares,
      resulting in the two-class method of computing earnings per share. In computing
      earnings per share, the Company has allocated dividends declared to Class A
      and
      Class B based on amounts actually declared for each class of stock and 5% more
      of the undistributed earnings have been allocated to Class B shares than to
      the
      Class A shares on a per share basis. 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, for
      each class of common stock, 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 for Class A and B common shares which, if
      exercised, would have a dilutive effect on earnings per share.





F-14




The
      earnings and weighted average shares outstanding used in the computation of
      basic and diluted earnings per share are as follows (dollars in thousands,
      except share and per share data):


2007
              
              2006
              
              2005Numerator:Net
                  earnings
              
              $
              26,336
              
              $
              25,203
              
              $
              20,233Less
                  Dividends declared:Class
                  A
              
              
              534
              
              
              431
              
              
              431Class
                  B (1)
              
              
              2,217
              
              
              1,810
              
              
              1,760Undistributed
                  earnings
              
              $
              23,585
              
              $
              22,962
              
              $
              18,042Undistributed
                  earnings allocation - basic:Class
                  A undistributed earnings
              
              $
              5,039
              
              $
              5,061
              
              $
              4,080Class
                  B undistributed earnings
              
              
              18,546
              
              
              17,901
              
              
              13,962Total
                  undistributed earnings
              
              $
              23,585
              
              $
              22,962
              
              $
              18,042Undistributed
                  earnings allocation - diluted:Class
                  A undistributed earnings
              
              $
              5,030
              
              $
              5,041
              
              $
              4,051Class
                  B undistributed earnings
              
              
              18,555
              
              
              17,921
              
              
              13,991Total
                  undistributed earnings
              
              $
              23,585
              
              $
              22,962
              
              $
              18,042Net
                  earnings allocation - basic:Class
                  A undistributed earnings
              
              $
              5,573
              
              $
              5,492
              
              $
              4,511Class
                  B undistributed earnings
              
              
              20,763
              
              
              19,711
              
              
              15,722Net
                  earnings
              
              $
              26,336
              
              $
              25,203
              
              $
              20,233Net
                  earnings allocation - diluted:Class
                  A undistributed earnings
              
              $
              5,564
              
              $
              5,472
              
              $
              4,482Class
                  B undistributed earnings
              
              
              20,772
              
              
              19,731
              
              
              15,751Net
                  earnings
              
              $
              26,336
              
              $
              25,203
              
              $
              20,233Denominator:Weighted
                  average shares outstanding:Class
                  A - basic and diluted
              
              
              2,637,409
              
              
              2,702,677
              
              
              2,702,677Class
                  B - basic
              
              
              9,244,198
              
              
              9,104,897
              
              
              8,807,498Dilutive
                  impact of stock options andunvested
                  restricted stock awards
              
              
              21,818
              
              
              44,548
              
              
              83,083Class
                  B - diluted
              
              
              9,266,016
              
              
              9,149,445
              
              
              8,890,581Earnings
                  per share:Class
                  A - basic
              
              $
              2.11
              
              $
              2.03
              
              $
              1.67Class
                  A - diluted
              
              $
              2.11
              
              $
              2.03
              
              $
              1.67Class
                  B - basic
              
              $
              2.25
              
              $
              2.16
              
              $
              1.79Class
                  B - diluted
              
              $
              2.24
              
              $
              2.15
              
              $
              1.77
  (1)
              Includes
                  dividends on restricted shares which were expensed in the fourth
                  quarter
                  of 2007


During
      the years ended December 31, 2007, 2006 and 2005, respectively, 14,000, 14,000,
      and 20,000 outstanding options were not included in the foregoing computations
      for Class B common shares because they were antidilutive.




F-15





STOCK-BASED
      COMPENSATION - The
      Company has one stock-based compensation plan under which both incentive
      stock-options and restricted stock awards are granted to employees and
      directors. Effective January 1, 2006, the Company accounts for stock-based
      compensation under SFAS No. 123 (R), "Share-Based Payment". The Company adopted
      SFAS 123(R) using the modified prospective method. Under modified prospective
      application, SFAS 123(R) applies to new awards and to awards modified,
      repurchased, or cancelled after the required effective date. Additionally,
      compensation costs for the portion of the awards for which the requisite service
      has not been rendered that are outstanding as of the required effective date
      are
      being recognized as the requisite service is rendered after the required
      effective date. The compensation cost for the portion of awards is based on
      the
      grant-date fair value of those awards as calculated for either recognition
      or
      pro forma disclosures under SFAS 123. Changes to the grant-date fair value
      of
      equity awards granted before the required effective date of this Statement
      are
      precluded. The compensation cost for those earlier awards is attributed to
      periods beginning on or after the required effective date of SFAS 123(R) using
      the attribution method that was used under SFAS 123, except that the method
      of
      recognizing forfeitures only as they occur was not continued.





During
      the years ended December 31, 2007, 2006 and 2005, the Company issued 74,200,
      21,600 and 152,400 class B common shares, respectively, under a restricted
      stock
      plan to various employees and directors. For additional information regarding
      the accounting treatment and effect on the Consolidated Financial Statements
      see
      Note 13 of Notes to the Consolidated Financial Statements.





F-16


Prior
      to
      January 1, 2006, the Company accounted for stock option grants issued to
      employees in accordance with Accounting Principles Board Opinion No. 25
      "Accounting for Stock Issued to Employees", and had adopted the disclosure
      only
      requirements of SFAS No. 123, "Accounting for Stock-Based Compensation", as
      amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and
      Disclosure, an amendment of FASB Statement No. 123”. As such, for periods prior
      to January 1, 2006, the Company presents pro forma net earnings and earnings
      per
      share as if the fair-value-based method of accounting had been applied under
      SFAS No. 123 (dollars in thousands, except per share data).


Year
                  EndedDecember
                  31, 2005Net
                  earnings - as reported
              
              $
              20,233Add:
                  Stock-based compensationexpense
                  included in net earnings,net
                  of taxes, as reported
              
              
              179Deduct:
                  Total stock-basedemployee
                  compensation expensedetermined
                  under fair value basedmethod
                  for all awards,net
                  of taxes
              
              
              (643
              )Net
                  earnings- pro forma
              
              $
              19,769Earnings
                  per Class A common share -basic-as
                  reported
              
              $
              1.67Earnings
                  per Class A common share -basic-pro
                  forma
              
              $
              1.63Earnings
                  per Class A common share -diluted-as
                  reported
              
              $
              1.67Earnings
                  per Class A common share -diluted-pro
                  forma
              
              $
              1.63Earnings
                  per Class B common share -basic-as
                  reported
              
              $
              1.79Earnings
                  per Class B common share -basic-pro
                  forma
              
              $
              1.74Earnings
                  per Class B common share -diluted-as
                  reported
              
              $
              1.77Earnings
                  per Class B common share -diluted-pro
                  forma
              
              $
              1.73




No
      options were granted during the years ended December 31, 2007, 2006 and
      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, 2007, 2006
      and 2005 amounted to $7.2 million, $6.6 million and $7.3 million, respectively.





F-17


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





FAIR
      VALUE OF FINANCIAL INSTRUMENTS - For
      financial instruments, including cash and cash equivalents, marketable
      securities, accounts receivable, accounts payable and accrued expenses, the
      carrying amount approximates fair value because of the short maturities of
      such
      instruments.





RECLASSIFICATIONS -
      Certain reclassifications have been made to prior period amounts to conform
      to
      the current year presentation, principally in
      the
      detailed disclosures within the footnote pertaining to Property, Plant and
      Equipment .





NEW
      FINANCIAL ACCOUNTING STANDARDS





In
      July
      2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in
      Income Taxes” ("FIN 48"). The interpretation requires a two step approach for
      recognizing and measuring tax benefits based on a recognition threshold of
“more
      likely than not”. The FASB also requires explicit disclosures about
      uncertainties in tax positions including a detailed rollforward of tax benefits
      that do not qualify for financial statement recognition. The adoption of FIN
      48
      is effective for fiscal years beginning after December 15, 2006. On January
      1,
      2007, the Company implemented FIN 48. At that date, the Company’s liability for
      uncertain tax positions amounted to $12.4 million, of which $7.2 million was
      classified as a noncurrent liability and the remainder was classified as a
      current liability as a component of income tax payable. There was no charge
      to
      equity upon adoption. For additional information regarding the accounting
      treatment and effect of FIN 48, see Note 8 of Notes to the Consolidated
      Financial Statements.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Post Retirement Plans”, an amendment of FASB
      Statements No. 87, 88, 106 and 132(R). SFAS 158 requires employers to recognize
      their defined benefit plans’ overfunded or underfunded status in their balance
      sheets, requires employers to measure plan assets and plan obligations as of
      the
      balance sheet date, immediately recognize any remaining transition obligation
      currently being deferred, and recognize actuarial gains and losses through
      other
      comprehensive income. The statement is effective for fiscal years ending after
      December 15, 2006. For additional information regarding the accounting treatment
      and effect on the Consolidated Balance Sheet of SFAS No. 158, see Note
      12 of Notes to the Consolidated Financial Statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which
      enhances existing guidance for measuring assets and liabilities using fair
      value. This Standard provides a single definition of fair value, together with
      a
      framework for measuring it, and requires additional disclosure about the use
      of
      fair value to measure assets and liabilities.




F-18


SFAS
      No.
      157, as amended by FASB Staff Position 157-2, is effective for financial
      statements issued for fiscal years beginning after November 15, 2008, and
      interim periods within those fiscal years. The Company does not believe that
      SFAS No. 157 will have a material impact on its financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option
      for Financial Assets and Financial Liabilities”, providing companies with an
      option to report selected financial assets and liabilities at fair value. The
      Standard’s objective is to reduce both complexity in accounting for financial
      instruments and the volatility in earnings caused by measuring related assets
      and liabilities differently. It also requires entities to display the fair
      value
      of those assets and liabilities for which the Company has chosen to use fair
      value on the face of the balance sheet. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. The Company does not believe that SFAS No.
      159 will have a material impact on its financial statements.





In
      June
      2007, the Emerging Issues Task Force of the FASB issued EITF Issue No. 07-3,
      "Accounting for Nonrefundable Advance Payments for Goods or Services Received
      for Use in Future Research and Development Activities," which is effective
      for
      calendar year companies on January 1, 2008. The Task Force concluded that
      nonrefundable advance payments for goods or services that will be used or
      rendered for future research and development activities should be deferred
      and
      capitalized. Such amounts should be recognized as an expense as the related
      goods are delivered or the services are performed, or when the goods or services
      are no longer expected to be provided. The Company is currently assessing the
      potential impact of implementing this standard.





In
      December 2007, the FASB issued SFAS 141(R), which replaces SFAS 141 “Business
      Combinations”. This statement is intended to improve the relevance, completeness
      and representational faithfulness of the information provided in financial
      reports about the assets acquired and the liabilities assumed in a business
      combination. This Statement requires an acquiror to recognize the assets
      acquired, the liabilities assumed, and any noncontrolling interest in the
      acquiree at the acquisition date, measured at their fair values as of that
      date,
      with limited exceptions specified in the Statement. Under SFAS 141(R),
      acquisition-related costs, including restructuring costs, must be recognized
      separately from the acquisition and will generally be expensed as incurred.
      That
      replaces SFAS 141’s cost-allocation process, which required the cost of an
      acquisition to be allocated to the individual assets acquired and liabilities
      assumed based on their estimated fair values. SFAS 141(R) shall be applied
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual report period beginning on or after
      December 15, 2008. The Company will implement this statement in
      2009.





In
      December 2007, the FASB issued SFAS No. 160 (“SFAS 160”) “Noncontrolling
      Interests in Consolidated Financial Statements”, which is effective on January
      1, 2009 for calendar year companies. SFAS 160 amends ARB 51 to establish
      accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. It also amends certain
      of ARB 51’s consolidation procedures for consistency with the requirements of
      SFAS 141(R). The
      Company does not believe that SFAS 160 will have a material impact on its
      financial statements.





F-19





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 was due to the sellers and was paid by the Company during June 2006.
      Netwatch s.r.o. is a designer and manufacturer of high-performance fiber optic
      and copper cable assemblies for data and telecommunication applications.
      Approximately $1.0 million of goodwill arose from the transaction which goodwill 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.





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. 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 $2.6 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, 2005 (dollars in
      thousands, except per share data):


Year
                  EndedDecember
                  31, 2005Net
                  sales
              
              $
              221,227Net
                  earnings
              
              
              20,026Earnings
                  per share - dilutedClass
                  A
              
              
              1.65Class
                  B
              
              
              1.75


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, 2005.  Such
      information should not be construed as a representation of the future results
      of
      operations of the Company.




F-20




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.





Other
      intangibles include patents, product information, covenants not-to-compete
      and
      supply agreements. Amounts assigned to these intangibles have been determined
      by
      management. Management considered a number of factors in determining the
      allocations, including valuations and independent appraisals. Other intangibles
      are being amortized over 1 to 10 years. Amortization expense was $0.8 million,
      $1.8 million and $2.6 million for the years ended December 31, 2007, 2006 and
      2005, 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 was 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 was
      to be paid
      $2.0 million in contingent purchase price payments if sales reached $15.0
      million and an additional $4.0 million if sales reached $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  and
      during February
      2006, E-Power was paid $2.0 million in contingent purchase price
      payments . **** During
      September 2006, an additional $4.0 million was earned when
      sales reached $25.0 million on a cumulative basis and,
      as a
      result, $4.0 million was paid in November 2006, and accounted for as additional
      purchase price and as an increase to goodwill. No additional payments will
      be
      made under the E-Power agreement.





Current
      Concepts was
      to
      be paid 16%
      of the first $10.0 million in sales through May 2007. This $10.0 million
      benchmark was reached during the second quarter of 2006. During
      the years ended December 31, 2006 and 2005, the Company paid approximately
      $0.4
      million and $0.5 million, respectively, in contingent purchase price payments
      to
      Current Concepts. The contingent purchase price payments for Current Concepts
      were accounted for as additional purchase price and as an increase to covenants
      not to compete within intangible assets when such payment obligations were
      incurred. No additional payments will be made under the Current Concepts
      agreement.





F-21


The
      changes in the carrying value of goodwill classified by geographic reporting
      units, net of accumulated amortization, for the years ended December 31, 2007
      and 2006 are as follows (dollars in thousands):


Total
              
              Asia
              
              North
                  America
              
              EuropeBalance,
                  January 1, 2006
              
              $
              22,428
              
              $
              6,407
              
              $
              14,413
              
              $
              1,608Goodwill
                  related to contingentpurchase
                  price payments
              
              
              6,000
              
              
              6,000
              
              
              -
              
              
              -Purchase
                  price adjustment -reclassification
                  to intangible assets
              
              
              (670
              )
              
              -
              
              
              (670
              )
              
              -Other
                  purchase price and foreignexchange
                  adjustments
              
              
              359
              
              
              -
              
              
              323
              
              
              36Balance,
                  December 31, 2006
              
              
              28,117
              
              
              12,407
              
              
              14,066
              
              
              1,644Foreign
                  exchange
              
              
              330
              
              
              -
              
              
              -
              
              
              330Balance,
                  December 31, 2007
              
              $
              28,447
              
              $
              12,407
              
              $
              14,066
              
              $
              1,974


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


December
                  31, 2007Total
              
              Asia
              
              North
                  AmericaGross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              AccumulatedAmount
              
              Amortization
              
              Amount
              
              Amortization
              
              Amount
              
              AmortizationPatents
                  and ProductInformation
              
              $
              2,750
              
              $
              2,385
              
              $
              2,468
              
              $
              2,150
              
              $
              282
              
              $
              235Customer
                  relationships
              
              
              1,830
              
              
              1,014
              
              
              -
              
              
              -
              
              
              1,830
              
              
              1,014$
              4,580
              
              $
              3,399
              
              $
              2,468
              
              $
              2,150
              
              $
              2,112
              
              $
              1,249
  December
                  31, 2006Total
              
              Asia
              
              North
                  AmericaGross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              Accumulated
              
              Gross
                  Carrying
              
              AccumulatedAmount
              
              Amortization
              
              Amount
              
              Amortization
              
              Amount
              
              AmortizationPatents
                  and ProductInformation
              
              $
              2,935
              
              $
              2,251
              
              $
              2,653
              
              $
              2,044
              
              $
              282
              
              $
              207Customer
                  relationships
              
              
              1,830
              
              
              648
              
              
              -
              
              
              -
              
              
              1,830
              
              
              648Covenants
                  not-to-compete
              
              
              5,300
              
              
              5,274
              
              
              4,500
              
              
              4,500
              
              
              800
              
              
              774$
              10,065
              
              $
              8,173
              
              $
              7,153
              
              $
              6,544
              
              $
              2,912
              
              $
              1,629


F-22




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


Year
                  Ending
              
              AmortizationDecember
                  31,
              
              Expense2008
              
              $
              5362009
              
              
              4322010
              
              
              1312011
              
              
              242012
              
              
              10


The
      weighted-average estimated life of each major intangible asset class as of
      December 31, 2007 is as follows:


Weighted-AverageIntangible
                  Asset
              
              Estimated
                  LifePatents
                  and product information
              
              1.3
                  yearsCustomer
                  relationships
              
              2.2
                  years




The
      weighted-average amortization period of the Company’s intangible assets at
      December 31, 2007 is 1.7 years.





4.  MARKETABLE
      SECURITIES





At
      December 31, 2007, the Company has an investment consisting of a private
      placement of units of beneficial interest in the Columbia Strategic Cash
      Portfolio (the “Columbia Portfolio”), which is an enhanced cash fund sold as an
      alternative to money-market funds. Since June 2007, the Company has invested
      a
      portion of its cash balances on hand in this fund; during the second and third
      quarters of 2007, the amounts were appropriately classified as cash equivalents
      in the consolidated balance sheet as the fund was considered both short-term
      and
      highly liquid in nature. These investments are subject to credit, liquidity,
      market and interest rate risk. For example, the Columbia Portfolio includes
      investments in certain asset backed securities and structured investment
      vehicles that are collateralized by sub-prime mortgage securities or related
      to
      mortgage securities, among other assets. As a result of adverse market
      conditions that have unfavorably affected the fair value and liquidity
      availability of collateral underlying the Columbia Portfolio, the Columbia
      Portfolio was overwhelmed with withdrawal requests from investors and it was
      closed with a restriction placed upon the cash redemption ability of its holders
      in the fourth quarter of 2007. At
      that
      time, the Company had $25.7 million invested in this fund, including $0.7
      million of reinvested interest. As
      such,
      the Company redesignated the Columbia Portfolio units from cash equivalents
      to
      short-term investments or long-term investments based upon the liquidation
      schedule provided by the fund.





F-23





On
      December 21, 2007, the Company received a cash payment of $2.3 million as
      redemption for 2,311,635 shares (9%). A realized loss of less than $0.1 million
      was recorded and is included in Gain on Sale of Marketable Securities, net
      in
      the accompanying Statement of Operations for the year ended December 31, 2007.
      At December 31, 2007, the closing net asset value (“NAV”) of the Columbia
      Portfolio was $0.9874. Subsequent to the Company’s December 31, 2007 year end
      and through February 29, 2008, the Company has received additional cash
      redemptions of $7.8 million at approximately $.9857 per unit.





As
      a
      result of these circumstances, the Company deemed a portion of its carrying
      value in the Columbia Portfolio to be other-than-temporarily impaired at
      December 31, 2007. Accordingly, the Company wrote down the carrying value of
      the
      investments to their then current market value at December 31, 2007 and the
      reduction in value of $0.3 million was recorded as an impairment charge during
      the fourth quarter of 2007. This is included in the accompanying Consolidated
      Statement of Operations for the year ended December 31, 2007. Information and
      the markets relating to these investment remain dynamic, and there may be
      further declines in the value of these investments, the value of the collateral
      held by these entities, and the liquidity of the Company’s investments. To the
      extent the Company determines there is a further decline in fair value, the
      Company may recognize additional impairment charges in future periods up to
      the
      aggregate amount of these investments.





As
      of
      December 31, 2007, the Company owned a total of 1,840,919 shares, or
      approximately 1.9% of the
      outstanding shares ,
      of the
      common stock of Toko, Inc. (“Toko”) at a total cost of $5.6 million. Toko had a
      market capitalization of approximately $172.9 million as of December 31, 2007.
      These shares are reflected on the Company’s consolidated balance sheets as
      marketable securities. These marketable securities are considered to be
      available for sale under SFAS No. 115, “Accounting for Certain Investments in
      Debt and Equity Securities”. Thus, as of December 31, 2007, the Company has
      recorded an unrealized loss, net of income tax benefit, of approximately $1.5
      million which is included in accumulated other comprehensive loss in
      stockholders’ equity. The Company’s investment in Toko has been in an unrealized
      loss position for less than twelve months. In accordance with FSP 115-1, the
      Company periodically reviews its marketable securities and determines whether
      the investments are other-than-temporarily impaired. The Company reviewed
      various factors in making its determination, including volatility of the Toko
      share price over the last year, Toko’s recent financial results and the
      Company’s intention and ability to hold the investment. The Toko share price has
      been extremely volatile over the last year, ranging from $1.22 - $4.20 (the
      Company’s cost basis in its remaining shares of Toko stock is $3.07 per share).
      As discussed below, in the second quarter of 2007, a gain was recognized on
      the
      disposition of the majority of the Company’s holdings of Toko stock. Toko
      recently issued its financial results for the quarter ended December 31, 2007
      and it showed a quarter over quarter increase in sales of 5.6% as compared
      to
      the fourth quarter of 2006 and increased profitability. The Company has the
      intention and the ability to hold the investment until it is in a gain position.
      As a result of these factors, management believes that the investment in Toko
      is
      not other-than-temporarily impaired.





F-24





During
      April 2007, the Company sold 4.0 million shares of common stock of Toko on
      the
      open market which resulted in a gain of approximately $2.5 million, net of
      investment banker fees and other expenses in the amount of $0.8 million. The
      Company accrued bonuses of $0.5 million in connection with this gain which
      were
      paid in January 2008. For financial statement purposes approximately $0.4
      million and $0.1 million has been classified within cost of sales and selling,
      general and administrative expenses, respectively.





During
      2004, the Company acquired a total of 2,037,500 shares of the common stock
      of
      Artesyn Technologies, Inc. (“Artesyn”) at a total purchase price of $16.3
      million. On April 28, 2006, Artesyn was acquired by Emerson Network Power for
      $11.00 per share in cash. During the second quarter of 2006, in connection
      with
      the Company's sale of its Artesyn common stock, the Company recognized a gain
      of
      approximately $5.2 million, net of investment banker advisory fees of $0.9
      million. The Company accrued bonuses of $1.0 million in connection with the
      gain. For financial statement purposes approximately $0.3 million and $0.7
      million was classified within cost of sales and selling, general and
      administrative expenses, respectively, and was paid to key employees in January
      2007.





At
      December 31, 2007 and 2006, respectively, marketable securities had a cost
      of
      approximately $5.6 million and $18.0 million, an estimated fair value of
      approximately $3.3 million and $15.6 million and gross unrealized losses of
      approximately $(2.3) million and $(2.4) million. Such unrealized losses are
      included, net of tax, in accumulated other comprehensive loss. The Company
      had
      no realized losses for the year ended December 31, 2007, 2006 or 2005. Included
      in other assets at December 31, 2007 and 2006 are marketable securities
      designated for utilization in accordance with the Company’s SERP plan with a
      cost of approximately $4.6 million and $3.8 million, respectively, and an
      estimated fair value of approximately $4.9 million and $4.1 million,
      respectively. The unrealized net gains of $0.3 million in each of 2007 and
      2006
      are included, net of tax, in accumulated other comprehensive loss.





5. INVENTORIES





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


December
                  31,2007
              
              2006Raw
                  materials
              
              $
              24,089
              
              $
              24,374Work
                  in progress
              
              
              2,434
              
              
              3,531Finished
                  goods
              
              
              12,526
              
              
              18,392$
              39,049
              
              $
              46,297





6. CASUALTY
          LOSS





During
      2006, the Company incurred a $1.0 million pre-tax casualty loss as a result
      of a
      fire at its leased manufacturing facility in the Dominican Republic for raw
      materials and equipment in excess of estimated insurance proceeds. The
      production at this facility was substantially restored during July
      2006.




F-25




7.  PROPERTY,
      PLANT AND EQUIPMENT





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


December
                  31,2007
              
              2006Land
              
              $
              3,239
              
              $
              3,585Buildings
                  and improvements
              
              
              27,035
              
              
              25,167Machinery
                  and equipment
              
              
              55,425
              
              
              59,083Construction
                  in progress
              
              
              3,431
              
              
              1,88189,130
              
              
              89,716Less
                  accumulated depreciation
              
              
              48,017
              
              
              45,427$
              41,113
              
              $
              44,289




Depreciation
      expense for the years ended December 31, 2007, 2006 and 2005 was $7.1 million,
      $7.2 million and $7.5 million, respectively.





During
      May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
      for $6.0 million. The Company had previously estimated that approximately $0.8
      million of the proceeds would be payable to the State of New Jersey as a portion
      of the property is subject to tideland claims. In December 2007, the Tidelands
      Resource Council voted to approve the Bureau of Tideland’s Management’s
      recommendation for a Statement of No Interest. As final approval of the
      Statement of No Interest is still pending, the Company has continued to defer
      the estimated gain on sale of the land, in the amount of $4.6 million. Of the
      $6.0 million sales price, the Company received cash of $1.5 million before
      closing costs, and $4.6 million (including interest) is being held in escrow
      pending final resolution of the State of New Jersey tideland claim and certain
      environmental costs the Company is liable for in the maximum amount of $0.4
      million. The Company anticipates resolution of this sale, release of the escrow
      and corresponding guarantees and recognition of the gain during fiscal 2008.
      As
      the timing of the release of the escrow of $4.6 million is not under the
      Company’s control, it has been classified in non-current assets as restricted
      cash and the deferred gain of $4.6 million has been classified in deferred
      gain
      on the sale of property in the Consolidated Balance Sheet as of December 31,
      2007. Additionally, the Company realized a $5.5 million pre-tax gain from the
      sale of property, plant and equipment in Hong Kong and Macao during the year
      ended December 31, 2007.





8.  INCOME
      TAXES





The
      Company adopted the provisions of FASB Interpretation No. 48, Accounting for
      Uncertainties in Income Taxes (“FIN 48”), on January 1, 2007. Although the
      implementation of FIN 48 did not impact the total amount of the Company’s
      liabilities for uncertain tax positions, which amounted to $12.4 million at
      January 1, 2007, the Company separately recognizes the liability for uncertain
      tax positions on its balance sheet. Included in the liabilities for uncertain
      tax positions at the date of adoption is $1.4 million for interest and
      penalties.




F-26




At
      December 31, 2007, the Company has approximately $9.2 million of liabilities
      for
      uncertain tax positions ($2.3 million included in income tax payable and $6.9
      million included in liability for uncertain tax positions) all of which, if
      recognized, would reduce the Company’s effective tax rate.





The
      Company and its subsidiaries file income tax returns in the U.S. federal
      jurisdiction and various states and foreign jurisdictions. The Company is no
      longer subject to U.S. federal examinations by tax authorities for years before
      2004 and for state examinations before 2003. Regarding foreign subsidiaries,
      the
      Company is no longer subject to examination by tax authorities for years before
      2000. The Internal Revenue Service (“IRS”) commenced an examination of the
      Company’s U.S. income tax returns for 2004 and reviewed 2003 and 2005 during the
      fourth quarter of 2006. During April 2007, the IRS wrote a preliminary letter
      to
      the Company accepting the tax return as originally filed for 2004.





The
      Company is currently being audited by the State of New Jersey, Department of
      the
      Treasury, Division of Taxation (“New Jersey”) for the years ended December 31,
      2003 through 2006. This examination is in its early stages and to date no
      adjustments have been proposed by New Jersey.





During
      February 2008, the Company received correspondence from the State of California
      Franchise Tax Board. They are requesting copies of U.S. federal income tax
      returns for the years 2005 and 2006 for further analysis to determine if the
      tax
      returns will be selected for audit.





The
      Inland Revenue Department (“IRD”) of Hong Kong commenced an examination of one
      of the Company’s Hong Kong subsidiaries’ income tax returns for the years 2000
      through 2005 and issued a notice of additional assessment during 2007 and demand
      for tax in the amount of $3.8 million. This was paid in May and August 2007.
      There is no interest or penalties in connection with this assessment. The IRD
      proposed certain adjustments to the Company’s offshore income tax claim position
      which Company management agreed with.





Based
      on
      possible outcomes of the examinations mentioned above, or as a result of the
      expiration of the statute of limitations for specific jurisdictions, it is
      reasonably possible that the related unrecognized benefits for tax positions
      taken regarding previously filed tax returns may change materially from those
      recorded as liabilities for uncertain tax positions in the Company’s
      consolidated financial statements at December 31, 2007. Based on the number
      of
      tax years currently under audit by the relevant tax authorities, the Company
      anticipates that several of these audits may be finalized in the next twelve
      months. It is not possible to estimate the effect of changes, if any that will
      occur to previously recorded uncertain tax positions over the next
      year.




F-27




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


Balance
                  January 1, 2007
              
              $
              12,396Additions
                  based on tax positionsrelated
                  to the current year
              
              
              1,669Additions
                  for tax positions of prior years
              
              
              1,000Expiration
                  of statutes of limitations
              
              
              (1,382
              )Reductions
                  for tax positions of prior years
              
              
              (699
              )Settlements
              
              
              (3,793
              )Balance
                  December 31, 2007
              
              $
              9,191




The
      Company’s policy is to recognize interest and penalties related to uncertain tax
      positions as a component of the current provision for income taxes. During
      the
      year ended December 31, 2007, the Company recognized approximately $0.5 million
      in interest and penalties in the Consolidated Statement of Operations. This
      amount is included in the $1.7 million noted above, related to additions based
      on tax provisions related to the current year. The Company has approximately
      $1.8 million accrued for the payment of interest and penalties at December
      31,
      2007, which is included in both income taxes payable and liability for uncertain
      tax positions in the consolidated balance sheet.





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


Years
                  Ended December 31,2007
              
              2006
              
              2005Current:Federal
              
              $
              4,294
              
              $
              4,784
              
              $
              4,590Foreign
              
              
              2,598
              
              
              1,619
              
              
              6,250State
              
              
              515
              
              
              430
              
              
              2447,407
              
              
              6,833
              
              
              11,084Deferred:Federal
                  and state
              
              
              (2,119
              )
              
              (928
              )
              
              (1,420
              )Foreign
              
              
              80
              
              
              (60
              )
              
              (2,182
              )(2,039
              )
              
              (988
              )
              
              (3,602
              )$
              5,368
              
              $
              5,845
              
              $
              7,482




F-28


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


Years
                  Ended December 31,2007
              
              2006
              
              2005Tax
                  provisioncomputed
                  at the Federalstatutory
                  rate of 35%, 34% and 34%
              
              $
              11,096
              
              $
              10,556
              
              $
              9,423Increase
                  (decrease) in taxes resulting from:Repatriation
                  of foreign earningsnet
                  of foreign tax credit of $520 (1)
              
              
              -
              
              
              -
              
              
              3,100Different
                  tax rates and permanent differencesapplicable
                  to foreign operations
              
              
              (4,992
              )
              
              (4,816
              )
              
              (5,128
              )Utilization
                  of net operating loss carryforward
              
              
              -
              
              
              (66
              )
              
              (122
              )Utilization
                  of research and development tax credits
              
              
              (365
              )
              
              (409
              )
              
              (630
              )State
                  taxes, net of federal benefit
              
              
              335
              
              
              279
              
              
              161Other,
                  including qualified production activity credits,non-qualified
                  disposition of incentive stock options,fair
                  value of vested stock awards over accruals andamortization
                  of purchase accounting intangibles
              
              
              (706
              )
              
              301
              
              
              678$
              5,368
              
              $
              5,845
              
              $
              7,482




(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 $70.6
      million 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.





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. Unrepatriated earnings, upon which U.S. income taxes have
      not been accrued, are approximately $100.0 million at December 31, 2007. Such
      unrepatriated earnings are deemed by management to be permanently
      reinvested. Estimated income taxes (net of estimated foreign tax credits) related to
      unrepatriated foreign earnings are $25.8 million under the current tax law
      as
      the Act has expired.




F-29




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


December
                  31,2007
              
              2006Tax
                  Effect
              
              Tax
                  EffectDeferred
                  Tax Assets - current:Unrealized
                  depreciation inmarketable
                  securities
              
              $
              1,007
              
              $
              801United
                  States net operating losscarryforward
              
              
              241
              
              
              -Foreign
                  tax credits carryforward
              
              
              564
              
              
              -Reserves
                  and accruals
              
              
              849
              
              
              865$
              2,661
              
              $
              1,666Deferred
                  Tax Assets - noncurrent:Deferred
                  gain on sale of property,plant
                  and equipment
              
              $
              1,765
              
              $
              -United
                  States net operating losscarryforward
              
              
              -
              
              
              887Unfunded
                  pension liability
              
              
              481
              
              
              686Depreciation
              
              
              222
              
              
              188Amortization
              
              
              773
              
              
              519State
                  net operating loss andcredits
                  carryforward
              
              
              331
              
              
              338Other
                  accruals
              
              
              1,123
              
              
              1,145Valuation
                  allowances
              
              
              (331
              )
              
              (338
              )$
              4,364
              
              $
              3,425




The
      tax
      rate in Macao for the year ended December 31, 2007 is 12%. During the year
      ended
      December 31, 2005, the Company used a $0.8 million net operating loss which
      resulted in a tax savings of approximately $0.1 million.





Galaxy,
      at the time of the acquisition, had a net operating loss carry forward of
      approximately $5.4 million. The remaining net operating loss carry forward
      of
      approximately $0.2 million at December 31, 2007, arose principally from the
      non-qualified dispositions of stock options and warrants and expires during
      2024. The use of the operating loss is limited, due to the change of ownership,
      but the Company expects to use the $0.2 million over the next year. The Company
      has set up a valuation allowance for losses for certain state carryforwards
      that
      it believes will not be realized.





During
      2005, the Company was granted an offshore operating license from the government
      of Macao to set up a Commercial Offshore Company ("MCO") named Bel Fuse (Macao
      Commercial Offshore) Limited. Sales to third party customers commenced during
      the first quarter of 2006. Sales consist of products manufactured in the PRC.
      The MCO is not subject to Macao corporation income taxes.




F-30




9.  DEBT





Short-term
      debt





As
      of
      December 31, 2006, a $20 million line of credit was available to the Company
      to
      borrow. The loan was collateralized
      with a first
      priority security interest in 100% of the issued and outstanding shares of
      the
      capital stock of the Company's material domestic subsidiaries and 65% of all
      the
      issued and outstanding shares of the capital stock of certain of the foreign
      subsidiaries of the Company. During February 2007, the Company entered into
      a
      new unsecured credit agreement in the amount of $20 million, which expires
      on
      July 21, 2008. There were no borrowings under the credit agreement during 2007
      and as such, there was no balance outstanding as of December 31, 2007. At that
      date, the entire $20 million line of credit was available to the Company to
      borrow. Loans under the new credit agreement will bear interest at LIBOR plus
      0.75% to 1.25% based on certain financial statement ratios maintained by the
      Company.





The
      Company’s Hong Kong subsidiary has an unsecured line of credit of approximately
      $2.0 million which was unused as of December 31, 2007. The line of credit
      expires on July 21, 2008. 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.





For
      the
      years ended December 31, 2007, 2006 and 2005, the Company recorded interest
      expense and other costs of $0.1 million, $0.1 million and $0.3 million,
      respectively. Included
      in interest expense for the year ended December 31, 2007 is the write-off of
      approximately $0.1 million of previously unamortized deferred financing charges
      in connection with a credit facility that has been superseded.





10  ACCRUED
      EXPENSES





Accrued
      expenses consist of the following (dollars in thousands):


Year
                  Ended December 31,2007
              
              2006Sales
                  commissions
              
              $
              2,930
              
              $
              1,716Subcontracting
                  labor
              
              
              1,723
              
              
              2,033Salaries,
                  bonuses andrelated
                  benefits
              
              
              4,208
              
              
              4,147Other
              
              
              3,252
              
              
              4,817$
              12,113
              
              $
              12,713




F-31




11.  BUSINESS
      SEGMENT INFORMATION





The
      Company operates in one industry with 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
      (dollars in thousands):




2007
              
              2006
              
              2005Net
                  sales from unrelatedentities
                  and countryof
                  Company's domicile:North
                  America
              
              $
              78,091
              
              $
              73,241
              
              $
              69,089Asia
              
              
              151,550
              
              
              153,037
              
              
              131,104Europe
              
              
              29,496
              
              
              28,655
              
              
              15,723$
              259,137
              
              $
              254,933
              
              $
              215,916Net
                  sales:North
                  America
              
              $
              90,939
              
              $
              80,860
              
              $
              80,836Asia
              
              
              182,301
              
              
              182,808
              
              
              151,992Europe
              
              
              30,680
              
              
              30,105
              
              
              16,967Less
                  intergeographicrevenues
              
              
              (44,783
              )
              
              (38,840
              )
              
              (33,879
              )$
              259,137
              
              $
              254,933
              
              $
              215,916Income
                  from Operations:North
                  America
              
              $
              6,515
              
              $
              2,658
              
              $
              4,020Asia
              
              
              17,488
              
              
              19,622
              
              
              22,391Europe
              
              
              1,509
              
              
              838
              
              
              206$
              25,512
              
              $
              23,118
              
              $
              26,617Long
                  Lived Assets:North
                  America
              
              $
              18,786
              
              $
              18,026Asia
              
              
              26,757
              
              
              30,050Europe
              
              
              1,005
              
              
              690$
              46,548
              
              $
              48,766Capital
                  Expenditures:North
                  America
              
              $
              1,453
              
              $
              2,823
              
              $
              1,328Asia
              
              
              7,069
              
              
              6,783
              
              
              6,322Europe
              
              
              196
              
              
              227
              
              
              96$
              8,718
              
              $
              9,833
              
              $
              7,746Depreciation
                  and Amortizationexpense:North
                  America
              
              $
              1,841
              
              $
              2,314
              
              $
              2,526Asia
              
              
              5,887
              
              
              6,476
              
              
              7,364Europe
              
              
              193
              
              
              237
              
              
              214$
              7,921
              
              $
              9,027
              
              $
              10,104




F-32




Net
      sales
      from external customers are attributed to individual segments based on the
      geographic source of the billing for such customer sales. Transfers between
      geographic areas include finished products manufactured in foreign countries
      which are then transferred to the United States and Europe for sale; finished
      goods manufactured in the United States which are transferred to Europe and
      Asia
      for sale; and semi-finished components manufactured in the United States which are
      sold
      to Asia for further processing. Income from operations represents gross profit
      less operating expenses.





Long
      lived assets consist of property, plant and equipment, net and other assets
      of
      the Company that are identified with the operations of each geographic
      area.





The
      territory of Hong Kong became a Special Administrative Region (“SAR”) of the PRC
      in the middle of 1997. The territory of Macao became a SAR of the PRC at the
      end
      of 1999. Management cannot presently predict what future impact this will have
      on the Company, if any, or how the political climate in the PRC will affect
      the
      Company's contractual arrangements in the PRC. Substantially all of the
      Company's manufacturing operations and approximately 42% of its identifiable
      assets are located in Asia. Accordingly, events resulting from any change in
      the
      "Most Favored Nation" status granted to the PRC by the U.S., could have a
      material adverse effect on the Company.




The
      Company had sales to one customer in excess of ten percent of consolidated
      net
      sales in 2007, 2006 and 2005. The amount and percentages of the Company's sales
      to this customer in each
      year
      was $40.3 million (15.6%) in 2007, $42.2 million (16.5%) in 2006 and $32.8
      million (15.2%) in 2005 and were derived primarily in Asia. Management believes
      that the loss of such customer could
      have a
      material adverse effect on the Company's consolidated results of operations,
      financial position and cash flows.





The
      Company realized a $5.5 million pre-tax gain from the sale of property, plant
      and equipment in Asia related to the sale of facilities in Hong Kong and Macao
      during the year ended December 31, 2007.





12.  RETIREMENT
      FUND AND PROFIT SHARING PLAN





The
      Company maintains a domestic profit sharing plan and a contributory stock
      ownership and savings 401(K) plan, which combines stock ownership and individual
      voluntary savings provisions to provide retirement benefits for plan
      participants. The plan provides for participants to voluntarily contribute
      a
      portion of their compensation, subject to certain legal maximums. The Company
      will match, based on a sliding scale, up to $350 for the first $600 contributed
      by each participant. Matching contributions plus additional discretionary
      contributions are made with Company stock purchased in the open market. The
      expense for the years ended December 31, 2007, 2006 and 2005 amounted to
      approximately $0.5 million, $0.5 million and $0.4 million, respectively. As
      of
      December 31, 2007, the plans owned 17,136 and 149,450 shares of Bel Fuse Inc.
      Class A and Class B common stock, respectively.




F-33




The
      Company's subsidiaries in Asia have a retirement fund covering substantially
      all
      of their Hong Kong based full-time employees. Eligible employees contribute
      up
      to 5% of salary to the fund. In addition, the Company must contribute a minimum
      of 5% of eligible salary, as determined by Hong Kong government regulations.
      The
      Company currently contributes 7% of eligible salary, in cash or Company stock. The
      expense for the years ended December 31, 2007, 2006 and 2005 amounted to
      approximately $0.4 million, $0.4 million and $0.5 million, respectively. As
      of
      December 31, 2007, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc.
      Class
      A and Class B common stock, respectively.





The
      Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to
      provide a limited group of key management and highly compensated employees
      of
      the Company with supplemental
      retirement and death benefits. Participants
      in the SERP are selected by the Compensation Committee of the Board of
      Directors .
      The
      SERP initially became effective in 2002
      and
      was amended and restated in April 2007 to conform with applicable requirements
      of Section 409A of the Internal Revenue Code and to modify the provisions
      regarding benefits payable in connection with a change in control of the
      Company. The
      Plan
      is unfunded. Benefits under the SERP are payable from the general assets of
      the
      Company, but the Company has certain life insurance policies in effect on
      participants to partially cover the Company’s obligations under the Plan. The
      Plan also allows the Company to establish a grantor trust to provide for the
      payment of Plan benefits. The benefits available under the Plan vary according
      to when and how the participant terminates employment with the Company. If
      a
      participant retires (with the prior written consent of the Company) on his
      normal retirement date (65 years old, 20 years of service, and 5 years of Plan
      participation), his normal retirement benefit under the Plan would be annual
      payments equal to 40% of his average base compensation (calculated using
      compensation from the highest 5 consecutive calendar years of Plan
      participation), payable in monthly installments for the remainder of his life.
      If a participant retires early from the Company (55 years old, 20 years of
      service, and 5 years of Plan participation), his early retirement benefit under
      the Plan would be an amount (i) calculated as if his early retirement date
      were
      in fact his normal retirement date, (ii) multiplied by a fraction, with the
      numerator being the actual years of service the participant has with the Company
      and the denominator being the years of service the participant would have had
      if
      he had retired at age 65, and (iii) actuarially reduced to reflect the early
      retirement date. If a participant dies prior to receiving 120 monthly payments
      under the Plan, his beneficiary would be entitled to continue receiving benefits
      for the shorter of (i) the time necessary to complete 120 monthly payments
      or
      (ii) 60 months. If a participant dies while employed by the Company, his
      beneficiary would receive, as a survivor benefit, an annual amount equal to
      (i)
      100% of the participant’s annual base salary at date of death for one year, and
      (ii) 50% of the participant’s annual base salary at date of death for each of
      the following 4 years, each payable in monthly installments. The Plan also
      provides for disability benefits, and a forfeiture of
      benefits if a participant terminates employment for reasons other than those
      contemplated under the Plan. The expense for the years ended December 31, 2007,
      2006 and 2005 amounted to approximately $0.7 million, $0.7 million and $0.7
      million, respectively.




F-34




The
      following provides a reconciliation of benefit obligations, the funded status
      of
      the SERP and a summary of significant assumptions (dollars in
      thousands):




December
                  31,
              
              2007
              
              2006
              
              2005Change
                  in benefit obligation:Projected
                  benefit obligation at beginning of year
              
              $
              4,728
              
              $
              4,476
              
              $
              2,890Service
                  cost
              
              
              313
              
              
              325
              
              
              332Interest
                  cost
              
              
              282
              
              
              243
              
              
              212Plan
                  amendments
              
              
              -
              
              
              -
              
              
              445Benefits
                  paid
              
              
              (75
              )
              
              (131
              )
              
              (38
              )Actuarial
                  (gains) losses
              
              
              (550
              )
              
              (185
              )
              
              635Minimum
                  pension obligation andunfunded
                  pension liability
              
              $
              4,698
              
              $
              4,728
              
              $
              4,476Funded
                  status of plan:Under
                  funded status
              
              $
              (4,698
              )
              $
              (4,728
              )
              $
              (4,476
              )Unrecognized
                  net loss
              
              
              -
              
              
              -
              
              
              870Unrecognized
                  prior service costs
              
              
              -
              
              
              -
              
              
              1,811Accrued
                  pension cost
              
              $
              (4,698
              )
              $
              (4,728
              )
              $
              (1,795
              )Change
                  in plan assets:Fair
                  value of plan assets, beginning of year
              
              $
              -
              
              $
              -
              
              $
              -Company
                  contributions
              
              
              75
              
              
              131
              
              
              38Benefit
                  paid
              
              
              (75
              )
              
              (131
              )
              
              (38
              )Fair
                  value of plan assets, end of year
              
              $
              -
              
              $
              -
              
              $
              -Balance
                  sheet amounts:Minimum
                  pension obligation andunfunded
                  pension liability
              
              $
              4,698
              
              $
              4,728Accumulated
                  other comprehensive loss
              
              $
              (1,154
              )
              $
              (1,647
              )
  The
                  components of SERP expense are as
                  follows:
  Year
                  Ended December 31,
              
              
              2007
              
              
              2006
              
              
              2005Service
                  cost
              
              $
              313
              
              $
              325
              
              $
              332Interest
                  cost
              
              
              282
              
              
              243
              
              
              212Net
                  amortization and deferral
              
              
              146
              
              
              161
              
              
              155Total
                  SERP expense
              
              $
              741
              
              $
              729
              
              $
              699Assumption
                  percentages:Discount
                  rate
              
              
              6.50
              %
              
              6.00
              %
              
              5.50
              %Rate
                  of compensation increase
              
              
              3.00
              %
              
              3.00
              %
              
              3.00
              %




The
      accumulated benefit obligation for the SERP was $3.6 million and $3.5 million
      as
      of December 31, 2007 and 2006, respectively.




F-35




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post
      Retirement Plans”, (“SFAS No. 158”). This statement is effective for fiscal
      years ending after December 15, 2006 and is applicable for the Company’s SERP
      Plan .





The
      amount of net gain and prior service cost on a pretax basis included in Other
      Comprehensive Income was $0 and $0.1 million, respectively, during the year
      ended December 31, 2007 and $0.7 million and $1.7 million, respectively, during
      the year ended
      December 31, 2006 .
      The
      estimated portion of net periodic gain and prior service cost that will be
      recognized as a component of net periodic benefit cost over the next fiscal
      year
      is $0 and $0.1 million, respectively. The Company expects to contribute $0.8
      million to the SERP in 2008.





The
      Company had no net transition assets or obligations recognized as an adjustment
      to Other Comprehensive Income and does not anticipate any plan assets being
      returned to the Company during 2008, as the plan has no assets.





The
      following benefit payments, which reflect expected future service, as
      appropriate, are expected to be paid (dollars in thousands):




Years
                  EndingDecember
                  31,2008
              
              $
              752009
              
              
              752010
              
              
              1302011
              
              
              742012
              
              
              742013
                  - 2017
              
              
              1,168




13.
      SHARE-BASED COMPENSATION





On
      January 1, 2006, the Company adopted SFAS No. 123 (R)
      "Share-Based Payment" requiring the recognition of compensation expense in
      the
      Consolidated Statements of Operations related to the fair value of its employee
      stock-based options and awards. SFAS No. 123 (R)
      revises SFAS No. 123 "Accounting for Stock-Based Compensation" and supercedes
      APB Opinion No. 25 "Accounting for Stock Issued to Employees." SFAS No. 123(R)
      is supplemented by SEC Staff Accounting Bulletin ("SAB") No. 107 "Share-Based
      Payment." SAB No. 107 expresses the SEC staff's views regarding the interaction
      between SFAS No. 123(R) and certain SEC rules and regulations including the
      valuation of stock-based payment arrangements.




F-36




The
      Company recognizes the cost of all employee stock options on a straight-line
      attribution basis over their respective vesting periods, net of estimated
      forfeitures. The Company has selected the modified prospective method of
      transition; accordingly, prior periods have not been restated. Prior to adopting
      SFAS No. 123(R), the Company applied APB Opinion No. 25 and
      related interpretations in accounting for its stock-based compensation plans.
      All employee stock options were granted at or above the grant date market price.
      Accordingly, prior to 2006 no compensation cost was recognized for fixed stock
      option grants.





On
      December 31, 2007, the Company has one stock-based compensation plan, which
      is
      described below. During the years ended December 31, 2007 and 2006, the adoption
      of SFAS No. 123(R) resulted in incremental stock-based compensation expense
      of
      approximately $0.1 million and $0.5 million, respectively. The incremental
      stock-based compensation expense caused both the basic and diluted earnings
      per
      common share to each decrease
      by $.04 and $.04 per share for Class A common stock and $.03 and $.03 per share
      for Class B common stock, respectively, for the year
      ended December 31, 2006
      and
      by $.01 and $.01 per share for Class A common stock and $.01 and $.01 per share
      for Class B common stock, respectively, for the year ended December 31, 2007. In
      addition, in connection with the adoption of SFAS No. 123 (R),
      net
      cash provided by operating activities decreased and net cash provided by
      financing activities increased during the years ended December 31, 2007 and
      2006
      by $0.1 million and $0.3 million, respectively, related to excess tax benefits
      from stock-based payment arrangements.





The
      aggregate pretax compensation cost recognized in net earnings for stock-based
      compensation (including incentive stock options, restricted stock and dividends
      on restricted stock, as further discussed below) amounted to approximately
      $1.5
      million, $1.6 million and $0.2 million for the years ended December 31, 2007,
      2006 and 2005, respectively .
      The
      Company did not use any cash to settle any equity instruments granted under
      share based arrangements during the years ended December 31, 2007 and 2006.




Under
      the
      provisions of SFAS 123(R), the recognition of deferred compensation,
      representing the amount of unrecognized restricted stock expense that is reduced
      as expense is recognized, at the date restricted stock is granted, is no longer
      required. Therefore, at January 1, 2006, the amount that had been in "Deferred
      compensation" in the Consolidated Balance Sheet was reversed to zero and is
      currently included in additional paid in capital.





Stock
      Options





The
      Company has an
      equity
      compensation program (the
      " Program ")
      which
      provides for the granting of "Incentive Stock Options" within
      the meaning of Section 422 of the Internal Revenue Code of 1986, as
      amended ,
      non-qualified stock options and restricted stock awards . The
      Company believes that such awards better align the interest of its employees
      with those of its shareholders. The Plan provides for the issuance of 2.4
      million common shares. Unless
      otherwise provided at the date of grant or unless subsequently accelerated,
      options granted under the Program  become
      exercisable twenty-five percent (25%)  one
      year
      from the date of grant and twenty-five percent (25%) for each year of the three
      years thereafter. Upon exercise the Company will issue new shares. The exercise
      price of  incentive
      stock options
      granted pursuant to the Plan is not to be less than 100 percent of the fair
      market value of the shares on the date of grant. In general,
      no option will be exercisable after ten years
      from the date granted.




F-37




No
      incentive stock options were granted in 2007, 2006 or 2005. Expected lives
      of
      options previously granted were estimated using the historical exercise behavior
      of employees. Expected volatilities were based on implied volatilities from
      historical volatility of the Company’s stock. The Company uses historical data
      to estimate employee forfeitures. The risk free rate is based on the U.S.
      Treasury yield curve in effect at the time of grant.





Information
      regarding the Company’s stock
      options for the
      year ended December 31, 2007 is as follows. All of the stock options noted
      below
      relate to options to purchase shares of the Company’s Class B common
      stock.




Stock
                  Options
              
              Shares
              
              Weighted-
                  Average Exercise Price
              
              Weighted-
                  Average Remaining Contractual Term
              
              Aggregate
                  Intrinsic Value (in 000's)Outstanding
                  at January 1, 2007
              
              
              137,813
              
              $
              25.59Exercised
              
              
              (63,313
              )
              
              22.94Granted
              
              
              -
              
              
              -Cancelled
              
              
              (4,500
              )
              
              18.89Outstanding
                  at December 31, 2007
              
              
              70,000
              
              $
              28.42
              
              
              1.8
                  years
              
              $
              177Exercisable
                  at December 31, 2007
              
              
              36,500
              
              $
              26.72
              
              
              1.2
                  years
              
              $
              177




During
      the years ended December 31, 2007 and 2006 the Company received $1.5 million
      and
      $3.2 million from the exercise of stock options and realized tax benefits of
      approximately $0.1 million and $0.3 million, respectively. The total intrinsic
      value of options exercised during the years ended December 31, 2007, 2006 and
      2005 was $0.9 million, $1.5 million and $2.9 million, respectively. Stock
      compensation expense applicable to stock options for the years ended December
      31, 2007, 2006 and 2005 was approximately $0.1 million, $0.5 million and $0,
      respectively.





A
      summary
      of the status of the Company’s non-vested options as of December 31, 2007 and
      2006 and changes during the year ended December 31, 2007 is presented
      below:




Nonvested
                  options
              
              Options
              
              Weighted-Average
                  Grant-Date Fair ValueNonvested
                  at December 31, 2006
              
              
              91,000
              
              $
              25.78Granted
              
              
              -
              
              
              -Vested
              
              
              (53,000
              )
              $
              23.09Forfeited
              
              
              (4,500
              )
              $
              18.89Nonvested
                  at December 31, 2007
              
              
              33,500
              
              $
              30.28




F-38


At
      December 31, 2007 there was less than $0.1 million of total unrecognized cost
      related to nonvested stock-based compensation arrangements under the  Program .
      The
      cost is expected to be recognized over a weighted average period of one year.
      The fair value of options that vested during the years ended December 31, 2007
      and 2006 was $1.6 million and $1.5 million, respectively. The aggregate
      intrinsic value of options vested during 2007 was $0.4 million. Currently,
      the
      Company believes that substantially all options will vest.





Restricted
      Stock Awards





The
      Company provides common stock awards to certain officers and key employees.
      The
      Company grants these awards, at its discretion, from the shares available under
      the Program.
      Unless otherwise provided at the date of grant or unless subsequently
      accelerated, the shares
      awarded are earned in 25% increments on the second,
      third, fourth and fifth anniversaries of the award ,
      respectively, and are distributed provided the employee has remained employed
      by
      the Company through such anniversary dates; otherwise the unearned shares are
      forfeited. The market value of these shares at the date of award is recorded
      as
      compensation expense on the straight-line method over the five  year
      periods from the respective award dates, as adjusted for forfeitures of unvested
      awards. During 2007, 2006 and 2005, the Company issued 74,200, 21,600 and
      152,400 class B common shares, respectively, under a restricted stock plan
      to
      various officers and employees. The shares vest 25% after two years of
      employment with an additional 25% vesting in each of years three through five.
      This resulted in pre-tax compensation expense of $1.3 million, $1.1 million
      and
      $0.2 million ($0.9 million, $0.8 million and $0.2 million, after tax benefit)
      for the years ended December 31, 2007, 2006 and 2005, respectively.





A
      summary
      of the activity under the Restricted Stock Awards Plan as of December 31, 2007
      is presented below:




Restricted
                  StockAwards
              
              Shares
              
              Weighted
                  Average AwardPrice
              
              Weighted
                  Average Remaining ContractualTermOutstanding
                  at January 1, 2007
              
              
              167,000
              
              $
              34.93Granted
              
              
              74,200
              
              $
              36.40Vested
              
              
              (34,250
              )
              $
              35.49Forfeited
              
              
              (11,550
              )
              $
              36.95Outstanding
                  at December 31, 2007
              
              
              195,400
              
              $
              35.31
              
              
              3.43




As
      of
      December 31, 2007, there was $5.4 million of total pre-tax unrecognized
      compensation cost included within additional paid-in-capital related to
      non-vested stock based compensation arrangements granted under the restricted
      stock award plan; that cost is expected to be recognized over a period of 4.4
      years.





The
      Company's policy is to issue new shares to satisfy Restricted Stock Awards
      and  stock
      option exercises. Currently the Company believes that substantially all
      restricted stock awards will vest.




F-39





14.
      COMMON STOCK





During
      2000, the Board of Directors of the Company authorized the purchase of up to
      ten
      percent of the Company’s outstanding common shares. As of December 31, 2007, the
      Company had purchased and retired 23,600 Class B common shares at a cost of
      approximately $0.8 million and had purchased and retired 160,033 Class A common
      shares at a cost of approximately $5.7 million. No shares of Class B common
      stock were repurchased during the year ended December 31, 2007 and 160,033
      shares of Class A common stock were repurchased during the year ended December
      31, 2007.





There
      are
      no contractual restrictions on the Company's ability to pay dividends provided
      the Company is not in default immediately before such payment and after giving
      effect to such payment. On February 1, 2007, May 1, 2007 and August 1, 2007
      the
      Company paid a $0.05 per share dividend to all shareholders of record of Class
      B
      Common Stock in the total amount of $0.5 million, $0.5 million and $0.5 million,
      respectively. On February 1, 2007, May 1, 2007 and August 1, 2007 the Company
      paid a $0.04 per share dividend to all shareholders of record of Class A Common
      Stock in the total amount of $0.1 million, $0.1 million and $0.1 million,
      respectively. During July 2007 the Board of Directors of the Company authorized
      an increase in the dividends by $.02 per share per quarter for both Class A
      and
      B common shares effective with the November 2007 dividend payment. As a result,
      on November 1, 2007, the Company paid a $0.06 and $0.07 per share dividend
      to
      all shareholders of record at October 15, 2007 of Class A and Class B Common
      Stock , **** respectively, in
      the total amount
      of $0.2 million and $0.6 million, respectively. On February 1, 2006, May 1,
      2006, August 1, 2006 and November 1, 2006 the Company paid a $0.05 per share
      dividend to all shareholders of record of Class B Common Stock in the total
      amount of $0.4 million, $0.4 million, $0.4 million and $0.5 million,
      respectively. On February 1, 2006, May 1, 2006, August 1, 2006 and November
      1,
      2006 the Company paid a $0.04 per share dividend to all shareholders of record
      of Class A Common Stock in the total amount of $0.1 million, $0.1 million,
      $0.1
      million and $0.1 million, respectively.




F-40




15.  COMMITMENTS
      AND CONTINGENCIES





Leases





The
      Company leases various facilities. Some of these leases require the Company
      to
      pay certain executory costs (such as insurance and maintenance).





Future
      minimum lease payments for operating leases are approximately as follows
      (dollars in thousands):




Years
                  EndingDecember
                  31,2008
              
              $
              1,5952009
              
              
              1,1072010
              
              
              7922011
              
              
              6952012
              
              
              622Thereafter
              
              
              444$
              5,255




Rental
      expense was approximately $2.0 million, $1.7 million and $1.6 million for the
      years ended December 31, 2007, 2006, and 2005, respectively.





Other
      Commitments





The
      Company submits purchase orders for raw materials to various vendors throughout
      the year for current production requirements, as well as forecasted
      requirements. Certain of these purchase orders relate to special purpose
      material, and as such, the Company may incur penalties if the order is
      cancelled. At December 31, 2007, the Company has outstanding purchase orders
      related to the purchase of raw
      materials in the aggregate amount of $22.3 million.





Legal
      Proceedings





The
      Company is a defendant in a lawsuit captioned Synqor, Inc. v. Artesyn
      Technologies, Inc., Astec America, Inc., Emerson Network Power, Inc., Emerson
      Electric Co., Bel Fuse Inc., Cherokee International Corp., Delta Electronics,
      Inc., Delta Products Corp., Murata Electronics North America, Inc., Murata
      Manufacturing Co., Ltd., Power-One, Inc., Tyco Electronics Corp. and Tyco
      Electronics Ltd. brought in the United States District Court, Eastern District
      of Texas in November 2007. Plaintiff claims the Company infringed its patents
      covering certain power products. Synqor is seeking unspecified damages. The
      Company filed an Answer to Synqor’s complaint, denying the allegations of
      infringement and asserting invalidity of the patents.




F-41




The
      Company is a defendant in a lawsuit captioned Halo Electronics, Inc. (“Halo”) v.
      Bel Fuse Inc., Pulse Engineering, Inc. and Technitrol, Inc. brought in Nevada
      Federal District Court. Plaintiff claims that the Company has infringed its
      patents covering certain surface mount discrete magnetic products made by the
      Company. Halo is seeking unspecified damages, which it claims should be trebled.
      In December 2007, this case was dismissed by the Nevada Federal District Court
      for lack of personal jurisdiction. Halo then re-filed this suit in the Northern
      California Federal District Court, captioned Halo Electronics, Inc. v. Bel
      Fuse
      Inc., Elec & Eltek (USA) Corporation, Wurth Electronics Midcom, Inc., and
      Xfmrs, Inc.





The
      Company is a plaintiff in a lawsuit captioned Bel Fuse Inc. v. Halo Electronics,
      Inc. brought in the United States District Court of New Jersey during May 2007.
      The Company claims that Halo has infringed a patent covering certain integrated
      connector modules made by Halo. The Company is seeking unspecified damages
      plus
      interest, costs and attorney fees.





The
      Company and two of its officers were defendants in a wrongful termination
      lawsuit brought in the District Court of Frankfurt am Main, Germany by a former
      employee at a foreign subsidiary of the Company. During July 2007, this lawsuit
      was settled for approximately $0.5 million. The Company had provided for this
      liability in its financial statements prior to the settlement.





The
      Company is a plaintiff in a lawsuit captioned Bel Fuse Inc. and Bel Power,
      Inc.
      v. Andrew Ferencz, Gregory Zvonar, Bernhard Schroter, EE2GO, Inc., Howard E.
      Kaepplein and William Ng, brought in the Superior Court of the Commonwealth
      of
      Massachusetts. The Company was granted injunctive relief and is seeking damages
      against the former stockholders of Galaxy Power, Inc., key employees of Galaxy
      and a corporation formed by some or all of the individual defendants. The
      Company 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.





In
      a
      related matter, the Company is a defendant in a lawsuit captioned Robert
      Chimielnski, P.C. on behalf of the stockholder representatives and the former
      stockholders of Galaxy Power, Inc. v. Bel Fuse Inc. et al. brought in the
      Superior Court of the Commonwealth of Massachusetts. This complaint for damages
      and injunctive relief is based on an alleged breach of contract and other
      allegedly illegal acts in a corporate context arising out of the Company’s
      objection to the release of nearly $2.0 million held in escrow under the terms
      of the stock purchase agreement between Galaxy and the Company.





The
      Company is a defendant in a lawsuit captioned Murata Manufacturing Company,
      Ltd.
      v. Bel Fuse Inc. et al, brought in Illinois Federal District Court. Plaintiff
      claims that its patent covers all of the Company's modular jack products. That
      party had previously advised the Company that it was willing to grant a
      non-exclusive license to the Company under the patent for a 3% royalty on all
      future gross sales of ICM products; payment of a lump sum of 3% of past sales
      including sales of applicable Insilco products; an annual minimum royalty of
      $0.5 million; 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., 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 $0.5
      million plus a 6% royalty on future sales. The District Court has granted
      summary judgment in the Company's favor dismissing Regal Electronics'
      infringement claims, while at the same time dismissing the Company's invalidity
      counterclaim against Regal Electronics. Regal has appealed the Court's rejection
      of its infringement claims to the U.S. Court of Appeals. The case was heard on
      February 6, 2007 and the U.S. Court of Appeals upheld the District Court’s
      ruling in favor of the Company.




F-42





The
      Company cannot predict the outcome of the unresolved 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. As of December 31, 2007, no amounts have been accrued in
      connection with these lawsuits, as the amounts are not determinable.





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





16.  ACCUMULATED
      OTHER COMPREHENSIVE INCOME (LOSS)





The
      components of accumulated other comprehensive income (loss) as of December
      31,
      2007 and 2006 are summarized below (dollars in thousands)


2007
              
              2006Foreign
                  currency translation adjustment
              
              $
              2,101
              
              $
              1,141Unrealized
                  holding loss on available-for-salesecurities
                  under SFAS No. 115, net oftaxes
                  of $(789) and $(801) as ofDecember
                  31, 2007 and 2006
              
              
              (1,291
              )
              
              (1,310
              )Unfunded
                  SERP liability related to SFASNo.
                  158, net of taxes of $(483) and $(686)as
                  of December 31, 2007 and 2006
              
              
              (1,154
              )
              
              (1,647
              )Accumulated
                  other comprehensive loss
              
              $
              (344
              )
              $
              (1,816
              )




F-43


17.  SUBSEQUENT
      EVENT





On
      February 25, 2008, the Company announced that it had acquired 4,370,052 shares
      of Power-One, Inc. (“Power-One”) common stock representing, to the Company’s
      knowledge, 5% of Power-One’s outstanding common stock, at a total purchase price
      of $10.1 million. Power-One’s common stock is quoted on the NASDAQ Global
      Market. Power-One is a designer and manufacturer of power conversion and power
      management products.




F-44




**CONDENSED
                  SELECTED QUARTERLY FINANCIAL DATA****(Unaudited)****(In
                  thousands, except per share
                  data)**
  Total
                  YearQuarter
                  Ended
              
              EndedMarch
                  31,
              
              June
                  30,
              
              September
                  30,
              
              December
                  31,
              
              December
                  31,2007
              
              2007
              
              2007
              
              2007
              
              2007
                  (1)Net
                  sales
              
              $
              61,807
              
              $
              61,612
              
              $
              66,379
              
              $
              69,339
              
              $
              259,137Gross
                  profit
              
              
              13,916
              
              
              13,014
              
              
              14,091
              
              
              15,109
              
              
              56,130Net
                  earnings
              
              
              4,009
              
              
              6,158
              
              
              5,914
              
              
              10,255
              
              
              26,336Earnings
                  per Class A common share:Basic
              
              $
              0.32
              
              $
              0.49
              
              $
              0.47
              
              $
              0.83
              
              $
              2.11Diluted
              
              $
              0.32
              
              $
              0.49
              
              $
              0.47
              
              $
              0.83
              
              $
              2.11Earnings
                  per Class B common share:Basic
              
              $
              0.34
              
              $
              0.52
              
              $
              0.50
              
              $
              0.88
              
              $
              2.25Diluted
              
              $
              0.34
              
              $
              0.52
              
              $
              0.50
              
              $
              0.88
              
              $
              2.24
  Total
                  YearQuarter
                  Ended
              
              EndedMarch
                  31,
              
              June
                  30,
              
              September
                  30,
              
              December
                  31,
              
              December
                  31,2006
              
              2006
              
              2006
              
              2006
              
              2006Net
                  sales
              
              $
              54,626
              
              $
              66,474
              
              $
              73,260
              
              $
              60,573
              
              $
              254,933Gross
                  profit
              
              
              14,639
              
              
              16,212
              
              
              17,450
              
              
              13,647
              
              
              61,948Net
                  earnings
              
              
              3,997
              
              
              8,763
              
              
              7,745
              
              
              4,698
              
              
              25,203Earnings
                  per Class A common share:Basic
              
              $
              0.32
              
              $
              0.71
              
              $
              0.62
              
              $
              0.38
              
              $
              2.03Diluted
              
              $
              0.32
              
              $
              0.71
              
              $
              0.62
              
              $
              0.38
              
              $
              2.03Earnings
                  per Class B common share:Basic
              
              $
              0.35
              
              $
              0.75
              
              $
              0.66
              
              $
              0.40
              
              $
              2.16Diluted
              
              $
              0.34
              
              $
              0.75
              
              $
              0.66
              
              $
              0.40
              
              $
              2.15




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





F-45




BEL
                  FUSE INC. AND SUBSIDIARIESSCHEDULE
                  II - VALUATION AND QUALIFYING ACCOUNTS(Amounts
                  in thousands)
  Column
                  A
              
              Column
                  B
              
              Column
                  C
              
              Column
                  D
              
              Column
                  E
              
              Column
                  FCharged
              
              AdditionsBalance
                  at
              
              to
                  profit
              
              Charged
              
              Deductions
              
              Balancebeginning
              
              and
                  loss
              
              to
                  other
              
              (describe)
              
              at
                  closeDescription
              
              of
                  period
              
              or
                  income
              
              accounts
                  (b)
              
              (a)
              
              of
                  periodYear
                  ended December 31, 2007Allowance
                  for doubtfulaccounts
              
              $
              1,087
              
              $
              (50
              )
              $
              48
              
              $
              108
              
              $
              977Allowance
                  for excess andobsolete
                  inventory
              
              $
              5,004
              
              $
              (1,134
              )
              $
              17
              
              $
              621
              
              $
              3,266Year
                  ended December 31, 2006Allowance
                  for doubtfulaccounts
              
              $
              1,107
              
              $
              707
              
              $
              109
              
              $
              836
              
              $
              1,087Allowance
                  for excess andobsolete
                  inventory
              
              $
              5,017
              
              $
              1,470
              
              $
              (65
              )
              $
              1,418
              
              $
              5,004Year
                  ended December 31, 2005Allowance
                  for doubtfulaccounts
              
              $
              1,610
              
              $
              275
              
              $
              25
              
              $
              803
              
              $
              1,107Allowance
                  for excess andobsolete
                  inventory
              
              $
              5,471
              
              $
              867
              
              $
              475
              
              $
              1,796
              
              $
              5,017
  (a)
                Write
                    offs
  (b)
                  Includes
                      foreign currency translation
                      adjustments
  S-1


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





Not
      applicable





Item
      9A  Controls
      and Procedures





Evaluation
      of Disclosure Controls and Procedures





During
      the fourth quarter of 2007, the Company’s management, including the principal
      executive officer and principal financial officer, evaluated the Company’s
      disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
      under the Securities Exchange Act of 1934) related to the recording, processing,
      summarization, and reporting of information in the Company’s periodic reports
      that the Company files with the SEC. These disclosure controls and procedures
      have been designed to ensure that material information relating to the Company,
      including its subsidiaries, is made known to the Company’s management, including
      these officers, by other of the Company’s employees, and that this information
      is recorded, processed, summarized, evaluated, and reported, as applicable,
      within the time periods specified in the SEC’s rules and forms. The Company’s
      controls and procedures can only provide reasonable, not absolute, assurance
      that the above objectives have been met. Notwithstanding these limitations,
      the
      Company believes that its disclosure controls and procedures are designed to
      provide reasonable assurances of achieving their objectives.




Based
      on
      their evaluation as of December 31, 2007, 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.




-46-




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, 2007.




The
      Company’s independent registered public accounting firm, Deloitte & Touche
      LLP, has audited the effectiveness of the Company’s internal control over
      financial reporting as of December 31, 2007 and has expressed an unqualified
      opinion in their report which is included herein.




-47-




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 , Executive Officers and
      Corporate Governance





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2008 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 2008 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 Stockholder  Matters





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2008 annual meeting of shareholders that
      is
      responsive to the information required with respect to this Item.





Item
      13. Certain
      Relationships and Related Transactions ,
      and
      Director Independence





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2008 annual meeting of shareholders that
      is
      responsive to the information required with respect to this Item.





Item
      14. Principal
      Accounting Fees and Services





The
      Registrant incorporates by reference herein information to be set forth in
      its
      definitive proxy statement for its 2008 annual meeting of shareholders that
      is
      responsive to the information required with respect to this Item.




-48-




PART
      IV





Item
                15.
            Exhibits,
                Financial Statement Schedules




Page(a)
            
            Financial
                Statements1.
            
            Financial
                statements filed as a part of thisAnnual
                Report on Form 10-K:Report
                of Independent RegisteredPublic
                Accounting Firm
            
            F-1
                - F-2Consolidated
                Balance Sheets as of December 31,2007
                and 2006
            
            F-3
                - F-4Consolidated
                Statements of Operations for Eachof
                the Three Years in the Period EndedDecember
                31, 2007
            
            F-5Consolidated
                Statements of Stockholders' Equityfor
                Each of the Three Years in the PeriodEnded
                December 31, 2007
            
            F-6
                - F-7Consolidated
                Statements of Cash Flows for Eachof
                the Three Years in the Period EndedDecember
                31, 2007
            
            F-8
                - F-10Notes
                to Consolidated Financial Statements
            
            F-
                11 - F-44Condensed
                Selected Quarterly Financial Data - YearsEnded
                December 31, 2007 and 2006 (Unaudited)
            
            F-452.
            
            Financial
                statement schedules filed as part ofthis
                report:Schedule
                II: Valuation and Qualifying Accounts
            
            S-1All
                other schedules are omitted because they areinapplicable,
                not required or the information isincluded
                in the consolidated financial statements or notesthereto.




-49-




(b)  Exhibits





Exhibit
      No.:





3.1
            Certificate
                of Incorporation, as amended, is incorporated by reference to Exhibit
                3.1
                of the Company’s Annual Report on Form 10-K for the year ended December
                31, 1999.





3.2
            By-laws,
                as amended, are incorporated by reference to Exhibit 4.2 of the Company's
                Registration Statement on Form S-2 (Registration No. 33-16703) filed
                with
                the Securities and Exchange Commission on August 25,
                1987.





10.1
            Agency
                agreement dated October 1, 1988 between Bel Fuse Ltd. and Rush Profit
                Ltd.
                Incorporated by reference to Exhibit 10.1 of the Company's annual
                report
                on Form 10-K for the year ended December 31,
                1994.





10.2
            2002
                Equity Compensation Program.
                Incorporated by reference tothe
                Registrant’s proxy statement for its 2002 annual meeting of
                shareholders.




10.3
            Credit
                and Guaranty Agreement, dated as of February 12, 2007, by and among
                Bel
                Fuse, Inc., as Borrower, the Subsidiary Guarantors party thereto
                and the
                Bank of America, N.A., as Lender. Filed as Exhibit 10.1 to the Company’s
                Current Report on Form 8-K filed on February 16, 2007 and incorporated
                herein by reference.




10.4
            Amended
                and Restated Bel Fuse Supplemental Executive Retirement Plan, dated
                as of
                April 17, 2007. Filed as Exhibit 10.1 to the Company’s Current Report on
                Form 8-K filed on April 23, 2007 and incorporated herein by
                reference.




10.5
            Contract
                for Purchase and Sale of Real Estate dated July 15, 2004 between
                Bel Fuse
                Inc. and Fields Development Group Co. Incorporated by reference to
                Exhibit
                10.9 of the Company’s Form 10-K for the year ended December 31,
                2004.





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





14.1
            Bel
                Fuse Inc. Code of Ethics, adopted February 11,
                2004





-50-




Item15.
            Exhibits,
                Financial Statement Schedules and Reports onForm
                8-K(continued)





Exhibit
      No.:





21.1
            Subsidiaries
                of the Registrant.





23.1
            Consent
                of Independent Registered Public Accounting
                Firm.





24.1
            Power
                of attorney (included on the signature
                page)





31.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





31.2
            Certification
                of the Vice President of Finance pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.





32.1
            Certification
                of the Chief Executive Officer pursuant to Section 906 of the Sarbanes
                -
                Oxley Act of 2002.




32.2
            Certification
                of the Vice-President of Finance pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




-51-




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, this report has been signed below by the following persons on behalf
      of
      the registrant and in the capacities and on the dates indicated.


BEL
      FUSE
      INC.




BY:
            /s/
              Daniel
              BernsteinDaniel
              Bernstein, President, Chief ExecutiveOfficer and Director




Dated:
      March 17, 2008





KNOW
      ALL
      MEN BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints Daniel Bernstein and Colin Dunn as his/her
      attorney-in-fact and agent, with full power of substitution and resubstitution,
      for him/her and in his/her name, place, and stead, in any and all capacities,
      to
      sign and file any and all amendments to this Annual Report on Form 10-K, with
      all exhibits thereto and hereto, and other documents with the Securities and
      Exchange Commission, granting unto said attorney-in-fact and agent, and each
      of
      them, full power and authority to do and perform each and every act and thing
      requisite or necessary to be done in and about the premises, as fully to all
      intents and purposes as he/she might or could do in person, hereby ratifying
      and
      confirming all that said attorneys-in-fact and agents, or any of them, or their
      or his substitutes, may lawfully do or cause to be done by virtue
      hereof.





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.




Signature
              
              Title
              
              Date/S/
                  Daniel Bernstein
              
              President,
                  Chief
              
              March
                  17, 2008Daniel
                  Bernstein
              
              Executive
                  Officer and
                  Director/s/
                  Howard Bernstein
              
              Director
              
              March
                  17, 2008Howard
                  B. Bernstein/s/
                  Robert H. Simandl
              
              Director
              
              March
                  17, 2008Robert
                  H. Simandl/s/
                  Peter Gilbert
              
              Director
              
              March
                  17, 2008Peter
                  Gilbert/s/
                  John Tweedy
              
              Director
              
              March
                  17, 2008John
                  Tweedy/s/
                  John Johnson
              
              Director
              
              March
                  17, 2008John
                  Johnson
  -52-
  Signature
              
              Title
              
              Date/s/
                  Avi Eden
              
              Director
              
              March
                  17, 2008Avi
                  Eden/s/
                  Colin Dunn
              
              Vice-President
                  -Colin
                  Dunn
              
              Finance
                  and Secretary
              
              March
                  17, 2008




-53-