BEL FUSE INC /NJ - 10-K Annual Report

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2002

[ ] 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

206 Van Vorst Street, Jersey City, New Jersey 07302
(201) 432-0463
(Address and telephone number, including area code, of registrant's
principal executive office)

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, $.10 par value; Class B Common Stock, $.10 par value

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
----- ------

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

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes X No
--- ---

The aggregate market value of the voting and non-voting common equity
of the registrant held by non-affiliates (for this purpose, persons and entities
other than executive officers, directors, and 5% or more shareholders) of the
registrant, as of the last business day of the registrant's most recently
completed second fiscal quarter (June 30, 2002), was $225,135,000.

Number of shares of Common Stock outstanding as of February 28, 2003:
2,676,225 Class A Common Stock; 8,272,492 Class B Common Stock

Documents incorporated by reference:

Bel Fuse Inc.'s Definitive Proxy Statement for the 2003 Annual Meeting
of Stockholders is incorporated by reference into Part III.

BEL FUSE INC.

INDEX

Part I Page
- ------ ----

Item 1. Business............................................. 1

Item 2. Properties........................................... 6

Item 3. Legal Proceedings.................................... 6

Item 4. Submission of Matters to a Vote of Security
Holders.............................................. 6

Item 4A. Executive Officers of the Registrant................. 7

Part II
- -------

Item 5. Market for Registrant's Common Equity
And Related Stockholder Matters...................... 9

Item 6. Selected Financial Data.............................. 10

Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operation............................................ 11

Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.................................... 21

Item 8. Financial Statements and Supplementary
Data................................................. 21*

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............... 22

Part III
- --------

Item 10. Directors and Executive Officers
of the Registrant.................................... 22

Item 11. Executive Compensation............................... 22

Item 12. Security Ownership of Certain
Beneficial Owners and Management..................... 22

Item 13. Certain Relationships and Related
Transactions......................................... 22

Part IV
- -------

Item 14. Controls and Procedures............................. 23

Item 15. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.............................. 24

Signatures............................................................. 27

*Page F-1 follows page 21

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 following: (a) the dramatic impact of current
conditions in the telecommunication market on the Company's customers; (b) the
general conditions in the electronics industry; (c) the risk that the Company
may be unable to respond adequately to rapidly changing technology developments
in its industry; (d) risks associated with the Company's Far East operations;
(e) the highly competitive nature of the Company's industry and the impact that
competitors' new products and pricing may have upon the Company; (f) the
likelihood that revenues may vary significantly from one accounting period to
another accounting period due to a variety of factors, including customers'
buying decisions, the Company's product mix and general market and economic
conditions; (g) the Company's reliance on certain substantial customers; (h)
risks associated with the Company's ability to manufacture and deliver products
in a manner that is responsive to its customers' needs; (i) the risk of foreign
currency fluctuations; (j) the uncertainties associated with current
geo-political conditions and (k) other market and competitive factors impacting
the Company's customers. 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 1 of the Company's Annual Report on
Form 10-K for the year ended December 31, 2002, which could cause actual results
to differ materially from its 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. (the "Company") is organized under New Jersey law. The
Company does not have reportable segments as defined in Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information". The Company is engaged in the design, manufacture and sale
of products used in networking, telecommunication, automotive and consumer
electronic applications. The Company operates facilities in the United States,
Europe and the Far East. The Company maintains its principal executive offices
at 206 Van Vorst Street, Jersey City, New Jersey 07302; telephone (201)
432-0463. The term "Company" as used in this Annual Report on Form 10-K refers
to Bel Fuse Inc. and its consolidated subsidiaries unless otherwise specified.

1

On December 15, 2002 the Company entered into a definitive agreement
with Insilco Technologies, Inc. ("Insilco") for the purchase by the Company of
certain assets, subject to certain liabilities, and common shares of entities
comprising Insilco's passive component group for $35 million in cash plus the
assumption of certain liablilities. On March 10, 2003 the Bankruptcy Court
entered an order approving this agreement. This approval order authorizes
Insilco to consummate the sale of assets and common shares of various entities
of Insilco to the Company, subject to certain assumed liabilities and free and
clear of all encumbrances on Insilco's U.S. operations. The Company closed on
this acquisition on March 21, 2003.

On January 2, 2003 the Company entered into an asset purchase agreement
with Advanced Power Components PLC ("APC") to purchase the communications
products division of APC for $5.5 million in cash plus the assumption of
certain liabilities. The Company will be required to make contingent purchase
price payments equal to 5% of sales (as defined) in excess of $5.5 million per
year for the years 2003 and 2004.

The transactions will be accounted for using the purchase method of
accounting and, accordingly, the results of operations of Insilco will be
included in the Company's financial statements from March 21, 2003 and the
results of operations of APC will be included in the Company's financial
statements from January 2, 2003.

On May 11, 2001, the Company acquired 100% of the common stock of
E-Power Ltd. ("E-Power") and the assets and business of Current Concepts, Inc.
("Current Concepts") for an aggregate $6,285,000 in cash (including acquisition
expenses). The Company will be required to make contingent purchase price
payments up to approximately $7.6 million should the acquired companies reach
various sales levels. During the year ended December 31, 2002 the Company paid
$61,000 in contingent purchase price payments. The transactions were accounted
for using the purchase method of accounting and, accordingly, the results of
operations of Current Concepts and E-Power have been included in the Company's
financial statements since the date of acquisition. The excess of the purchase
price over net assets acquired ($2.0 million) and other identifiable intangible
assets ($3.7 million) approximated $5.7 million. The identifiable intangible
assets, other than goodwill, are being amortized on a straight-line basis over 4
to 10 years. Goodwill has been amortized based on a 15 year life from May 11,
2001 through December 31, 2001. After January 1, 2002, in accordance with the
provisions of Financial Accounting Standards Board Opinion No. 142, the Company
ceased amortization of goodwill and will review goodwill at least annually for
impairment. See Note 1 of notes to consolidated financial statements.

Product Groups
--------------

Power Products
--------------

In 2001, the Company entered into the market for power conversion
products focusing on providing 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 the developers of integrated
circuits are now commonly adjusting the supply voltage as a means of optimizing
device performance. The Company develops both standard and custom DC/DC
converters. These products leverage the Company's existing manufacturing
capabilities and are marketed primarily to the Company's existing customer base.

2

Magnetic Components
-------------------

The Company manufactures a broad range of magnetic components used in
networking, telecommunications, high speed data transmission equipment,
automotive and consumer products. These wire-wound devices perform such
functions as signal delay, signal timing, signal conditioning, impedance
matching, filtering, isolation, power conversion and power transfer.
Transformers for networking and telecommunication applications are developed
based on market requirements for emerging technologies, often to support an
integrated circuit (IC) design.

Integrated Connector Modules
----------------------------

These modules combine the Company's magnetic components with
combinations of RJ45 and USB connectors. In addition to connectivity, these
modules provide the signal conditioning, electro-magnetic interference
suppression and signal isolation which were previously performed by multiple,
discrete components.

Value-added Modules
-------------------

The Company supplies value-added modules to end users whose
requirements can be satisfied by combining in one integrated package one or more
of the Company's capabilities in surface mount assembly, automatic winding,
hybrid fabrication and component encapsulation.

Miniature, Micro and Chip Fuses
-------------------------------

Fuses prevent currents in an electrical or electronic circuit from
exceeding certain predetermined levels. Fuses act as a safety valve to protect
expensive components from damage or to cut off high currents before they can
generate enough heat to cause smoke or fire. The Company manufactures miniature
and micro fuses for supplementary circuit protection. The Company sells its
fuses to a worldwide market. They are used in such products as televisions,
VCR's, power supplies, computers, telephones and networking equipment.

Marketing
---------

The Company sells its products to approximately 1,000 customers
throughout North America, Western Europe and the Far East. Sales are made
through independent sales representative organizations and authorized
distributors who are overseen by the Company's sales personnel throughout the
world. As of December 31, 2002, the Company had a sales and support staff of 18
persons that supported 59 sales representative organizations and 1 non-exclusive
distributor.

The Company has written agreements with all of its sales representative
organizations and major distributor. Written agreements terminable on short
notice by either party, of the type utilized by the Company, are standard in the
industry.

Finished products manufactured by the Company in its Far East
facilities are, in general, either sold to the Company's Jersey City facility
for resale to customers in the Americas or are shipped directly to other
customers throughout the world. For further information regarding the Company's
geographic operations, see Note 7 of Notes to Consolidated Financial Statements.

The Company had sales to two customers in excess of ten percent of 2002
consolidated sales. The amounts and percentages of the Company's sales were
$11,606,000 (12.1%) and $11,410,000 (11.9%). The loss of either or both of these
customers would have a material adverse effect on the Company's results of
operations, financial position and cash flows.

3

Research and Development
- ------------------------

The Company's research and development efforts in 2002 were spread
among all of the Company's current product groups. The Company's research and
development facilities are located in California, Indiana, Massachusetts, Hong
Kong and China. In addition to its research and development efforts, the Company
maintains continuing programs to improve the reliability of its products and to
design specialized assembly equipment to increase manufacturing efficiencies.
Research and development costs amounted to $6,174,000 in 2002. The Company plans
to close its Indiana facility by June 30, 2003 and closed its Texas facility
during the fourth quarter of 2002. Such closings are not expected to materially
impact the level of the Company's spending on research and development efforts.
The Company purchased property in San Diego, California where its research and
development facility is located. The Company's statement regarding its plans to
close its Indiana facility constitutes a Forward-Looking Statement. Actual
experience could differ materially from such statements for a variety of
factors, including applicable legal and regulatory requirements and other
logistical issues.

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 were 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 source 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 and ferrites, when these materials were in great demand. Even though
the Company may have more than one supplier for certain materials, it is
possible that these materials may not be available to the Company in sufficient
quantities or at the times desired by the Company.

Backlog
- -------

The Company manufactures products against firm orders and projected
usage by customers. Cancellation and return arrangements are either negotiated
by the Company on a transactional basis or contractually determined. The
Company's backlog of orders as of February 25, 2003 was approximately $14.3
million, as compared with a backlog of $13.0 million as of February 25, 2002.
Management expects that all of the Company's backlog as of February 25, 2003
will be shipped by December 31, 2003. 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 shorter lead times on purchase orders and have implemented
consignment inventory programs with the goal of reducing their inventories.
Accordingly, backlog is no longer as reliable an indicator of the timing of
future sales as it has been in the past.

4

Trademarks and Patents
- ----------------------

The Company has been granted a number of U.S. patents and has
additional U.S. patent applications pending relating to its products. While the
Company believes that the issued patents are defendable and that the pending
patent applications relate to patentable inventions, there can be no assurance
that a patent will be obtained from the applications or that its existing
patents can be successfully defended. It is management's opinion that the
successful continuation and operation of the Company's business does not depend
upon the ownership of patents or the granting of pending patent applications,
but upon the innovative skills, technical competence and marketing and
managerial abilities of its personnel. The patents have a life of seventeen
years from the date of issue or twenty years from filing of patent applications.
The Company's existing patents expire on various dates from March 11, 2006 to
February 15, 2021.

The Company utilizes eight U.S. registered trademarks - BELFUSE, BEL,
BELMAG, BELSTACK, BELSTICK, BELCOMBO, SURFUSE and COMPONENTS FOR A CONNECTED
PLANET- 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.

Competition
- -----------

The Company's business is highly competitive. There are numerous
independent companies and divisions of major companies which manufacture
products that are competitive with one or more of the Company's products. Some
of the Company's competitors possess greater financial, marketing and other
resources than those available to the Company. The Company's ability to compete
is dependent upon several factors, including product performance, quality,
reliability, design and price.

Employees
- ---------

As of December 31, 2002, the Company had 940 full-time employees. The
Company employed 84 people in its U.S. facilities and 856 throughout the rest of
the world, excluding workers supplied by independent contractors. The Company's
employees are not represented by any labor union. The Company believes that its
relations with employees are satisfactory.

Website Disclosure
- ------------------

The Company makes available free of charge on it website,
www.belfuse.com, all materials that it files electronically with the Securities
and Exchange Commission, including its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports, as soon as reasonably practicable after the Company electronically
files or furnishes such materials to the SEC.

5

Item 2. Properties
----------

The Company currently occupies approximately 689,000 square feet of
manufacturing, warehouse, office, technical and staff quarter space worldwide.
In addition to the Company's principal corporate offices in New Jersey, the
Company maintains facilities in The People's Republic of China and its Special
Administrative Regions ("SAR") of Hong Kong and Macau in the Far East, in
California, Massachusetts and Indiana in the U.S.A. and in the United Kingdom in
Europe. The Company also owns an idle facility of 46,300 square feet in
Illinois. Approximately 33% of the 689,000 square feet the Company occupies is
owned, while the remainder is leased. The Company closed its Texas facility
during the fourth quarter of 2002 and plans to close its Indiana facility by the
end of the second quarter of 2003 and relocate the employees to California. The
statements regarding its plans to close facilities and relocate them constitute
Forward-Looking Statements. Actual experience could differ materially from such
statements for a variety of factors, including applicable legal and regulatory
requirements and other logistical issues. See Note 11 of Notes to Consolidated
Financial Statements for additional information pertaining to leased properties.

Item 3. Legal Proceedings
-----------------

a) The Company commenced an arbitration proceeding before the American
Arbitration Association against Lucent Technologies, Inc. in or about December
2000. The arbitration arises out of an Agreement for the Purchase and Sale of
Assets, dated October 2, 1998 (the "Asset Purchase Agreement"), among Bel Fuse
Inc., Lucent Technologies, Inc. and Lucent Technologies Maquiladores, Inc., and
a related Global Procurement Agreement, dated October 2, 1998 (the "Supply
Agreement"), between Lucent Technologies, Inc., as Buyer, and Bel Fuse Inc., as
Supplier. Pursuant to the Asset Purchase Agreement, the Company purchased
substantially all of the assets of Lucent's signal transformer business.
Pursuant to the Supply Agreement, Lucent agreed that except for limited
instances where Lucent was obligated to purchase product elsewhere, for a term
of 3 1/2 years, Lucent would be obligated, on an as required basis, to purchase
from the Company all of Lucent's requirements for signal transformer products.
The Supply Agreement also provided that the Company would be given the
opportunity to furnish quotations for the sale of other products.

The Company is seeking monetary damages for alleged breaches by Lucent
of the Asset Purchase Agreement and the Supply Agreement. In its answer, Lucent
denied many of the material allegations made by the Company and also asserted
two counterclaims. The counterclaims seek recovery for alleged losses, including
loss of revenue, sustained by Lucent as a result of the Company's alleged breach
of various provisions of the Supply Agreement. The parties are currently engaged
in extensive discovery proceedings. The Company believes it has substantial and
meritorious claims against Lucent and substantial and meritorious defenses to
Lucent's counterclaims. However, the Company cannot predict how the arbitrator
will decide this matter and whether it will have a material effect on the
Company's consolidated financial statements.

b) The Company has received a letter from a third party which states that its
patent covers certain of the Company's modular jack products and indicates the
third party's willingness to grant a non-exclusive license to the Company under
the patent. The Company believes that none of its products are covered by this
particular patent.

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 2002.

6

Item 4A. Executive Officers of the Registrant
------------------------------------

The following table and biographical outlines set forth the positions
and offices within the Company presently held by each executive officer of the
Company and a brief account of the business experience of each such officer for
the past five years.

Positions and Offices
Officer With the Company/
Name and Age Since Business Experience
- ------------ ----- -------------------

Daniel Bernstein, 49 1985 President, Chief Executive
Officer and Director

Robert H. Simandl, 74 1967 Secretary and Director

Colin Dunn, 58 1992 Vice President of Finance and
Treasurer

Joseph Meccariello, 52 1995 Vice President of
Manufacturing

Dennis Ackerman, 40 2001 Vice President of
Operations

Dwayne Vasquez, 40 2001 Vice President of
Sales

Daniel Bernstein has served the Company as President since June 1992.
He previously served as Vice President (1985-1992) and Treasurer (1986-1992) and
has served as a Director since 1986. He has occupied other positions with the
Company since 1978. He was appointed Managing Director of the Company's Macau
subsidiary during 1991.

Robert H. Simandl, a Director and Secretary of the Company since 1967,
is a member of the law firm of Robert H. Simandl, Counselor At Law. He has been
a practicing attorney in New Jersey since 1953.

Colin Dunn joined the Company in 1991 as Finance Manager and in 1992
was named Vice President of Finance and Treasurer. He is currently a director of
Bel Fuse Ltd and Bel Fuse Macau LDA. Prior to joining the Company, Mr. Dunn was
Vice President of Finance and Operations at Kentek Information Systems, Inc.
from 1985 to 1991 and had previously held a series of senior management
positions with Braintech Inc. and Weyerhaeuser Company.

Joseph Meccariello joined the Company in 1979 as a Manager of
Mechanical Engineering and in 1994 became the Deputy Managing Director of the
Company's Hong Kong subsidiary, Bel Fuse, Ltd. In 1995 he was named Vice
President of Manufacturing with responsibility for Far East production
operations.

7

Dennis Ackerman joined the Company in 1986 and has held the positions
of customer service manager, sales manager, purchasing manager and operations
manager. In 2001 he was named Vice President of Operations.

Dwayne Vasquez joined the Company in 2001 as Director of Sales. In
October 2001 he was promoted to Vice President of Sales with responsibility for
the Company's worldwide sales organization. From 1997 to 2001 he was Director of
Sales and Marketing at Ericson Microelectronics, Power Module Division in
Richardson, Texas where he was responsible for driving revenue in the DC/DC and
Board Mounted Power product markets.

8

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------

(a) Market Information
------------------

On July 9, 1998 the shareholders approved an amendment to the Company's
Certificate of Incorporation authorizing a new voting Class A Common Stock, par
value $.10 per share, and a new non-voting Class B Common Stock, par value $.10
per share ("Class A" and "Class B," respectively), which are traded on the
NASDAQ National Market. The following table sets forth the high and low closing
sales price range (as reported by National Quotation Bureau, Inc.) for the
Common Stock on NASDAQ for each quarter during the past two years.

Class A Class A Class B Class B
High Low High Low
Year Ended December 31, 2001
First Quarter $39.75 $19.75 $39.94 $20.00
Second Quarter 31.75 20.25 33.50 20.57
Third Quarter 30.00 17.55 31.45 18.55
Fourth Quarter 24.25 18.00 26.69 19.25

Year Ended December 31, 2002
First Quarter $26.05 $19.50 $26.80 $21.69
Second Quarter 24.84 22.00 27.80 23.72
Third Quarter 23.50 16.00 27.00 19.44
Fourth Quarter 18.74 14.61 21.85 16.97

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

(b) Holders
-------

As of February 28, 2003 there were 138 registered shareholders of the
Company's Class A Common Stock and 152 registered shareholders of the Company's
Class B Common Stock. The Company estimates that there were 1,922 beneficial
shareholders of Class A Common Stock and 4,251 beneficial shareholders of Class
B Common Stock as of February 28, 2003.

(c) Dividends
---------

There are no contractual restrictions on the Company's ability to pay
dividends. On February 1, 2002, May 1, 2002, August 1, 2002, and November 1,
2002 the Company paid a $.05 per share dividend to all shareholders of record of
Class B Common Stock in the total amount of $404,351, $410,199, $410,874, and
$411,299, respectively. On February 1, 2001, May 1, 2001, August 1, 2001 and
November 1, 2001, the Company paid a $.05 per share dividend to all shareholders
of record of Class B Common Stock in the total amount of $399,070, $400,036,
$402,150 and $402,304, respectively. On February 1, 2003 the Company paid a $.05
per share dividend to all shareholders of record at January 13, 2003 of Class B
Common Stock in the total amount of $411,674.

9

Item 6. Selected Financial Data

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

(b) Includes gains of $1,081 from the sale of marketable
securities during 2000.

(c) After giving retroactive effect to a two for one stock
split payable in the form of a dividend on December 1,
1999.

10

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
infer any conclusion that such results, causes or trends will necessarily
continue in the future.

Critical Accounting Policies
- ----------------------------

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

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

The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
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.

The Company makes purchasing decisions principally based upon firm
sales orders from customers, the availability and pricing of raw materials and
projected customer requirements. Future events that could adversely affect these
decisions and result in significant charges to the Company's operations include
slow down in customer demand as the Company is currently experiencing, customers
delaying the issuance of sales orders to the Company, miscalculating customer
requirements, technology changes which render the raw materials and finished
goods obsolete, and cancellation or loss of customers and/or cancellation of
sales orders. 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.

11

The Company seeks sales and profit growth by expanding its existing
customer base, developing new products and by pursuing strategic acquisitions
that meet the Company's criteria relating to the market for the products: the
Company's ability to efficiently manufacture the product; synergies that are
created by the acquisition; and a purchase price that represents fair value. If
the Company's evaluation of a target company misjudges its technology, estimated
future sales and profitability levels, or ability to keep pace with the latest
technology, these factors could impair the value of the investment, which could
materially adversely affect the Company's profitability.

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

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 Sales
----------------------------------------
Years Ended December 31,
----------------------------------------
2002 2001 2000
---- ---- ----

Net sales 100.0% 100.0% 100.0%
Cost of sales 75.8 93.3 60.9
Selling, general and
administrative expenses 23.3 22.4 16.0
Other income, net of
interest expense 1.0 2.5 2.7
Earnings (loss) before income
taxes 1.9 (13.2) 25.8
Income tax provision (benefit) 1.3 (0.6) 3.6
Net earnings (loss) 0.6 (12.6) 22.2

Increase (decrease) from
Prior Period
----------------------------------------
2002 compared 2001 compared
with 2001 with 2000
-------------- -------------

Net sales (0.5)% (33.9)%

Cost of sales (19.2) 1.3

Selling, general and
administrative expenses 3.3 (7.4)

Net earnings 104.8 (137.8)

12

Sales
- -----

Net sales decreased .5% from approximately $96.0 million in 2001 to
approximately $95.5 million in 2002. The Company attributes this decrease to the
decline in demand affecting the global electronics industry. Although all
product lines experienced sales decreases except for integrated connector
modules ("ICM"), the telecommunications line was particularly depressed. The
Company has experienced price degradation as customers have taken aggressive
price positions.

Net sales decreased 33.9% from approximately $145.2 million in 2000 to
approximately $96.0 million in 2001. The Company attributes this decrease to the
decline in demand affecting the global electronics industry. Although all
product lines experienced sales decreases except for integrated connector
modules ("ICM"), the telecommunications and networking segments were
particularly depressed. The Company is experienced both volume reductions and
price degradation as the number of manufacturers with saleable products
increased and customers took aggressive price positions.

Cost of Sales
-------------

Cost of sales as a percentage of net sales decreased from 93.3% in 2001
to 75.8% in 2002. The decrease in the cost of sales percentage is primarily
attributable to a $14.6 million inventory write-off of surplus and obsolete
inventory and non-cancelable purchase commitments during the year ended December
31, 2001 and cost containment measures implemented by the Company that
positively affected the year ended December 31, 2002, offset in part by
manufacturing inefficiencies due to reduced sales volume and a change in the
Company's sales mix. During the year ended December 31, 2002, the Company
reduced its reserve for purchase commitments by approximately $1.9 million. This
reserve was established during the second quarter of 2001 and was part of the
$12.0 million inventory write-off incurred by the Company. Additionally, the
Company increased its inventory reserves by approximately $2.6 million for
surplus and obsolete inventory during the year ended December 31, 2002. The
Company's product mix during the year ended December 31, 2002 contained a
relatively significant percentage of products that have a high material content.
Such products do not produce margins as high as the Company's traditional
products.

The Company incurred approximately $.8 million of severance and
employee relocation costs during the year ended December 31, 2002.

13

Cost of sales as a percentage of net sales increased from 60.9% in 2000
to 93.3% in 2001. The increase in the cost of sales percentage was primarily
attributable to a $14.6 million inventory write-off of surplus and obsolete
inventory and estimated losses on non-cancelable purchase commitments. This
provision reflected the Company's assessment of then current business levels and
its belief that its customers would ultimately seek next generation products
when and if a recovery occurs. Additionally, the Company incurred a charge
during the fourth quarter of 2001 in the total amount of $5.6 million for the
write-down of fixed assets due to changing customer preferences and projected
lower volumes in mature product lines and other charges related to the
consolidation of the Company's engineering facilities. Also contributing to the
increase in cost of sales were manufacturing inefficiencies due to reduced sales
volume and sales with lower or no gross profit margins.

Selling, General and Administrative Expenses
--------------------------------------------

The percentage relationship of selling, general and administrative
expenses to net sales increased from 22.4% in 2001 to 23.3% in 2002. Selling,
general and administrative expenses increased in dollar amount by approximately
3.3%. The Company attributes the increase in the dollar amount of such expenses
primarily to a goodwill impairment charge of approximately $5.2 million offset,
in part, by cost containment measures implemented by the Company which included
reduced salaries, the elimination of the amortization of goodwill of
approximately$791,000 and a decrease in the amortization of other intangibles of
approximately $661,000.

The percentage relationship of selling, general and administrative
expenses to net sales increased from 16.0% in 2000 to 22.4% in 2001. The Company
attributes the percentage increase primarily to decreased sales. Selling,
general and administrative expenses decreased in dollar amount by approximately
7.4%. The Company attributes the decrease in dollar amount of such expenses to
reduced sales and marketing salaries and related expenses, offset in part by a
salary continuance of approximately $700,000 due under the terms of the late
Chairman of the Board's employment agreement and a charge in the amount of
$533,000 related to the modification of the terms of certain non-qualified
incentive stock options held by the estate of the Chairman of the Board. The
Company's Chairman passed away in July 2001. Additionally, the Company incurred
severance costs in the Far East of $460,000.

Other Income - net
------------------

Other income, consisting principally of a gain on the sale of
marketable securities during 2001 and interest earned on cash and cash
equivalents, decreased by approximately $1.5 million during the year 2002
compared to the year 2001 The decrease is due to lower interest rates earned on
cash and cash equivalents.

Other income, consisting principally of a gain on the sale of
marketable securities during 2000 and interest earned on cash and cash
equivalents, decreased by approximately $1.5 million during the year 2001
compared to the year 2000. The decrease is due to the $1.0 million gain on the
sale of marketable securities during 2000 and lower interest income due to lower
interest rates earned on cash and cash equivalents despite higher cash and cash
equivalent balances during 2001.

14

Provision for 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 the Far East, such funds would be subject
to United States Federal income taxes. Management has identified $21.4 million
of foreign earnings that may not be permanently reinvested. Deferred income
taxes in the amount of approximately $6.4 million have been provided on such
earnings ($.4 million during 2002, $(.1) million during 2001 and $2.1 million
during 2000) through December 31, 2002.

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

The provision (benefit) for income taxes for 2002 was 1,199,000 as
compared to $(547,000) for 2001. The increase in the provision is due primarily
to the Company's earnings before income taxes for the year ended December 31,
2002 versus a loss before income taxes for the year ended December 31, 2001.

The provision (benefit) for income taxes for 2001 was $(547,000) as compared
to $5,159,000 for 2000. The decrease in the provision is due primarily to
foreign losses arising from inventory write-downs, United States and foreign
losses arising from fixed asset write-offs and severance related expenses in
2001 and lower United States taxes resulting from the gain on the sale of
marketable securities in 2000 versus 2001 offset, in part, by pretax profit in
2001 before these charges.

The Company's effective tax rate has generally been lower than the
statutory United States corporate rate primarily as a result of the lower tax
rates in Hong Kong and Macau.

Cost Control Measures
- ---------------------

In light of the current market in the Company's industry, the Company
continues to review its operating structures in efforts to control costs. Such
measures can be expected to result in a restructuring of the Company's
operations and the recognition of related restructuring charges in future
periods. The Company incurred severance and employee relocation charges of
approximately $.8 million during the year ended December 31, 2002.

15

Inflation
- ---------

During the past two years, the effect of inflation on the Company's
operations 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 transactions have been denominated in U.S. dollars or
currencies linked to the U.S. dollar.

Liquidity and Capital Resources
- -------------------------------

Historically, the Company has financed its capital expenditures through
cash flows from operating activities. Management believes that the cash flow
from operations, combined with its existing capital base and the Company's
available lines of credit, will be sufficient to fund its operations for the
near term. Such statement constitutes a Forward-Looking Statement. Factors which
could cause the Company to require additional capital include, among other
things, a further softening in the demand for the Company's existing products,
an inability to respond to customer demand for new products, potential
acquisitions requiring substantial capital, future expansion of the Company's
operations and net losses that could 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 open markets.

The Company has two domestic lines of credit amounting to $11,000,000
which were unused at December 31, 2002. An unsecured $1 million line of credit
is renewable annually. The $10 million line of credit expires on March 21, 2006.
Borrowings under the $10 million line of credit are secured by a first priority
lien on all personal property of Bel Fuse Inc. and its subsidiaries.

On March 21, 2003 the Company negotiated an additional $10 million
secured term loan. The term loan was used to finance the Company's acquisition
of the Passive Components division of Insilco Holdings Company, Inc. The $10
million term loan will fully amortize in 20 equal quarterly installments of
principal with a final maturity of March 21, 2008. Interest at 3.75% is payable
monthly. The term loan is guaranteed by Bel Fuse Inc. and its domestic
subsidiaries. The term loan is collateralized with a first priority lien on 65%
of all of the issued and outstanding shares of the capital stock of the foreign
subsidiaries of Bel Fuse Inc. and all other personal property of Bel Fuse Inc.

The Company's Hong Kong subsidiary has an unsecured line of credit of
approximately $2,000,000, which was unused at December 31, 2002. The line of
credit expires on December 31, 2003. Borrowing on the line of credit is
guaranteed by the U.S. parent.

For information regarding further commitments under the Company's
operating leases, see Note 11 of Notes to the Company's Consolidated Financial
Statements.

16

On December 15, 2002 the Company entered into a definitive agreement
with Insilco Technologies, Inc. ("Insilco") for the purchase by the Company of
certain assets, subject to certain liabilities, and common shares of entities
comprising Insilco's passive component group for $35 million in cash plus the
assumption of certain liabilities. On March 10, 2003 the Bankruptcy Court
entered an order approving this agreement. This approval order authorizes
Insilco to consummate the sale of assets and common shares of various entities
of Insilco to the Company, subject to certain assumed liabilities and free and
clear of all encumbrances on Insilco's U.S. operations. The Company closed on
this acquisition on March 21, 2003.

On January 2, 2003 the Company entered into an asset purchase agreement
with Advanced Power Components PLC ("APC") to purchase the communications
products division of APC for $5.5 million in cash plus the assumption of certain
liabilities. The Company will be required to make contingent purchase price
payments equal to 5% of sales, as defined, in excess of $5.5 million per year
for the years 2003 and 2004.

The transactions will be accounted for using the purchase method of
accounting and, accordingly, the results of operations of Insilco will be
included in the Company's financial statements from March 21, 2003 and the
results of operations of APC will be included in the Company's financial
statements from January 2, 2003.

On May 11, 2001, the Company acquired 100% of the common stock of
E-Power Ltd. ("E-Power") and the assets and business of Current Concepts, Inc.
("Current Concepts") for an aggregate of $6,285,000 in cash (including
acquisition expenses). The Company will be required to make contingent purchase
price payments up to approximately $7.6 million should the acquired companies
reach various sales levels. The transactions were accounted for using the
purchase method of accounting and, accordingly, the results of operations of
Current Concepts and E-Power have been included in the Company's financial
statements since the date of acquisition. The excess of the purchase price over
the net assets acquired ($2.0 million) and other intangible assets ($3.7
million) is approximately $5.7 million. The identifiable intangible assets,
other than goodwill, are being amortized on a straight-line basis over 4 to 10
years. Goodwill has been amortized based on a 15 year life from May 11, 2001
through December 31, 2001. Effective January 1, 2002, in accordance with the
provisions of Financial Accounting Standards Board Opinion No. 142, the Company
ceased amortization of goodwill and will review goodwill at least annually for
impairment. See Note 1 of notes to the consolidated financial statements.

On July 29, 2002 the Company purchased a building in San Diego, CA
for approximately $2.5 million. The Company moved its domestic research and
development operations to this facility in December 2002 after making
approximately $.7 million in improvements to the facility.

During 2001 the Chairman of the Board passed away. Under the terms
of his employment agreement dated October 29, 1997, the Company is obligated to
pay his Estate the balance due on his employment agreement which approximates
$895,000 (of which $195,000 was expensed in prior years) through December 31,
2003 plus health insurance benefits. In addition, the Board of Directors
unanimously agreed to modify the terms of certain options held by the late
Chairman's Estate. This resulted in a non-cash compensation charge of $533,000
for the year ended December 31, 2001.

17

On May 9, 2000 the Board of Directors authorized the repurchase of up
to 10% of the Company's outstanding common shares from time to time in market or
privately negotiated transactions. As of December 31, 2002 the Company had
purchased and retired 23,600 Class B shares at a cost of approximately $808,000,
which reduced the number of Class B common shares outstanding.

During 2002, the Company's cash and cash equivalents decreased by
approximately $10.3 million, reflecting approximately $6.5 million in purchases
of plant and equipment, $6.5 million for the payment for acquisitions,
approximately $1.6 million in dividends and $8.8 million in purchases of
marketable securities, offset, in part, by approximately $5.0 million provided
by operating activities, $6.1 million from the sale of marketable securities and
$1.9 million from the exercise of stock options.

Cash, marketable securities and cash equivalents and accounts
receivable comprised approximately 55.0% and 55.2% of the Company's total assets
at December 31, 2002 and 2001, respectively. The Company's current ratio (i.e.,
the ratio of current assets to current liabilities) was 8.1 to 1 and 7.2 to 1 at
December 31, 2002 and 2001, respectively.

At December 31, 2002, the Company was obligated under non-cancelable
operating leases, purchase commitments for raw materials and capital commitments
as follows:

Years Ending Purchase Capital
December 31, Leases Commitments Commitments
------------ ------ ----------- -----------

2003 $ 567,000 $ 801,000 $ 412,000
2004 327,000 -- --
2005 203,000 -- --
2006 87,000 -- --
2007 -- -- --
----------- ---------- ----------
$ 1,184,000 $ 801,000 $ 412,000
=========== ========== ==========

The Company is currently obligated to fund the Company's Supplemental
Executive Retirement Plan ("SERP"). As of December 31, 2002 the SERP had an
unfunded benefit obligation of approximately $1.9 million. See Note 8 of the
Notes to Consolidated Financial Statements for further information.

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.

18

Territories of Hong Kong, Macau and The People's Republic of China
------------------------------------------------------------------

The Territory of Hong Kong became a Special Administrative Region
("SAR") of The People's Republic of China in the middle of 1997. The territory
of Macau became a SAR of The People's Republic of China at the end of 1999.
Management cannot presently predict what future impact, if any, this will have
on the Company or how the political climate in China will affect its contractual
arrangements in China. Substantially all of the Company's manufacturing
operations and approximately 59% of its identifiable assets are located in Hong
Kong, Macau, and The People's Republic of China. Accordingly, events resulting
from the expiration of such leases as well as any change in the "Most Favored
Nation" status granted to China by the U.S. could have a material adverse effect
on the Company.

New Financial Accounting Standards
----------------------------------

In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of tangible
long-lived assets. The Company is required to implement SFAS No. 143 on January
1, 2003. Management believes the effect of implementing this pronouncement will
not have a material impact on the Company's results of operations or financial
position.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement eliminates the automatic classification of gain or
loss on extinguishment of debt as an extraordinary item of income and requires
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board No. 30 "Reporting Results of
Operations". This statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical corrections to
existing pronouncements. This statement will be effective for the Company for
the year ending December 31, 2003. Management believes that adopting this
statement will not have a material effect on the Company's results of operations
or financial position.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan. Adoption of this Statement
is required with the beginning of fiscal year 2003. The Company has not yet
completed its evaluation of the impact of adopting this Statement.

19

In January 2003, the FASB issued SFAS No. 148, "Accounting for Stock
Based Compensation-Transition and Disclosure, and amendment of FASB Statement
No. 123". SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. It also requires disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for annual and interim periods beginning after December 15, 2002.
Management is currently evaluating the impact of adopting the fair value based
method of accounting for stock based employee compensation and will implement
the provisions of this statement during the first quarter ending March 31, 2003.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, and interpretation of FASB
Statements No. 5, 57,and 107 and Rescission of FASB Interpretation No. 34. FIN
45 clarifies the requirements of FASB Statement No. 5, Accounting for
Contingencies, relating to the guarantor's accounting for, and disclosure of,
the issuance of certain types of guarantees . This interpretation clarifies that
a guarantor is required to recognize, at the inception of certain types of
guarantees, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The disclosure requirements in this interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company is assessing the impact that the adoption of this
interpretation will have and will implement the provisions of this statement
during the first quarter ending March 31, 2003.

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest Entities," which
addresses consolidation by business enterprises of variable interest entities.
In general, a variable interest entity is a corporation, partnership, trust, or
any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights or (b) has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
A variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. The objective of Interpretation No. 46
is not to restrict the use of variable interest entities but to improve
financial reporting by companies involved with variable interest entities. Until
now, a company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.
Interpretation No. 46 changes that by requiring a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of Interpretation No. 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company does not have any variable interest
entities, and, accordingly, adoption is not expected to have a material effect
on the Company.

20

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------

Fair Value of Financial Instruments -- The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures about 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.

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

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

The Company's carrying values of cash, marketable securities, accounts
receivable, accounts payable and accrued expenses are a reasonable approximation
of their fair value.

The Company's business in this regard is subject to certain risks,
including, but not limited to, differing economic conditions, loss of
significant customers, changes in political climate, differing tax structures,
other regulations and restrictions and foreign exchange rate volatility. The
Company's future results could be materially and adversely impacted by changes
in these or other factors.

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.

21

BEL FUSE INC

INDEX

Page
-----------
Financial Statements
--------------------

Independent Auditors' Report F-1

Consolidated Balance Sheets as of December 31,
2002 and 2001 F-2 - F-3

Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 2002 F-4

Consolidated Statements of Stockholders' Equity
for Each of the Three Years in the Period
Ended December 31, 2002 F-5 - F-6

Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 2002 F-7 - F-9

Notes to Consolidated Financial Statements F-10 - F-31

Selected Quarterly Financial Data - Years Ended
December 31, 2002 and 2001 (Unaudited) F-32

INDEPENDENT AUDITORS' REPORT

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, 2002 and 2001, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2002. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Bel Fuse Inc. and subsidiaries as
of December 31, 2002 and 2001, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

As described in Note 1, effective January 1, 2002, in connection with the
adoption of SFAS No. 142, "Goodwill and Intangible Other Assets", the Company
ceased amortization of goodwill.

Deloitte & Touche LLP

New York, New York
March 18, 2003 (March 21, 2003 as to Notes 11 and 12)

F-1

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31, December 31,
2002 2001
------------ ------------

ASSETS
Current Assets:
Cash and cash equivalents $ 59,002,581 $ 69,278,574
Marketable securities 4,966,275 2,342,663
Accounts receivable - less allowance
of $945,000 and $945,000 16,839,497 9,814,914
Inventories 12,384,472 13,870,822
Prepaid expenses and other current
assets 190,199 269,275
Refundable income taxes 681,887 826,859
Deferred income taxes 439,000 817,000
------------ ------------
Total Current Assets 94,503,911 97,220,107
------------ ------------

Property, plant and equipment - net 37,605,195 36,353,951

Goodwill and other intangibles - net 7,624,729 13,653,521

Other assets (including $5.5 million of deposits
relating to APC acquisition) 7,159,077 288,943
------------ ------------
TOTAL ASSETS $146,892,912 $147,516,522
============ ============

F-2

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)

December 31, December 31,
2002 2001
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,099,894 $ 4,624,185
Accrued expenses 6,202,871 8,492,425
Dividends payable 412,000 405,000
------------- -------------
Total Current Liabilities 11,714,765 13,521,610
------------- -------------
Deferred income taxes 4,519,000 4,532,000
------------- -------------
Total Liabilities 16,233,765 18,053,610
------------- -------------

Commitments and Contingencies

Stockholders' Equity:
Preferred stock, no par value,
authorized 1,000,000 shares;
none issued -- --
Class A common stock, par value $.10 per share - authorized
10,000,000 shares; outstanding
2,676,225 and 2,664,637 shares, respectively
(net of 1,072,770 treasury shares) 267,623 266,464
Class B common stock, par value
$.10 per share - authorized
30,000,000 shares; outstanding 8,261,492
and 8,105,117 shares, respectively
(net of 3,218,310 treasury shares) 826,149 810,512
Additional paid-in capital 13,982,688 11,674,768
Retained earnings 115,632,819 116,699,114
Cumulative other comprehensive
income (loss) (50,132) 12,054
------------- -------------
Total Stockholders' Equity 130,659,147 129,462,912
------------- -------------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 146,892,912 $ 147,516,522
============= =============

See notes to consolidated financial statements.

F-3

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
----------------------------------------------------
2002 2001 2000
---- ---- ----

Net Sales $ 95,527,892 $ 96,044,817 $ 145,226,811
------------- ------------- -------------

Costs and expenses:
Cost of sales 72,420,220 89,603,327 88,478,545
Selling, general and administrative 22,269,733 21,561,028 23,284,152
------------- ------------- -------------
94,689,953 111,164,355 111,762,697
------------- ------------- -------------

Income (loss) from operations 837,939 (15,119,538) 33,464,114
Other income - net 940,058 2,410,566 3,912,347
------------- ------------- -------------

Earnings (loss) before provision for income taxes 1,777,997 (12,708,972) 37,376,461
Income tax provision (benefit) 1,199,000 (547,000) 5,159,000
------------- ------------- -------------

Net earnings (loss) $ 578,997 $ (12,161,972) $ 32,217,461
============= ============= =============

Earnings (loss) per common share - basic $ 0.05 $ (1.13) $ 3.04
============= ============= =============

Earnings (loss) per common share - diluted $ 0.05 $ (1.13) $ 2.94
============= ============= =============

Weighted average number of
common shares outstanding - basic 10,907,371 10,715,921 10,582,916
============= ============= =============
Weighted average number of
common shares outstanding - diluted 11,085,934 10,715,921 10,953,540
============= ============= =============

See notes to consolidated financial statements.

F-4

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Cumulative
Other
Compre- Compre- Class A Class B Additional
hensive Retained hensive Common Common Paid-In
Total Income (loss) Earnings Income (loss) Stock Stock Capital
------------- ------------- -------- ------------- --------- --------- ---------

Balance, January 1, 2000 $ 110,253,937 $ 99,839,765 $ 548,268 $ 263,220 $ 791,031 $8,811,653
Exercise of stock
options 962,516 1,463 10,708 950,345
Tax benefits arising
from the disposition of
non-qualified
incentive stock options 438,000 438,000
Cash dividends on Class B
common stock (1,586,650) (1,586,650)
Currency translation
adjustment 26,607 $ 26,607 26,607
Purchase and retirement of
common stock (807,805) (2,360) (805,445)
Issuance of stock warrants
for consulting services 25,000 25,000
Decrease in marketable
securities-net of taxes (512,986) (512,986) (512,986)
Net income 32,217,461 32,217,461 32,217,461
------------
Comprehensive Income $ 31,731,082
============
------------- ------------ ---------- --------- --------- ----------
Balance, December 31, 2000 141,016,080 130,470,576 61,889 264,683 799,379 9,419,553
Exercise of stock
options 1,328,129 1,781 11,133 1,315,215
Tax benefits arising
from the disposition of
non-qualified
incentive stock options 382,000 382,000
Cash dividends on Class B
common stock (1,609,490) (1,609,490)
Modifications of terms of
stock option 533,000 533,000
Currency translation
adjustment 3,165 $ 3,165 3,165
Issuance of common stock warrants
for consulting services 25,000 25,000
Decrease in marketable
securities-net of taxes (53,000) (53,000) (53,000)
Net loss (12,161,972) (12,161,972) (12,161,972)
------------
Comprehensive loss $(12,211,807)
============
------------- ------------ ---------- --------- --------- -----------
Balance, December 31, 2001 129,462,912 116,699,114 12,054 266,464 810,512 11,674,768

See notes to consolidated financial statements.

F-5

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)

Cumulative
Other
Compre- Compre- Class A Class B Additional
hensive Retained hensive Common Common Paid-In
Total Income (loss) Earnings Income (loss) Stock Stock Capital
------------- ------------- -------- ------------- --------- --------- ---------

Balance, December 31, 2001 129,462,912 116,699,114 12,054 266,464 810,512 11,674,768
Exercise of stock
options 1,872,716 1,159 15,637 1,855,920
Tax benefits arising
from the disposition of
non-qualified
incentive stock options 452,000 452,000
Cash dividends on Class B
common stock (1,645,292) (1,645,292)
Currency translation
adjustment (19,186) $ (19,186) (19,186)
Decrease in marketable
securities-net of taxes (43,000) (43,000) (43,000)

Net income 578,997 578,997 578,997
------------
Comprehensive income $ 516,811
============
------------- ------------ ---------- --------- --------- -----------
Balance, December 31, 2002 $ 130,659,147 $115,632,819 $ (50,132) $ 267,623 $ 826,149 $13,982,688
============= ============ ========== ========= ========= ===========

See notes to consolidated financial statements.

F-6

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
--------------------------------------------------
2002 2001 2000
------------ ------------ -----------

Cash flows from operating activities:
Net income (loss) $ 578,997 $(12,161,972) $ 32,217,461
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation and amortization 5,998,426 7,784,577 5,931,755
Goodwill impairment 5,200,000 -- --
Inventory write-off -- 14,586,000 --
Loss on write-off/sale of fixed assets 8,614 3,957,267 --
Restructuring charges -- 1,056,000 --
Other 452,000 941,575 493,269
Deferred income taxes 405,000 (2,592,000) 1,783,000
Gain on sale of marketable securities -- -- (1,081,437)
Changes in operating assets
and liabilities (7,552,738) 7,400,734 (941,946)
------------ ------------ ------------
Net Cash Provided by
Operating Activities 5,090,299 20,972,181 38,402,102
------------ ------------ ------------

Cash flows from investing activities:
Purchase of property, plant
and equipment (6,477,313) (5,975,441) (8,127,595)
Purchase of marketable
securities (8,824,630) (5,864,808) (773,253)
Deposit on APC acquisition (5,500,000) -- --
Cost of acquisitions - net of
cash acquired (61,411) (5,943,046) --
Deferred acquisition costs related to
Insilco (947,121) -- --
Proceeds from sale of
marketable securities 6,131,796 3,663,213 3,024,432
Proceeds from sale of
equipment 48,964 89,164 865
------------ ------------ ------------
Net Cash Used in
Investing Activities (15,629,715) (14,030,918) (5,875,551)
------------ ------------ ------------

See notes to consolidated financial statements.

F-7

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Year Ended December 31,
----------------------------------------------------
2002 2001 2000
------------ ------------ --------------

Cash flows from financing activities:
Repurchase of common stock -- -- (807,805)
Loan repayments 29,000 29,000 104,000
Proceeds from exercise of
stock options 1,872,716 1,328,129 962,516
Dividends paid to common
shareholders (1,638,293) (1,606,851) (1,580,858)
------------ ------------ ------------
Net Cash Provided By (Used In)
Financing Activities 263,423 (249,722) (1,322,147)
------------ ------------ ------------

Net Increase (decrease) in
Cash and Cash Equivalents (10,275,993) 6,691,541 31,204,404
Cash and Cash Equivalents
- beginning of year 69,278,574 62,587,033 31,382,629
------------ ------------ ------------
Cash and Cash Equivalents
- end of year $ 59,002,581 $ 69,278,574 $ 62,587,033
============ ============ ============

Changes in operating assets
and liabilities consist of:
(Increase) decrease in accounts
receivable $ (7,024,583) $ 15,351,628 $ (6,377,235)
(Increase) decrease in inventories 1,486,350 1,863,260 (6,048,952)
(Increase) decrease in prepaid
expenses and other
current assets 50,076 73,287 (87,300)
(Increase) decrease in prepaid taxes 144,972 (826,859) --
(Increase) decrease in other assets (423,134) 29,409 54,123
Increase (decrease) in
accounts payable 475,709 (8,446,636) 8,662,384
(Decrease) increase in
accrued expenses (2,262,128) (643,355) 3,096,884
Increase (decrease) in
income taxes payable -- -- (241,850)
------------ ------------ ------------
$ (7,552,738) $ 7,400,734 $ (941,946)
============ ============ ============

See notes to consolidated financial statements.

F-8

BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)

Year Ended December 31,
------------------------------------------
2002 2001 2000
---------- ---------- ----------

Supplementary information:
Cash paid during the year for:
Income taxes $ 205,000 $2,421,000 $3,183,000
========== ========== ==========

Details of acquisition:
Fair value of assets
acquired (excluding cash of $341,954) $ 267,789
Intangibles 5,675,257
----------
Cash paid for acquisition $5,943,046
==========

See notes to consolidated financial statements.

F-9

BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Bel Fuse Inc. and subsidiaries (the "Company") operate in one industry
segment and are engaged in the design, manufacture and sale of products used in
local area networking, telecommunication, business equipment and consumer
electronic applications. Operations are managed on a geographic basis. Sales are
predominantly in North America, Western Europe and the Far East.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
---------------------------
include the accounts of the Company and its wholly owned subsidiaries. All
intercompany transactions and balances have been eliminated.

USE OF ESTIMATES - The preparation of the 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, 2002 and 2001, cash equivalents
approximate $41,207,000 and $50,588,000, respectively.

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

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

F-10

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

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
primarily to 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, by policy, limits the amount of credit exposure with
any one financial instrument.

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

REVENUE RECOGNITION - Revenue is recognized when products are shipped
-------------------
and title passes to customers.

GOODWILL AND OTHER INTANGIBLES - Goodwill represents the excess of
------------------------------
purchase price and related costs over the value assigned to the net tangible and
other intangible assets with finite lives acquired in a business acquisition.
Prior to January 1, 2002, goodwill has been amortized on a straight-line basis
over 4 to 15 years. Amortization expense was $-0- in 2002, $792,000 in 2001, and
$679,000 in 2000.

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". Under SFAS No.
142, goodwill and intangible assets deemed to have indefinite lives and are no
longer amortized, but are subject to, at a minimum, an annual impairment test.
If the carrying value of goodwill or intangible assets exceeds its fair market
value, an impairment loss would be recorded. The Company uses a discounted cash
flow model to determine fair market value of the Company's reporting units. In
the fourth quarter of 2002, the Company recorded a goodwill impairment charge of
$5,200,000.

Other intangibles include patents and product information, covenants
not-to-compete and supply agreements. Amounts assigned to these intangibles are
based on independent appraisals. Other intangibles are being amortized over 4 to
10 years. Amortization expense was $890,000 in 2002, $1,426,000 in 2001 and
$820,000 in 2000.

F-11

The following information represents proforma net income (loss) and
earnings (loss) per share assuming the adoption of SFAS No. 142 in the first
quarter of 2000:

For the year
Ended December 31,
-------------------------------------------------
2002 2001 2000
---------- ------------- ------------

Reported net income (loss) $ 578,997 $ (12,161,972) $ 32,217,461
Addback: Goodwill amortization (net of income tax) -- 653,000 550,000
----------- -------------- ------------
Adjusted net income (loss) $ 578,997 $ (11,508,972) $ 32,767,461
=========== ============== ============

Basic earnings (loss) per share:
Reported net income (loss) $ 0.05 $ (1.13) $ 3.04
Addback: Goodwill amortization -- 0.06 0.05
----------- -------------- ------------
Adjusted net income (loss) $ 0.05 $ (1.07) $ 3.09
=========== ============== ============

Diluted earnings (loss) per share:
Reported net income (loss) $ 0.05 $ (1.13) $ 2.94
Addback: Goodwill amortization -- 0.06 0.05
------------
Adjusted net income (loss) $ 0.05 $ (1.07) $ 2.99
=========== ============== ============

The changes in the carrying value of goodwill for the year ended
December 31, 2002 are as follows:

Balance, December 31, 2001 $ 10,019,563
Impairment (5,200,000)
------------
Balance, December 31, 2002 $ 4,819,563
============

The components of other intangible assets are as follows:

December 31, 2002 December 31, 2001
-------------------------- --------------------------
Gross Carrying Accumulated Gross Carrying Accumulated
Amount Amortization Amount Amortization
-------------- ------------ -------------- ------------

Patents and Product Information $1,335,000 $ 486,819 $1,335,000 $ 332,708

Covenants not-to-compete 2,961,411 1,004,426 2,900,000 458,334

Supply agreement 2,660,000 2,660,000 2,660,000 2,470,000
---------- ---------- ---------- ----------

$6,956,411 $4,151,245 $6,895,000 $3,261,042
========== ========== ========== ==========

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

Estimated
Amortization
December 31, Expense
------------ ------------
2003 $ 709,000
2004 709,000
2005 633,000
2006 486,000
2007 97,000

F-12

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

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

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

Except for a portion of foreign earnings, 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 dividends.

The principal items giving rise to deferred taxes are the use of
accelerated depreciation methods for plant and equipment, the assumed
repatriation of a portion of foreign earnings and certain expenses which have
been deducted for financial reporting purposes which are not currently
deductible for income tax purposes and the future tax benefit of certain foreign
net operating loss carryforwards.

STOCK - BASED COMPENSATION - The Company accounts for equity-based
--------------------------
compensation issued to employees in accordance with Accounting Principles Board
("ABP") Opinion No. 25 "Accounting for Stock Issued to Employees". APB No. 25
requires the use of the intrinsic value method, which measures compensation cost
as the excess, if any, of the quoted market price of the stock at the
measurement date over the amount an employee must pay to acquire the stock. The
Company makes disclosures of pro forma net earnings and earnings per share as if
the fair-value-based method of accounting had been applied as required by SFAS
No. 123 "Accounting for Stock-Based Compensation-Transition and Disclosure".

On July 6, 2001 the Chairman of the Board passed away. The Board of
Directors unanimously agreed to modify the terms of certain options held by the
late Chairman's Estate. This resulted in a non-cash compensation charge of
$533,000 for the year ended December 31, 2001.

F-13

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

EVALUATION OF LONG-LIVED ASSETS - Long-lived assets are assessed for
-------------------------------
recoverability on an on-going basis. In evaluating the fair value and future
benefits of long-lived assets, their carrying value would be reduced by the
excess, if any, of the long-lived asset over management's estimate of the
anticipated undiscounted future net cash flows of the related long-lived asset.
In 2001, the Company wrote-off property and equipment with a net book value of
approximately $4.1 million.

EARNINGS (LOSS) PER COMMON SHARE - Basic earnings (loss) per common
--------------------------------
share are computed by dividing net earnings (loss) by the weighted average
number of common shares outstanding during the year. Diluted earnings per common
share are computed by dividing net earnings by the weighted average number of
common shares and potential common shares outstanding during the year. Potential
common shares used in computing diluted earnings per share relate to stock
options and warrants which, if exercised, would have a dilutive effect on
earnings per share. The number of potential common shares outstanding were
178,563, 218,212, and 370,624 for the years ended December 31, 2002, 2001 and
2000, respectively. During the year ended December 31, 2001 potential common
shares outstanding were omitted from the calculation of loss per share as the
effect would be antidilutive. During the years ended December 31, 2002 and 2000,
there were no antidilutive options and warrants omitted from the calculation of
diluted earnings per share.

FAIR VALUE OF FINANCIAL INSTRUMENTS - For financial instruments,
-----------------------------------
including cash, accounts receivable, accounts payable and accrued expenses, it
was assumed that the carrying amount approximated fair value because of the
short maturities of such instruments.

NEW FINANCIAL ACCOUNTING STANDARDS - In January 2001, the Company
----------------------------------
adopted SFAS 133 "Accounting for Derivative Instruments and Hedging Activities,
as amended ("SFAS 133 as amended"). SFAS 133 as amended, established accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. Under SFAS
133, as amended, certain contracts that were formerly not considered derivatives
may now meet the definition of a derivative. Because the Company does not
currently utilize derivatives, the impact of the adoption was not material to
the Company's financial statements.

In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations and costs associated with the retirement of tangible long-lived
assets. The Company is required to implement SFAS No. 143 on January 1, 2003.
Management believes the effect of implementing this pronouncement will not have
a material impact on the Company's results of operations or financial position.

F-14

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", effective for fiscal years
beginning after December 15, 2001. Under SFAS No. 144 assets held for sale will
be included in discontinued operations if the operations and cash flows will be
or have been eliminated from the ongoing operations of the entity and the entity
will not have any significant continuing involvement in the operations of the
component. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of
SFAS No. 144 did not have a material impact on the Company's results of
operations or financial position.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement eliminates the automatic classification of gain or
loss on extinguishment of debt as an extraordinary item of income and requires
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board No. 30 "Reporting Results of
Operations". This statement also requires sales-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sales-leaseback transactions, and makes various other technical corrections to
existing pronouncements. This statement will be effective for the Company for
the year ending December 31, 2003. Management believes that adopting this
statement will not have a material effect on the Company's results of operations
or financial position.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan. Adoption of this Statement
is required with the beginning of fiscal year 2003. The Company has not yet
completed the evaluation of the impact of adopting this Statement.

In January 2003, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure, an amendment of FASB
Statement No. 123" SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. It also requires disclosure in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for annual and interim periods beginning after December 15, 2002.
Management is currently evaluating the impact of adopting the fair value based
method of accounting for stock-based employee compensation and will implement
the provisions of this statement during the first quarter ending March 31, 2003.

F-15

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, and interpretation of FASB
Statements No. 5, 57,and 107 and Rescission of FASB Interpretation No. 34. FIN
45 clarifies the requirements of FASB Statement No. 5, Accounting for
Contingencies, relating to the guarantor's accounting for, and disclosure of,
the issuance of certain types of guarantees. This interpretation clarifies that
a guarantor is required to recognize, at the inception of certain types of
guarantees, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The disclosure requirements in this interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company is assessing the impact that the adoption of this
interpretation will have and will implement the provisions of this statement
during the first quarter ending March 31, 2003.

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities," which addresses
consolidation by business enterprises of variable interest entities. In general,
a variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. A
variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. The objective of Interpretation No. 46
is not to restrict the use of variable interest entities but to improve
financial reporting by companies involved with variable interest entities. Until
now, a company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.
Interpretation No. 46 changes that by requiring a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of Interpretation No. 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company does not have any variable interest
entities, and, accordingly, adoption is not expected to have a material effect
on the Company.

F-16

2. ACQUISITION

On May 11, 2001, the Company acquired 100% of the common stock of
E-Power Ltd. ("E-Power") and the assets and business of Current Concepts, Inc.
("Current Concepts") for an aggregate of $6,285,000 in cash (including
acquisition expenses). The Company will be required to make contingent purchase
price payments of up to approximately $7.6 million should the acquired companies
reach various sales levels. During the year ended December 31, 2002, $61,000 of
contingent purchase price payments were made. The transactions were accounted
for using the purchase method of accounting and, accordingly, the results of
operations of Current Concepts and E-Power have been included in the Company's
consolidated financial statements since the date of acquisition. Purchase price
allocations were based on independent formal appraisals. The excess of the
purchase price over net assets acquired ($2.0 million) and other identifiable
intangible assets ($3.7 million) approximated $5.7 million. The identifiable
intangible assets, other than goodwill, are being amortized on a straight-line
basis over a period of 4 to 10 years. Goodwill has been amortized based on a 15
year life from May 11, 2001 through December 31, 2001. After January 1, 2002, in
accordance with the provisions of Financial Accounting Standards Board Opinion
No. 142, the Company ceased amortization of goodwill and will review goodwill at
least annually for impairment.

The following unaudited pro forma summary results of operations assumes
that both Current Concepts and, E-Power had been acquired as of January 1, 2000:

Year Ended
December 31,
--------------------------------------------
2001 2000
-------- --------
(Dollars in thousands except per share data)
Sales $ 96,133 $145,929
Net income (loss) (13,321) 31,173
Earnings (loss) per share-diluted $ (1.24) $ 2.85

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, 2000, nor should such information be construed as being a
representation of the future results of operations of the Company.

3. MARKETABLE SECURITIES

At December 31, 2002 and 2001 respectively, marketable securities have
a cost of approximately $5,090,000 and $2,396,000, an estimated fair value of
approximately $4,966,000 and $2,343,000, gross unrealized loss of approximately
$124,000 and $53,000 and realized gain of approximately $1,081,000 during 2000.
The realized gain in 2000 is included in other income -net.

F-17

4. INVENTORIES

Inventories consist of the following:

December 31,
----------------------------------
2002 2001
----------- -----------
Raw materials $ 7,350,130 $ 9,289,702
Work in process 53,776 67,638
Finished goods 4,980,566 4,513,482
----------- -----------
$12,384,472 $13,870,822
=========== ===========

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

December 31,
----------------------------------
2002 2001
----------- -----------
Land $ 2,713,966 $ 1,660,466
Buildings and improvements 19,133,907 16,931,722
Machinery and equipment 55,840,319 54,586,642
Idle property held for sale 250,000 250,000
----------- -----------
77,938,192 73,428,830
Less accumulated depreciation 40,332,997 37,074,879
----------- -----------
$37,605,195 $36,353,951
=========== ===========

Depreciation expense for the years ended December 31, 2002, 2001, and
2000 was $5,108,000, $5,521,000, and $4,425,000, respectively.

F-18

6. INCOME TAXES

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

Years Ended December 31,
-----------------------------------------------
2002 2001 2000
----------- ----------- -----------
Current:
Federal $ 345,000 $ 1,674,000 $ 1,758,000
Foreign 411,000 244,000 1,367,000
State 38,000 127,000 251,000
----------- ----------- -----------
794,000 2,045,000 3,376,000
----------- ----------- -----------
Deferred:
Federal and state 265,000 (1,616,000) 1,806,000
Foreign 140,000 (976,000) (23,000)
----------- ----------- -----------
405,000 (2,592,000) 1,783,000
----------- ----------- -----------
$ 1,199,000 $ (547,000) $ 5,159,000
=========== =========== ===========

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

Years Ended December 31,
2002 2001 2000
------------ ------------ ------------

Tax provision (benefit)
computed at the Federal
statutory rate of 34% $ 604,000 $ (4,321,000) $ 12,708,000
Increase (decrease) in
taxes resulting from:
Different tax rates and permanent
differences applicable to
foreign operations 366,000 3,698,000 (7,376,000)
State taxes, net of federal
benefit 163,000 84,000 166,000
Other, net 66,000 (8,000) (339,000)
------------ ------------ ------------
$ 1,199,000 $ (547,000) $ 5,159,000
============ ============ ============

F-19

6. INCOME TAXES (continued)

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

December 31,
--------------------------------------------------------------------
2002 2001
------------------------------- ------------------------------
Temporary Temporary
Difference Tax Effect Difference Tax Effect
------------ ------------ ------------ -----------

Deferred Tax Liabilities-
non-current:
Depreciation $ 13,094,000 $ 1,149,000 $ 11,758,000 $ 1,101,000
Amortization (3,412,000) (1,217,000) (841,000) (362,000)
Unremitted earnings of
foreign subsidiaries
not permanently
reinvested 21,420,000 6,426,000 20,180,000 6,054,000
Foreign net operating
loss carryforward (7,109,000) (567,000) (8,000,000) (696,000)
Other temporary
differences (3,181,000) (1,272,000) (3,913,000) (1,565,000)
------------ ------------ ------------ ------------
$ 20,812,000 $ 4,519,000 $ 19,184,000 $ 4,532,000
============ ============ ============ ============
Deferred Tax Assets -
current:
Unrealized
depreciation
in marketable
securities $ 123,000 $ 49,000 $ 50,000 $ 20,000
Reserves and
accruals 976,000 390,000 1,943,000 797,000
------------ ------------ ------------ ------------
$ 1,099,000 $ 439,000 $ 1,993,000 $ 817,000
============ ============ ============ ============

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

The Company has foreign net operating loss carry-forwards of
approximately $7,109,000 which expire during the years ending 2004 through 2005.

F-20

6. INCOME TAXES (continued)

It is management's intention to permanently reinvest the majority of
the earnings of foreign subsidiaries in the expansion of its foreign operations.
$643,000 and $1,810,000 of earnings were repatriated during 2002 and 2001,
respectively. No earnings were repatriated during 2000. Unrepatriated earnings,
upon which U.S. income taxes have not been accrued, approximate $92.0 million at
December 31, 2002. Estimated income taxes related to unrepatriated foreign
earnings would approximate $28.0 million. Management has identified
approximately $21.4 million of foreign earnings that may not be permanently
reinvested. Deferred income taxes in the amount of approximately $6.4 million
have been provided on such earnings ($.4 million during 2002, $(.1) million
during 2001 and $6.1 million during 2000 and prior years).

7. SEGMENTS - OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT
SALES

The Company does not have reportable operating segments as defined in
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information". Operations are managed on a
geographic basis. The method for attributing revenues to individual countries is
based on the destination to which finished goods are shipped. The Company
operates facilities in the United States, Europe and the Far East.

The Company had sales to individual customers in excess of ten percent of
consolidated net sales as follows: The amount and percentages of the Company's
sales were $11,606,000 (12.1%), and $11,410,000 (11.9%) in 2002, and $20,707,000
(14.3%), $17,622,000 (12.1%) and $15,483,000 (10.2%) in 2000, respectively. No
customers represented in excess of ten percent of consolidated sales in 2001.
The loss of any of these customers would have a material adverse effect on the
Company's results of operations, financial position and cash flows.

F-21

7. SEGMENTS - OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT
SALES (Continued)

2002 2001 2000
------------- ------------- -------------

Revenue from unrelated
entities and country
of Company's domicile:
North America $ 26,227,607 $ 47,257,490 $ 84,389,919
Asia/Pacific 35,046,275 22,895,848 30,021,853
Hong Kong 23,586,199 13,906,574 14,292,061
United Kingdom 362,119 1,296,138 2,211,792
Europe 10,025,464 10,354,125 13,903,454
Other 280,228 334,642 407,732
------------- ------------- -------------
$ 95,527,892 $ 96,044,817 $ 145,226,811
============= ============= =============

Total Revenues:
United States $ 28,956,505 $ 46,989,911 $ 84,875,000
Asia 81,906,834 75,523,422 121,230,526
Less intergeographic
revenues (15,335,447) (26,468,516) (60,878,715)
------------- ------------- -------------
$ 95,527,892 $ 96,044,817 $ 145,226,811
============= ============= =============

Income (loss) from Operations:
United States $ (90,470) $ (1,877,751) $ 3,735,292
Asia 928,409 (13,241,787) 29,728,822
------------- ------------- -------------
$ 837,939 $ (15,119,538) $ 33,464,114
============= ============= =============

Identifiable Assets:
United States $ 46,101,626 $ 47,116,502 $ 49,925,968
Asia 118,819,792 112,651,502 123,634,713
Less intergeographic
eliminations (18,028,506) (12,251,482) (4,047,276)
------------- ------------- -------------
Total Identifiable Assets $ 146,892,912 $ 147,516,522 $ 169,513,405
============= ============= =============

Capital Expenditures:
United States $ 3,394,916 $ 1,583,417 $ 2,337,330
Asia 3,082,397 4,392,024 5,790,265
------------- ------------- -------------
$ 6,477,313 $ 5,975,441 $ 8,127,595
============= ============= =============

Depreciation and Amortizaion
expense:
United States $ 858,155 $ 1,477,180 $ 1,262,419
Asia (1) 5,140,271 6,307,397 4,669,336
------------- ------------- -------------
$ 5,998,426 $ 7,784,577 $ 5,931,755
============= ============= =============

(1) Excludes $5,200,000 of goodwill impairment in 2002.

F-22

7. SEGMENTS - OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT
SALES (Continued)

Transfers between geographic areas include raw materials purchased in
the United States which are shipped to foreign countries to be manufactured into
finished products. Finished products manufactured in foreign countries are then
transferred to the United States for sale. Income from operations represents
gross profit less operating expenses.

Identifiable assets are those assets of the Company that are
identified with the operations of each geographic area.

The territory of Hong Kong became a Special Administrative Region
("SAR") of the People's Republic of China in the middle of 1997. The territory
of Macau became a SAR of the People's Republic of China at the end of 1999.
Management cannot presently predict what future impact this will have on the
Company, if any, or how the political climate in China will affect the Company's
contractual arrangements in China. Substantially all of the Company's
manufacturing operations and approximately 59% of its identifiable assets are
located in The People's Republic of China and its SARs of Hong Kong and Macau.
Accordingly, events which may result from the expiration of such leases, as well
as any change in the "Most Favored Nation" status granted to China by the U.S.,
could have a material adverse effect on the Company.

The Company's research and development facilities are located in
California, Indiana, Massachusetts, Hong Kong and China. Research and
development costs, which are expensed as incurred, amounted to $6,174,000 in
2002, $4,967,000 in 2001, and $6,229,000 in 2000. The Company plans to close its
Indiana facility by June 30, 2003 and closed its Texas facility during the
fourth quarter of 2002. The Company purchased property in San Diego, California
where its research and development facility is located.

8. 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 will be made with Company stock purchased in the open market. The
expense for the years ended December 31, 2002, 2001, and 2000 amounted to
approximately $207,000, $216,000, and $261,000, respectively. As of December 31,
2002, the plans owned 27,730 and 130,631 shares of Bel Fuse Inc. Class A and
Class B common stock, respectively.

F-23

8. RETIREMENT FUND AND PROFIT SHARING PLAN (Continued)

The Company's Far East subsidiaries have a retirement fund covering
substantially all of their Hong Kong based full-time employees. Eligible
employees contribute up to 5% of salary to the fund. In addition, the Company
may contribute an amount equal to a percentage of eligible salary, as determined
by the Company, in cash or Company stock. The expense for the years ended
December 31, 2002, 2001, and 2000 amounted to approximately $604,000, $665,000,
and $518,000, respectively. As of December 31, 2002, the plan owned 3,323 and
16,842 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

During 2002, the Company established a Supplemental Executive
Retirement Plan ("SERP") which provides retirement benefits to certain officers
and other select employees of the Company. The benefits are unfunded and limited
to a maximum of 40% of monthly average compensation.

F-24

8. RETIREMENT FUND AND PROFIT SHARING PLAN (Continued)

The following provides a reconciliation of benefit obligations, funded
status of the SERP as well as a summary of significant assumptions:

December 31, 2002
- --------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ --
Service cost 80,153
Interest cost 63,801
Plan amendments 1,760,028
- --------------------------------------------------------------------------------
Benefit obligations at end of year $ 1,903,982
- --------------------------------------------------------------------------------

Funded status of plan:
Under funded status $ (1,903,982)
Unrecognized prior service costs 1,707,473
- --------------------------------------------------------------------------------
Accrued pension cost $ (196,509)
- --------------------------------------------------------------------------------

Balance sheet amounts:
Accrued benefit liability $ 1,143,482
Intangible asset 946,973
- --------------------------------------------------------------------------------

The components of SERP expense are as follows:

December 31, 2002
- --------------------------------------------------------------------------------

Service cost $ 80,153
Interest cost 63,801
Amortization of adjustments 52,556
- --------------------------------------------------------------------------------
Total SERP expense $ 196,510
- --------------------------------------------------------------------------------

Assumption percentages:
Discount rate 6.50%
Rate of compensation increase 4.00%
- --------------------------------------------------------------------------------

F-25

9. STOCK OPTION PLAN

The Company has a Qualified Stock Option Plan (the "Plan") which
provides for the granting of "Incentive Stock Options" to key employees within
the meaning of Section 422 of the Internal Revenue Code of 1954, as amended. The
Plan provides for the issuance of 2,400,000 shares. Substantially all options
outstanding become exercisable twenty-five percent (25%) one year from the date
of grant and twenty-five percent (25%) for each year of the three years
thereafter. The price of the options granted pursuant to the Plan is not to be
less than 100 percent of the fair market value of the shares on the date of
grant. An option may not be exercised within one year from the date of grant,
and in general, no option will be exercisable after five years from the date
granted. The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"(SFAS No. 123). Accordingly, no compensation cost has been
recognized for the stock options awarded. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the grant
date for awards in 2002, 2001 and 2000 consistent with the provisions of SFAS
No. 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:

December 31,
---------------------------------------------------
2002 2001 2000
------------ ------------- ------------

Net earnings (loss) - as reported $ 578,997 $ (12,161,972) $ 32,217,461
Net earnings (loss)- pro forma $ (1,576,938) $ (14,416,817) $ 30,576,995
Earnings (loss) per share -
basic-as reported $ 0.05 $ (1.13) $ 3.04
Earnings (loss) per share -
basic-pro forma $ (0.15) $ (1.35) $ 2.89
Earnings (loss) per share -
diluted-as reported $ 0.05 $ (1.13) $ 2.94
Earnings (loss) per share -
diluted-pro forma $ (0.15) $ (1.35) $ 2.79

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2002, 2001 and 2000, respectively: dividends
yield of .9%, .7%, and .8%, expected volatility of 76% in 2000 for Class A, and
54%, 41% and 85% for Class B; risk-free interest rate of 3%, 5% and 5%, and
expected lives of 5 years.

F-26

9. STOCK OPTION PLAN (Continued)

Information regarding the Company's Plan for 2002, 2001, and 2000 is as
follows:

2002 2001 2000
------------------------------ ---------------------------- ------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------------- --------- --------------- ---------- --------------- ---------

Options out-
standing, begin-
ning of year 878,115 $ 17.44 822,429 $ 13.07 568,137 $ 9.03
Options exercised (167,963) $ 11.15 (129,143) $ 10.27 (121,708) $ 7.91
Options granted 78,000 $ 20.92 213,100 $ 29.50 376,000 $ 17.34
Options cancelled (30,914) $ 16.58 (28,271) $ 14.05 -- $ --
-------- -------- ---------
Options out-
standing, end
of year 757,238 $ 19.23 878,115 $ 17.44 822,429 $ 13.07
======== ======== ========
Options price
range at end
of year $5.75 to $29.50 $5.75 to $29.50 $5.75 to $19.00
Options price
range for
exercised
shares $5.75 to $18.70 $5.75 to $17.00 $5.75 to $15.44
Options available
for grant at end
of year 1,105,000 152,000 337,000

Weighted-
average fair
value of options
granted during
the year $ 9.75 $ 12.16 $ 9.28

F-27

9. STOCK OPTION PLAN (continued)

The following table summarizes information about fixed-price stock options
outstanding at December 31, 2002:

Weighted-
Number Out- Average Weighted Number Weighted-
Range of standing at Remaining Average Exercisable at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Prices 2002 Life Price 2002 Price
- ----------------- ------------ ----------- --------- -------------- ----------

$5.75 to $7.00 111,938 -- $ 6.13 111,938 $ 6.13
$15.38 to $15.44 57,000 1 year $ 15.41 32,500 $ 15.41
$17.00 to $19.00 301,200 2 years $ 17.25 145,693 $ 17.32
$29.50 209,100 3 years $ 29.50 37,275 $ 29.50
$19.56 to $22.25 78,000 4 years $ 20.92 -- $ --
------- -------
757,238 327,406
======= =======

10. COMMON STOCK

During 2000 the Board of Directors of the Company authorized the
purchase of up to ten percent (10%) of the Company's outstanding common shares.
As of December 31, 2002, the Company purchased and retired 23,600 Class B common
shares at a cost of approximately $808,000 which reduced the number of Class B
common shares outstanding.

11. 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).

F-28

Future minimum lease payments for operating leases are approximately as
follows:

Years Ending
December 31,
------------
2003 $ 567,000
2004 327,000
2005 203,000
2006 87,000
2007 --
-----------
$ 1,184,000
===========

Rental expense was approximately $863,000, $830,000, and $670,000, for
the years ended December 31, 2002, 2001, and 2000, respectively.

Credit Facilities
-----------------

The Company has two domestic lines of credit amounting to $11,000,000
which were unused at December 31, 2002. An unsecured $1 million line of credit
is renewable annually. The $10 million line of credit expires on March 21, 2006.
Borrowings under the $10 million line of credit are secured by the first
priority interest in and a lien on all personal property of Bel Fuse Inc and its
subsidiaries.

On March 21, 2003 the Company negotiated an additional $10 million
secured term loan. The term loan was used to finance the Company's acquisition
of the Passive Components division of Insilco Holdings Company, Inc. The $10
million term will fully amortize in 20 equal quarterly installments of principal
with a final maturity of March 21, 2008. Interest at 3.75% is payable monthly.
The term loan is guaranteed by Bel Fuse Inc and its domestic subsidiaries. The
term loan is collateralized with a first priority security interest in and lien
on 65% of all of the issued and outstanding shares of the capital stock of the
foreign subsidiaries of Bel Fuse Inc. and all other personal property at Bel
Fuse Inc (Note 12).

The Company's Hong Kong subsidiary has an unsecured line of credit of
approximately $2 million which was unused as of December 31, 2002. The line of
credit expires December 31, 2003. Borrowing on the line of credit is guaranteed
by the U.S. parent.

F-29

Facilities
----------

On July 29, 2002, the Company purchased a building in San Diego, CA for
approximately $2.5 million. The Company moved its domestic research and
development operations to this facility in December 2002 after making
approximately $.7 million in improvements to the facility. As of December 31,
2002, there are no outstanding liabilities in connection with this project.

Legal Proceedings
-----------------

a) The Company commenced an arbitration proceeding before the American
Arbitration Association against Lucent Technologies, Inc. in or about December
2000. The arbitration arises out of an Agreement for the Purchase and Sale of
Assets, dated October 2, 1998 (the "Asset Purchase Agreement"), among Bel Fuse
Inc., Lucent Technologies, Inc. and Lucent Technologies Maquiladores, Inc., and
a related Global Procurement Agreement, dated October 2, 1998 (the "Supply
Agreement"), between Lucent Technologies, Inc., as Buyer, and Bel Fuse Inc., as
Supplier. Pursuant to the Asset Purchase Agreement, the Company purchased
substantially all of the assets of Lucent's signal transformer business.
Pursuant to the Supply Agreement, Lucent agreed that except for limited
instances where Lucent was obligated to purchase product elsewhere, for a term
of 3 1/2 years, Lucent would be obligated, on an as required basis, to purchase
from the Company all of Lucent's requirements for signal transformer products.
The Supply Agreement also provided that the Company would be given the
opportunity to furnish quotations for the sale of other products.

The Company is seeking monetary damages for alleged breaches by Lucent
of the Asset Purchase Agreement and the Supply Agreement. In its answer, Lucent
denied many of the material allegations made by the Company and also asserted
two counterclaims. The counterclaims seek recovery for alleged losses, including
loss of revenue, sustained by Lucent as a result of the Company's alleged breach
of various provisions of the Supply Agreement. The parties are currently engaged
in extensive discovery proceedings. The Company believes it has substantial and
meritorious claims against Lucent and substantial and meritorious defenses to
Lucent's counterclaims. However, the Company cannot predict how the arbitrator
will decide this matter and whether it will have a material effect on the
Company's consolidated financial statements.

c) The Company has received a letter from a third party which states that its
patent covers certain of the Company's modular jack products and indicates the
third party's willingness to grant a non-exclusive license to the Company under
the patent. The Company believes that none of its products are covered by this
particular patent.

F-30

12. SUBSEQUENT EVENTS

On December 15, 2002 the Company entered into a definitive agreement
with Insilco Technologies, Inc. ("Insilco") for the purchase by the Company of
certain assets, subject to certain liabilities, and common shares of entities
comprising Insilco's passive component group for $35 million in cash plus the
assumption of certain liabilities. On March 10, 2003 the Bankruptcy Court
entered an order approving this agreement. This approval order authorizes
Insilco to consummate the sale of assets and common shares of various entities
of Insilco to the Company, subject to certain assumed liabilities and free and
clear of all encumbrances on Insilco's U.S. operations. The Company closed on
this acquisition on March 21, 2003. The Company financed the acquisition with a
$10 million term loan (Note 11).

On January 2, 2003 the Company entered into an asset purchase agreement
with Advanced Power Components PLC ("APC") to purchase the communications
products division of APC for $5.5 million in cash plus the assumption of certain
liabilities. The Company will be required to make contingent purchase price
payments equal to 5% of sales (as defined) in excess of $5.5 million per year
for the years 2003 and 2004.

The transactions will be accounted for using the purchase method of
accounting and, accordingly, the results of operations of Insilco will be
included in the Company's financial statements from March 21, 2003 and the
results of operations of APC will be included the Company's financial statements
from January 2, 2003.

F-31

CONDENSED SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)

Quarter Ended Total Year
-------------------------------------------------------------------- Ended
March 31, June 30, September 30, December 31, December 31,
2002 2002 2002 2002 (1) 2002
------------ ------------ ------------- ------------ ------------

Net sales $ 16,514,002 $ 24,726,829 $ 27,401,089 $ 26,885,972 $ 95,527,892
Gross profit (loss) 2,153,379 6,180,774 6,254,195 8,519,324 23,107,672
Net earnings (loss) (1,820,576) 1,292,880 1,746,160 (639,467) 578,997
Earnings (loss)
per share
- basic (2) $ (0.17) $ 0.12 $ 0.16 $ (0.06) $ 0.05
Earnings (loss)
per share -
diluted (2) $ (0.17) $ 0.12 $ 0.16 $ (0.06) $ 0.05

Quarter Ended Total Year
------------------------------------------------------------------- Ended
March 31, June 30, September 30, December 31, December 31,
2001 2001 (4) 2001 2001 (3) 2001
------------ ------------ ------------ ------------ -------------

Net sales $ 33,703,785 $ 22,076,118 $ 23,291,790 $ 16,973,124 $ 96,044,817
Gross profit 13,432,220 (7,310,879) 4,350,224 (4,030,075) 6,441,490
Net earnings 7,576,682 (11,110,114) (400,294) (8,228,246) (12,161,972)
Earnings
per share
- basic (2) $ 0.72 $ (1.04) $ (0.04) $ (0.77) $ (1.13)
Earnings
per share -
diluted (2) $ 0.68 $ (1.04) $ (0.04) $ (0.77) $ (1.17)

(1) During the fourth quarter of 2002, the Company recorded a goodwill
impairment charge of $5,200,000 and reversed $1,900,000 of purchase
commitment accruals which were settled on a favorable basis. Such
accruals were established during the second quarter of 2001. (See note 4
below)
(2) Quarterly amounts of earnings per share may not agree to the total for the
year due to the use of potential common shares outstanding in computing
diluted earnings per common share during the first quarter of 2001 and
omitting potential common shares outstanding in computing loss per
common share for the year ended 2001, as those shares would be
antidilutive.
(3) During the fourth quarter of 2001, management concluded that $700,000 of
accruals, recorded in the fourth quarter of 2000, were no longer
required. Such accruals, which related to its Far East operations, were
reversed in the fourth quarter of 2001.
(4) Includes a $14,600,00 charge consisting of inventory write-offs and
estimated losses on non-cancellable purchase commitments.

F-32

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

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2003 annual meeting of
shareholders that is responsive to the information required with respect to this
Item.

Item 11. EXECUTIVE COMPENSATION

The Registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2003 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

The Registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2003 annual meeting of
shareholders that is responsive to the information required with respect to this
Item.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2003 annual meeting of
shareholders that is responsive to the information required with respect to this
Item.

-22-

Item 14. CONTROLS AND PROCEDURES

Based on their evaluation as of a date within 90 days of the filing
date of this Annual Report on Form 10-K, the Company's principal executive
officer and vice - president of finance have concluded that the Company's
disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934 (the Exchange Act) are effective to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules and forms.

There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation and up to the filing date of this Annual Report on
Form 10-K. There were no significant deficiencies or material weaknesses, and
therefore there were no corrective actions taken.

It should be noted that any system of controls, however well designed
and operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met.

23

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------

Page
----
(a) Financial Statements

1. Financial statements filed as a part of this
Annual Report on Form 10-K:

Independent Auditors' Report F-1

Consolidated Balance Sheets as of December 31,
2002 and 2001 F-2 - F-3

Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 2002 F-4

Consolidated Statements of Stockholders' Equity
for Each of the Three Years in the Period
Ended December 31, 2002 F-5 - F-6

Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 2002 F-7 - F-9

Notes to Consolidated Financial
Statements F-10 - F-31

Selected Quarterly Financial Data - Years Ended
December 31, 2002 and 2001 (Unaudited) F-32

2. Financial statement schedules filed as part of this
report:

Schedule II: Valuation and Qualifying Accounts S-1

All other schedules are omitted because they are
inapplicable, not required or the information is included
in the consolidated financial statements or notes thereto.

(b) Reports on Form 8-K

The Company did not file any current reports on Form 8-K
during the three month period ended December 31, 2002.

(c) Exhibits

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

24

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

Exhibit No.:

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

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

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

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

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

10.5 Employment agreement between Elliot Bernstein and Bel Fuse Inc. dated
October 29, 1997. Incorporated by reference to Exhibit 10.7 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.

10.6 Stock and Asset Purchase Agreement among Bel Fuse Ltd, Bel Fuse Macau,
L.P.A., Bel Connector, Inc. and Bel Transformer, Inc. and Insilco
Technologies, Inc. and certain of its subsidiaries, dated as of
December 31, 2002, as amended by Amendment No. 1, dated as of March 21,
2003, to Stock and Asset Purchase Agreement, among Bel Fuse Inc., Bel
Fuse Ltd., Bel Fuse Macau, L.D.A., Bel Connector Inc. and Bel
Transformer Inc. and Insilco Technologies, Inc. and Certain of its
Subsidiaries.

10.7 Amended and Restated Credit and Guarantee Agreement, dated as of March
21, 2003, by and among Bel Fuse Inc., as Borrower, the Subsidiary
Guarantors party thereto and The Bank of New York, as Lender.

25

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

Exhibit No.:

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

22.1 Subsidiaries of the Registrant.

23.1 Consent of Independent Auditors.

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

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

26

SIGNATURES

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

BEL FUSE INC.

BY: /s/ Daniel Bernstein
------------------------------------------------
Daniel Bernstein, President, Chief Executive
Officer and Director

/s/ Colin Dunn
------------------------------------------------
Colin Dunn, Vice - President of Finance

Dated: March 21, 2003

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 21, 2003
- -------------------- Executive Officer and
Daniel Bernstein Director

/s/ Howard B. Bernstein Director March 21, 2003
- -----------------------
Howard B. Bernstein

27

/s/ Robert H. Simandl Director March 21, 2003
- -----------------------
Robert H. Simandl

/s/ Peter Gilbert Director March 21, 2003
- -----------------------
Peter Gilbert

/s/ John Tweedy Director March 21, 2003
- -----------------------
John Tweedy

/s/ John Johnson Director March 21, 2003
- -----------------------
John Johnson

28

I, Daniel Bernstein, certify that

1. I have reviewed this annual report on Form 10-K of Bel Fuse Inc;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 21, 2003

By: /s/ Daniel Bernstein
-------------------------------
Daniel Bernstein, President and
Chief Executive Officer

I, Colin Dunn, certify that

1. I have reviewed this annual report on Form 10-K of Bel Fuse Inc;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 21, 2003

By: /s/ Colin Dunn
--------------------------
Colin Dunn, Vice President
of Finance

BEL FUSE INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
------------------------------------------------------------------------------------

Charged Charged
Balance at to profit to other Balance
beginning and loss accounts Deductions at close
Description of period or income (describe) (describe) of period
- ---------------------------- ---------- ------------ ------------ ----------- -----------

Year ended December 31, 2002
Allowance for doubtful
accounts $ 945,000 $ $ -- $ $ 945,000
========== =========== =========== =========== ==========
Allowance for excess and
obsolete inventory $2,988,000 $ 2,622,000 $ --(a) $ 2,474,000 $3,136,000
========== =========== =========== =========== ==========
Year ended December 31, 2001
Allowance for doubtful
accounts $ 945,000 $ -- $ -- $ -- $ 945,000
========== =========== =========== ==========
Allowance for excess and
obsolete inventory $2,847,000 $14,814,000 $ --(a) $14,673,000 $2,988,000
========== =========== =========== =========== ==========

Year ended December 31, 2000
Allowances for doubtful
accounts $ 661,000 $ 1,454,000 $ --(a) $ 1,170,000 $ 945,000
========== =========== =========== ==========
Allowance for excess and
obsolete inventory $1,542,000 $ 1,644,000 $ --(a) $ 339,000 $2,847,000
========== =========== =========== =========== ==========

S-1