BEL Increases Holdings to Over 6%, States Concerns to Toko Management

December 19, 2006 by Jeff Shepard

Bel Fuse Inc. issued announcements in regard to its roughly 6% investment in Toko Inc.

Over the past months, Bel claims that it has requested meetings with Toko to discuss its management strategy. On November 30, Bel claims that it requested a meeting with the president of Toko for purposes of discussing the worsening financial position of the company, the need to retreat from the semiconductor business, the need for more oversight by the board, and Bel's intention to nominate at least one independent board member at the next annual shareholders meeting. Bel claims that Toko has refused to meet with Bel during this period and has not responded to its letters of October 18th and November 30th, even though the two firms have had discussions in the past and Bel is one of Toko's largest shareholders.

Bel stated that it is concerned about the significant worsening of Toko's financial performance and future projections, as reflected by the recent downward adjustment of its estimates for fiscal 2006 ordinary and net income (by 60% and 75%, respectively) from their amounts as forecasted last May. Further, Bel is disturbed that the company has not disclosed the detailed causes for its deteriorating financial position and has not announced any credible plan to restore profitability. Bel believes the company needs more external oversight, including independent directors on its board.

Bel also stated that it believes that Toko's semiconductor division should be divested in a process directed by independent board members, as it continues to be a major drag on the company's profitability. Bel CEO Dan Bernstein said, "This part of Toko's strategy has completely failed. The foundry business is one which requires continuous large investments, scale, and competitive technology. For many years, Toko has mis-allocated huge resources to this non-core business without ever achieving scale, profitability, or competitiveness. This has clearly been sapping resources and managerial focus from the products where Toko is competitive. In terms of preventing further erosion of long-term corporate value, divestment is the only sensible decision at this point."

Bel has recently purchased additional stock of Toko in the market, and now holds approximately 6% of Toko's outstanding stock. Depending on the market price, Bel is considering further increasing its holdings in Toko stock.

Bel stated that it has proposed that joint management of the new "group" would focus on healthy growth based on synergies from the two firms' highly complementary customer bases, distribution networks, production facilities, products, and technologies. Bel stressed that the full prior agreement and understanding of Toko's management is an essential precondition to executing any transaction, both legally and from Bel's point of view.

Through its 100% subsidiary Bel Ventures Inc., Bel currently holds 5,874,919 shares of Toko stock, corresponding to 6.02% of Toko's total outstanding shares. The acquisition of Toko stock has been conducted through market purchases.

As of the time of publication, there was no official comment from representatives of Toko regarding the Bel announcement.