DIRECTOR COMPENSATION

        We pay each non-employee director as follows:

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Annual retainer: $20,000



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Supplemental retainers:



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Audit Committee—Chair: $15,000



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Other Committee—Chair: $5,000



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Meeting fees (Board or Committee):



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In person: $3,000/day



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Telephonic: $1,000/day for meetings over two hours that involve substantial time and preparation.



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Only one daily meeting fee is paid on days when multiple meetings of separate Committees, or Committee(s) and Board are held on same day.

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As of March 11, 2005.

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        In addition to such compensation, Mr. Brändli received approximately $10,000 in 2004 for serving on the boards of our Swiss subsidiaries.

        We also reimbursed our directors for reasonable out-of-pocket expenses incurred in connection with attending board and committee meetings.

        Our non-employee directors have also received, and are expected to continue to receive, options to purchase our common stock. Certain automatic grants were made to non-employee directors in the past under our 1996 Stock Incentive Plan (the "1996 Plan"). Last year we adopted and stockholders approved our 2004 Stock Incentive Plan (the "2004 Plan"). As a result, the Company ended the automatic grants under the 1996 Plan to non-employee directors as of or after the Annual Meeting of stockholders held in 2004. The Compensation Committee approved a discretionary stock option grant for 10,000 shares to Messrs. Bishop, Brändli, Jacoby and Walters as of May 4, 2004. These grants have an exercise price equal to the fair market value on the grant date, a ten-year term, and vest in equal annual installments over a four-year period beginning on the first anniversary of the grant date.

        Pursuant to the 2004 Plan, our Compensation Committee as administrator of the 2004 Plan implemented a program in July 2004 of stock option grants for non-employee directors. Under the program as approved by the Compensation Committee, each person (excluding all current directors as of July 2004) who becomes a non-employee director will receive an initial nonqualified stock option ("NQSO") grant of 30,000 shares granted at the fair market value as of the date of their initial election to the Board of Directors. Such grant would have a ten-year term, and would vest in equal portions in each of the three years following the earlier of (i) the anniversary of the date of grant in that year, and (ii) the annual meeting date in that year.

        Additionally, for continued service, annually beginning as of this Annual Meeting, each non-employee director who continues in service to the Board of Directors after an Annual Meeting and who has served as a director for not less than 180 days prior to the first day of the month in which such Annual Meeting occurs, will receive a NQSO grant of 10,000 shares. This annual grant would be awarded at the fair market as of the date of such Annual Meeting. Such grant would have a ten-year term, and would vest in full on the earlier of (i) the first anniversary of the date of grant, or (ii) the next Annual Meeting date following the date of grant.

        All prior 1996 Plan non-employee director options have an exercise price equal to the fair market value on the grant date, a ten-year term, and vest in equal annual installments over a four-year period beginning on the first anniversary of the grant date.

        Mr. Bishop received a discretionary stock option in July 2004 for 5,000 shares of the Company's common stock per authorization of the Board of Directors. This grant was issued at fair market value on the date of grant, and becomes fully vested at the one year anniversary of the date of grant. This grant was issued to Mr. Bishop in consideration of special duties and services he undertook in relation to a transaction the company explored.

*  DIRECTOR ATTENDANCE AT MEETINGS AND AT ANNUAL MEETING

        Each of our directors attended at least 75% of the aggregate number of Board meetings and meetings of committees on which he served in 2004.

        It is our policy that all directors make every reasonable effort to attend annual stockholders meetings. Five of our six directors (as the Board was constituted in 2004) attended our 2004 Annual Stockholders Meeting.

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*  STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS/ DIRECTOR NOMINEE RECOMMENDATIONS

        Stockholders are welcome to communicate directly with our Board of Directors, and to make recommendations for director nominees. Stockholders interested in communicating directly with any or all non-employee directors, and stockholders interested in recommending director nominees, may do so by writing to:

Board of Directors
Power-One, Inc.
740 Calle Plano
Camarillo, CA 93012
Attn: Corporate Secretary

        All such correspondence will be logged in by the Corporate Secretary. Communications on matters other than as noted in the following sentences will be promptly forwarded to our Lead Director, currently Mr. Walters. Recommendations for director nominees will be sent to the Chair of our Nominating and Corporate Governance Committee. If the Lead Director is not the Chair of the Audit Committee, all matters relating to accounting or internal controls will be brought immediately to that Chair's attention. The applicable director who has received the communication will deliver a summary of all stockholder communications to the full Board at its next regularly scheduled meeting. Any director may review the correspondence log and request copies of any such correspondence.

*  DIRECTOR QUALIFICATIONS AND SKILLS

        Minimum qualifications for recommendation for a position on our Board of Directors, whether from our Nominating and Corporate Governance Committee, or from a stockholder, include:

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a proven record of ethical and responsible service of not less than five (5) years in a corporate or comparable position involving substantial professional judgment and responsibility;



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the ability to devote necessary time and attention to the position as a Director;



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training and experience in a function or discipline relevant to the business and operations of the Company (e.g. technology, manufacturing, finance, international operations, marketing, or other areas which would enhance the effectiveness of the Board of Directors);



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awareness of and allegiance to the interests of the stockholders of the Company;



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fluency in English (written and spoken).

        Specific skills or qualities that we believe are necessary for one or more of our Directors to possess are listed below. Please note that we do not expect that a single individual possess all listed skills, but rather that the Board as a whole include one or more individual(s) who possess one or more of the listed skills or qualities:

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financial knowledge and experience which qualifies a director as a "financial expert" under applicable SEC criteria; and



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in-depth knowledge, based upon prior employment as a senior officer, in a key area of a for-profit corporate entity, e.g. finance, operations, sales, marketing, strategic planning.

        Ms. Gayla Delly joined the Board of Directors in 2005. The Board has determined that Ms. Delly is independent per all applicable NASDAQ and SEC rules and regulations. It is anticipated that Ms. Delly will be appointed to the Audit Committee at the regular meeting of the Board of Directors which is scheduled to be held following our Annual Meeting of Stockholders. The Board has determined that Ms. Delly, when appointed to the Audit Committee, will qualify as an audit committee

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financial expert, as defined under SEC rules and regulations. Additionally, the Board has determined that Ms. Delly, when appointed to the Audit Committee, will qualify as a member of the Audit Committee who meets the NASDAQ listing requirement under Rule 4350(d)(2)(A) as having the requisite past employment experience which provides her with the required financial sophistication.

*  EVALUATION OF NOMINEES

        Nominees (including nominees recommended by security holders) are identified and evaluated by the Nominating and Corporate Governance Committee through review of resume or other summary of experience, personal interviews conducted by members of the Committee, and submission of such supplemental information as may be reasonably requested by the Committee.

*  COMMITTEE MEMBERSHIPS

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Audit: Mr. Bishop (Chair), Mr. Brändli, Mr. Melliar-Smith, and Mr. Walters.



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Compensation: Mr. Walters (Chair), Mr. Bishop and Mr. Jacoby.



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Nominating and Corporate Governance: Mr. Melliar-Smith (Chair), Mr. Brändli and Mr. Bishop.

        All members of the Audit Committee and of the Nominating and Corporate Governance Committee are non-employee directors whom the Board has determined meet NASDAQ independence requirements.

*  COMMITTEE RESPONSIBILITIES

Audit Committee

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Engages our independent auditors;



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Reviews and oversees the services performed by our independent auditors;



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Reviews the independence of the independent auditors; and,



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Reviews and evaluates our accounting principles and our system of internal accounting controls.



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The Audit Committee operates under an updated Charter adopted by the Board in 2003. A copy is available via the "Governance" link found under our main "Investor Relations" link at our website located at www.power-one.com . Please see also "Audit Committee Report" at page 13 below.

Compensation Committee

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Determines compensation of our executive officers;



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Administers our Amended and Restated 1996 Stock Incentive Plan, 1997 Employee Stock Purchase Plan, 2001 Stock Option Plan, and the 2004 Stock Incentive Plan;



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Establishes the criteria for the awarding of bonuses;



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Recommends to the Board of Directors adoption of other compensation plans as may from time to time be deemed to be in the best interests of the Company.



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The Compensation Committee operates under the Charter adopted by the Board in 2003. A copy is available via the "Governance" link found under our main "Investor Relations" link at our website located at www.power-one.com . Please see also "Compensation Committee Report on Executive Compensation" at page 21 below.

Nominating and Corporate Governance Committee

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Establishes qualifications for board membership;

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•

Evaluates stockholder nominees for director, if same are properly presented to the Corporation. See page 9 above under section noted "STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS/DIRECTOR NOMINEE RECOMMENDATIONS" for information on the process for presenting stockholder nominees;



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Recommends director nominees to the Board both for the annual stockholders meeting and for the filling of any vacancies that occur between annual meetings;



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Assists the Board in devising a methodology for annually evaluating the Board's performance;



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Recommends the size of the Board, committee structure and assignments and frequency of regular Board meetings; and,



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Discusses and makes recommendations to the full Board on the Company's Corporate Governance Guidelines.

        The Nominating and Corporate Governance Committee operates under the Charter adopted by the Board in 2003. A copy is available via the "Governance" link found under our main "Investor Relations" link at our website located at www.power-one.com .

*  MEETINGS IN 2004

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Board of Directors:
    8 meetings in total (4 were telephonic)



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Audit Committee:
    6 meetings in total (2 were telephonic)



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Compensation Committee:
    4 meetings in total (1 was telephonic)
    2 actions by written consent



•

Nominating and Corporate Governance Committee:
    3 meetings.


RECOMMENDATION

         The Board of Directors recommends a vote FOR the election of all Directors listed above. We will vote Proxies received by us in favor of the nominees unless a contrary choice is indicated.

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