2003 Letter to Shareholders

Fellow Shareholders:

Despite a tough environment for the electronics industry, fiscal 2003 was the
best year in NVE's history. We were able to increase product sales over 50% and
generate a solid profit. Our growth was driven by superior products, wider
distribution, and effective advertising. Together with our technology partners
we brought revolutionary spintronics memories closer to fruition. Our world-
class research team expanded our intellectual property portfolio and won a
number of prestigious government contracts.

Dominating a Market Segment
     The proven way small companies can become big companies is to identify a
market segment where they can provide big advantages over the incumbent
technology, dominate that segment, then expand into other segments. Our target
market is industrial/factory automation, where we offer three to four times the
accuracy and five to ten times the data rate of conventional electronics. That
allows factories to make better products at lower costs. We do not dominate
that segment yet, but we are getting there.

     We believe the fastest way for us to reach a large number of potential
customers is to partner with organizations that reach a large customer base in
our target market. After a year of rigorous qualification testing, Agilent
Technologies, Inc. began selling our parts under their brand. Agilent, the
Hewlett-Packard spin-off, is the leading supplier of high-performance digital
data couplers. Before they began selling our parts, Agilent sold only opto-
electronic couplers. Their willingness to sell a competing technology confirms
the importance of what we have.

     Also in the past fiscal year, we added a number of new distributors and
sales representatives, and we now ship our products to 39 countries. We
expanded our "hate optos" advertising campaign. The brash campaign has struck a
chord with engineers frustrated with conventional electronics and generated an
excellent return on our advertising investment.

MRAM This Year?
     We are pioneers in Magnetic Random Access Memory (MRAM), a revolutionary
spintronic memory. MRAM has been called the ideal memory because it combines
the high speed and small size of semiconductor memories with the ability of
disks to retain data with power removed. Some have speculated that MRAM could
take over the $50 billion memory device market.

     We feel we have one of the best portfolios of MRAM designs, patents, and
know-how in the industry, but we have neither a large enough factory nor the
experience to build memories. Our strategy therefore is to capitalize on our
MRAM intellectual property through manufacturing partnerships. In the past
fiscal year we signed a technology exchange agreement with Cypress
Semiconductor Corporation, one of the industry's smartest memory manufacturers.
Cypress joins Motorola, Honeywell, and Union Semiconductor Technology
Corporation as NVE MRAM licensees. Cypress and Motorola both demonstrated
prototype MRAMs in the past year, and both announced plans for product
introductions this calendar year. We have an agreement for Motorola to pay us
royalties and a contract for Cypress to manufacture MRAMs we can resell at a
profit.

Intellectual Property Through Government Contracts
     A record $5.6 million in government contract revenue in fiscal 2003 helped
us develop new products and more intellectual property. Contracts in the past
year included developing higher-speed couplers, more sensitive sensors, denser
MRAM cells, sensors for biological agents, and nanotechnology.

Nasdaq Listing to Better Serve Our Shareholders
     Profitability and a $6 million-plus Cypress investment allowed us to
qualify for Nasdaq listing. Our common stock began trading on the Nasdaq in
January 2003, and we believe this will allow us to better serve our
shareholders.

New Assignments to Strengthen Development and Sales
     John Myers, who envisioned and built our coupler business, has taken on an
expanded role as Vice President of Development. We are transitioning
responsibility for our world-class Research and Development group from Jim
Daughton, our founder and Chief Technology Officer. Jim will remain Chief
Technology Officer and continue to provide his extraordinary technical
expertise. Anthony Leali has taken responsibility for standard product sales.

     This new organization will make us better than ever at both development
and sales.

Leading the Spintronics Revolution
     We entered fiscal 2004 with a solid sales backlog, key design wins, and a
first-rate distribution channel. In the coming year, we will expand our product
lines, continue to target industrial/factory automation, and advance our
mission of leading the spintronics revolution with practical products.


Sincerely,

/s/ Daniel A. Baker
Daniel A. Baker, Ph.D.
President and Chief Executive Officer
June 11, 2003