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Investor Relations

1999 Annual Review

Dr. T

To Our Shareholders and Friends
In 1999 we accomplished our primary goal of increasing our growth rate, returning to more than 20 percent revenue growth. Our consistent investments in R&D and the Web, combined with our direct sales model, were major factors in achieving our 23rd consecutive year of double-digit growth.

Our continued investment during the industry downturn in 1998 positioned us well for our growth in 1999. We are especially pleased with our performance versus our competitors' over the last two years. Many of our traditional instrument competitors reported strong growth in the fourth quarter – but most are essentially flat from Q4 1997. We are up 42 percent since Q4 1997.

In 1999 we carried on our tradition of introducing revolutionary products that improve the way engineers and scientists approach measurement and automation. We have a track record of bringing advanced technologies to wider audiences through our flexible, low-cost hardware and software. Of special note in 1999 was the introduction of LabVIEW RT real-time software. Our customers can tap the power and ease-of-use of LabVIEW RT to build solutions that require real-time measurement and control, or create embedded applications that previously required specialized tools and knowledge.

This year saw good growth across our product lines, especially among our newer product areas such as machine vision, motion control and PXI modular instrumentation. These product lines all had record sales and growth rates well above the company rate. We expanded our wide range of measurement products, with new data acquisition devices and computer-based instruments, that deliver performance advantages of 10 to 100 times that of traditional instruments.

Increased interest from customers looking to use the Internet in their measurement and automation systems created strong demand for the company's growing portfolio of Internet-enabled products. Our computer-based approach made it easy for our customers to acquire, analyze and present data across the Internet. We call this "distributed virtual instrumentation" and our technologies and platform ideally position us to leverage Internet and Web technologies.

We believe the coming explosion of new devices, ranging from Internet appliances and mobile handheld devices to new generation telephones and automotive PCs, will dramatically expand our possibilities to new platforms and applications. We intend to aggressively increase our investment in R&D in order to leverage these opportunities and continue to introduce innovative products. Our enhanced recruiting efforts have paid off in bringing bright talent to NI and helped us increase R&D spending to 13 percent of sales in 1999.

Our direct sales model and strong customer relationships have made it easy for us to leverage the Internet into our business model. Our early adoption of the Web in 1994, combined with aggressive investment, have played a key role in the significant user traffic at ni.com. Our e-commerce initiatives in 1999 saw tremendous response. Today, ni.com is quickly becoming our customers preferred method for learning about the products and solutions for their measurement and automation needs. We have created online configurators that guide customers to the hardware and software that match their solution needs. ni.com is a core component of our customer support activities, and in 1999 we launched initiatives to further strengthen and build our user community.

In our successful history of growth, we have not forgotten the importance of the National Instruments culture. We understand that as an intellectual property company, one of the most important keys to creating long-term shareholder value is ensuring that our employees are happy and motivated. We are very pleased that our efforts to create a company built-to-last were recognized when Fortune named NI among its 100 Best Companies to Work For in America.

I congratulate and thank our customers, shareholders, employees and suppliers for their support in making 1999 yet another record year for National Instruments. We are proud of our track record and look forward to the future – never forgetting that our customers' success is our success.

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Dr. James Truchard
President and CEO

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