A Publicly Traded Venture Capital Company Investing in Tiny Technology

SIX MONTHS' REPORT 2003

FELLOW SHAREHOLDERS:

During the first six months of 2003 ended June 30, we continued to build our portfolio of privately held tiny technology companies (companies developing nanotechnology, microsystems or microelectromechanical systems (MEMS)), by making three new investments and one follow-on investment. Those investments totaled $2,945,618.

New Investment	Amount
Chlorogen, Inc.	$525,900
NanoGram Devices Corporation	$750,000
Nanosys, Inc.	$1,500,000
Follow-on Investment
Nanotechnologies, Inc.	$169,718
	$2,945,618

Since August of 2001, we have made initial venture capital investments exclusively in tiny technology, with emphasis on companies working at the nanoscale, and we now have 13 tiny technology companies in our venture capital portfolio. Thus, since 2001, there has been a marked shift in the composition of our venture capital portfolio.

Category	June 30, 2003	December 31, 2002	December 31, 2001
Tiny Technology	57%	49%	9%
Other Venture Capital Investments	43%	51%	91%
Total Venture Capital Investments	100%	100%	100%

Moreover, since the close of the first half of 2003 to the date of this letter, August 29, 2003, we have made one more follow-on investment, in the amount of $323,000, in one of our tiny technology portfolio companies working at the nanoscale that has not yet announced the financing. We have agreed also to make a follow-on investment of up to $250,000 in another of our tiny technology portfolio companies working at the nanoscale.

Most of the dollar value of our non-tiny technology portfolio investments is concentrated in two companies, NeuroMetrix, Inc. ($5,075,426) and Experion Systems, Inc. ($1,037,000). These two investments pre-dated our decision to invest strictly in tiny technology, and these two companies are now more mature than our more recent tiny technology investments. Given the weighting of these two investments in our portfolio, you may wish to visit their respective websites, www.neurometrix.com and www.experionsystems.com.

On occasion, some ask how the accounting regulations work for business development companies (BDCs) such as our Company. We urge our shareholders to read our Forms 10-Q and 10-K in their entirety and to pay particular attention to the Asset Valuation Policy Guidelines. In our most recent Form 10-Q for the quarter ended June 30, 2003, these Guidelines are found on pages 10-12. In reading them, you will note among other things, that "unrestricted securities with readily available market quotations are to be valued at the current market value; all other assets must be valued at "fair value" as determined by or under the direction of the Board of Directors….

"Fair value is generally defined as the amount that an investment could be sold for in an orderly disposition over a reasonable time. Generally, to increase objectively in valuing the assets of the Company, external measures of value, such as public markets or third-party transactions, are utilized whenever possible. Valuation is not based on long-term work-out value, nor immediate liquidation value, nor incremental value for potential change that may take place in the future.

"The values assigned to these investments are based on available information and do not necessarily represent amounts that might ultimately be realized, as such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated."

When we make a venture capital investment, it typically does not go on our books at its actual full economic cost to us, as we expense all of the unreimbursed direct and indirect costs of due diligence and closing costs as well as our general corporate overhead. Nor is it subsequently valued on our books based on any expectations about the future. Consequently, the full economic cost, or replacement cost, is typically greater than the initial valuation of the investment for purposes of calculating NAV, and subsequent quarterly valuations of the investment do not include any speculations about future sale or IPO values.

We hope that this letter helps our shareholders become more familiar with our Asset Valuation Policy Guidelines. Shareholders who wish to delve into the general performance characteristics of venture capital funds might start by going to the websites of CalPERS (http://www.calpers.ca.gov/invest/aim/review.asp) and The University of Texas Investment Management Company (http://www.utimco.org/funds/allfunds/privatemarkets/documentirrcalculationsold.pdf) to read their discussions of the "J-curve phenomenon."

In closing, we appreciate the continuing support of our shareholders as we continue to build our Company into an increasingly pure play in tiny technology. In the last 12 months alone, we have reviewed 125 business plans of companies that we classify as tiny technology enabled. Of these 125, we have funded three so far. We have a lot of work ahead, and in keeping with the nature of our business, we will continue to encounter bumps in the road with these high-risk investments. But the quantity and quality of our deal flow tells us that we have chosen the right path for our Company, in our exclusive focus on tiny technology.

Charles E. Harris	Mel P. Melsheimer	Douglas W. Jamison
Chairman and CEO	President & COO	Vice President

August 29, 2003

This letter may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the Company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this letter. Please see the Company's Annual Report on Form 10-K and recent Prospectus filed with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the Company’s business, including but not limited to the risks and uncertainties associated with venture capital investing and other significant factors that could affect the Company's actual results. Except as otherwise required by Federal securities laws, Harris & Harris Group, Inc. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

Unaudited Schedule of Investments*

(As of June 30, 2003)

Shares/
Principal	Value

Investment

Agile Materials & Technologies, Inc.
Series A Convertible Preferred Stock	3,732,736	$  1,000,000
AlphaSimplex Group, LLC
Limited Liability Company interest	--	106,250
Chlorogen, Inc.
Series A Convertible Preferred Stock	3,000,000	525,900
Continuum Photonics, Inc.
Series B Convertible Preferred Stock	2,000,000	86,380
Experion Systems, Inc.
Series A Convertible Preferred Stock	294,118
Series B Convertible Preferred Stock	35,294
Series C Convertible Preferred Stock	222,184	1,037,000
Exponential Business Development Company
Limited Partnership interest	--	25,000
Kriton Medical, Inc.
Series B Convertible Preferred Stock	476,191	0
NanoGram Corporation
Series 1 Preferred Stock	63,210	21,672
NanoGram Devices Corporation
Series A-1 Convertible Preferred Stock	63,210
Series A-2 Convertible Preferred Stock	750,000	813,210
NanoOpto Corporation
Series A-1 Convertible Preferred Stock	267,857	128,292
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