A Publicly Traded Venture Capital Company Investing in Tiny Technology
NINE MONTHS' REPORT 2003
FELLOW SHAREHOLDERS:
At September 30, 2003, our net asset value and net asset value per share (NAV) declined to $24,225,912 and $2.11, respectively, from $25,496,210 and $2.22, respectively, at June 30, 2003. These declines reflected write-downs in our venture capital portfolio and on-going expenses, as well as the amortization over a two-year period of a mandatory retirement benefit for our President and COO.
On August 6, 2003, we announced that we had made an initial investment of $525,900 in Chlorogen, Inc. (www.chlorogen.com). Chlorogen's objective is to develop plant-made drugs and vaccines for the treatment and prevention of human diseases. Its patented chloroplast technology permits the expression of foreign proteins only within plant chloroplasts. With this investment, our last 12 initial private equity investments have been in tiny technology-enabled companies. During the quarter, we also made a follow-on investment of $323,000 in Nantero, Inc. (www.nantero.com). Nantero is developing NRAMä, a high-density, non-volatile random access memory chip using nanotechnology. In addition, we made a follow-on investment of $62,500 in NanoOpto Corporation (www.nanoopto.com). NanoOpto is creating and commercializing novel classes of optical components for a broad range of markets, including optical data transfer, telecommunications, sensors and displays.
In August, we relocated our office within New York City. This move enabled us to acquire expansion space and to avoid the sizeable increase in our rent that renewal of our old lease would have entailed, while staying in equivalent quality space.
After the close of the third quarter, on October 29, 2003, we filed a registration statement with the Securities and Exchange Commission on Form N-2, covering the proposed public offering of 2,000,000 shares of our common stock. All of the shares will be offered by Harris & Harris Group. We intend to use the net proceeds of the offering to make initial and follow-on venture capital investments and for working capital. The shares will be offered through Punk, Ziegel & Company, L.P., acting as lead managing underwriter. This communication is not an offering of any securities, which will be made by means of a prospectus.
Also after the close of the third quarter, on November 13, 2003, our Chairman and CEO, Charles E. Harris, was recognized as a 2003 Small Times Magazine Best of Small Tech Business Leader Award Finalist. In 2002, we had received a 2002 Small Times Magazine Best of Small Tech Company Finalist Award. The recipients of the Small Times Magazine Best of Small Tech Awards, along with the finalists, were selected by nominations and applications submitted by companies and individuals. Small Times Media news staff and an industry panel of experts reviewed the applicants and selected one winner and four finalists in six categories, plus lifetime achievement and other. A complete list of winners and finalists can be found in the November/December issue of Small TimesÒ Magazine and online at www.smalltimes.com. Small Times Media LLC is the leading source of business news about the small tech industry, which includes nanotechnology, MEMS and microsystems.
Although capital markets conditions have improved notably, with especially strong price advances by Nasdaq in general and speculative stocks on Nasdaq in particular, and there have been stirrings of activity with respect to venture-capital backed initial public offerings (IPOs), venture capital funding itself has remained in the doldrums. According to Renaissance Capital (www.IPOhome.com), there were 486 IPOs in 1999, 406 in 2000, 83 in 2001, 70 in 2002 and only 42 so far this year. But November to date is the best month for IPOs since May of 2002. By and large, these recent IPOs are of companies that are in a much more mature stage of development than the fledgling tiny technology companies in which we are investing. Meanwhile, in the third quarter, according to two separate studies, venture-capital investing declined slightly from the second quarter, as measured both by number of deals and dollars. During the past five quarters, venture-capital investing has held steady at about $4 billion per quarter. In the current environment, it is still difficult for venture capital-backed companies to attract funding from firms that have not previously backed them, which means that even when new rounds of financing are secured, these rounds are often at flat or down valuations.
Government backing of nanotechnology research remains strong. Today, the United States House of Representatives approved a version of the Nanotechnology Research & Development Act that was passed unanimously by the Senate on November 18, 2003 and that was negotiated with the House Science Committee. The bill authorizes $3.7 billion in expenditures over the next four years. It awaits the signature of the President.
We thank you for your continued support.

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

November 20, 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 September 30, 2003)

Shares/
Principal	Value

Investment

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Agile Materials & Technologies, Inc.
Series A Convertible Preferred Stock	3,732,736	$500,000
AlphaSimplex Group, LLC
Limited Liability Company interest	--	112,500
Chlorogen, Inc.
Series A Convertible Preferred Stock	3,000,000	525,900
Continuum Photonics, Inc.
Series B Convertible Preferred Stock	2,000,000	0
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
Heartware, Inc.
Series A-2 Non-Voting Preferred Stock	47,620	0
NanoGram Corporation
Series 1 Convertible 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
Series B Convertible Preferred Stock	146,921	110,067
Nanopharma Corp.
Series A Convertible Preferred Stock	684,516	350,000