893739--3/13/2008--HARRIS_&_HARRIS_GROUP_INC

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Risks related to the companies in our portfolio. A continuing lack of initial public offering opportunities may cause companies to stay in our portfolio longer, leading to lower returns, write-downs and write-offs. Investing in small, private companies involves a high degree of risk and is highly speculative. We may invest in companies working with technologies or intellectual property that currently have few or no proven commercial applications. Our portfolio companies may not successfully develop, manufacture or market their products. Our portfolio companies working with tiny technology may be particularly susceptible to intellectual property litigation. Unfavorable general economic conditions, as well as unfavorable conditions specific to the venture capital industry or a segment of portfolio companies, could result in the inability of our portfolio companies to access additional capital, leading to financial losses in our portfolio. The value of our portfolio could be adversely affected if the utilized by our portfolio companies are found, or even rumored or feared, to cause health or environmental risks, or if legislation is passed that limits the commercialization of any of these technologies. Our portfolio companies may generate revenues from the sale of non-tiny technology-enabled products. Risks related to the illiquidity of our investments. We invest in illiquid securities and may not be able to dispose of them when it is advantageous to do so, or ever. Unfavorable economic conditions and regulatory changes could impair our ability to engage in liquidity events. Even if some of our portfolio companies complete initial public offerings, the returns on our investments in those companies would be uncertain. Risks related to our Company. Because there is generally no established market in which to value our investments, our Valuation Committee s value determinations may differ materially from the values that a ready market or third party would attribute to these investments. Changes in valuations of our privately held, early stage companies tend to be more volatile than changes in prices of publicly traded securities. We expect to continue to experience material write-downs of securities of portfolio companies. Because we do not choose investments based on a strategy of diversification, the value of our business is subject to greater volatility than the value of companies with more broadly diversified investments. We are dependent upon key management personnel for future success, and may not be able to retain them. We will need to hire additional employees as the size of our portfolio increases. The market for venture capital investments, including tiny technology investments, is highly competitive. In addition to the difficulty of finding attractive investment opportunities, our status as a regulated business development company may hinder our ability to participate in investment opportunities or to protect the value of existing investments. Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio. Bank borrowing or the issuance of debt securities or preferred stock by us, to fund investments in portfolio companies or to fund our operating expenses, would make our total return to common shareholders more volatile. We are authorized to issue preferred stock, which would convey special rights and privileges to its owners senior to those of common stock shareholders. Loss of status as a RIC would reduce our net asset value and distributable income. We operate in a heavily regulated environment, and changes to, or non-compliance with, regulations and laws could harm our business. Market prices of our common stock will continue to be volatile. Quarterly results fluctuate and are not indicative of future quarterly performance. To the extent that we do not realize income or choose not to retain after-tax realized capital gains, we will have a greater need for additional capital to fund our investments and operating expenses. Investment in foreign securities could result in additional risks. Investing in our stock is highly speculative and an investor could lose some or all of the amount invested. Our shares might trade at discounts from net asset value or at premiums that are unsustainable over the long term. The Board of Directors intends to grant stock options to our employees pursuant to the Company's Equity Incentive Plan. When exercised, these options may have a dilutive effect on existing shareholders. You have no right to require us to repurchase your shares.

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893739--3/13/2008--HARRIS_&_HARRIS_GROUP_INC_/NY/