SEC Form 5

FORM 5		UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 or Section 30(h) of the Investment Company Act of 1940	OMB APPROVAL OMB Number: 3235-0362 Estimated average burden hours per response: 1.0
	Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).
	Form 3 Holdings Reported.
	Form 4 Transactions Reported.

1. Name and Address of Reporting Person* MARXE AUSTIN W (Last) (First) (Middle) C/O SPECIAL SITUATIONS FUND III LP 153 E 53RD ST 55TH FL (Street) NEW YORK NY 10022 (City) (State) (Zip)	2. Issuer Name and Ticker or Trading Symbol SPECIAL SITUATIONS FUND III L P [ none ]	5. Relationship of Reporting Person(s) to Issuer (Check all applicable) Director 10% Owner Officer (give title below) X Other (specify below) Affiliate of Investment Advise
	3. Statement for Issuer's Fiscal Year Ended (Month/Day/Year) 12/31/2004
	4. If Amendment, Date of Original Filed (Month/Day/Year)	6. Individual or Joint/Group Filing (Check Applicable Line) X Form filed by One Reporting Person Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction Code (Instr. 8)	4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5)			5. Amount of Securities Beneficially Owned at end of Issuer's Fiscal Year (Instr. 3 and 4)	6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
				Amount	(A) or (D)	Price
units of limited partnership interest	07/01/2004		J	159.5417(1)	A	$25,000	989.5617	I	through Investment Adviser
units of limited partnership interest	12/31/2004		D	200	D	$25,000	789.5617	D
units of limited partnership interest	01/01/2005		J	354.984(1)(3)	A	$25,000	1,144.546(2)(3)	I(2)	through Investment Adviser
units of limited partnership interest	01/01/2005		J	37.1132(1)(3)	A	$25,000	1,181.659(2)(3)	D

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	4. Transaction Code (Instr. 8)	5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)		6. Date Exercisable and Expiration Date (Month/Day/Year)		7. Title and Amount of Securities Underlying Derivative Security (Instr. 3 and 4)		8. Price of Derivative Security (Instr. 5)	9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)	10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
					(A)	(D)	Date Exercisable	Expiration Date	Title	Amount or Number of Shares

Explanation of Responses:

1. To record allocation of additional units from profit reinvestment.

2. Mr. Marxe owns 50.1% of MGP Advisers Limited Parternship, (approximately 1021.822 units) the investment adviser to the Special Situations Fund III, L.P. Mr. Marxe also owns approximately 159.8365 units directly.

3. The number of units owned is an estimate. Such number is calculated based on performance allocation which can only be estimated at this time.

	Austin Marxe	01/05/2005
	** Signature of Reporting Person	Date
Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 4 (b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
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