-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EKhJwDYEZJHCgQVttHnZnHYeW4m71iU1bRHX37tApPPaAZFHorAFbUNG6W9r3Brc uLNDSYGxQ4RHKlLrvTRr7w== 0000914248-07-000030.txt : 20071126 0000914248-07-000030.hdr.sgml : 20071126 20071126152102 ACCESSION NUMBER: 0000914248-07-000030 CONFORMED SUBMISSION TYPE: N-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070930 FILED AS OF DATE: 20071126 DATE AS OF CHANGE: 20071126 EFFECTIVENESS DATE: 20071126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECIAL SITUATIONS FUND III L P CENTRAL INDEX KEY: 0000914248 IRS NUMBER: 550898321 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-Q SEC ACT: 1940 Act SEC FILE NUMBER: 811-08110 FILM NUMBER: 071266169 BUSINESS ADDRESS: STREET 1: 527 MADISON AVENUE STREET 2: SUITE 2600 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-319-6670 MAIL ADDRESS: STREET 1: 527 MADISON AVENUE STREET 2: SUITE 2600 CITY: NEW YORK STATE: NY ZIP: 10022 N-Q 1 ssfiiinqsept2007.htm SSF III N-Q SEPT 2007 ssfiiinqsept2007.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number
811-08110
 
SPECIAL SITUATIONS FUND III, L.P.
(Exact name of registrant as specified in charter)
 
527 MADISON AVENUE, SUITE 2600, NEW YORK, NEW YORK
10022
(Address of principal executive offices)
(Zip code)
 
Allen Levithan, Esq.
Lowenstein Sandler, PC
65 Livingston Avenue
Rosedale, NJ  07068-1791
(Name and address of agent for service)
 
Registrant’s telephone number, including area code
(212) 319-6670
 
Date of fiscal year end:
DECEMBER 31, 2007
 
Date of reporting period:
SEPTEMBER 30, 2007
 
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (SS 239.24 and 274.5 of
this chapter), to file reports with the Commission not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b-1 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5).  The Commission may
use the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q,
and the Commission will make this information public.  A registrant is not
required to respond to the collection of information contained in Form N-Q
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number.  Please direct comments concerning the accuracy of
the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609.  The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. § 3507.


 
 
 
Item 1.                                Schedule of Investments.

 
SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
 Shares
  
Common Stocks
 Value
         
   
Aerospace 0.07%
    
78,294
  
SPACEHAB, Inc.
$
           32,101
         
   
Automotive Components 1.32%
    
22,371
  
Rush Enterprises, Inc. - Class A
  
         567,105
         
   
Biotechnology 7.59%
    
39,575
  
Combinatorx, Inc.
  
         244,573
86,027
  
Medivation, Inc.
  
      1,724,841
35,587
  
Metabasis Therapeutics, Inc.
  
         103,915
22,952
  
Opexa Therapeutics, Inc.
  
           91,808
64,380
  
Sangamo BioSciences, Inc.
  
         908,402
134,278
  
Tapestry Pharmaceuticals, Inc.
  
         200,074
       
      3,273,613
         
   
Building Materials 1.24%
    
30,358
  
Comfort Systems USA, Inc.
  
         431,084
22,600
  
Viceroy Homes, Ltd. (Canada)
  
           93,419
300
  
WFI Industries, Ltd. (Canada)
  
             8,418
       
         532,921
         
   
Business Services 0.03%
    
15,600
  
Utix Group, Inc.
  
           11,856
         
   
Capital Equipment 0.74%
    
18,000
  
Mfri, Inc.
  
         321,120
         
   
Casino - Services 0.81%
    
109,560
  
Full House Resorts, Inc.
  
         349,496
         
   
Chemicals 2.27%
    
37,338
  
KMG Chemicals, Inc.
  
         977,509
         
   
Communication Equipment - Software 2.22%
    
1,424,157
  
ION Networks, Inc.
  
           71,208
53,573
  
PC-Tel, Inc.
  
         406,619
10,000
  
RIT Technologies, Ltd. (Israel)
  
           11,400
182,835
  
Vertical Communication, Inc.
  
         166,380
330,340
  
Vertical Communication, Inc. (Restricted)
  
         300,610
       
         956,217
         
   
Communication Products - Equipment 0.84%
    
89,893
  
Centillium Communications, Inc.
  
         151,020
173,207
  
NMS Communications Corporation
  
         213,045
       
         364,065
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 2
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Shares
  
Common Stocks (Continued)
 Value
         
   
Computer Peripherals 0.39%
    
12,399
  
Printronix, Inc.
$
         168,006
         
   
Computer Services - Software 12.28%
    
57,523
  
Acorn Factor, Inc.
  
         257,128
100,147
  
ClickSoftware Technologies, Ltd. (Israel)
  
         550,808
18,760
  
CryptoLogic, Inc. (Canada)
  
         375,200
302,600
  
Excapsa Software, Inc. (Canada) (Illiquid)
  
           72,494
44,658
  
Interplay Entertainment Corporation
  
             3,126
385,342
  
Interplay Entertainment Corporation (Restricted)
  
                  -
36,698
  
LocatePlus Holdings Corporation (Restricted)
  
             3,669
798,696
  
Motive, Inc.
  
      1,341,809
111,408
  
Openwave Systems, Inc.
  
         487,967
60,605
  
Phoenix Technologies, Ltd.
  
         649,080
110,505
  
Primal Solutions, Inc.
  
             9,945
25,810
  
Radware, Ltd. (Israel)
  
         404,959
108,645
  
Stamford Industrial Group, Inc.
  
         215,117
93,175
  
SumTotal Systems, Inc.
  
         546,005
21,653
  
SupportSoft, Inc.
  
         126,455
49,346
  
Unify Corporation
  
         251,663
       
      5,295,425
         
   
Computer Systems 1.63%
    
76,108
  
Adept Technology, Inc.
  
         438,382
52,408
  
Performance Technologies, Inc.
  
         262,564
       
         700,946
         
   
Consumer Products 0.35%
    
138,952
  
Varsity Group, Inc.
  
         150,068
         
   
Diagnostics 0.17%
    
53,938
  
Curagen Corporation
  
           74,434
         
   
Educational Products - Services 1.37%
    
98,461
  
Scientific Learning Corporation
  
         590,766
         
   
Electronic Components 1.79%
    
137,082
  
American Technology Corporation
  
         520,912
12,051
  
Frequency Electronics, Inc.
  
         121,474
73,125
  
Interlink Electronics, Inc.
  
         124,312
58,116
  
Tvia, Inc.
  
             3,487
       
         770,185
         
   
Electronic - Display 0.00%
    
993,474
  
E Ink Corporation (Restricted)
  
                  -
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 3
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Shares
  
Common Stocks (Continued)
 Value
         
   
Electronic Equipment 2.31%
    
460,277
  
Capstone Turbine Corporation
$
         552,332
198,705
  
Iteris, Inc.
  
         443,112
       
         995,444
         
   
Electronic Instruments 2.36%
    
42,132
  
Image Sensing Systems, Inc.
  
         535,076
38,723
  
PowerSecure Internatinal, Inc.
  
         482,489
       
      1,017,565
         
   
Electronic Semiconductor 1.49%
    
136,897
  
Kopin Corporation
  
         521,578
84,082
  
PSi Technologies Holdings, Inc. (Philippines)
  
         118,808
       
         640,386
         
   
Energy - Technology 0.85%
    
253,101
  
Catalytica Energy Systems, Inc.
  
         323,969
40,000
  
Quantum Fuel Systems Technologies Worldwide, Inc.
  
           44,000
       
         367,969
         
   
Financial Services - Miscellaneous 0.60%
    
43,556
  
MicroFinancial Incorporated
  
         259,158
         
   
Food 0.61%
    
25,020
  
Zhongpin, Inc. (China)
  
         262,710
         
   
Gold Mining 0.59%
    
205,536
  
MK Resources Company (Illiquid)
  
         252,809
         
   
Healthcare Services 0.99%
    
28,968
  
U.S. Physical Therapy, Inc.
  
         428,726
         
   
Healthcare - Specialized Products & Services 2.49%
    
95,400
  
Alpha Pro Tech Ltd.
  
         169,812
32,282
  
American Dental Partners, Inc.
  
         904,219
       
      1,074,031
         
   
Housing - Construction 0.85%
    
70,631
  
Modtech Holdings, Inc.
  
         130,667
33,060
  
U.S. Home Systems, Inc.
  
         236,379
       
         367,046
         
   
Information Services 1.34%
    
438,015
  
Pfsweb, Inc.
  
         578,180
         
   
Insurance 2.51%
    
114,563
  
AmCOMP, Inc.
  
      1,081,475
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 4
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Shares
  
Common Stocks (Continued)
 Value
         
   
Internet Commerce 0.57%
    
130,809
  
Youbet.com, Inc.
$
         247,229
         
   
Medical Devices & Equipment 7.59%
    
50,602
  
Natus Medical Incorporated
  
         806,596
111,147
  
Orthovita, Inc.
  
         336,775
104,522
  
Precision Optics Corporation, Inc.
  
           26,130
16,895
  
Quidel Corporation
  
         330,466
19,028
  
Regeneration Technologies, Inc.
  
         203,980
117,571
  
Sonic Innovations, Inc.
  
      1,078,126
175,068
  
World Heart Corporation (Canada)
  
         488,441
       
      3,270,514
         
   
Medical Instruments 0.04%
    
27,790
  
Caprius, Inc.
  
           18,341
         
   
Oil Equipment 0.00%
    
650
  
Beluga Composites Corporation
  
                  -
         
   
Online Services 0.85%
    
17,230
  
The Knot, Inc.
  
         366,310
         
   
Optical Recognition Equipment 0.14%
    
15,000
  
VeriChip Corporation
  
           60,300
         
   
Paper - Packaging 0.02%
    
47,850
  
Chase Packaging Corporation
  
             9,570
         
   
Practice Management 0.82%
    
28,738
  
IntegraMed America, Inc.
  
         354,914
         
   
Restaurant 1.03%
    
71,761
  
Buca, Inc.
  
         134,193
80,955
  
Monterey Gourmet Foods, Inc.
  
         308,439
       
         442,632
         
   
Retail 0.65%
    
61,721
  
Bakers Footwear Group, Inc.
  
         275,276
33,737
  
Odimo Incorporated
  
             6,073
       
         281,349
         
   
Semiconductor 3.54%
    
64,136
  
CEVA, Inc.
  
         576,583
232,900
  
NeoMagic Corporation
  
         947,903
       
      1,524,486
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 5
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Shares
  
Common Stocks (Continued)
 Value
         
   
Semiconductor Equipment 4.71%
    
55,321
  
HI/FN, Inc.
$
         452,526
27,152
  
Integral Vision, Inc.
  
             7,602
109,215
  
Nova Measuring Instruments, Ltd. (Israel)
  
         295,973
56,274
  
Tegal Corporation
  
         304,442
65,924
  
Ultra Clean Holdings, Inc.
  
         969,083
       
      2,029,626
         
   
Services 2.70%
    
49,337
  
Collectors Universe, Inc.
  
         694,665
40,418
  
OPNET Technologies, Inc.
  
         468,849
       
      1,163,514
         
   
Specialty Pharmaceuticals 0.53%
    
37,500
  
Barrier Therapeutics, Inc.
  
         226,500
         
   
Technology - Miscellaneous 3.08%
    
108,445
  
iPass, Inc.
  
         455,469
87,284
  
Intermap Technologies Corp. (Canada)
  
         544,260
68,910
  
Vuance, Ltd. (Israel)
  
         328,702
       
      1,328,431
         
   
Telecom Equipment 1.05%
    
55,571
  
COMARCO, Inc.
  
         320,645
189,908
  
Peco II, Inc.
  
         132,936
       
         453,581
         
   
Telecom Services 2.16%
    
69,605
  
Multiband Corporation
  
         208,816
69,810
  
WPCS International Incorporated
  
         722,533
       
         931,349
         
   
Telecommunications 0.75%
    
353,424
  
Emrise Corporation
  
         325,150
         
   
Therapeutics 3.40%
    
365,691
  
Anadys Pharmaceuticals, Inc.
  
         749,666
125,000
  
Pharmacopeia Drug Discovery, Inc.
  
         715,000
       
      1,464,666
         
   
Toys 0.01%
    
983
  
Corgi International, Ltd. (China) (ADR)
  
             4,327
         
   
Transportation 0.43%
    
10,350
  
Fuel Systems Solutions, Inc.
  
         184,851
73
  
Velocity Express Corporation
  
                  41
       
         184,892
         
   
Vitamins 1.71%
    
81,537
  
Omega Protein Corporation
  
         737,910
         
   
Total Common Stocks 87.87% (cost $33,812,947)
  
    37,886,923
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
6
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Shares
  
Preferred Stocks
 Value
         
   
Business Services 0.40%
    
24
  
UTIX Group, Inc. convertible
$
         140,308
34,618
  
UTIX Group, Inc. convertible (Restricted)
  
           30,001
       
         170,309
         
   
Communications Equipment - Software 0.23%
    
100
  
Vertical Communications, Inc. convertible (Restricted)
  
         100,000
         
   
Data Security 0.59%
    
100,739
  
Verdasys, Inc. Series B convertible (Illiquid)
  
         254,870
         
   
Electronic - Display 0.83%
    
549,484
  
E Ink Corporation Series A (Restricted)
  
         241,773
904,490
  
E Ink Corporation Series B (Restricted)
  
         118,186
       
         359,959
         
   
Food 1.04%
    
42,750
  
Zhongpin, Inc. convertible (China)
  
         448,875
         
   
Medical Instruments 0.08%
    
1,612
  
Caprius, Inc. convertible
  
           10,639
100
  
Caprius, Inc. convertible (Restricted)
  
           25,000
       
           35,639
         
   
Transportation 0.02%
    
8,901
  
Velocity Express Corporation 6% convertible
  
             9,257
         
   
Total Preferred Stocks 3.20% (cost $1,032,426)
  
      1,378,909
         
Principal
    
 Fair
Amount
  
Corporate Debt
 Value
         
   
Computer Services - Software 0.36%
    
 $         869
  
Primal Solutions, Inc. 4.9%, due 3/31/08
$
                869
 $    11,000
  
Primal Solutions, Inc. 5% convertible, due 3/31/08
  
           11,000
 $    68,000
  
Unify Corporation 11.25% convertible, due 10/31/10
  
           85,680
 $    17,600
  
Unify Corporation 11.25% convertible, due 10/31/11
  
           17,952
 $    40,000
  
Unify Corporation  Revolving Credit 10.5%, due 10/31/10
  
           40,000
       
         155,501
         
   
Consumer Products 0.28%
    
 $  120,886
  
Rockford Corporation 4.5% convertible, due 6/11/09
  
         120,886
         
   
Electronic Components 0.18%
    
 $    78,000
  
Interlink Electronics, Inc. 8% convertible, due 7/19/10 (Restricted)
  
           78,000
         
   
Technology - Miscellaneous 0.08%
    
 $    33,000
  
Vuance, Ltd. 8% convertible, due 11/19/09 (Israel)
  
           33,000
         
   
Total Corporate Debt 0.90% (cost $368,486)
  
         387,387
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 7
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Warrants
  
Warrants
 Value
         
   
Biotechnology 0.15%
    
96,038
  
La Jolla Pharmaceutical Company 12/14/10
$
           14,405
3,847
  
Metabasis Therapeutics, Inc. 9/30/10
  
             4,000
142,000
  
Opexa Therapeutics, Inc. 4/13/11
  
           14,200
100,000
  
Tapestry Pharmaceuticals, Inc. 4/6/11
  
           32,000
       
           64,605
         
   
Biotechnology - Drug Delivery 0.00%
    
16,790
  
Aradigm Corporation 11/10/07
  
                   -
         
   
Building Materials 0.12%
    
200,000
  
American Mold Guard, Inc. Class A 4/26/11
  
           28,000
200,000
  
American Mold Guard, Inc. Class B 4/26/11
  
           24,000
       
           52,000
         
   
Business Services 0.03%
    
1,500,000
  
UTIX Group, Inc. 1/13/11
  
           15,000
1,731
  
UTIX Group, Inc. 11/9/11 (Restricted)
  
                   -
6,924
  
UTIX Group, Inc. 9/28/12 (Restricted)
  
                   -
       
           15,000
         
   
Communication Equipment - Software 0.00%
    
3,614
  
Vertical Communications, Inc. 12/16/08 (Restricted)
  
                   -
9,523
  
Vertical Communications, Inc. 9/28/15 (Restricted)
  
                   -
94,340
  
Vertical Communications, Inc. 12/1/16 (Restricted)
  
                   -
       
                   -
         
   
Computer Services - Software 0.16%
    
805,910
  
LocatePlus Holding Corporation 7/8/10 (Restricted)
  
                   -
55,000
  
Primal Solutions, Inc. 3/31/11
  
             2,200
74,914
  
Unify Corporation 4/26/09
  
           23,972
53,600
  
Unify Corporation 10/31/12
  
           42,504
       
           68,676
         
   
Computer Systems 0.04%
    
134,321
  
Adept Technology, Inc. 11/18/08
  
           16,118
         
   
Consumer Products 0.00%
    
5,713
  
Rockford Corporation 6/11/09
  
             1,314
         
   
Electronic Components 0.15%
    
14,450
  
American Technology Corporation 7/18/09
  
             8,814
32,422
  
American Technology Corporation 8/6/10
  
           53,820
30,952
  
Interlink Electronics, Inc. 7/19/12 (Restricted)
  
                   -
       
           62,634
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 8
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
 Fair
Warrants
  
Warrants (Continued)
 Value
         
   
Electronic Equipment 0.14%
    
175,438
  
Capstone Turbine Corporation 1/23/12
 $
           57,895
11,246
  
Iteris, Inc. B 9/28/11
  
             2,362
       
           60,257
         
   
Electronic Semiconductor 0.10%
    
6,447
  
ParkerVision, Inc. 3/10/10
  
           45,129
         
   
Energy - Technology 0.09%
    
10,692
  
Arotech Corporation 6/30/08
  
                   -
4,680
  
Arotech Corporation 12/31/08
  
                   -
80,000
  
Quantum Fuel Systems Technologies Worldwide, Inc. 12/22/12
  
           27,200
34,146
  
Quantum Fuel Systems Technologies Worldwide, Inc. 4/27/14
  
           13,658
       
           40,858
         
   
Food 0.36%
    
25,683
  
Zhongpin, Inc. 1/30/11
  
         154,686
         
   
Medical Devices & Equipment 0.04%
    
9,210
  
Orthovita, Inc. 6/26/08
  
                921
536,190
  
World Heart Corporation 9/22/08 (Canada)
  
           16,086
       
           17,007
         
   
Medical Information Systems 0.00%
    
177,300
  
LifeRate Systems, Inc. 11/14/07
  
                   -
         
   
Medical Instruments 0.02%
    
222,320
  
Caprius, Inc. 2/15/10
  
             8,893
4,477
  
Caprius, Inc. 2/16/11
  
             1,313
31,250
  
Caprius, Inc. 2/27/12 (Restricted)
  
                   -
       
           10,206
         
   
Semiconductor Equipment 0.03%
    
60,250
  
Tegal Corporation 7/14/10
  
             2,410
270,793
  
Tegal Corporation 9/19/10
  
           10,831
16,622
  
Trikon Technologies, Inc. 10/22/07 (United Kingdom)
  
                   -
       
           13,241
         
   
Technology - Miscellaneous 0.25%
    
75,316
  
Intermap Technologies Corp. 3/17/08 (Canada)
  
           79,082
90,990
  
Vuance, Ltd. 12/9/10 (Israel)
  
           29,117
8,250
  
Vuance, Ltd. 11/19/11 (Israel)
  
             1,650
       
         109,849
         
   
Telecom Services 0.65%
    
12,152
  
GoAmerica, Inc. 12/19/08
  
                   -
705,171
  
WPCS International Incorporated 11/16/09
  
         282,068
       
         282,068
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 9
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

     
Fair
Warrants
  
Warrants (Continued)
Value
         
   
Telecommunications 0.00%
    
6,431
  
Q Comm International, Inc. 6/24/08
 $
65
         
   
Therapeutics 0.04%
    
12,868
  
Critical Therapeutics, Inc. 6/6/10
  
2,445
47,506
  
Memory Pharmaceuticals Corp. 9/22/10
  
       16,628
       
19,073
         
   
Total Warrants 2.39% (cost $12,762)
  
1,032,786
         
   
TOTAL INVESTMENTS 94.36% (cost $35,226,621)
 $
40,686,005
         
         
     
Fair
Shares
  
Securities Sold Short
Value
         
   
Medical Instruments 2.55%
    
155,564
  
Thermage, Inc.
 $
1,101,393
         
   
TOTAL SECURITIES SOLD SHORT 2.55% (proceeds $1,302,666)
 $
1,101,393
         
         
         
         
         
         
         
         
         
 
All percentages are relative to Partners' Capital.
    
         
 
All securities are non-income producing except for Collectors Universe, Inc.,
 
COMARCO, Inc., Comfort Systems USA, Inc., CryptoLogic, Inc.,
    
 
Frequency Electronics, Inc., Interlink Electronics, Inc., KMG Chemicals, Inc.,
 
MicroFinancial Incorporated, Primal Solutions, Inc., Printronix, Inc., Rockford
 
Corporation, Unify Corporation, Inc., Velocity Express Corporation, Vertical
 
Communications, Inc., Vuance, Ltd. and WFI Industries, Ltd.
    
         
         
         
See the accompanying Notes to the Financial Statements.
    
         
 
  
 10
    


SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

 
 
 
    
% of
         
Partners'
Industry Concentration
 
 
 Total
 
Capital
           
Aerospace
 
 $
            32,101
 
0.07
Automotive Components
    
          567,105
  
1.32
Biotechnology
    
       3,338,218
  
7.74
Biotechnology - Drug Delivery
    
                    -
  
0.00
Building Materials
    
          584,921
  
1.36
Business Services
    
          197,165
  
0.46
Capital Equipment
    
          321,120
  
0.74
Casino - Services
    
          349,496
  
0.81
Chemicals
    
          977,509
  
2.27
Communication Equipment - Software
    
       1,056,217
  
2.45
Communication Products - Equipment
    
          364,065
  
0.84
Computer Peripherals
    
          168,006
  
0.39
Computer Services - Software
    
       5,519,602
  
12.80
Computer Systems
    
          717,064
  
1.67
Consumer Products
    
          272,268
  
0.63
Data Security
    
          254,870
  
0.59
Diagnostics
    
            74,434
  
0.17
Educational Products -Services
    
          590,766
  
1.37
Electronic Components
    
          910,819
  
2.11
Electronic - Display
    
          359,959
  
0.83
Electronic Equipment
    
       1,055,701
  
2.45
Electronic Instruments
    
       1,017,565
  
2.36
Electronic Semiconductor
    
          685,515
  
1.59
Energy - Technology
    
          408,827
  
0.95
Financial Services
    
          259,158
  
0.60
Food
    
          866,271
  
2.01
Gold Mining
    
          252,809
  
0.59
Healthcare Services
    
          428,726
  
0.99
Healthcare - Specialized Products & Services
    
       1,074,031
  
2.49
Housing - Construction
    
          367,046
  
0.85
Information Services
    
          578,180
  
1.34
Insurance
    
       1,081,475
  
2.51
Internet Commerce
    
          247,229
  
0.57
Medical Devices & Equipment
    
       3,287,521
  
7.63
Medical Information Systems
    
                    -
  
0.00
Medical Instruments
    
      (1,037,207)
  
(2.41)
Oil Equipment
    
                    -
  
0.00
         
 
     
 
  
 
 
 
 
 
 
 
See the accompanying Notes to the Financial Statements.
           
11



SPECIAL SITUATIONS FUND III, L.P.
    
(A Limited Partnership)
    
         
PORTFOLIO OF INVESTMENTS
    
         
SEPTEMBER 30, 2007
    
 
                                                                       (Unaudited)
    

         
% of
         
Partners'
Industry Concentration (Continued)
 
 
 Total
 
Capital
           
Online Services
  
 $
          366,310
  
0.85
Optical Recognition Equipment
    
            60,300
  
0.14
Paper - Packaging
    
              9,570
  
0.02
Practice Management
    
          354,914
  
0.82
Restaurant
    
          442,632
  
1.03
Retail
    
          281,349
  
0.65
Semiconductor
    
       1,524,486
  
3.54
Semiconductor Equipment
    
       2,042,867
  
4.74
Services
    
       1,163,514
  
2.70
Specialty Pharmaceuticals
    
          226,500
  
0.53
Technology - Miscellaneous
    
       1,471,280
  
3.41
Telecom Equipment
    
          453,581
  
1.05
Telecom Services
    
       1,213,417
  
2.81
Telecommunications
    
          325,215
  
0.75
Therapeutics
    
       1,483,739
  
3.44
Toys
    
              4,327
  
0.01
Transportation
    
          194,149
  
0.45
Vitamins
  
 
          737,910
  
1.71
     
 
  
 
     
 
    
TOTAL PORTFOLIO
  
$
     39,584,612
  
91.81%
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
 
 
 
 
 
 
See the accompanying Notes to the Financial Statements.
           
12



Item 2.                                Controls and Procedures.

(a)              Based on an evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, the registrant’s principal executive and principal financial officers, or persons performing similar functions, concluded that the disclosure controls and procedures are effective.

(b)              There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 3.                                Exhibits

Separate certifications for the registrant’s principal executive officer and principal financial officer, as required by rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX99.CERT.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SPECIAL SITUATIONS FUND III, L.P.


By:              __/s/ Austin Marxe_______________
Austin Marxe, Principal Executive Officer

Date: November 26, 2007


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By:              _/s/ Austin Marxe_______________________
Austin Marxe, Principal Executive Officer

Date:  November 26, 2007


By:              __/s/Rose M. Carling  ______________
Rose M. Carling, Principal Financial Officer

Date:  November 26, 2007






 EX-99.HTM 2 exhibit99.htm EXHIBIT 99 exhibit99.htm
CERTIFICATION

I, Austin Marxe, certify that:

1.  I have reviewed this report on Form N-Q of Special Situations Fund III, L.P.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the schedule of investments included in this report, fairly present in all material respects the investments of the registrant as of the fiscal quarter for which the report is filed;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act  of 1940) for the registrant and have:

           (a)                   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

           (b)                  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

           (c)           Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

           (c)                   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

           (a)                    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

           (b)                   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date:  November 26, 2007                                                                      __/s/Austin Marxe__________________
    Austin Marxe, Principal Executive Officer



CERTIFICATION

I, Rose M. Carling, certify that:

1.  I have reviewed this report on Form N-Q of Special Situations Fund III, L.P.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the schedule of investments included in this report, fairly present in all material respects the investments of the registrant as of the fiscal quarter for which the report is filed;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act  of 1940) for the registrant and have:

           (a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

           (b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

           (c)       Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

           (d)       Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.  The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

           (a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

           (b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date:
November 26, 2007                                                                    _/s/Rose M. Carling__________________
Rose M. Carling, Principal Financial Officer




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