SC TO-I

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 2008

SECURITIES ACT FILE NO. ___________

INVESTMENT COMPANY ACT FILE NO. 811-08110

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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SCHEDULE TO

ISSUER TENDER OFFER STATEMENT

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(Pursuant To Section 13(E)(1) Of The

Securities Exchange Act Of 1934)

SPECIAL SITUATIONS FUND III, L.P.

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(Name Of Issuer)

SPECIAL SITUATIONS FUND III, L.P.

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(Names Of Person Filing Statement)

LIMITED PARTNERSHIP UNITS

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(Title Of Class Of Securities)

NOT APPLICABLE

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(CUSIP Number Of Class Of Securities)

AUSTIN W. MARXE

c/o SPECIAL SITUATIONS FUNDS

527 MADISON AVENUE, SUITE 2600

NEW YORK, NEW YORK 10022

TELEPHONE: (212) 319-6670

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(Name, Address And Telephone Number Of Person Authorized To

Receive Notices And Communications On Behalf Of Person(S) Filing Statement)

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COPIES TO:

ALLEN B. LEVITHAN, ESQ.

LOWENSTEIN SANDLER PC

65 LIVINGSTON AVENUE

ROSELAND, NEW JERSEY 07068-1791

TELEPHONE: (973) 597-2406

FAX: (973) 597-2407

S5313/3

03/31/2008 2040027.02

CALCULATION OF FILING FEE

Transaction Valuation: $ _1,668,089.21__*      Amount Of Filing Fee: $_186.44__**

* Transactional valuation equals the aggregate maximum purchase price to be paid for Units in the Offer as estimated for purposes of calculating the filing fee only.  Calculated assuming that 5% of the aggregate amount of Units outstanding as of March 27, 2008 is purchased in the Offer at the unaudited net asset value per Unit calculated as of March 27, 2008.

**Calculated as the Transaction Valuation multiplied by 0.0001177.

[ ]   Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

      Amount Previously Paid: ________________  Filing Party:_________________

      Form or Registration No.:_______________  Date Filed:___________________

[ ]   Check the box if the filing relates solely to preliminary communications made before

the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

      [ ]  third-party tender offer subject to Rule 14d-1.

      [X]  issuer tender offer subject to Rule 13e-4.

      [ ]  going-private transaction subject to Rule 13e-3.

      [ ]  amendment to Schedule 13D under Rule 13d-2.

      Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ]

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ITEM 1.  SUMMARY TERM SHEET.

Reference is made to the Summary Term Sheet in the Notice of Tender Offer (the "Notice of Offer") that is attached as Exhibit A and is incorporated herein by reference.

ITEM 2.  SUBJECT COMPANY INFORMATION.

(a)  The name of the issuer is Special Situations Fund III, L.P. (the "Fund"), a closed-end investment company organized as a Delaware limited partnership and registered under the Investment Company Act of 1940, as amended (the “1940 Act”).  The principal executive offices of the Fund are currently located at 527 Madison Avenue, Suite 2600, New York, New York 10022, (212) 319-6670.

(b)  The title of the securities being sought is units of limited partnership interests ("Units"). As of January 1, 2008 there were approximately 1,548.9864 Units issued and outstanding.

(c)   There is currently no established trading market for the Units.

(d)-(f)  Not applicable.

ITEM 3.  IDENTITY AND BACKGROUND OF FILING PERSON.

(a)  The Fund is tendering for its own Units.  The principal executive offices of the Fund are currently located at 527 Madison Avenue, Suite 2600, New York, New York 10022, (212) 319-6670.

(b)-(d) Not applicable.

ITEM 4.  TERMS OF THE TRANSACTION.

(a)(1)

        (i)   The Fund is seeking tenders for up to 5% of the total outstanding Units held by limited partners of the Fund (“Limited Partners”) for a cash payment equal to the net asset value (the "NAV") per Unit of the Units tendered as calculated on June 30, 2008 (the “Offer”).

        (ii)  For each Unit tendered, the security holder will receive a cash amount equal to the NAV per Unit of the Fund calculated on June 30, 2008, upon the terms and subject to the conditions set forth in the Notice of Offer.  Reference is hereby made to Section 2 "The Offer" of the Notice of Offer, which is incorporated herein by reference.

        (iii)  The Offer is scheduled to expire on May 1, 2008.  Reference is hereby made to Section 5 "Certain Conditions of the Offer" of the Notice of Offer, which is incorporated herein by reference.

        (iv)   Not applicable.

        (v)  The Offer may not be extended.

       (vi)  Reference is hereby made to Section 4 "Withdrawal Rights" of the Notice of Offer, which is incorporated herein by reference.

       (vii)  Reference is hereby made to Section 3 "Procedure for Tenders" and Section 4 "Withdrawal Rights" of the Notice of Offer, which are incorporated herein by reference.

        (viii) Reference is hereby made to Section 3 "Procedure for Tenders" of the Notice of Offer, which is incorporated herein by reference.

        (ix)   The maximum percentage of Units to be purchased in the Offer is 5% of the total Units outstanding.  If the Offer is oversubscribed, the Fund will repurchase Units tendered on a pro rata basis (based upon the number of Units submitted for purchase by each such holder).  Reference is hereby made to Section 2 “The Offer” of the Notice of Offer, which is incorporated herein by reference.

         (x)   Not applicable.

        (xi)  Reference is hereby made to Section 6 "Certain Federal Income Tax Consequences" of the Notice of Offer, which is incorporated herein by reference.

        (xii)  Reference is hereby made to Section 6 "Certain Federal Income Tax Consequences" of the Notice of Offer, which is incorporated herein by reference.

(a)(2)  Not applicable.

(b)  No Units will be purchased from any officer, director or affiliate of the Fund.

(c)-(f) Not applicable.

ITEM 5.  PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.

(a)-(d) Not applicable.

(e)  The Fund does not know of any contract, agreement, arrangement, understanding or relationship, whether contingent or otherwise or whether or not legally enforceable, between the Fund or MGP Advisers Limited Partnership (“MGP”), the corporate general partner of the Fund, any of the Fund's or MGP 's executive officers or directors, any of the Fund’s Individual General Partners or any person controlling the Fund or MGP or any executive officer or director of any corporation or other entity ultimately in control of the Fund or MGP and any person with respect to any securities of the Fund or MGP (including, but not limited to, any contract, agreement, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies, consents or authorizations).

ITEM 6.  PURPOSES OF THE TRANSACTION AND PLANS AND PROPOSALS.

(a)  Reference is hereby made to Section 1 "Background and Purpose of the Offer" of the Notice of Offer, which is incorporated herein by reference.

(b)  Reference is hereby made to Section 1 "Background and Purpose of the Offer" of the Notice of Offer, which is incorporated herein by reference.

(c) On March 10, 2008, the Independent General Partners of the Fund approved the submission to a vote of the Partners of the authorization of the liquidation of the Fund.  The affirmative vote of Partners holding at least 67% of the outstanding Units is needed to authorize the liquidation of the Fund.  The meeting date and record date for the special meeting of Partners that will be called for this purpose has not been set.  If authorized, it is expected that it would take a considerable amount of time for the liquidation to be completed.  Other than as described in the preceding sentence of this Item 6(c), the Fund does not have any plans, proposals or negotiations that relate to or would result in (1) an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Fund or MGP; (2) a purchase, sale or transfer of a material amount of assets of the Fund or MGP; (3) any material change in the present dividend rate or policy, or indebtedness or capitalization of the Fund; (4) any change in the present board of managers or management of the Fund or MGP, including but not limited to, any plans or proposal to change the number or the term of managers or to change any material term of the employment contract of any executive officer; (5) any other material change in the Fund’s or MGP’s structure or business, including any plans or proposals to make any changes in its investment policy for which a vote would be required by Section 13 of the Investment Company Act of 1940, as amended; (6) any class of equity securities of the Fund or MGP to be delisted from a national securities exchange or cease to be authorized to be quoted in an automated quotation system operated by a national securities association; (7) any class of equity securities of the Fund or MGP becoming eligible for termination of registration under Section 12(g)(4) of the Securities Exchange Act of 1934 (the "1934 Act"); (8) the suspension of the Fund’s or MGP’s obligation to file reports under Section 15(d) of the 1934 Act; (9) the acquisition by any person of additional securities of the Fund or MGP or the disposition of securities of the Fund or MGP other than as described above and in the Fund’s Confidential Private Placement Memorandum; or (10) any changes in the Fund’s or MGP’s charter, bylaws or other governing instruments or other actions that could impede the acquisition of control of the Fund or MGP.

(d)  Not applicable.

ITEM 7.  SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.

(a) The funds to be used to satisfy tenders in the Offer will be obtained by utilizing cash on hand and/or liquidating a portion of the portfolio securities of the Fund.  Based upon an unaudited NAV per Unit calculated as of March 27, 2008, an estimated cash amount of $1,668,089__ would be required in order to purchase the maximum amount of Units that may be tendered pursuant to the Offer.  Reference is hereby made to Section 2 "Offer" of the Notice of Offer, which is incorporated herein by reference.

(b)  Not applicable.

(c)  Not applicable.

(d) None of the funds or other consideration to be paid to Limited Partners tendering pursuant to the Offer is, or is expected to be, borrowed, directly or indirectly.

ITEM 8.  INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a)  MGP holds 199.2052 Units (or 12.9% of the Units outstanding), representing the entire corporate general partner interest of the Fund.  AWM Investment Company, Inc. (“AWM”), is the general partner of MGP and Austin W. Marxe, David M. Greenhouse and Adam Stettner are the limited partners of MGP (the “Principals”).  Mr. Marxe and Mr. Greenhouse are the sole shareholders and executive officers of AWM and along with Dianne Marxe are the sole directors of AWM.  Mr. Marxe holds 15.2176 Units (or 1.0% of the Units outstanding), Mr. Greenhouse holds 3.1539 Units (or 0.2% of the Units outstanding) and Mr. Stettner holds 0 Units (or 0% of the Units outstanding).  The Fund also has five Individual General Partners: Austin W. Marxe is the Managing Individual General Partner of the Fund and holds 15.2176 Units (or 1.0% of the Units outstanding), Peter W. Williams is an Individual General Partner of the Fund and holds 19.3366 Units (or 1.2% of the Units outstanding), William Austin is an Individual General Partner of the Fund and holds 0.2479 Units (or less than 0.1% of the Units outstanding), Stanley S. Binder is an Individual General Partner of the Fund and holds 0.9617 Units (or less than 0.1% of the Units outstanding), and Delcour S. Potter is an Individual General Partner of the Fund and holds 0.2479 Units (or less than 0.1% of the Units outstanding).  All ownership information provided in this paragraph is as of January 1, 2008.  The address of MGP and each of the Principals and Individual General Partners is currently 527 Madison Avenue, Suite 2600, New York, New York 10022, (212) 319-6670.

(b)  There have not been any transactions involving the Units that were effected during the past 60 days by the Fund or MGP, any executive officer or director of the Fund or MGP, any person controlling the Fund or MGP, any executive officer or director of any corporation ultimately in control of the Fund or MGP or by any associate or subsidiary of any of the foregoing, including any executive officer or director of any such subsidiary.  The Fund issues interests in private placement transactions that do not involve any "public offering" within the meaning of Section 4(2) of the Securities Act of 1933 in amounts equal to the NAV on the date of each such sale.  Within the past 60 business days, the Fund has not issued any Units.

ITEM 9.  PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.

(a)  No persons have been directly or indirectly employed, retained, or are to be compensated by or on behalf of the Fund to make solicitations or recommendations in connection with the Offer.

(b)   Not applicable.

ITEM 10.  FINANCIAL STATEMENTS.

(a)   The Fund's financial information for the period ended December 31, 2006 and December 31, 2007 has been audited by Weiser, LLP, and is incorporated herein by reference to the Certified Shareholder Report filed with the SEC on March 7, 2007 (File number 914248-07-000005) and on March 7, 2008 (File number 914248-08-000007), respectively.  Copies of the Fund's financial information may be found on the SEC's website at WWW.SEC.GOV or may be obtained free of charge by calling the Fund at (212) 319-6670.

(b)-(c)  Not applicable.

ITEM 11.  ADDITIONAL INFORMATION.

(a) (1)    None.

     (2)    None.

     (3)    Not Applicable.

     (4)    Not Applicable.

     (5)    None.

(b)  The Notice of Offer, attached hereto as Exhibit A, is incorporated herein by reference in its entirety.

ITEM 12.  EXHIBITS.

(a)           (1)     Form of Cover Letter to Limited Partners.

(2)     Notice of Tender Offer.

(3)    Tender Form

ITEM 13.  INFORMATION REQUIRED BY SCHEDULE 13E-3.

Not applicable.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

SPECIAL SITUATIONS FUND III, L.P.

                         BY: MGP ADVISERS LIMITED PARTNERSHIP

By:   /s/ Austin W. Marxe

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Austin W. Marxe

Managing Individual General Partner

April 1, 2008

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EXHIBIT INDEX

EXHIBITS

99. (a)(1)     Form of Cover Letter to Limited Partners

99. (a)(2)     Notice of Tender Offer

99. (a)(3)     Form of Tender Form

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EX-99.(A)(1)

April 1, 2008

Dear Investor:

Enclosed please find documentation that relates to the semi-annual tender offer to all limited partners of Special Situations Fund III, L.P.  To assist you in your decision, you will find:

1.   Schedule TO – providing you with various SEC required disclosures;

2.   Notice of Tender Offer – describing the terms under which you may redeem units;

3.   A Tender Form – which must be completed and in our possession by May 1, 2008 if you plan to redeem units;  and

4.   A return envelope for your convenience.

Within the next few weeks you will be receiving a Proxy Statement informing you of a special meeting to be held in connection with a proposal to liquidate and dissolve the Fund.  The meeting date and record date for the special meeting have not yet been determined.  We request that you read the documentation that will be sent to you carefully and respond as promptly as possible.

The outcome of the special meeting will not affect the current Tender Offer and its terms. You do not need to respond to this mailing if you do not wish to tender any of your units.

Please feel free to contact us at (212) 319-6670, if you have any questions.

Sincerely,

Special Situations Funds

EX-99.(A)(2)

NOTICE OF TENDER OFFER

DATED

APRIL 1, 2008

SPECIAL SITUATIONS FUND III, L.P.

527 MADISON AVENUE, SUITE 2600

NEW YORK, NEW YORK 10022

TELEPHONE: (212) 319-6670

FAX: (212) 319-6677

OFFER TO ALL LIMITED PARTNERS TO REPURCHASE UP TO 5% OF ALL OUTSTANDING UNITS AT NET ASSET VALUE

THE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON

MAY 1, 2008

SPECIAL SITUATIONS FUND III, L.P.

527 MADISON AVENUE, SUITE 2600

NEW YORK, NEW YORK 10022

APRIL 1, 2008

To the limited partners of

Special Situations Fund III, L.P.:

Special Situations Fund III, L.P. (the "Fund"), is offering to purchase for cash on the terms and conditions set forth in this Notice of Tender Offer (“Notice of Offer”) and the related Tender Form (which together constitute the "Offer") up to 5% of all outstanding units of the Fund pursuant to tenders by limited partners of the Fund ("Limited Partners"). (As used in this Notice of Offer, the term "Unit" or "Units" as the context requires, shall refer to the units of limited partnership interest in the Fund and portions thereof representing beneficial interests in the Fund.).  Limited Partners who choose to participate in the Offer may tender all or a portion of their Units in exchange for a cash amount equal to the net asset value (“NAV”) of the respective Units of the Fund as of the close of business on June 30, 2008 (the “Valuation Date”).  This Offer is being made to all Limited Partners and is not conditioned on any minimum amount of Units being tendered, but is subject to certain conditions described below.  Units are not traded on any established trading market and are subject to strict restrictions on transferability pursuant to the Fund's Limited Partnership Agreement, as amended (the "Limited Partnership Agreement").

Limited Partners should realize that the value of the Units tendered will likely change between the date hereof and the Valuation Date, when the value of the Units tendered to the Fund will be determined for purposes of calculating the purchase value of such Units.  Limited Partners tendering their Units should also note that they will remain limited partners of the Fund, with respect to the Units tendered and accepted by the Fund, through the Valuation Date.  Limited Partners may obtain daily NAV information during the period from the date hereof through May 1, 2008 (the “Tender Deadline”), by contacting the Fund at the telephone number or address set forth on page 1, Monday through Friday, except holidays, during normal business hours of 9:00 A.M. to 5:00 P.M. (Eastern Time).

LIMITED PARTNERS DESIRING TO TENDER THEIR UNITS IN THE OFFER SHOULD COMPLETE AND SIGN THE ATTACHED TENDER FORM AND MAIL, FAX OR SEND IT BY A NATIONAL OVERNIGHT COURIER SERVICE TO THE FUND IN THE MANNER DESCRIBED IN SECTION 3 HEREIN.  THE METHOD OF DELIVERY OF ANY DOCUMENTS IS AT THE ELECTION AND COMPLETE RISK OF THE LIMITED PARTNER TENDERING UNITS INCLUDING, BUT NOT LIMITED TO, THE FAILURE TO RECEIVE ANY TENDER FORM OR OTHER DOCUMENT SUBMITTED BY FACSIMILE TRANSMISSION.

IMPORTANT

THE FUND MAKES NO RECOMMENDATION TO ANY LIMITED PARTNER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING UNITS. LIMITED PARTNERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER UNITS.

BECAUSE EACH LIMITED PARTNER'S INVESTMENT DECISION IS AN INDIVIDUAL ONE, BASED ON ITS FINANCIAL CIRCUMSTANCES.  NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE FUND AS TO WHETHER ANY LIMITED PARTNER SHOULD TENDER UNITS PURSUANT TO THE OFFERS.  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE TENDER FORM.  IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE FUND.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR ON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

Questions, requests for assistance and requests for additional copies of this Notice of Offer may be directed to:

SPECIAL SITUATIONS FUND III, L.P.

527 MADISON AVENUE, SUITE 2600

NEW YORK, NEW YORK 10022

TELEPHONE: (212) 319-6670

FAX: (212) 319-6677

SUMMARY TERM SHEET

·   The Fund provides its limited partners with liquidity by conducting periodic tender offers pursuant to Rule 23c-2 under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as its Limited Partnership Agreement.  The Fund generally intends to make such tender offers semi-annually, on June 30 and December 31 of each year.  The Offer is such a semi-annual tender offer to all Limited Partners.  See Section 1 - Background and Purposes of the Offer.

·   The Offer will enable all Limited Partners of the Fund to choose to tender all or a portion of their Units to the Fund for a cash payment equal to the NAV of the Units tendered, as calculated on the Valuation Date.  Subject to the limitations set forth below, Limited Partners may tender all of their Units or a portion of their Units.  See Section 1 - Background and Purposes of the Offer.

·   The Board has determined that the maximum percentage of Units of the Fund to be repurchased pursuant to the Offer initially will be 5% of the total Units outstanding.  If the amount of Units that are properly tendered pursuant to the Offer and not withdrawn pursuant to Section 4 below is less than or equal to 5% of the total Units outstanding, the Fund will, on the terms and subject to the conditions of the Offer, purchase all of the Units so tendered.  If the Offer is oversubscribed, the Fund will repurchase Units tendered on a pro rata basis (based upon the number of Units submitted for purchase by each such holder).  If a Limited Partner’s tender is accepted, the Fund will pay the entire value of the Units that are repurchased in cash on or before July 7, 2008.  The funds to be used to satisfy tenders in the Offer will be obtained by utilizing cash on hand and/or liquidating a portion of the portfolio securities of the Fund.  See Section 2 - The Offer.

·   The Offer will remain open until 5:00 p.m., Eastern Time, on May 1, 2008 (the “Tender Deadline”).  Until that time, you have the right to change your mind and withdraw any tender of your Units.  If you would like us to tender all or a portion of your Units pursuant to the Offer you should (i) mail or send by national overnight courier service the Tender Form (enclosed with this Notice of Offer), to the Fund, 527 Madison Avenue, Suite 2600, New York, New York 10022; or (ii) fax it to the Fund at (212) 319-6677, so that it is received before 5:00 p.m., Eastern Time, on May 1, 2008.  IF YOU FAX THE TENDER FORM, YOU SHOULD MAIL THE ORIGINAL TENDER FORM TO THE FUND PROMPTLY AFTER YOU FAX IT (ALTHOUGH THE ORIGINAL DOES NOT HAVE TO BE RECEIVED BEFORE 5:00 P.M., EASTERN TIME, ON THE TENDER DEADLINE). See Section 3 - Procedures for Tenders.

·   As of the close of business on March 27, 2008, the NAV of a Unit held by a Limited Partner was approximately $21,369.  Limited Partners should realize that the value of the Units tendered will likely change between such date and the Valuation Date, when the value of the Units tendered to the Fund will be determined for purposes of calculating the purchase or exchange value of such Units.  Limited Partners may obtain daily NAV information during the period from the date hereof through the Tender Deadline, by contacting the Fund at the telephone number or address set forth on page 1, Monday through Friday, except holidays, during normal business hours of 9:00 A.M. TO 5:00 P.M. (EASTERN TIME).  See Section 2 - The Offer.

1.BACKGROUND AND PURPOSE OF THE OFFER.

The Fund, which was organized as a Delaware limited partnership on October 18, 1993, is a closed-end management investment company registered with the Securities and Exchange Commission (the “Commission”) under the 1940 Act.1  The Fund provides its limited partners with liquidity by conducting periodic tender offers pursuant to Rule 23c-2 under the 1940 Act, as well as its Limited Partnership Agreement.  The Fund generally intends to make such tender offers semi-annually, on June 30 and December 31 of each year.  The Offer is such a semi-annual tender offer to all Limited Partners.  For each semi-annual tender offer, the Individual General Partners (collectively, the “Board”) will determine the maximum percentage of Units to be repurchased, which will generally be a maximum of 5% of the total Units outstanding in accordance with applicable laws, rules and regulations (determined after redetermination of Units).

Units that are tendered to the Fund in connection with the Offer will be retired, although the Fund may issue new Units from time to time pursuant to non-public offerings limited to “accredited investors” (within the meaning of Regulation D promulgated under the Securities Act of 1934) who are also “qualified clients” (within the meaning of the Investment Advisers Act of 1940) as set forth in its Confidential Private Placement Memorandum.

2.THE OFFER.

The Offer will enable all Limited Partners of the Fund to choose to tender all or a portion of their Units to the Fund for a cash payment equal to the NAV of the Units tendered, as calculated on the Valuation Date.  Subject to the limitations set forth below, Limited Partners may tender all of their Units or the portion of their Units, as described below.  The Offer is being made to all Limited Partners and is not conditioned on any minimum amount of Units being tendered.  If a Limited Partners tender is accepted, the Fund will pay the entire value of the Units that are repurchased in cash on or before July 7, 2008.  The funds to be used to satisfy tenders in the Offer will be obtained by utilizing cash on hand and/or liquidating a portion of the portfolio securities of the Fund.

The Board has determined, in accordance with applicable laws, rules and regulations, that the maximum percentage of Units of the Fund to be repurchased pursuant to the Offer initially will be 5% of the total Units outstanding.  If the amount of Units that are properly tendered pursuant to the Offer and not withdrawn pursuant to Section 4 below is less than or equal to 5% of the total Units outstanding, the Fund will, on the terms and subject to the conditions of the Offer, purchase all of the Units so tendered.  If the Offer is oversubscribed, the Fund will repurchase Units tendered on a pro rata basis (based upon the number of Units submitted for purchase by each such holder).  The Individual General Partners, the Adviser and the limited partners of the Adviser (Austin W. Marxe, David Greenhouse and Adam Stettner, collectively, the “Principals”) will not participate in the Offer.

In order to maintain a fixed price per Unit of $25,000 for the repurchase of a Unit, the Fund will redetermine the number of Units held by each Partner on the Valuation Date (immediately before any repurchases of Units) to reflect allocations of profit or loss of the Fund.  As a result, the number of Units owned by each Partner will equal the balance in such Partner's Book Capital Account on the Valuation Date divided by $25,000.  By way of example only, if the net asset value of a Unit is $37,500 immediately prior to such redetermination, a Partner will be credited with 1.5 Units for each Unit owned on the Valuation Date.  As a convenience to Partners, the enclosed Tender Form allows a Partner to tender a specified number of Units or a specified percentage of such Units, in each case at $25,000 per Unit.

The Offer will remain open until 5:00 p.m., Eastern Time, on May 1, 2008.  The Offer may be suspended or postponed as described in Section 5 below.  Limited Partners should realize that the value of the Units tendered likely will change between the date hereof and the Valuation Date, when the value of the Units tendered to the Fund will be determined for purposes of calculating the redemption value of such Units.  The following table sets forth the key deadlines and dates for the tender and payment of Units with respect to this Offer:

Description	Date
Tender Deadline--the last day to submit tenders of Units for repurchase and the last day to modify or withdraw any tender submitted to the Fund	May 1, 2008
Valuation Date-- the day for determination of the net asset value per Unit	June 30, 2008
Payment Deadline--the last day for payment of repurchased Units	July 7, 2008

As of the close of business on March 27, 2008, the net asset value of a Unit held by a Limited Partner was $21,369.  LIMITED PARTNERS MAY OBTAIN DAILY NET ASSET VALUE INFORMATION DURING THE PERIOD FROM THE DATE HEREOF THROUGH THE TENDER DEADLINE, BY CONTACTING THE FUND AT THE TELEPHONE NUMBER OR ADDRESS SET FORTH ON PAGE 1, MONDAY THROUGH FRIDAY, EXCEPT HOLIDAYS, DURING NORMAL BUSINESS HOURS OF 9:00 A.M. TO 5:00 P.M. (EASTERN TIME).

3.PROCEDURE FOR TENDERS.

If you would like us to tender all or a portion of your Units pursuant to the Offer you should (i) mail or send by national overnight courier service the Tender Form (enclosed with this Notice of Offer), to the Fund, 527 Madison Avenue, Suite 2600, New York, New York 10022; or (ii) fax it to the Fund at (212) 319-6677, so that it is received before 5:00 p.m., Eastern Time, on May 1, 2008.  IF YOU FAX THE TENDER FORM, YOU SHOULD MAIL THE ORIGINAL TENDER FORM TO THE FUND PROMPTLY AFTER YOU FAX IT (ALTHOUGH THE ORIGINAL DOES NOT HAVE TO BE RECEIVED BEFORE 5:00 P.M., EASTERN TIME, ON MAY 1, 2008). THE METHOD OF DELIVERY OF ANY DOCUMENTS IS AT THE ELECTION AND COMPLETE RISK OF THE LIMITED PARTNER TENDERING UNITS INCLUDING, BUT NOT LIMITED TO, THE FAILURE TO RECEIVE ANY TENDER FORM OR OTHER DOCUMENT SUBMITTED BY FACSIMILE TRANSMISSION.

The Fund recommends that all documents be submitted via certified mail, return receipt requested, via national overnight courier or by facsimile transmission with confirmation of successful transmission. A Limited Partner choosing to fax a Tender Form must also send or deliver the original completed and executed Tender Form promptly thereafter. Limited Partners wishing to confirm receipt of a Tender Form may contact the Fund at the address or telephone number set forth above.  The method of delivery of any documents is at the election and complete risk of the Limited Partner tendering Units including, but not limited to, the failure to receive any Tender Form or other document submitted by facsimile transmission.  All questions as to the validity, form, eligibility (including time of receipt) and acceptance of tenders will be determined by the Fund, in its sole discretion, and such determination shall be final and binding.  The Fund reserves the absolute right to reject any or all tenders determined by it not to be in appropriate form or the acceptance of or payment for which would, in the opinion of counsel for the Fund, be unlawful.  The Fund also reserves the absolute right to waive any of the conditions of the Offer or any defect in any tender with respect to any particular Unit or any particular Limited Partner, and the Fund's interpretation of the terms and conditions of the Offer will be final and binding.  Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Fund shall determine.  Tenders will not be deemed to have been made until the defects or irregularities have been cured or waived.  Neither the Fund nor its agents shall be obligated to give notice of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give such notice.

4.WITHDRAWAL RIGHTS.

Any Limited Partner tendering Units pursuant to the Offer may withdraw his, her or its tender at any time prior to or on the Tender Deadline.  To be effective, any notice of withdrawal of a tender must be timely received at the address or fax number set forth on page 1.  A form to give notice of withdrawal of a tender is available by calling the Fund at the telephone number indicated on page 1.  All questions as to the form and validity (including time of receipt) of notices of withdrawal of a tender will be determined by the Fund, in its sole discretion, and such determination shall be final and binding.  A tender of Units properly withdrawn shall not thereafter be deemed to be tendered for purposes of the Offer.  However, withdrawn Units may be tendered again prior to the Tender Deadline by following the procedures described in Section 3.

5.CERTAIN CONDITIONS OF THE OFFER.

The Offer will expire on May 1, 2008.  The Fund reserves the right, at any time and from time to time, to suspend or postpone the Offer, by approval of a majority of the Independent General Partners, for: (a) any period during which there is a suspension of trading on any organized exchange or over-the-counter market where the Fund has a material investment, (b) any period during which an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable, or during which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or (c) any period as the Commission may by order permit.  The Fund will promptly notify all Partners of any such suspension or postponement.

6.CERTAIN FEDERAL INCOME TAX CONSEQUENCES.

Below is a general summary of the United States federal income tax consequences to the Limited Partners who participate in the Offer.  Limited Partners should consult their own tax advisors for a complete description of the tax consequences to them as a result of participation in the Offer.

In general, a Limited Partner from which Units are repurchased by the Fund will be treated as receiving a distribution of money from the Fund.  Such Limited Partner generally will not recognize income or gain as a result of the repurchase, except to the extent (if any) that the amount of consideration (both in money and in a reduction in the Limited Partners share of the Fund’s liabilities) received by the Limited Partner exceeds such Limited Partner's adjusted tax basis in such Limited Partner's Units.  A Limited Partner's basis in such Limited Partner's Units will be reduced (but not below zero) by the amount of consideration received by the Limited Partner from the Fund in connection with the purchase of such Units.  Cash distributed to a Limited Partner in excess of the adjusted tax basis of such Limited Partner's Units is taxable as capital gain or ordinary income, depending on the circumstances.  A Limited Partner that has all of its Units purchased by the Fund may recognize a loss, but only to the extent that the amount of consideration received from the Fund is less than the Limited Partner’s then adjusted tax basis in such Limited Partner's Units.

7.MISCELLANEOUS.

No repurchase fees, brokerage commissions, fees or other remuneration will be paid by the Fund, or any Limited Partner in connection with the Offer.  Any and all costs and expenses in connection with the Offer will be incurred before the Fund calculates its NAV, and therefore will be reflected in the NAV, on the Valuation Date.

The Offer is not being made to, nor will tenders be accepted from, Limited Partners in any jurisdiction in which the Offer or its acceptance would not comply with the securities or Blue Sky laws of such jurisdiction.  The Fund is not aware of any jurisdiction in which the Offer or tenders pursuant thereto would not be in compliance with the laws of such jurisdiction.  However, the Fund reserves the right to exclude Limited Partners from the Offer in any jurisdiction in which it is asserted that the Offer cannot lawfully be made.  The Fund believes such exclusion is permissible under applicable laws and regulations, provided the Fund makes a good faith effort to comply with any state law deemed applicable to the Offer.

 

1           The Fund has a corporate general partner, MGP Advisers Limited Partnership (the “Adviser”), which acts as its investment adviser, and individual general partners (“Individual General Partners,” and together with the Adviser, the “General Partners”) who serve in the same capacity as directors of a registered investment company organized as a corporation.  The Individual General Partners are responsible for the overall management and supervision of the Fund.  Following consummation of the Offer, the Individual General Partners shall remain in such capacity with the Fund.   All other partners of the Fund are limited partners (“Limited Partners,” and together with the General Partners, the “Partners”).

EX-99.(A)(3)

SPECIAL SITUATIONS FUND III, L.P.

___________

TENDER FORM

___________

Special Situations Fund III, L.P.

527 Madison Avenue, Suite 2600

New York, NY 10022

Attention of Austin W. Marxe

Dear Sirs:

Reference is made to the Notice of Tender Offer (the "Notice") of Special Situations Fund III, L.P. (the "Fund") dated April 1, 2008.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Notice.

The undersigned hereby tenders Units for purchase, at a price of $25,000 per Unit, as follows (complete one of the following):

________ Number of Units

or

________% of Units

The number or percentage of Units tendered herein will represent Units owned by the undersigned on the Valuation Date June 30, 2008.

THIS TENDER FORM MUST BE COMPLETED AND RECEIVED BY THE FUND ON OR BEFORE MAY 1, 2008, IN ORDER TO BE EFFECTIVE.

(To be signed and dated on the reverse side)

If the Partner is an Individual or Joint Account:

_______________________________

Print Name(s)

_______________________________                                                                                     

Signature(s)

______________________

Date

If the Partner is an Entity:

_______________________________

Name of Entity

By ____________________________

Print Name _____________________

Print Title ______________________

______________________

Date

2

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