TECHNOLOGY FUNDING PARTNERS III, L.P.
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 94403
NOTICE OF MEETING OF LIMITED PARTNERS
To the Limited Partners of Technology Funding Partners III, L.P.:
Notice is hereby given that the tri-annual Meeting of Limited Partners of
Technology Funding Partners III, L.P., (the "Partnership") will be held at
10:00 a.m., local time, on Friday, December 8, 2000, at the Partnership's
offices at 2000 Alameda de las Pulgas, Suite 250, San Mateo, California 94403,
to consider and vote upon:
1. The election of three Individual General Partners to serve as members of
the Partnership's Management Committee each for a three-year term;
2. The election of two Managing General Partners to serve as members of the
Partnership's Management Committee each for a three-year term;
3. Ratification of the Management Committee's appointment of Arthur Andersen
LLP as independent certified public accountants of the Partnership;
4. The amendment of Article 2, Section (m) of the Partnership Agreement to
delete references to "Controlling Person" in the definition of "General
Partner Overhead" so that the salary and fringe benefits of a Controlling
Person of a Managing General Partner directly involved in carrying out the
business of the Partnership are expenses of the Partnership;
5. The amendment of Article 1.03 of the Partnership Agreement to clarify the
Partnership's investment objective;
6. The amendment of Article 5.04 of the Partnership Agreement to clarify the
Limited Partners' right to vote under the Investment Company Act of 1940, as
amended (the "Act");
7. Such other matters as may properly come before the Meeting or any
adjournment thereof.
This notice and the enclosed proxy statement and form of proxy are first being
mailed to Limited Partners on or about November 8, 2000.
You are cordially invited to attend this Meeting. Whether or not you plan to
attend this meeting, please complete, sign, and date the accompanying proxy
and return it as promptly as possible in the enclosed postage-paid envelope.
The enclosed proxy is being solicited by the Management Committee.
By order of the Management Committee,
Charles R. Kokesh
Chief Executive Officer
Technology Funding Inc.
San Mateo, California
Dated: November 8, 2000
<PAGE>
TECHNOLOGY FUNDING PARTNERS III, L.P.
2000 Alameda de las Pulgas, Suite 250
San Mateo, California 9440
PROXY STATEMENT
The notice of meeting, proxy statement, and form of proxy are
first being mailed to Limited Partners on or about November 8, 2000.
General Information
Technology Funding Partners III, L.P., (the "Partnership") is a
limited partnership that was organized under the laws of the State
of Delaware on December 4, 1986. The Partnership commenced selling
units of limited partnership interests ("Units") in April 1987. On
June 2, 1987, the minimum number of Units required to commence
Partnership operations (6,000) was sold to persons who became
limited partners of the Partnership ("Limited Partners"). The
Partnership completed an offering on February 3, 1989, raising a
total of $40,000,000 from the sale of 160,000 Units.
The Partnership is managed by a Management Committee, consisting
of three Individual General Partners and a representative of each
of the two Managing General Partners, Technology Funding Inc.
("TFI") and Technology Funding Ltd. ("TFL"). The Management
Committee has exclusive control of the management of the
Partnership, provides overall guidance and supervision of the
Partnership's operations, and performs the various duties imposed
on the boards of directors of business development companies by
the Investment Company Act of 1940, as amended (the "Act"). In
addition to having general fiduciary duties, the Management
Committee, among other things, supervises the management
arrangements of the Partnership and supervises the activities of
the Managing General Partners. Subject to the supervision of the
Management Committee, the Managing General Partners are
responsible for (i) management of the Partnership; (ii) making all
decisions regarding the Partnership's venture capital investment
portfolio; (iii) negotiation and structuring of investments in
portfolio companies; (iv) oversight of the portfolio companies
including providing, or arranging for the provision of, managerial
assistance to portfolio companies; and (v) day-to-day
administration of Partnership affairs.
The Partnership's term was extended for a two-year period to
December 31, 1998, pursuant to unanimous approval by the
Management Committee on September 13, 1996. The Partnership term
was further extended to December 31, 2000, with an amendment by
the General Partners and approved by a majority of the Limited
Partners. If no further action is taken by the General Partners
before this termination date, the Partnership will be liquidated
in accordance with the Partnership Agreement. The General Partners
expect the Management Committee to vote in favor of extending the
term of the Partnership for one additional two-year period. The
Management Committee is authorized to exercise this right to
extend the Partnership by an amendment to the Partnership
Agreement approved by a vote of the Limited Partners in December
1997.
The Partnership's principal investment objectives are long-term
capital appreciation from venture capital investments in new and
developing companies and preservation of Limited Partner capital
through risk management and active involvement with portfolio
companies. The Partnership elected to be a business development
company under the Act, and operates as a nondiversified investment
company as that term is defined in the Act.
Solicitation of Proxies
The accompanying proxy is solicited on behalf of the Management
Committee for use at the tri-annual Meeting of Limited Partners of
the Partnership to be held at 10:00 a.m., local time, on December
8, 2000, (the "Meeting") at the Partnership's offices located at
2000 Alameda de las Pulgas, Suite 250, San Mateo, California
94403, and any adjournment thereof. The Management Committee of
the Partnership has designated Charles R. Kokesh and Gregory T.
George or either of them, each with power of substitution, to
serve as proxies.
The expenses of soliciting proxies will be paid by the
Partnership. Following the original mailing of the proxies,
representatives of the Partnership may request brokers,
custodians, nominees, and other record holders to forward copies
of the proxy to persons for whom they hold Units and to request
authority for the exercise of proxies. In such case, the
Partnership, upon the request of the record holders, will
reimburse such holders for their reasonable expenses. Excluding
the costs of printing the proxies, ballots, and return envelopes
and postage, the expected cost of this proxy solicitation will be
approximately $25,000 to $35,000 including the allocable costs of
personnel of the Managing General Partners engaged in preparing
the proxy statement, supervising the costs of printing and
mailing, tabulating the ballots, and responding to inquiries from
Limited Partners, plus approximately $30,000 of legal costs
attributable to this proxy for counsel to the Partnership and
special Delaware counsel. Should it become necessary to hire an
outside proxy solicitation firm, costs could increase by $75,000
to $100,000. The total cost of this proxy and solicitation could
be as much as $175,000.
Record Date
By order of the Management Committee, only Limited Partners of
record at the close of business on October 31, 2000, are entitled
to notice of and will be entitled to vote at the Meeting and any
adjournment thereof.
Voting Rights and Procedures
Only Limited Partners of record on October 31, 2000, will be
entitled to vote at the Meeting. At the close of business on that
date, the Partnership had 160,000 Units outstanding and entitled
to vote. Limited Partners are entitled to one vote for each Unit
held.
Limited Partners may vote in person or by proxy at the Meeting.
The enclosed form of proxy, if returned properly executed and not
subsequently revoked, will be voted in accordance with the choices
made by the Limited Partner with respect to each proposal listed
on the form of proxy. The representation in person or by proxy of
at least a majority of the outstanding Units entitled to vote at
the Meeting is necessary to establish a quorum for the election of
the members of the Management Committee. The Management Committee
is elected by a plurality of the votes cast by the Limited
Partners entitled to vote at the meeting. Units represented by
proxies that are marked "WITHHOLD AUTHORITY" will have no effect
on the outcome of the vote for election of the members of the
Management Committee.
The approval of each of the other matters proposed in this proxy
statement requires the affirmative vote or consent of the Limited
Partners who in the aggregate own more than 50% of the outstanding
Units. Abstentions so marked on the ballot will have the same
effect as votes against a proposal.
If a Limited Partner does not specify on the form of proxy how the
Limited Partner's Units are to be voted, or if a Limited Partner
fails to return a proxy, the Limited Partner, pursuant to Article
14.04 of the Partnership Agreement, shall be deemed to have
granted to the Management Committee a proxy solely for those
matters noted on the form of proxy and the Management Committee
will vote all such proxies "FOR" each proposal noted on the
enclosed form of proxy.
If any other matters should be properly presented at the Meeting,
the persons designated to serve as proxies will vote on such
matters in accordance with a determination by a majority of the
members of the Management Committee, including a majority of the
Independent General Partners (as defined below).
Revocation and Dissenter's Rights
Any person signing a proxy in the form accompanying this proxy
statement has the power to revoke it prior to the vote pursuant to
the proxy. A proxy may be revoked by (i) submitting before or at
the Meeting a written revocation of the proxy with the
Partnership; (ii) submitting to the Partnership before or at the
Meeting a subsequent proxy that is signed by the person who signed
the earlier proxy; or (iii) attending the Meeting and casting a
contrary vote.
The Partnership is a closed-end, non-trading entity that has
elected to operate as a business development company under the
Investment Company Act of 1940, as amended. Limited Partners do
not have any "dissenter's rights."
Ownership of Partnership Units
To the knowledge of management of the Partnership, as of October
31, 2000, no person owned beneficially more than 5% of the
outstanding Units. Except as noted below regarding the direct
ownership of 20 Units each by the three Independent General
Partners, the General Partners do not own any securities of the
Partnership, whether voting or non-voting. As provided in Article
7.01(a) of the Partnership Agreement, the Managing General
Partners made a capital contribution and received an ownership
interest reflected in the allocation provisions in Articles 8 and
9 of the Partnership Agreement, relating to profits and losses and
distributions, but do not own Partnership Units.
Annual Reports
The Partnership's Annual Report on Form 10-K for the year ended
December 31, 1999, ("Annual Report") was mailed to all Limited
Partners of record as of April 1, 2000, on or about July 6, 2000.
The Partnership will provide without charge to each Limited
Partner a copy of the Annual Report upon request. Address your
request to Client Services by calling toll-free 1-800-821-5323, or
by writing Client Services, Annual Reports Section, Attn: Darrin
Abby, at Technology Funding, 460 St. Michael's Drive, Suite 1000,
Santa Fe, New Mexico 87505.
Proposal 1 - Election of Individual General Partners
All General Partners of the Partnership are elected by the Limited
Partners. The members of the Management Committee are the three
Individual General Partners and a representative from each of TFI
and TFL, the Managing General Partners. Generally, the
representative for TFL is Mr. Kokesh, and the representative for
TFI is Mr. George. The three Individual General Partners are
Messrs. Baines, Craft, and Tempesta. The Managing General Partners
and one of the three Individual General Partners have served in
those capacities since the formation of the Partnership. As
required by the Investment Company Act, a majority of the General
Partners must be individuals who are not "interested persons" of
the Partnership as defined in the Act. The Securities and Exchange
Commission ("SEC") has issued an order declaring that persons
serving as Individual General Partners of the Partnership will not
be deemed to be "interested persons" of the Partnership, as
defined in Section 2(a)(19) of the Act, solely by reason of their
being partners of the Partnership and co-partners of one another.
Presently, none of the Individual General Partners is an
"interested person" of the Partnership. Therefore, the Individual
General Partners constitute the Partnership's Independent General
Partners. None of the nominees for Individual General Partner has
provided in the past five years or provides any services to or
receives compensation in any form from the Partnership except as
disclosed below, nor have they received any compensation from any
other partnerships managed by the Managing General Partners or
from the Managing General Partners.
At the Meeting, the Limited Partners will elect three Individual
General Partners, each to hold office until the next required
meeting, which will be in the 2003 calendar year, and until his
successor is elected and qualified or until his earlier
resignation or removal. Each nominee is presently an Individual
General Partner of the Partnership. Each nominee listed below has
consented to continue to serve as an Individual General Partner.
There are no arrangements or understandings related to the
nomination of any of the Individual General Partners except as
provided in the Partnership Agreement. If any nominee is not
available for election, which is not anticipated, the proxies
received will be voted for such substitute nominee as the
Management Committee may recommend.
Certain information about each nominee is set forth below:
Partnership Units Percentage Ownership
Nominee Age Beneficially Owned of Outstanding Units
G. Whitney Baines, Ph.D. 56 8 *
A. Logan Craft 40 8 *
Michael S. Tempesta, Ph.D. 48 8 *
*Denotes beneficial ownership of less than 1% of outstanding
Units.
G. Whitney Baines, Ph.D., has been an Independent General Partner
since 1987 when the Partnership was formed. Dr. Baines is a
professor at Monterey Peninsula College where he teaches
biological sciences. Prior to joining the faculty at Monterey
Peninsula College in September 1975, he was a lecturer at the
University of California, Santa Barbara.
The Rev. A. Logan Craft has been an Independent General Partner
since his appointment in April 2000. Mr. Craft is currently
Associate Rector at the Episcopal Church of the Holy Faith in
Santa Fe, New Mexico. Prior to his ordination to the priesthood,
he served as Vice-President and Partner of Craft Associates, Inc.,
from 1991 to 1997 where he was responsible for a portfolio of
domestic and international companies involved in industrial
production of metals and plastics. From 1982 to 1985, Mr. Craft
was a sales representative for American Petrafina Marketing, Inc.,
where he was responsible for corporate franchise agreements for
the wholesale distribution of refined petroleum products.
Michael Tempesta, Ph.D., has been an Independent General Partner
since his appointment in January 1997. Dr. Tempesta is President
of NatProd Consulting Services, which he founded in 1995. From
1997 to 1998, he was also Senior Vice President of Research and
Development at Pharmaprint and, from 1995 to 1996, Chief
Scientific Officer for Larex, Inc. He also held several positions
at Shaman Pharmaceuticals, Inc., from 1990 to 1994, including
Chief Scientific Officer, Senior Vice President, Research, and
Vice President, Chemistry and Discovery. Prior to that, Dr.
Tempesta was a Professor at the University of Missouri. He did
post-doctoral fellowships at Suntory Institute for Bioorganic
Research in Japan and Columbia University.
Compensation
Under Article 4.02 of the Partnership Agreement, the Partnership
will pay each Individual General Partner compensation for services
rendered as follows:
(a) The sum of $10,000 per person annually in quarterly
installments beginning on the commencement date;
(b) The sum of $1,000 per person for each meeting of the
Management Committee attended by such Individual General Partner;
(c) If a committee is appointed by the Management Committee, the
sum of $1,000 for each such committee meeting attended; provided,
however, that, if such committee meeting is held on the same day
as a meeting of the Management Committee, the sum paid for
attendance at such committee meeting shall be $500 per person; and
(d) All out-of-pocket expenses relating to attendance at the
meetings, committee or otherwise, of the Management Committee.
Under Article 4.02, neither the Managing General Partners nor any
of their affiliates shall receive any compensation from the
Partnership. Although the Partnership Agreement provides a
mechanism by which the Management Committee, with the approval of
a majority in interest of the Limited Partners, may increase or
decrease compensation payable to the Individual General Partners,
there have been no changes to the compensation arrangements set
forth above. Payment of compensation to an Individual General
Partner is not considered a distribution and will not effect his
right to receive a distribution to which he may be entitled as a
Limited Partner.
Individual General Partner Compensation for Fiscal Year 1999
Aggregate Pension or Estimated Total
Individual Compensation Retirement Annual Bene- Compensation
General from the Benefits fits upon from the
Partner Partnership Accrued Retirement Partnership
G. Whitney Baines,
Ph.D. $15,240.49 N/A N/A $15,240.49
A. Logan Craft $ 0.00 N/A N/A $ 0.00
Michael S. Tempesta,
Ph.D. $14,485.56. N/A N/A $14,485.56
Pursuant to Article 7.01(b) of the Partnership Agreement, each
Individual General Partner made a capital contribution of $2,000
in cash at the time of his admission to the Partnership, for which
that Individual General Partner received an interest in the
Partnership of eight Units. For calendar year 1999, Messrs. Baines
and Tempesta were each allocated losses attributable to their Unit
holdings of $124.
Management Committee Meetings and Committees
During 1999, the Partnership's Management Committee held a total
of four meetings. All of the Individual General Partners attended
at least 75% of the regular meetings of the Partnership. The
Partnership does not have a separate audit committee, valuation
committee, compensation committee, nominating committee, or any
committee performing similar functions since these functions are
served by the entire Management Committee. There were no committee
meetings or other special meetings other than the regularly
scheduled quarterly Management Committee meetings in the last
fiscal year.
Proposal 2 - Election of Managing General Partners
At the Meeting, two Managing General Partners will be elected,
each to serve until the next required meeting of Limited Partners
and until its successor is elected and qualified or until its
earlier resignation or removal. The nominees discussed below have
consented to continue to serve as Managing General Partners.
Technology Funding Inc. ("TFI") is a California corporation formed
in 1979 to act as a general partner in limited partnerships
providing funding to high technology companies. Its address is
2000 Alameda de las Pulgas, Suite 250, San Mateo, California
94403. In conjunction with TFL, TFI has organized and managed 20
limited partnerships in addition to the Partnership. TFI is a
registered investment adviser under the Investment Advisers Act of
1940. Mr. Kokesh is the sole director of TFI, and all of the
shares of stock of TFI are owned by TFL. TFI and its wholly owned
subsidiary, Technology Funding Capital Corp., currently employ
approximately 30 persons. The backgrounds and experience of
certain senior officers of TFI are outlined in "Key Personnel of
the Managing General Partners" below. TFI has been a Managing
General Partner of the Partnership since its formation in 1987.
Technology Funding Ltd. ("TFL") is a California limited
partnership formed in 1980 that serves as co-general partner with
TFI in the Technology Funding partnerships. TFL is a registered
investment adviser under the Investment Advisers Act of 1940. TFL
is the sole shareholder of TFI. TFL has two general partners, Mr.
Kokesh and Mr. George, one venture partner, Mr. Bernardoni, and
four limited partners. Mr. Kokesh is the managing general partner
of TFL. TFL has been a Managing General Partner of the Partnership
since its formation in 1987.
Voting Interests in the Managing General Partners
The following table sets forth the voting interests of the general
partners of TFL as of October 31, 2000. TFL is the sole
shareholder of TFI. Mr. Kokesh may be deemed to be a control
person of TFL.
TFL (1)
Charles R. Kokesh 6 votes
Gregory T. George 2 votes
Total 8 votes
(1)Under the TFL partnership agreement, all material decisions
require the vote of at least 75% of the voting interests. The
General Partners' capital, profit, and loss interests are flexible
and may vary from the voting percentages set forth above. Limited
Partners of TFL have very limited voting rights.
Key Personnel of the Managing General Partners
Charles R. Kokesh, 52, is President and Chief Executive Officer of
TFI and Managing General Partner of TFL. Prior to forming
Technology Funding in 1979, Mr. Kokesh was a Vice President of
Bank of America where he was responsible for Global Treasury
Management Services. Had Proposal 4 been approved and in effect
during the years ended December 31, 1999, and December 31, 1998,
additional expenses to the Partnership related to the compensation
of Mr. Kokesh would have been $50,105 and $60,624, respectively.
Gregory T. George, 52, is a Group Vice President of TFI and a
General Partner of TFL. Prior to joining Technology Funding in
June 1986, Mr. George was an independent management consultant
specializing in the technical and strategic analysis of venture-
backed software companies.
Peter F. Bernardoni, 41, is a Vice President of TFI and a Venture
Partner of TFL. Prior to joining Technology Funding in February
1988, Mr. Bernardoni served in several capacities with IBM,
including design engineer and sales and marketing manager.
Compensation
Over and above their distributive share of Partnership profits,
losses, and distributions, the Managing General Partners receive
from the Partnership (i) a management fee equal to 1/4% of the
fair value of the Partnership assets at the end of the preceding
quarter, as determined by the Management Committee; and (ii)
reimbursement of operational costs of the Partnership incurred by
the Managing General Partners or their affiliates in connection
with the business of the Partnership.
Managing General Partner Compensation for Fiscal Year 1999
Aggregate Pension or Estimated Total
Managing Compensation Retirement Annual Bene- Compensation
General from the Benefits fits upon from the
Partner Partnership Accrued Retirement Partnership
TFI $282,321(2) N/A N/A $282,321(2)
TFL $ 0 N/A N/A $ 0
(2) Compensation from the Partnership to the Managing General
Partners is equivalent to the management fees paid in the year
ended December 31, 1999.
For fiscal years 1999 and 1998, management fees were $282,321 and
$280,034, respectively, and reimbursement of operational costs was
$654,648 and $973,896, respectively.
Removal of the Managing General Partners
The Managing General Partners, together, may be removed from the
Partnership either (i) by a majority of the Independent General
Partners of the Partnership; (ii) by failure to be reelected by
the Limited Partners; or (iii) with the consent of a majority in
interest of the Limited Partners.
In the event of the removal of the Managing General Partners and
the continuation of the Partnership, the Partnership Agreement
provides that the venture capital investments held by the
Partnership at the time of removal will be valued in a procedure
set forth in the Partnership Agreement. With respect to their
Partnership interests, the removed Managing General Partners will
receive a final allocation of net profit or net loss equal to the
net profit or net loss that they would have been allocated
pursuant to the Partnership Agreement if all unrealized capital
gains and losses of the Partnership were deemed realized and an
allocation of net profit or net loss were made at such time.
If the capital accounts of the removed Managing General Partners
have a positive balance after the final allocation, the
Partnership will deliver a promissory note to the removed Managing
General Partners, with a principal amount equal to the amount, if
any, by which the positive amount of the removed Managing General
Partners' capital accounts exceeds the amount of their capital
contributions, bearing interest at the prime rate in effect at the
time of removal, with interest payable annually and principal
payable, if at all, only from 20% of any available cash before any
distributions thereof are made to the Partners. If the capital
accounts of the removed Managing General Partners have a negative
balance after such allocation, the Managing General Partners will
contribute cash to the Partnership equal to that negative balance.
The Partnership interests of the removed Managing General Partners
will convert to those of Limited Partners and the removed Managing
General Partners will continue to receive, as Limited Partners,
allocations of net profits and net losses pursuant to the
Partnership Agreement and related distributions as provided in the
Partnership Agreement.
Proposal 3 - Appointment of Independent Public Accountants
At its meeting held on September 10, 1999, the Management
Committee of the Partnership appointed the firm of KPMG LLP
("KPMG"), independent public accountants, to examine the financial
statements of the Partnership for the year ending December 31,
1999, and until either its resignation or the appointment of its
successor. On September 5, 2000, the Partnership received notice
that KPMG had resigned from the engagement. KPMG informed the
Partnership that it had no disagreement on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which should be
reported by the Partnership on a Form 8-K.
During the Partnership's two most recent fiscal years and through
September 5, 2000, the Partnership has had no reportable events as
defined in Item 304(a)(1)(v) of Regulation S-K, except for KPMG's
inability to complete its review of the June 30, 2000, financial
statements. The Partnership subsequently filed a Form 8-K on
September 12, 2000, which reported the resignation along with the
events surrounding KPMG's inability to complete the June 30, 2000,
review. The Partnership requested that KPMG provide a letter
addressed to the SEC stating whether or not it agreed with the
statements in the Form 8-K.
In its September 20, 2000, letter to the SEC, KPMG identified no
reason for its resignation but stated that it had been "precluded
from completing its review of the unaudited June 30, 2000
financial statements" because the Partnership did not provide in a
timely fashion documentation from an independent third party to
support the valuation of investments. The Partnership does not
agree with KPMG's assertion regarding its inability to complete
the review because all documentation requested by KPMG was made
available. The Partnership stated its position in the amended Form
8-K filed with the SEC on September 25, 2000.
During KPMG's tenure as the Partnership's independent accountants,
none of KPMG's reports contained adverse opinions, disclaimers, or
other qualifications regarding the Partnership's accounting
policies.
Pursuant to the authority conferred in Article 3.07 of the
Partnership Agreement and subject to the approval of a majority in
interest of the Limited Partners, the Management Committee has
directed the Managing General Partners to appoint Arthur Andersen
LLP as the Partnership's independent public accountants. The
Partnership knows of no direct or indirect financial interest of
Arthur Andersen LLP in the Partnership. The appointment of Arthur
Andersen LLP is subject to ratification or rejection by the
Limited Partners of the Partnership. Unless a contrary
specification is made, the accompanying proxy will be voted in
favor of ratifying the appointment of Arthur Andersen LLP.
Arthur Andersen LLP will also act as independent public
accountants for the Managing General Partners and all of the other
Technology Funding partnerships and entities. The fees received by
Arthur Andersen LLP from these other entities are substantially
greater, in the aggregate, than the total fees received by it from
the Partnership. The Management Committee considered the fact that
Arthur Andersen LLP has been retained as the independent
accountants for the Managing General Partners and the other
entities described above in its evaluation of the independence of
Arthur Andersen LLP with respect to the Partnership.
Representatives of KPMG and Arthur Andersen LLP are not expected
to be present at the Meeting and therefore will not have the
opportunity to respond to questions from Limited Partners or to
make a statement.
Proposal 4 - Increase in Partnership Expenses by Redefining
"General Partner Overhead"
The Partnership Agreement defines the terms "Controlling Person"
and "General Partner Overhead." The term Controlling Person
currently means any person, whatever his or her title, who
performs functions for the Managing General Partners or their
affiliates similar to those of the chairman or member of the board
of directors; is a member of executive management, such as the
president, executive vice president or senior vice president,
corporate secretary, or treasurer; or holds a 5% or more equity
interest in the Managing General Partners or their affiliates or a
person having the power to direct or cause the direction of the
Managing General Partners or their affiliates, whether through the
ownership of voting securities, by contract, or any other means.
Pursuant to that definition, Charles R. Kokesh, as the Managing
General Partner of TFL and President of TFI, currently is a
Controlling Person and would have been a Controlling Person for
each of the Partnership's fiscal years ended December 31, 1999,
and December 31, 1998. No other person was a Controlling Person
during those years or is now a Controlling Person.
The term Controlling Person is relevant to the definition of
General Partner Overhead which means those customary and routine
expenses incurred by the Managing General Partners (excluding all
organizational and offering expenses) in performing their
obligations to the Partnership, including: (i) rent or
depreciation, utilities, property taxes, and the cost of capital
equipment unless acquired primarily for the benefit of the
Partnership; (ii) expenses of a general and administrative nature
that are customarily incurred by the General Partners for their
own accounts and are not attributable to the Partnership; and
(iii) salaries and fringe benefits incurred by or allocated to any
Controlling Person of the General Partners or their Affiliates and
specifically including the salary paid to Mr. Kokesh as an
employee of TFI.
In his respective roles at TFL and TFI, Mr. Kokesh is responsible
for managing those two entities and supervising the operation,
management, and progress of all portfolio companies as well as for
administering the day-to-day affairs of the Partnership. In
addition, from time to time Mr. Kokesh directly carries out the
business of the Partnership, as opposed to supervising third
parties. If he were not a Controlling Person, that portion of his
salary from TFI directly attributable to carrying out the business
of the Partnership would be a reimbursable expense of the
Partnership. While his time and TFI salary are tracked and
allocated to his respective tasks, the Partnership has not
reimbursed TFI for the portion of Mr. Kokesh's salary specifically
related to carrying out the Partnership's business. The
Partnership receives a significant and material benefit from the
direct involvement of Mr. Kokesh. Under the definition of those
expenses incurred on behalf of the Partnership for which
reimbursement is allowable, the Partnership does not currently pay
for Mr. Kokesh's expertise and TFI salary since General Partner
Overhead is not reimbursable and a Controlling Person's salary and
fringe benefits are included in the definition of General Partner
Overhead. Article 3.04(d) expressly allows the employment of
affiliates of any General Partner "to carry out the business and
affairs of the Partnership" and to pay such compensation as is
competitive with the compensation paid to unaffiliated persons in
the area for similar services.
The Management Committee proposes to amend the definition of
General Partner Overhead to delete references to "Controlling
Person" so that the Partnership is permitted to pay for the
expertise, time, and management services directly provided to it
by a Controlling Person in carrying out the business of the
Partnership as allowed under Article 4.01(c), "Reimbursement of
Operational Costs." The Partnership Agreement makes a clear
distinction between operational costs and those responsibilities
compensated by the management fee and enumerated in Article
4.01(b), namely "supervising the operation, management, and
progress of all Portfolio Companies, administering the day-to-day
affairs of the Partnership and evaluating, selecting and
negotiating Portfolio Company financings." If the Limited Partners
approve this proposed amendment, the Partnership will incur the
expenses related to the management of the activities and
investments of the Partnership by Mr. Kokesh or any other
Controlling Person whose salary and fringe benefits are paid by
TFI. The proposed change would become effective as of January 1,
2000. The following table below illustrates the additional costs
to the Partnership for the full 12 months of calendar year 2000.
Additional Cost to the Partnership of Amending the Definition of
General Partner Overhead
Controlling Person 1998 1999 2000 (Estimated)
Charles R. Kokesh $60,624 $50,105 $76,245
Proposal 5 - Investment Objective
According to Article 1.03 of the Partnership Agreement, the
Partnership's principal investment objective is "to provide the
Partners with long-term capital appreciation on their investment."
In order to clarify the Partnership's goals and remove any
ambiguity regarding investment strategies as the Partnership nears
the end of its term, the Management Committee proposes to amend
this section to state:
"The Partnership's principal investment objective is to maximize
long-term capital appreciation for the Limited Partners up to and
including the final day of the Partnership's operations prior to
dissolution."
This change makes it clear that the Managing General Partners are
focused on maximizing returns to Limited Partners up to and
including the final day of the Partnership's active operation. The
Partnership does not intend to change its current investing
strategies.
Proposal 6 - Clarification of the Limited Partners' Right to Vote
under the Investment Company Act of 1940, as Amended (the "Act")
Article 5.04 of the Partnership Agreement outlines certain rights
of the Limited Partners. In order to conform to certain provisions
of the Act respecting fundamental voting rights of investors in
business development companies, the proposed amendment to Article
5.04 will clarify that any vote of the Limited Partners that is
mandated by the Act shall not be limited by the requirement to
obtain an opinion of counsel pursuant to Articles 6.01 or 14.02 of
the Partnership Agreement.
This section currently states: "Each of the foregoing matters
shall be approved or disapproved, as the case may be, upon the
vote or consent of a Majority in Interest of the Limited
Partners." The Managing General Partners propose to add the
following phrase:
"...and any vote of the Limited Partners mandated by the 1940 Act
shall not be limited by the requirement to obtain an opinion of
counsel pursuant to Articles 6.01 or 14.02."
Other Matters
The Management Committee does not intend to bring any other
business before the Meeting and, so far as it is known to the
Management Committee, no matters are to be brought before the
Meeting except as specified in the notice of the Meeting.
Additional Information
Limited Partner Status
The Partnership Agreement provides that the Limited Partners of
the Partnership are prohibited from exercising certain rights of
limited partners, including the right to elect General Partners,
to approve certain Partnership matters, and to amend the
Partnership Agreement, unless prior to the exercise of such
rights, counsel for the Partnership has delivered to the
Partnership an opinion to the effect that neither the existence of
such rights nor the exercise thereof will violate the provisions
of the Revised Uniform Limited Partnership Act of the State of
Delaware, as amended, or the applicable laws of the other
jurisdictions in which the Partnership is then formed or
qualified, or will adversely affect the classification of the
Partnership as a partnership for federal income tax purposes.
Prickett, Jones & Elliott, as special Delaware counsel to the
Partnership, has delivered a favorable opinion to the Partnership
with respect to the foregoing and as required by Section 6.01 of
the Partnership Agreement. To the extent that the Investment
Company Act requires a vote on certain matters, there will be a
shareholder vote.
Limited Partner Proposals
Any Limited Partner proposal submitted to the Partnership for
inclusion in the Partnership's proxy statement and form of proxy
relating to the Partnership's next meeting of the Limited Partners
in 2003, pursuant to Rule 14a-8 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), must be received by the
Partnership at the Partnership's principal executive offices 120
days or a reasonable length of time prior to the date the
Partnership mails proxy materials for the meeting in order for the
proposal to be considered at that meeting. Any such proposal must
comply in all respects with the applicable rules and regulations
under the Exchange Act.
In order for proposals made outside Rule 14a-8 of the Exchange Act
to be considered "timely" within the meaning of Rule 14a-4(c)
under the Exchange Act, such proposals must be received by the
Partnership at the Partnership's principal executive offices a
reasonable length of time prior to the date the Partnership mails
the proxy materials for the meeting for consideration at that
meeting.
The proxies solicited by the Partnership will confer general
discretionary authority only with regard to such matters
specifically noticed in this proxy statement. Notwithstanding such
discretionary authority, the Management Committee is supportive of
all the proposals noticed in this proxy statement and will vote
any proxies granted to it in favor of each proposal unless a proxy
is marked to be voted against a specific proposal or candidate as
provided on the ballot. The Partnership will specifically advise
the Limited Partners when to submit proposals for the next tri-
annual meeting in future reports filed under the Exchange Act.
Where You Can Find More Information
The Partnership files annual and quarterly reports, proxy
statements, and other information with the U.S. Securities and
Exchange Commission ("SEC"). The Partnership's filings with the
SEC are available to the public through the SEC's Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR") accessible
through the SEC's web site at http://www.sec.gov. Limited Partners
also may read and copy any report, statement, or other information
that the Partnership has filed with the SEC at the SEC's public
reference rooms at the following locations:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
New York Regional Office
7 World Trade Center
Suite 1300
New York, NY 10048
Chicago Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, IL 60661-2511
Call the SEC at 1-800-SEC-0330 for more information on obtaining
information from the SEC's public reference rooms.
The SEC allows the Partnership to incorporate by reference
information into this proxy statement, meaning the Partnership can
disclose important information by referring Limited Partners and
others who read this proxy statement to other documents that the
Partnership has filed with the SEC. The Partnership incorporates
by reference the document listed below:
The Partnership's annual report on Form 10-K, filed on March 30,
2000, file number 814-00048.
All Limited Partners are urged to complete, sign, and date the
accompanying proxy and return it in the enclosed postage-paid
envelope. Thank you for your assistance.
<PAGE>
Annex A
Proposal 4 - Increase in Partnership Expenses by Redefining
"General Partner Overhead"
Article 2, Section (m) of the Partnership Agreement currently
reads as follows:
(m) "General Partner Overhead" means those customary and routine
expenses incurred by the Managing General Partners (excluding all
Organizational and Offering Expenses) in performing their
obligations to the Partnership, including: (i) rent or
depreciation, utilities, property taxes, and the cost of capital
equipment unless acquired primarily for the benefit of the
Partnership; (ii) expenses of a general and administrative nature
that are customarily incurred by the General Partners for their
own accounts and are not attributable to the Partnership; and
(iii) salaries and fringe benefits incurred by or allocated to any
Controlling Person of the General Partners or their Affiliates.
For purposes of this subsection, "Controlling Person" is any
Person, whatever his or her title, who performs functions for the
Managing General Partners or their Affiliates similar to those of
the chairman or member of the board of directors; executive
management, such as the president, executive vice president or
senior vice president, corporate secretary, or treasurer; or who
holds a 5% or more equity interest in the Managing General
Partners or their Affiliates or a Person having the power to
direct or cause the direction of the Managing General Partners or
their Affiliates, whether through the ownership of voting
securities, by contract, or otherwise.
As amended by Proposal 4, Article 2, Section (m) would read as
follows:
(m) "General Partner Overhead" means those customary and routine
expenses incurred by the Managing General Partners (excluding all
Organizational and Offering Expenses) in performing their
obligations to the Partnership, including: (i) rent or
depreciation, utilities, property taxes, and the cost of capital
equipment unless acquired primarily for the benefit of the
Partnership; and (ii) expenses of a general and administrative
nature that are customarily incurred by the General Partners for
their own accounts and are not attributable to the Partnership.
Annex B
Proposal 5 - Investment Objective
Article 1.03 of the Partnership Agreement currently reads as
follows:
1.03 Purpose. The Partnership is authorized and empowered to elect
to operate, and to operate, as a business development company
under the Investment Company Act of 1940, as amended. The
Partnership's principal investment objective is to provide the
Partners with long-term capital appreciation on their investment.
The Partnership will seek to accomplish this objective by making
venture capital investments in new and developing companies that
the "Managing General Partners," as hereinafter defined, believe
offer significant long-term growth possibilities and by providing
those companies with active management assistance where warranted.
The Partnership will also seek to achieve this objective by
investing in established companies that the Managing General
Partners believe offer special opportunities for growth. The
Partnership will also seek to preserve Limited Partner capital
through risk management and active participation with Portfolio
Companies. Generation of current income or tax benefits will not
be primary factors in the selection of investments.
As amended by Proposal 5, Article 1.03 would read as follows:
1.03 Purpose. The Partnership is authorized and empowered to elect
to operate, and to operate, as a business development company
under the Investment Company Act of 1940, as amended. The
Partnership's principal investment objective is to maximize long-
term capital appreciation for the Limited Partners up to and
including the final day of the Partnership's operations prior to
dissolution. The Partnership will seek to accomplish this
objective by making venture capital investments in new and
developing companies that the "Managing General Partners," as
hereinafter defined, believe offer significant long-term growth
possibilities and by providing those companies with active
management assistance where warranted. The Partnership will also
seek to achieve this objective by investing in established
companies that the Managing General Partners believe offer special
opportunities for growth. The Partnership will also seek to
preserve Limited Partner capital through risk management and
active participation with Portfolio Companies. Generation of
current income or tax benefits will not be primary factors in the
selection of investments.
Annex C
Proposal 6 - Clarification of the Limited Partners' Right to Vote
under the Investment Company Act of 1940, as Amended (the "Act")
Article 5.04 of the Partnership Agreement currently reads as
follows:
5.04 Rights of Limited Partners. The Limited Partners shall have
the following rights:
(a)the right to approve and elect or disapprove and remove General
Partners;
(b) the right to approve or disapprove proposed changes in the
nature of the Partnership's business so as to cause the
Partnership to cease to be, or to withdraw its election as, a
business development company under the 1940 Act;
(c) the right to approve or disapprove any proposed investment
advisory contract or management agreement or to disapprove and
terminate any such existing contracts; provided, however, that
such contracts are also approved by a majority of the Independent
General Partners;
(d) the right to approve and ratify or disapprove and reject the
appointment of the independent accountants of the Partnership;
provided, however, that such appointment is approved by the
Management Committee, including a majority of the Independent
General Partners;
(e) the right to approve or disapprove the appointment of
successor Managing General Partners;
(f) the right to propose and approve an amendment to this
Agreement; provided, however, that no such amendment shall
conflict with the 1940 Act; and
(g) the right to approve any other material matters related to the
business of the Partnership that the 1940 Act requires to be
approved by the Limited Partners so long as the Partnership is a
business development company subject to the provisions of the 1940
Act; provided, however, that, prior to the exercise of any such
right of approval, the Management Committee amends this Agreement
to reflect such additional voting right.
Each of the foregoing matters shall be approved or disapproved, as
the case may be, upon the vote or consent of a Majority in
Interest of the Limited Partners.
As amended by Proposal 6, Article 5.04 would read as follows:
5.04 Rights of Limited Partners. The Limited Partners shall have
the following rights:
(a) the right to approve and elect or disapprove and remove
General Partners;
(b) the right to approve or disapprove proposed changes in the
nature of the Partnership's business so as to cause the
Partnership to cease to be, or to withdraw its election as, a
business development company under the 1940 Act;
(c) the right to approve or disapprove any proposed investment
advisory contract or management agreement or to disapprove and
terminate any such existing contracts; provided, however, that
such contracts are also approved by a majority of the Independent
General Partners;
(d) the right to approve and ratify or disapprove and reject the
appointment of the independent accountants of the Partnership;
provided, however, that such appointment is approved by the
Management Committee, including a majority of the Independent
General Partners;
(e) the right to approve or disapprove the appointment of
successor Managing General Partners;
(f) the right to propose and approve an amendment to this
Agreement; provided, however, that no such amendment shall
conflict with the 1940 Act; and
(g) the right to approve any other material matters related to the
business of the Partnership that the 1940 Act requires to be
approved by the Limited Partners so long as the Partnership is a
business development company subject to the provisions of the 1940
Act; provided, however, that, prior to the exercise of any such
right of approval, the Management Committee amends this Agreement
to reflect such additional voting right.
Each of the foregoing matters shall be approved or disapproved, as
the case may be, upon the vote or consent of a Majority in
Interest of the Limited Partners, and any vote of the Limited
Partners mandated by the 1940 Act shall not be limited by the
requirement to obtain an opinion of counsel pursuant to Articles
6.01 or 14.02.
<PAGE>
TECHNOLOGY FUNDING PARTNERS III, L.P.
Proxy for Meeting of Limited Partners
December 8, 2000
Proxy Solicited by the Management Committee of the Partnership
The undersigned hereby appoints Charles R. Kokesh and Gregory T. George or
either of them, each with power of substitution, as proxies to represent
the undersigned at the tri-annual Meeting of the Limited Partners of
Technology Funding Partners III, L.P., (the "Partnership") to be held at
the Partnership's offices at 2000 Alameda de las Pulgas, Suite 250,
San Mateo, California 94403, at 10:00 a.m., local time, on December 8,
2000, and any adjournment thereof, and to vote the number of Units of
limited partnership interest in the Partnership the undersigned would be
entitled to vote if personally present in the following matters:
1. Election of Three Individual General Partners to serve as members of the
Partnership's Management Committee each for a three-year term.
FOR all nominees listed below (except as marked to the contrary below):
[ ]
WITHHOLD AUTHORITY to vote for all nominees listed below:
[ ]
Nominees: G. Whitney Baines, Ph.D.
A. Logan Craft
Michael S. Tempesta, Ph.D.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name(s) below.)
____________________________________________
2. Election of Two Managing General Partners to serve as members of the
Partnership's Management Committee each for a three-year term.
FOR all nominees listed below (except as marked to the contrary below):
[ ]
WITHHOLD AUTHORITY to vote for all nominees listed below:
[ ]
Nominees: Technology Funding Inc.
Technology Funding Ltd.
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name(s) below.)
_______________________________________________
3. Ratification of the Appointment of Arthur Andersen LLP as independent
certified public accountants of the Partnership.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Amend Article 2, Section (m) of the Partnership Agreement to include the
salary and benefits of a Controlling Person in the expenses of the Partnership.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Amend Article 1.03 of the Partnership Agreement to clarify the
Partnership's investment objective.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. Amend Article 5.04 of the Partnership Agreement to clarify the Limited
Partners' right to vote under the Investment Company Act of 1940, as amended.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. In their discretion, upon such other business as may properly come before
the meeting or any adjournment thereof.
The Management Committee recommends a vote FOR all Proposals 1, 2, 3, 4, 5,
and 6 above. This proxy will be voted as directed. If a Limited Partner does
not specify on the form of proxy how the Limited Partner's Units are to be
voted, or if a Limited Partner fails to return a proxy, the Limited
Partner, pursuant to Article 14.04 of the Partnership Agreement,
shall be deemed to have granted to the Management Committee a proxy solely
for those matters noted on the form of proxy and the Management Committee
will vote all such proxies "FOR" each proposal noted on the enclosed form
of proxy. Abstentions so marked on any proposal will have the same effect
as a vote against the proposal.
PROXY INSTRUCTIONS
1. Please sign exactly as the name or names appear hereon.
2. If Units of limited partnership interest are held jointly by two or more
persons, each joint holder should sign the proxy.
3. A proxy executed by a corporation should be signed in its name by an
authorized officer.
4. Persons signing as executors, administrators, trustees and partners should
so indicate when signing.
Dated:__________________, 2000
By signing below, the undersigned hereby acknowledges receipt of the Proxy
Statement and the 1999 Annual Report.
Signature(s)_______________________________________________
_______________________________________________
If the information on the mailing label is not correct, please make changes
below:
Social Security #: ______ - _____ - ____________
Address:____________________________
____________________________
Please mark, date, and sign this proxy and return it in the envelope provided,
which requires no postage if mailed within the United States. Your vote must
be received prior to the meeting of Limited Partners to be held on
December 8, 2000.
investor id bar code
