June 30, 1999
__________________________________
Special Situations Second
Fund III, L.P. Quarter
Report
SPECIAL SITUATIONS FUND III, L.P.
INDEX TO SECOND QUARTER REPORT
JUNE 30, 1999
_________________________________________________________________________
PAGE
Statement of Financial Condition 1
Portfolio of Investments 2
Statement of Operations 10
Statement of Changes in Partners' Capital 11
Notes to the Financial Statements 12
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1999
(Unaudited)
ASSETS - NOTE 2
Investments, at fair value (cost $119,630,422) $ 140,680,958
Cash and cash equivalents 10,030,009
Receivable for investments sold 4,207,127
Other 24,150
--------------
Total Assets $ 154,942,244
--------------
--------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Payable for Units repurchased - Note 4 $ 6,596,550
Securities sold short, at fair value 4,290,909
(proceeds $4,514,293) - Note 10
Payable for investments purchased - Note 2 2,235,930
Administrator's fee payable - Note 7 264,535
Accrued expenses 116,184
------------
Total Liabilities $ 13,504,108
------------
Partners' Capital - Note 1,3 and 4
Limited Partners $ 130,232,165
Corporate General Partner 6,174,066
Individual General Partners 5,031,905
--------------
Total Partners' Capital $ 141,438,136
--------------
Total Liabilities and Partners' Capital $ 154,942,244
--------------
--------------
________________________________________________________________________
See the accompanying Notes to the Financial Statements.
1
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
Fair
Shares Common Stocks Value
- --------------------------------------------------------------------------
Aerospace 1.49%
166,200 Aviation General, Inc. $ 207,750
371,500 SPACEHAB, Incorporated 1,903,937
---------
2,111,687
---------
Automotive 0.01%
289,000 Steel City Products, Inc. 11,199
---------
Beverages - Alcohol 0.94%
127,200 Ravenswood Winery, Inc. 1,335,600
---------
Biotechnology 1.95%
211,000 ArQule, Inc. 1,028,625
428,580 Cell Therapeutics, Inc. 1,058,057
61,200 Planet Polymer Technologies, Inc. 91,800
70,500 Tripos, Inc. 581,625
----------
2,760,107
----------
Broadcast 0.91%
382,400 Accom, Inc. 334,600
322,300 Film Roman, Inc.(a) 946,756
--------
1,281,356
---------
Building Materials 0.05%
162,000 Lincoln Logs, Ltd. 68,850
-------
Capital Equipment 1.49%
172,500 Quixote Corporation 2,102,344
Communications Products 2.19%
100,900 Corsair Communications, Inc. 428,825
327,721 ION Networks, Inc. 1,351,849
437,500 ION Networks, Inc. (Restricted) 1,312,500
---------
3,093,174
---------
_________________________________________________________________________
See the accompanying Notes to the Financial Statements.
2
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
(Unaudited)
Fair
Shares Common Stocks (Continued) Value
- ---------------------------------------------------------------------------
Component Equipment 0.26%
20,500 SeaChange International, Inc. $ 371,562
Computer Equipment 3.86%
400,600 Blue Wave Systems, Inc. 1,452,175
276,300 Check Technology Corporation (a) 656,212
277,600 Media 100, Inc. 1,405,350
483,700 Netrix Corporation 1,723,181
90,000 Tridex Corporation 230,625
---------
5,467,543
---------
Computer Services- Software 2.84%
162,500 GlobalNet Financial.com, Inc. 325,000
70,500 Intelligent Life Corporation 462,656
308,200 Peerless Systems Corporation 3,236,100
---------
4,023,756
---------
Computer Systems 1.02%
194,000 I.D. Systems, Inc. 1,442,875
---------
Consumer Services - Miscellaneous 0.19%
24,000 Youbet.com, Inc. 274,500
---------
Electronic Components 6.94%
372,200 AMX Corporation 5,234,062
393,579 Barringer Technologies, Inc. (a) 2,545,961
181,800 Frequency Electronics, Inc. 1,522,575
301,800 Stocker & Yale, Inc.(a) 509,287
---------
9,811,885
---------
Electronic Instruments 0.64%
150,000 BOLDER Technologies Corporation (Restricted) 900,000
---------
Energy - Miscellaneous 0.56%
600,000 Boots & Coots International Well Control (Rest) 787,500
---------
Energy - Oil & Gas 1.09%
241,379 Edge Petroleum Corporation 1,538,791
---------
___________________________________________________________________________
See the accompanying Notes to the Financial Statements.
3
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
(Unaudited)
Fair
Shares Common Stocks (Continued) Value
- ---------------------------------------------------------------------------
Energy Services 0.04%
43,330 TGC Industries, Inc. (a) $ 58,901
----------
Entertainment 2.15%
175,500 Platinum Entertainment, Inc. 1,382,062
236,863 Platinum Entertainment, Inc. (Restricted) 1,652,487
----------
3,034,549
---------
Financial Services - Miscellaneous 1.73%
114,500 MicroFinancial Incorporated 1,638,781
53,200 nFront, Inc. 807,975
---------
2,446,756
---------
Foods 0.02%
9,464 Opta Food Ingredients, Inc. 30,166
---------
Gold Mining 0.76%
2,182,000 MK Gold Company 1,069,180
Healthcare Management 3.21%
764,600 Apache Medical Systems, Inc. 812,387
373,900 Mednet International, Ltd. 575,806
330,000 Physicians' Specialty Corp. 3,155,625
---------
4,543,818
---------
Healthcare-Specialized Products & Services 0.11%
223,529 Accuhealth, Inc. (a) 153,676
---------
Manufacturer-Consumer Products 1.53%
262,800 Zindart Limited 2,168,100
---------
Medical - Drugs 1.55%
556,267 Cubist Pharmaceuticas, Inc. 2,190,301
---------
_________________________________________________________________________
See the accompanying Notes to the Financial Statements.
4
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
(Unaudited)
Fair
Shares Common Stocks (Continued) Value
- --------------------------------------------------------------------------
Medical Devices and Equipment 16.49%
453,800 Aksys Ltd. 2,637,712
1,064,400 Applied Imaging Corporation 1,596,600
57,714 Cambridge Heart, Inc. (Restricted) 302,998
88,825 Cardiac Control Systems, Inc. 6,440
435,200 EP MedSystems, Inc.(a) 1,305,600
425,700 Image Guided Technologies, Inc. (a) 93,101
772,700 IRIDEX Corporation (a) 3,766,912
49,300 Invivo Corporation 647,062
1,222,200 Laserscope, Inc. (a) 1,833,300
267,727 Medical Graphics Corporation (Restricted) 334,659
546,800 Optical Sensors Incorporated 495,537
88,345 Possis Medical, Inc. 749,961
338,300 Precision Optics Corporation 338,300
850,000 The Spectranetics Corporation 2,390,625
369,400 Thoratec Laboratories Corporation 3,924,875
96,000 World Heart Corporation 984,000
160,000 Zoll Medical Corporation 1,920,000
----------
23,327,682
----------
Medical Drugs 0.87%
224,300 EPIX Medical, Inc. 1,233,650
----------
Medical Information Systems 1.72%
525,580 CIMA Labs Inc. 2,430,807
---------
Paper & Forest Products 0.11%
24,967 Mercer International, Inc. - SBI 149,802
----------
Paper-Packaging 0.02%
593,749 Chase Packaging Corporation 32,656
--------
Retail 10.92%
259,300 1-800 CONTACTS, INC. 4,861,875
194,700 EZCORP, Inc. 1,338,532
734,200 Jos. A. Bank Clothiers, Inc. (a) 4,680,525
224,000 One Price Clothing Stores, Inc. 1,064,000
151,200 Travis Boats & Motors, Inc. 2,192,400
69,100 Value America, Inc. 1,312,900
----------
15,450,262
- ---------------------------------------------------------------------------
See the accompanying Notes to the Financial Statements.
5
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
(Unaudited)
Fair
Shares Common Stocks (Continued) Value
- ---------------------------------------------------------------------------
Software 18.97%
297,300 ANSYS, Inc. $ 2,954,419
413,908 Connect, Inc. 1,306,397
329,400 Enlighten Software Solutions, Inc.(a) 1,132,312
202,125 Enterprise Software, Inc. 1,617,000
354,740 Fourth Shift Corporation 1,308,104
437,400 Gensym Corporation 1,640,250
256,000 Mechanical Dynamics, Inc. 1,536,000
376,200 OrCad, Inc. 4,773,035
222,900 Rogue Wave Software, Inc. 2,033,962
810,000 Silicon Valley Research, Inc. 101,250
862,069 Silicon Valley Research, Inc. (Restricted) 107,759
177,000 Template Software, Inc. 774,375
535,500 ULTRADATA Corporation (a) 3,748,500
427,000 Versant Corporation (a) 1,067,500
622,700 White Pine Software, Inc. (a) 2,724,312
----------
26,825,175
----------
Specialty Financial 4.24%
201,000 Medallion Financial Corporation 3,831,562
288,900 MFC Bancorp Ltd. 2,166,750
---------
5,998,312
---------
Technology CAD/CAM/CAE 3.33%
1,019,300 Spatial Technology, Inc.(a) 4,714,262
---------
Transportation 1.37%
152,400 Aramex International Limited 1,333,500
845,000 Country Wide Transport Services, Inc. 607,344
---------
1,940,844
---------
Total Common Stocks 95.57% 135,181,628
-----------
- ---------------------------------------------------------------------------
See the accompanying Notes to the Financial Statements.
6
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTOFLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
(UNAUDITED)
Fair
Shares Preferred Stocks Value
- ------------------------------------------------------------------------
Computer Equipment 0.21%
21,818 Netrix Corporation convertible preferred $ 299,997
-----------
Computer Services 0.88%
1,250 SkyLynx Communications, Inc. (Restricted) 1,250,000
-----------
Energy Services 0.74%
150,300 TGC Industries, Inc. (a) 385,144
-----------
Healthcare-Specialized Products & Services 0.38%
425,000 Accuhealth, Inc. convertible preferred (a) 531,250
-----------
Medical Devices 0.01%
246 KeraVision, Inc. convertible preferred 8,548
---------
Total Preferred Stocks 1.75% 2,474,939
---------
Fair
Warrants Warrants Value
- ---------------------------------------------------------------------------
Biotechnology 0.03%
271,000 Diacrin, Inc. 12/31/00 42,344
---------
Broadcasting 0.00%
43,125 Children's Broadcasting Corporation 1/8/01 -
---------
Computer Services 0.00%
38,235 SkyLynx Communications, Inc. 5/20/00 -
---------
Communications Products 0.45%
218,750 ION Networks, Inc. 6/7/02 -
267,242 ION Networks, Inc. 4/1/00 634,698
---------
634,698
---------
- ---------------------------------------------------------------------------
See the accompanying Notes to the Financial Statements.
7
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1999
(Unaudited)
Fair
Shares Warrants (Continued) Value
- ---------------------------------------------------------------------------
Electronic Components 0.96%
229,167 Barringer Technologies, Inc. 5/9/00 1,033,256
200,000 Energy Conversion Devices, Inc. 7/31/01 325,000
---------
1,358,256
---------
Energy - Miscellaneous 0.00%
180,000 Boots & Coots International Well Control 5/14/04 (R) -
300,000 Boots & Coots International Well Control 5/14/02 (R) -
---------
-
---------
Energy - Oil & Gas 0.08%
72,414 Edge Petroleum Corporation 5/5/04 108,621
---------
Medical Devices and Equipment 0.05%
5,771 Cambridge Heart, Inc. 6/9/03 (Restricted) -
345,000 Hemagen Diagnostics, Inc. 2/28/01 70,069
13,252 Possis Medical, Inc. 6/2/03 -
---------
70,069
---------
Medical-Drugs 0.28%
233,334 Cubist Pharmaceuticals, Inc. 9/23/03 393,751
---------
Medical Information Systems 0.00%
1,100,000 Liferate Systems, Inc. 11/14/07 -
1,100,000 Liferate Systems, Inc. 11/14/07 (Restricted) -
---------
-
---------
Retail 0.04%
95,000 Pawnmart, Inc. A 3/11/03 32,657
90,000 Pawnmart, Inc. B 3/11/04 16,875
---------
49,532
---------
- --------------------------------------------------------------------------
See the accompanying Notes to the Financial Statements.
8
SPECIAL SITUATIONS FUND III, L. P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30,1999
(Unaudited)
Fair
Warrants Warrants (Continued) Value
- ---------------------------------------------------------------------------
Software 0.10%
862,069 Silicon Valley Research, Inc. 4/15/00 (Restricted) -
236,250 Versant Corporation 12/28/01 (a) 147,656
---------
147,656
---------
Total Warrants 1.98% 2,804,927
----------
Fair
Units Units Value
- ---------------------------------------------------------------------------
Housing - Construction 0.10%
281,600 Boulevard Investments Group $ 140,800
---------
Software 0.06%
629,310 Silicon Valley Research, Inc. (Restricted) 78,664
---------
Total Units 0.16% 219,464
---------
TOTAL INVESTMENTS 99.46% $ 140,680,958
-----------
-----------
------------------------------------------------------------------------
See the accompanying Notes to the Financial Statements.
9
SPECIAL SITUATIONS FUND III, L. P.
(A Limited Partnership)
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30,1999
(Unaudited)
Securities Sold Short Fair
Shares Common Stocks Value
- ---------------------------------------------------------------------------
Electronic Instruments 0.08%
13,000 BOLDER Technologies Corporation $ 113,750
---------
Healthcare - Drugs 1.56%
33,800 Shared Medical, Inc. 2,205,397
---------
Medical Devices & Equipment 1.16%
90,000 Calypte Biomedical Corporation 157,500
126,100 Possis Medical, Inc. 1,481,675
---------
1,639,175
---------
Software 0.23%
54,300 TRO Learning, Inc. 332,587
---------
---------
TOTAL SECURITIES SOLD SHORT 3.03% 4,290,909
---------
---------
(A) Affiliated issuer under the Investment Company Act of 1940, inasmuch as
the Fund owns more than 5% of the voting securities of the issuer.
All percentages are relative to Partners' Capital.
------------------------------------------------------------------------
See the accompanying Notes to the Financial Statements.
10
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
___________________________________________________________________________
INCOME
Net realized gain on investments $ 10,581,142
Net change in unrealized appreciation 1,309,536
-----------
Net gain on investment portfolio 11,890,678
Interest 174,613
Dividends 133,478
----------
Total $ 12,198,769
----------
EXPENSES
Administrator's fee - Note 7 $ 516,656
Professional Fees 178,124
Independent General Partners' fees 15,000
Other 48,600
----------
Total 758,380
------------
Net Income $ 11,440,389
------------
------------
___________________________________________________________________________
See the accompanying Notes to the Financial Statements.
11
SPECIAL SITUATIONS FUND III,L.P.
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPTIAL
(Information Subsequent to December 31, 1998 is Unaudited)
___________________________________________________________________________
Per Limited Corporate Individual
Partners' Limited General General
Unit Partners Partner Partners Total
---------- --------- ---------- ----------- ---------
YEAR ENDED
DECEMBER 31, 1998:
BALANCE
DECEMBER 31, 1997 $155,655,577 9,989,872 3,861,262 169,506,711
Capital contributions 4,150,000 - - 4,150,000
Transfers - (2,602,867) 2,602,867 -
Allocation of net loss (18,053,984) (913,319) (752,425) (19,719,728)
Repurchases (19,092,686) - - (19,092,686)
----------- ----------- -------- ------------
BALANCE,
DECEMBER 31, 1998 $25,000 122,658,907 6,473,686 5,711,704 134,844,297
-------
SIX MONTHS ENDED
JUNE 30, 1999:
Capital contributions 1,750,000 - 1,750,000
Transfers - (776,763) 776,763 -
Allocation of
net income $ 2,094 10,419,808 477,143 543,438 11,440,389
-------
Repurchases (4,596,550) - (2,000,000 (6,596,550)
----------- ----------- ---------- ----------
BALANCE,
JUNE 30, 1999: $25,000 $130,232,165 6,174,066 5,031,905 141,438,136
------- ----------- --------- --------- ------------
------- ----------- --------- --------- ------------
See Note 4 for changes in Units outstanding.
________________________________________________________________________
See the accompanying Notes to the Financial Statements.
12
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1998 is Unaudited)
NOTE 1- GENERAL:
Special Situations Fund III, L.P. (the "Fund") was organized under
the Delaware Revised Uniform Limited Partnership Act on October
18, 1993, and commenced investment operations on January 1, 1994.
The Fund is a closed-end interval fund registered under the
Investment Company Act of 1940. The Fund will continue until December
31, 2010 unless further extended or sooner terminated as provided for
in the Agreement of Limited Partnership(the "Agreement").
The Agreement provides for not less than three "Individual General
Partners" and a "Corporate General Partner". The General Partners,
as a group, must own not less than one percent (1%) of the Fund's
outstanding Units.
The Corporate General Partner and Investment Adviser is MGP
Advisers Limited Partnership ("MGP"), of which the General Partner
is AWM Investment Company, Inc. ("AWM"). Austin W. Marxe, an
Individual General Partner of the Fund and a limited partner of MGP
owns directly and indirectly a majority of MGP and AWM. Mr. Marxe
is primarily responsible for managing the Fund's investments and
performing certain administrative services on its behalf.
The Fund seeks long-term capital appreciation by investing
primarily in equity securities and securities with equity features
of publicly traded companies which possess a technological, market
or product niche, which may be, for various reasons, undervalued,
or with prospects of going private or being acquired.
NOTE 2- ACCOUNTING POLICIES:
Securities traded on a securities exchange or on the NASDAQ System
are valued at the last reported sales price on the last business day
of the reporting period. Securities for which no sale occurred on
such day are valued at the average of the highest bid and lowest asked
prices on the last trading day. Securities for which market
quotations are not available are valued at fair value as determined in
good faith by the Individual General Partners. Securities
transactions are recorded on trade date. Realized gains and losses on
sales of securities are determined using the specific identification
cost method. Dividend income is recorded on the ex-dividend date, and
interest income is recorded on the accrual basis.
13
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1998 is Unaudited)
NOTE 2- ACCOUNTING POLICIES (CONTINUED):
Cash and cash equivalents include cash held in money market funds.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 3- ALLOCATION OF ACCOUNTING INCOME AND LOSSES:
Income is allocated; first, to MGP to the extent of any previous
net losses allocated to MGP in excess of the other partners'
capital balances; next, to the partners in proportion to the number
of Units held by each to the extent of net losses previously
allocated to them; and, thereafter, 80% to the partners in
proportion to the number of Units held by each and 20% to MGP. If
there is a loss for an accounting period, the 20% allocation to
MGP will not apply to future periods until the loss has been
recovered. For purposes of the 20% allocation, income for the six
months ended June 30, 1999 was eliminated by a loss carryover from
December 31, 1998 of $19,719,728. Accordingly, there was no 20%
allocation for the period.
Losses are allocated to the partners in proportion to the number of
Units Held by each, provided, however, that losses in excess of an
Individual General Partner's or a Limited Partner's capital balance
will be allocated to MGP.
NOTE 4- PARTNER CAPITAL ACCOUNT TRANSACTIONS:
All net income allocated to partners will be reinvested. In order
to maintain a $25,000 price per Unit, the number of Units held by
each partner at the close of each fiscal period (generally June 30
and December 31, commencing December 31, 1994), is adjusted to
equal the Partner's capital account divided by $25,000.
As of each fiscal period, the Fund will offer to repurchase at
least 10% and no more than 25% of the outstanding Units. The
repurchase request deadline will generally be June 16, and December
17, of each year.
14
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1998 is Unaudited)
NOTE 4- PARTNER CAPITAL ACCOUNT TRANSACTIONS (CONTINUED):
In May 1999, the Fund offered to repurchase up to 546.3772 Units
(10% of its outstanding Units at June 30, 1999 prior to the semi-
annual adjustment of Units). 263.8620 Units were tendered for
repurchase.
The Fund also has the right to sell additional Units at the
beginning of each fiscal period.
Changes in Units outstanding are as follows:
Corporate Individual
Limited General General
Partners Partner Partner Total
__________ __________ ____________ _______
Balance, December 31, 1997 6,226.2231 399.5948 154.4505 6,780.2684
Additional Units sold 166.0000 - - 166.0000
Transfers - (104.1147) 104.1147 -
Semi-annual adjustment
of Units (722.1594) (36.5327) (30.0970)(788.7891)
Repurchases (763.7074) - - (763.7074)
----------- --------- --------- ---------
Balance, December 31, 1998 4,906.3563 258.9474 228.4682 5,393.7719
Additional Units sold 70.0000 - - 70.0000
Transfer - (31.0705) 31.0705 -
Semi-annual adjustment
of Units 416.7923 19.0857 21.7375 457.6155
Repurchases (183.8620) - (80.000) (263.8620)
----------- ---------- --------- --------
Balance, June 30, 1999 5,209.2866 246.9626 201.2762 5,657.5254
----------- --------- -------- ---------
NOTE 5- PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities for the six months ended June 30,
1999 aggregated $90,947,463 and $94,991,630, respectively.
15
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1998 is Unaudited)
NOTE 6- INCOME TAXES:
No provision for income taxes has been made in the accompanying
financial statements as each partner is individually responsible
for reporting income or loss based upon the respective share of the
Fund's income and expenses reported for income tax purposes.
NOTE 7- RELATED PARTY TRANSACTIONS:
AWM is the administrator of the Fund. The administrator's fee is
computed monthly at an annual rate of .75% of the average net
assets.
The Fund pays each Independent General Partner an annual fee of
$10,000.
NOTE 8- SUPPLEMENTARY FINANCIAL INFORMATION:
Six Months
Ended Years Ended
June 30, December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
Ratio of total 1.10%* 1.02% .98% 1.00% 1.18% 1.19%
expenses to
average net
assets
Ratio of net 16.53%* (12.73)% 21.84% 39.58% 38.09% 11.18%
income (loss)
to average net
assets
Portfolio 66.39% 114.61% 139.70% 228.0% 245.2% 233.4%
turnover rate
*Annualized
16
SPECIAL SITUATIONS FUND III, L.P.
(A Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Information Subsequent to December 31, 1998 is Unaudited)
NOTE 9- RETURN ON PARTNER INVESTMENT:
At June 30, 1999, the value of a $25,000 investment made at each
respective subscription date is as follows:
Subscription Date Value
----------------- -----
January 1, 1994 $58,808
January 1, 1995 53,762
July 1, 1995 47,604
January 1, 1996 39,699
July 1, 1996 29,969
January 1, 1997 28,364
July 1, 1997 26,867
January 1, 1998 23,836
July 1, 1997 24,440
January 1, 1999 27,094
NOTE 10- SECURITIES SOLD SHORT:
The Fund is subject to certain inherent risks arising from its
activities of selling securities short. The ultimate cost to
the Fund to acquire these securities may exceed the liability
reflected in the financial statements. In addition, the Fund is
required to maintain collateral with the broker to secure these
short positions.
17
