TECHNOLOGY FUNDING PARTNERS III L P - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For The Year Ended December 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from N/A to N/A
--- ---

Commission File No. 814-48

TECHNOLOGY FUNDING PARTNERS III, L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)

DELAWARE 94-3033783
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1107 Investment Boulevard, Suite 180
El Dorado Hills, California 95762
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)

(916) 941-1400
--------------------------------------------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units

Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
No active market for the Units of limited partnership interests
(Units) exists, and therefore the market value of such Units cannot be
determined.
Documents incorporated by reference: Portions of the Registrant's
Proxy Statement relating to the Registrant's Meeting of Limited
Partners held on November 8, 2002 are incorporated by reference into
Part III of this Form 10-K where indicated.

PART I

Item 1. BUSINESS
- ------ --------

Technology Funding Partners III, L.P. (the Partnership or the
Registrant) was formed as a Delaware limited partnership on
December 4, 1986. For the period from December 5, 1986,
through March 25, 1987, the Partnership was inactive. The
Partnership filed a registration statement with the
Securities and Exchange Commission on March 25, 1987, and
commenced selling Units of limited partnership interest
(Units) in April 1987. On June 2, 1987, the minimum number
of Units required to commence Partnership operations (6,000)
had been sold. The offering terminated with 160,000 Units
sold on February 3, 1989. The Partnership's original
contributed capital was $40,040,054, consisting of
$40,000,000 from Limited Partners for 160,000 Units and
$40,054 from the General Partners, Technology Funding Ltd.
(TFL) and Technology Funding Inc. (TFI). The General
Partners do not own any Units.

The principal investment objectives of the Partnership 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 such companies (portfolio companies). The
Partnership's investments in portfolio companies primarily
consist of equity securities such as common and preferred
shares, but also include debt convertible into equity
securities and warrants and options to acquire equity
securities. Although venture capital investments offer the
opportunity for significant gains, such investments involve a
high degree of business and financial risk that can result in
substantial losses. Among these are the risks associated
with investment in companies in an early stage of development
or with little or no operating history, companies operating
at a loss or with substantial variations in operating results
from period to period, and companies with the need for
substantial additional capital to support expansion or to
achieve or maintain a competitive position. Such companies
may face intense competition, including competition from
companies with greater financial resources, more extensive
development, manufacturing, marketing and service
capabilities, and a larger number of qualified managerial and
technical personnel. There is no ready market for many of
the Partnership's investments. The Partnership's investments
in portfolio companies are generally subject to restrictions
on sale because they were acquired from the issuer in private
placement transactions or because the Partnership is an
affiliate of the issuer.

The Partnership was organized as a business development
company under the Investment Company Act of 1940, as amended
(the Act), and operates as a non-diversified investment
company, as defined in the Act. 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
Management Committee and approved by a majority of the
Limited Partners. On October 25, 2000, the Management
Committee voted to extend the life of the Partnership to
December 31, 2002. On November 8, 2002, the Limited Partners
approved an extension of the Partnership's term to December
31, 2004, and authorized the Partnership's Management
Committee to extend the Partnership for up to two one-year
additional terms.

Item 2. PROPERTIES
- ------ ----------

The Registrant has no material physical properties.

Item 3. LEGAL PROCEEDINGS
- ------ -----------------

In October 2000, Kanematsu Corporation, a creditor of one of
the Partnership's portfolio companies, initiated an
arbitration proceeding against the Partnership, two
affiliated partnerships, and a fourth co-investor. Kanematsu
was seeking to recover $2,000,000, the purchase price in a
contract by which the Partnership and the other entities were
alleged to have agreed to purchase certain debt securities of
the portfolio company from Kanematsu. The Partnership and
affiliated partnerships asserted counterclaims against
Kanematsu. On February 12, 2002, the Partnership, affiliated
partnerships and the co-investor were awarded $4,000,000 and
all of Kanematsu's claims were denied. The award is in full
settlement of all claims and counterclaims. The Partnership
recognized revenue and a receivable of $666,667 as of
February 12, 2002, for its proportionate share of the award.
Kanematsu immediately filed a petition to vacate the award,
and on October 9, 2002, the United States District Court
issued an order confirming the arbitration award. Kanematsu
appealed the order but in early November 2002 paid a
forbearance fee of $200,000 in exchange for an option to
settle all liabilities. On November 29, 2002, Kanematsu
agreed to settle for $3,999,999. A decision on the
allocation of the proceeds between the Partnership,
affiliates and co-investor was reached in January 2003,
however a dispute of the legal fee has arisen. The
Partnership received $774,298 on February 13, 2003, which
represents its proportionate share of the settlement, less
disputed legal fees, plus accrued interest. The Partnership
recognized the additional revenue and receivable of $107,631
at December 31, 2002. Legal counsel for the Partnership is
actively seeking to resolve the fee dispute and recover the
remaining settlement proceeds for the Partnership. The
Partnership is unable to determine the amount of remaining
settlement proceeds or disputed legal fees as of December 31,
2002.

From time to time, the Partnership is subject to routine
litigation incidental to the business of the Partnership.
Although there can be no assurances as to the ultimate
disposition of these matters and the proceeding disclosed
above, it is the opinion of the Managing General Partners,
based upon the information available at this time, that the
expected outcome of these matters, individually or in the
aggregate, will not have a material adverse effect on the
results of operations and financial condition of the
Partnership.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------

A special meeting of the Limited Partners of the Partnership
was held on November 8, 2002. At that meeting, the Limited
Partners ratified the appointment of Grant Thornton as
independent certified public accountants of the Partnership
(153,384 Units voting for, 3,640 Units voting against and
2,976 Units abstaining) and amended the Limited Partnership
Agreement for the following items: 1) change the composition
of the Management Committee to include only one
representative from Technology Funding Ltd., the Managing
General Partner, and no fewer than two Individual General
Partners (148,576 Units voting for, 8,492 Units voting
against and 2,932 Units abstaining), 2) increase the
compensation each Individual General Partner receives for
services rendered to the Partnership (128,200 Units voting
for, 28,814 Units voting against and 2,986 Units abstaining),
and 3) extend the term of the Partnership from December 31,
2002, to December 31, 2004, and for up to two one-year
extensions through December 31, 2006, at the discretion of
the Partnership's Management Committee (138,794 Units voting
for, 18,808 Units voting against and 2,398 Units abstaining).
No other matters were voted on at this meeting.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------ -------------------------------------------------------------
MATTERS
-------

(a) There is no established public trading market for the
Units.

(b) At December 31, 2002, there were 5,666 record holders of
Units.

(c) The Registrant, being a partnership, does not pay
dividends. Cash distributions, however, may be made to
the partners pursuant to the Partnership Agreement.

Item 6. SELECTED FINANCIAL DATA
- ------ -----------------------

For the Years Ended and As of December 31,
---------------------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------

Total investment income $ 115,953 $ 309,810 $ 1,158,257 $ 110,361 $ 165,624
Net investment loss (2,027,322) (1,388,085) (1,667,706) (1,196,362) (1,450,097)
Net realized gain from
venture capital limited
partnership investments 133,884 324,536 587,735 135,893 108,591
Net realized gain (loss) from
sales of equity investments 375,546 1,514,305 10,703,511 (883,446) (1,535,862)
Realized loss from
investment write-offs (6,313,008) (1,727,140) (2,392,941) -- (836,249)
Realized gain from recovery of
investments previously
written off 459,375 -- -- -- --
Net realized loss on foreign
currency -- -- (63,370) -- --
(Increase) decrease in unrealized
depreciation:
Equity investments (7,280,360) 1,046,437 (20,273,430) 16,105,208 (1,639,131)
Notes receivable 5,142,683 (313,870) (4,839,250) -- --
Other income 774,298 -- -- -- --
Net decrease in partners' capital
resulting from operations (8,734,904) (543,817) (17,945,451) 14,161,293 (5,352,748)
Net decrease in partners' capital
resulting from operations
per Unit (1) (54.05) (3.36) (94.91) 68.39 (28.46)
Total assets 8,224,129 17,025,262 20,832,769 38,293,191 24,420,151
Distributions declared -- -- 2,862,928 283,627 --
Distributions declared
per Unit (2) -- -- -- -- --
(1) See Notes 1 and 3 to the Financial Statements for a description of the method of calculation of
net (decrease) increase in partners' capital resulting from operations per Unit.
(2) Calculation is based on distributions declared to Limited Partners divided by the weighted
average number of Units outstanding during the year.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------

Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------

The Partnership operates as a business development company under
the Investment Company Act of 1940 and makes venture capital
investments in new and developing companies. The Partnership's
financial condition is dependent upon the success of the portfolio
companies. There is no ready market for many of the Partnership's
investments. It is possible that some of its venture capital
investments may be a complete loss or may be unprofitable and that
others will appear likely to become successful, but may never
realize their potential. The valuation of the Partnership's
investments in securities for which there are no available market
quotes is subject to the estimate of the Managing General Partners
in accordance with the valuation guidance described in Note 1 to
the financial statements. In the absence of readily obtainable
market values, the estimated fair value of the Partnership's
investments may differ significantly from the values that would
have been used had a ready market existed.

For the year ended December 31, 2002 net cash used by operating
activities totaled $2,339,075. The Partnership paid management
fees of $154,899 to the Managing General Partners and reimbursed
related parties for operating expenses of $1,671,949. In
addition, $64,500 was paid to the Individual General Partners as
compensation for their services. The Partnership prepaid
operating expenses of $272,793 to related parties as part of an
employee retention program. Other operating expenses of $288,569
were paid and interest income of $113,635 was received.

For the year ended December 31, 2002, the Partnership funded
equity investments of $2,996,463, primarily to portfolio companies
in the medical/biotechnology, high tech/financial and information
technology industries. Proceeds from sales of equity investments
totaled $644,775 and repayments of notes receivable provided cash
of $250,000. The Partnership received $46,385 in cash
distributions from venture capital limited partnership
investments. The Partnership received $459,375 as a recovery of
investments in Thermatrix Inc. which were previously written off.
At December 31, 2002, there were no unfunded commitments.

Cash and cash equivalents at December 31, 2002, were $2,318,947.
Cash reserves, interest income on short-term investments and
future proceeds from equity investments sales are expected to be
adequate to fund Partnership operations and future investments
through the next twelve months.

Results of Operations
- ---------------------

2002 compared to 2001
- ---------------------

The net decrease in partners' capital resulting from operations
was $8,853,126 in 2002 compared to $543,817 in 2001.

Unrealized depreciation on equity investments was $10,059,528 and
$2,779,168 at December 31, 2002 and 2001, respectively. During
the year ended December 31, 2002, the net increase in unrealized
depreciation of equity investments of $7,280,360 was primarily due
to a decrease in the publicly traded price of Endocare, Inc. and
decreases in the fair values of portfolio companies in the
medical/biotechnology and communications industries. The increase
was partially offset by the write off of American OBGYN, Inc.
during 2002, which contributed a net decrease in unrealized
depreciation of $1,013,059 as the depreciation was realized upon
write-off. In 2001, the net decrease in unrealized depreciation
of equity investments of $1,046,437 was primarily attributable to
favorable events and market conditions for portfolio companies in
the medical/biotechnology and communications industries. Equity
investments sold or written off during 2001 contributed a
$1,009,933 net decrease in unrealized depreciation as the
depreciation was realized upon sale or write-off.

Unrealized depreciation on notes receivable investments was
$10,437 and $5,153,120 at December 31, 2002 and 2001,
respectively. During 2002, the Partnership recorded a decrease in
unrealized depreciation of notes receivable of $5,142,683
primarily related to the write-off of loans made to Sutmyn Storage
Corporation. During 2001, the Partnership recorded an increase in
unrealized depreciation of $313,870 primarily related to the
decrease in fair value of loans made to a portfolio company in the
environmental industry.

During 2002, the Partnership recorded a realized loss from
investment write-offs of $6,313,008, of which $4,836,805
represents the Partnership's total investment in Sutmyn Storage
Corporation. The fair value of these notes was reduced to zero
during 2000, and it has been determined by the Managing General
Partners that there will be no recovery on the notes as the
company has ceased operations. Remaining write-offs related to the
Partnership's total investment in American OBGYN, Inc. for
$1,226,202, and loans of $250,000 to Thermatrix Inc. American
OBGYN, Inc. filed for bankruptcy in February 2002, and the
Managing General Partners believe there will be no proceeds from
the liquidation. During 2001, the Partnership recorded realized
losses from investment write-offs of $1,727,140, which represents
the Partnership's total investment in Adesso Healthcare Technology
Services Inc. Adesso ceased operations in the third quarter of
2001.

During 2002, net realized gain from sales of equity investments
totaled $375,546 and primarily was the result of gains on the sale
of Matrix Pharmaceutical, Inc. shares. During 2001, net realized
gain from sales of equity investments was $1,514,305 and primarily
resulted from gains on the sale of shares of Photon Dynamics, Inc.

Other income was $774,298 for the year ended December 31, 2002.
In October 2000, Kanematsu Corporation, a creditor of one of the
Partnership's portfolio companies, initiated an arbitration
proceeding against the Partnership, two affiliated partnerships,
and a fourth co-investor. Kanematsu was seeking to recover
$2,000,000, the purchase price in a contract by which the
Partnership and the other entities were alleged to have agreed to
purchase certain debt securities of the portfolio company from
Kanematsu. The Partnership and affiliated partnerships asserted
counterclaims against Kanematsu. On February 12, 2002, the
Partnership, affiliated partnerships and the co-investor were
awarded $4,000,000 and all of Kanematsu's claims were denied. The
award is in full settlement of all claims and counterclaims. The
Partnership recognized revenue and a receivable of $666,667 as of
February 12, 2002, for its proportionate share of the award.
Kanematsu immediately filed a petition to vacate the award, and on
October 9, 2002, the United States District Court issued an order
confirming the arbitration award. Kanematsu appealed the order
but in early November 2002 paid a forbearance fee of $200,000 in
exchange for an option to settle all liabilities. On November 29,
2002, Kanematsu agreed to settle for $3,999,999. A decision on
the allocation of the proceeds between the Partnership, affiliates
and co-investor was reached in January 2003; however, a dispute of
the legal fee has arisen. The Partnership received $774,298 on
February 13, 2003, which represents its proportionate share of the
settlement, less disputed legal fees, plus accrued interest. The
Partnership recognized the additional revenue and receivable of
$107,631 at December 31, 2002. Legal counsel for the Partnership
is actively seeking to resolve the fee dispute and recover the
remaining settlement proceeds for the Partnership. The
Partnership is unable to determine the amount of remaining
settlement proceeds or disputed legal fees as of December 31,
2002. There was no such income in 2001.

Investment expenses were $2,143,275 and $1,697,895 for 2002 and
2001, respectively. In 2002 the Managing General Partners billed
the Partnership $63,389 and $18,305 for operating expenses
incurred during 2001 and prior years, respectively. Had these
expenses been billed in the prior years the investment expenses
for 2002 and 2001 would have been $2,061,581 and $1,761,284,
respectively. The increase is primarily due to increased
administrative and investor services fees.

During 2002, the Partnership recovered $459,375 from Thermatrix
Inc. for equity and note receivable investments previously written
off. This was recorded as a realized gain. There were no
recoveries in 2001.

Interest income was $115,953 and $309,810 for 2002 and 2001,
respectively. The decrease was primarily the result of secured
notes receivable being placed on non-accrual status.

During 2002, the Partnership recorded net realized gains from
venture capital limited partnership investments of $133,884 as
compared to gains of $324,536 during 2001. The gains represented
distributions from profits of venture capital limited
partnerships.

Given the inherent risk associated with the business of the
Partnership, the future performance of the portfolio company
investments may significantly impact future operations.

2001 compared to 2000
- ---------------------

The net decrease in partners' capital resulting from operations
was $543,817 in 2001 compared to a net decrease in partners'
capital resulting from operations of $17,945,451 in 2000.

Unrealized depreciation on equity investments was $2,779,168 and
$3,825,605 at December 31, 2001 and 2000, respectively. During
the year ended December 31, 2001, the net decrease in unrealized
depreciation of equity investments of $1,046,437 was primarily
attributable to favorable events and market conditions for
portfolio companies in the medical/biotechnology and
communications industries. Equity investments sold or written off
during 2001 contributed a $1,009,933 net decrease in unrealized
depreciation as the depreciation was realized upon sale or write-
off. In 2000, the net increase in unrealized depreciation of
equity investments of $20,273,430 was primarily attributable to
decreases in the value of the Partnership's marketable equity
securities and the fair value of the Partnership's investments in
restricted securities.

Net realized gain from sales of investments during 2001 totaled
$1,514,305 and primarily resulted from gains on the sale of shares
of Photon Dynamics, Inc. During 2000, net realized gain from
sales of equity investments of $10,703,511 primarily resulted from
gains on the sales of shares in Matrix Pharmaceutical, Inc.,
Oxford GlycoSciences Plc and White Electronic Designs Corporation.

Unrealized depreciation on notes receivable investments was
$5,153,120 and $4,839,250 at December 31, 2001 and 2000,
respectively. During 2001, the Partnership recorded an increase
in unrealized depreciation of $313,870 primarily related to the
decrease in fair value of loans made to a portfolio company in the
environmental industry. During 2000, the Partnership recorded an
increase in unrealized depreciation of notes receivable of
$4,839,250 primarily related to a decrease in the fair value of
loans made to Sutmyn Storage Corporation, a portfolio company in
the computer equipment, systems and software industry.

During 2001, the Partnership recorded realized losses from
investment write-offs of $1,727,140, which represents the
Partnership's total investment in Adesso Healthcare Technology
Services Inc. Adesso ceased operations in the third quarter of
2001. During 2000, the Partnership recorded realized losses from
investment write-offs of $2,392,941, which represents the
Partnership's total investment in Biex, Inc. and its equity
investment in Thermatrix Inc. Biex, Inc. suspended operations in
November 2000 after it was unable to obtain additional funding.

Investment expenses were $1,697,895 and $2,825,963 for 2001 and
2000, respectively. In the second quarter of 2000, the Managing
General Partners billed the Partnership an additional $182,297 for
investment management expenses incurred by the General Partners in
1998 and 1999, but not previously billed to the Partnership. In
the fourth quarter of 2000, the Managing General Partners billed
the Partnership an additional $763,117 for operating expenses
relating to prior years that had not been fully recovered as
permitted by the Partnership Agreement. If these expenses had
been billed in prior years, investment expenses for 2000 would
have been $1,880,549. The decrease is primarily due to decreased
management fees and personnel costs, partially offset by increased
professional fees due to the Kanematsu arbitration and increased
interest expense.

Interest income was $309,810 and $1,158,257 for 2001 and 2000,
respectively. The decrease was primarily the result of secured
notes receivable being placed on non-accrual status on September
30, 2000.

During 2001, the Partnership recorded net realized gains from
venture capital limited partnership investments of $324,536 as
compared to gains of $587,735 during 2000. The gains represented
distributions from profits of venture capital limited
partnerships.

New Accounting Pronouncement
- ----------------------------

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("SFAS No. 146").
SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities, such as
restructurings, involuntarily terminating employees, and
consolidating facilities initiated after December 31, 2002. The
implementation of SFAS No. 146 will not require the restatement of
previously issued financial statements. The Partnership has
implemented early adoption of SFAS No. 146 to all applicable costs
associated with exit or disposal activities occurring after
December 31, 2002. See Note 1 to the financial statements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- ------- ----------------------------------------------------------

The Partnership is subject to financial market risks, including
changes in interest rates with respect to its investments in debt
securities and interest-bearing cash equivalents as well as
changes in marketable equity security prices. The Partnership
does not use derivative financial instruments to mitigate any of
these risks. The return on the Partnership's investments is
generally not affected by foreign currency fluctuations.

The Partnership does not have a significant exposure to modest
public market price fluctuations as the Partnership primarily
invests in private business enterprises. However, should
significant changes in market equity prices occur, there could be
a longer-term effect on valuations of private companies, which
could affect the carrying value and the amount and timing of gains
realized on these investments. Since there is typically no public
market for the Partnership's investments in private companies, the
valuation of the investments is subject to the estimate of the
Partnership's Managing General Partners. In the absence of a
readily ascertainable market value, the estimated value of the
Partnership's investments in private companies may differ
significantly from the values that would be placed on the
portfolio if a ready market existed. The Partnership's portfolio
also includes common stocks in publicly traded companies. These
investments are directly exposed to equity price risk, in that a
hypothetical 10 percent change in these equity prices would result
in a similar percentage change in the fair value of these
securities. The Partnership's investments also include some debt
securities. Since the debt securities are generally priced at a
fixed rate, changes in interest rates do not directly impact
interest income. The Partnership's debt securities are generally
held to maturity or converted into equity securities of private
companies.

Item 8. FINANCIAL STATEMENTS
- ------ --------------------

The financial statements of the Registrant are set forth in Item
15.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------ ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------

A Form 8-K was filed by the Partnership on July 1, 2002, to report
the appointment of Grant Thornton LLP as the Partnership's
independent public accountants.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------

As a partnership, the Registrant has no directors or executive
officers. The Management Committee is responsible for the
management and administration of the Partnership. The members of
the Management Committee consist of two Individual General
Partners and a representative from Technology Funding Ltd., a
California limited partnership (TFL). TFL and its wholly owned
subsidiary, Technology Funding Inc., a California corporation
(TFI) are the Managing General Partners. Reference is made to the
information regarding Individual General Partners and the Managing
General Partners in the Registrant's Proxy Statement related to
the Meeting of Limited Partners held on November 8, 2002, which
information is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION
- ------- ----------------------

As a partnership, the Registrant has no officers or directors. In
2002, the Partnership incurred management fees of $152,636. The
fees are designed to compensate the Managing General Partners for
General Partner Overhead incurred in performing management duties
for the Partnership. General Partner Overhead (as defined in the
Partnership Agreement) includes the General Partners' share of
rent, utilities, property taxes and the cost of capital equipment
and the general and administrative expenses paid by Managing
General Partners in performing their obligations to the
Partnership. As compensation for their services, each of the
Individual General Partners receive $14,000 annually plus $1,500
for each attended meeting of the Management Committee and
committees thereof. In 2002, $64,500 of such compensation was
paid. The Individual General Partners are reimbursed for all out-
of-pocket expenses relating to attendance of the meetings,
committees or otherwise of the Management Committee.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------- --------------------------------------------------------------

Not applicable. No Limited Partner beneficially holds more than 5
percent of the aggregate number of Units held by all Limited
Partners, and neither the Managing General Partners nor any of
their officers, directors or partners own any Units. The
Individual General Partners each own eight Units. The Management
Committee controls the affairs of the Partnership pursuant to the
Partnership Agreement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------

The Registrant, or its investee companies, have engaged in no
transactions with the Managing General Partners or their officers
and partners other than as described above, in the notes to the
financial statements, or in the Prospectus.

Item 14. PROCEDURES AND CONTROLS
- ------- -----------------------

The signing officer is responsible for establishing and
maintaining disclosure controls and procedures for Technology
Funding Partners III, L.P. Such officer has concluded (based upon
his evaluation of these controls and procedures as of a date
within 90 days of the filing of this report) that Technology
Funding Partners III, L.P.'s disclosure controls and procedures
are effective to ensure that information required to be disclosed
by Technology Funding Partners III, L.P. in this report is
accumulated and communicated to Technology Funding Partners III,
L.P.'s management, including its principal executive officers as
appropriate, to allow timely decisions regarding required
disclosure.

The certifying officer also has indicated that there were no
significant changes in Technology Funding Partners III, L.P.'s
internal controls or other factors that could significantly affect
such controls subsequent to the date of their evaluation, and
there were no corrective actions with regard to significant
deficiencies and material weaknesses.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------

(a) List of Documents filed as part of this Annual Report on Form
10-K

(1) Financial Statements - the following financial
statements are filed as a part of this Report:

Report of Independent Certified Public Accountants as
of and for the year ended December 31, 2002
Report of Independent Public Accountants as of and for
the years ended December 31, 2001 and 2000
Balance Sheets as of December 31, 2002
and 2001
Statements of Investments as of
December 31, 2002 and 2001
Statements of Operations for the years
ended December 31, 2002, 2001 and 2000
Statements of Partners' Capital for the years
ended December 31, 2002, 2001 and 2000
Statements of Cash Flows for the years
ended December 31, 2002, 2001 and 2000
Notes to Financial Statements

(2) Financial Statement Schedules

All schedules have been omitted because they are not
applicable or the required information is included
in the financial statements or the notes thereto.

(3) Exhibits

None

(b) Reports on Form 8-K

(1) On July 1, 2002, the Partnership reported on Form
8-K the appointment of Grant Thornton LLP as the
Partnership's independent public accountants.

(2) On July 23, 2002, the Partnership filed its
Amended and Restated Limited Partnership Agreement
on Form 8-K.

(3) On July 30, 2002, the Partnership filed its
Amended and Restated Limited Partnership Agreement
on Form 8-K.

(4) On November 13, 2002, the Partnership filed Form 8-K
to report the voting results of the special meeting
of Limited Partners held on November 8, 2002.

(5) On January 8, 2003, the Partnership filed its
Amended and Restated Limited Partnership Agreement
on Form 8-K.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------

To the Partners of
Technology Funding Partners III, L.P.:

We have audited the accompanying balance sheet of Technology Funding
Partners III, L.P. (a Delaware limited partnership) (the Fund), including
the statement of investments, as of December 31, 2002, and the related
statements of operations, partners' capital, and cash flows for the year
ended December 31, 2002. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The
financial statements of Technology Funding Partners III, L.P. as of
December 31, 2001, and for the year ended December 31, 2001 and 2000,
were audited by other auditors who have ceased operations. Those
auditors expressed an unqualified opinion on those financial statements
in their report dated March 15, 2002.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
physical inspection of securities owned as of December 31, 2002. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Technology
Funding Partners III, L.P. as of December 31, 2002, and the results of
its operations, changes in partners' capital, and its cash flows for the
year ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.

Albuquerque, New Mexico /S/GRANT THORNTON LLP
March 17, 2003

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------

To the Partners of
Technology Funding Partners III, L.P.:

We have audited the accompanying balance sheets of Technology Funding
Partners III, L.P. (a Delaware limited partnership) (the Fund), including
the statements of investments, as of December 31, 2001 and 2000, and the
related statements of operations, partners' capital, and cash flows for
the years then ended. These financial statements are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
physical inspection of securities owned as of December 31, 2001 and 2000.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Technology
Funding Partners III, L.P. as of December 31, 2001 and 2000, and the
results of its operations, changes in partners' capital, and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

Los Angeles, California /S/ARTHUR ANDERSEN LLP
March 15, 2002

THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR
ANDERSEN LLP IN CONNECTION WITH TECHNOLOGY FUNDING VENTURE PARTNERS III,
LP'S FILING ON FORM 10-K FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000.
THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THIS FILING ON FORM 10-K.

BALANCE SHEETS
- --------------

December 31,
------------------------
2002 2001
-------- --------

ASSETS

Equity investments (cost basis of
$14,941,698 and $13,334,652 for 2002
and 2001, respectively) $4,882,170 $10,555,484
Notes receivable, net (cost basis
of $13,045 and $5,366,048 for 2002
and 2001, respectively) 2,608 212,928
--------- ----------
Total investments 4,884,778 10,768,412

Cash and cash equivalents 2,318,947 6,253,950
Prepaid expenses 262,841 --
Other receivable 774,298 --
Other assets 3,265 2,900
--------- ----------
Total assets $8,244,129 $17,025,262
========= ==========
LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses $ 65,445 $ 109,574
Due to related parties 47,611 49,711
Other liabilities 1,977 1,977
--------- ----------
Total liabilities 115,033 161,262

Commitments and contingencies
See Note 10.

Partners' capital
(160,000 Limited Partner Units
outstanding) 8,129,096 16,864,000
--------- ----------
Total liabilities
and partners' capital $8,244,129 $17,025,262
========= ==========

The accompanying notes are an integral part of these financial
statements.

STATEMENTS OF INVESTMENTS
- -------------------------

Principal
Amount or December 31, 2002 December 31, 2001
Industry Shares at ----------------- -----------------
(1) Investment December 31, Cost Fair Cost Fair
Company Position Date 2002 Basis Value Basis Value
- ------------- -------- ---------- ---------- ----- ----- ----- -----

Equity Investments
- ------------------

Communications
- --------------
5.4% and 7.0% at December 31, 2002 and 2001, respectively
- ---------------------------------------------------------
ISCO Common share
International, warrants
Inc. expired
2002 1999 -- $ -- $ -- $ 7,183 $ 0
iVillage Inc. Common 1996-
shares 2000 240,375 990,716 225,953 990,716 456,713
WorldRes.com, Inc. Common 1997-
(a) (b) shares 2001 604,392 2,218,124 181,317 2,218,124 725,271
WorldRes.com, Inc. Convertible
(a) (b) note (2) 2002 $284,500 303,014 30,301 -- --
WorldRes.com, Inc. Common share
(a) (b) warrants
expired 1997-
2002 2002 -- -- -- 195 0
--------- --------- --------- ---------
3,511,854 437,571 3,216,218 1,181,984
--------- --------- --------- ---------

STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Environmental
- -------------
0.0% and 0.1% at December 31, 2002 and 2001, respectively
- ---------------------------------------------------------
Triangle
Biomedical Common
Sciences, Inc.(a) shares 1999 4,099 79,792 0 79,792 11,477
Triangle Common
Biomedical share
Sciences, Inc.(a) warrants at
$28.00;
expiring
2009 1999 4,099 4,099 0 4,099 411
--------- --------- --------- ---------
83,891 0 83,891 11,888
--------- --------- --------- ---------
High Tech/Financial
- -------------------
3.4% and 0.0% at December 31, 2002 and 2001, respectively
- ---------------------------------------------------------
Vencore Solutions, LLC
LLC (a)(b) units 2002 625,000 625,000 250,000 -- --

Vencore Solutions, LLC unit
LLC (a)(b) warrants
at $0.001
expiring
2007 2002 62,500 0 24,975 -- --
---------- ---------- ---------- ----------
625,000 274,975 -- --
---------- ---------- ---------- ----------

STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------

Information Technology
- ----------------------
4.5% and 0.7% at December 31, 2002 and 2001, respectively
- ---------------------------------------------------------
Ascential Software Common
Corporation shares 2001 -- -- -- 0 867
KeyEye
Communications, Common
Inc. (a)(b) Shares 2002 3,142,856 550,000 220,000 -- --
Virage, Inc. Common
Shares 2002 1,022 1,188 716 1,194 1,569
White Electronic
Designs Common
Corporation shares 2000 19,125 120,095 146,306 120,095 117,619
--------- --------- --------- ---------
671,283 367,022 121,289 120,055
--------- --------- --------- ---------
Medical/Biotechnology
- ---------------------
41.8% and 50.1% at December 31, 2002 and 2001, respectively
- -----------------------------------------------------------
Acusphere, Inc. Preferred 1995-
(a) shares 2002 690,437 1,536,176 97,350 1,201,975 1,292,233
American OBGYN, Preferred
Inc. (a) shares 1994 148,439 0 0 1,226,202 207,468
American OBGYN, Common
Inc. (a) shares 1994 12,611 0 0 0 5,675
Applied Molecular Common
Evolution, Inc. shares 2001 16,713 224,623 34,262 224,623 205,737
CareCentric Common
Solutions, Inc. shares 1999 47,836 382,875 31,093 382,875 28,702

STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------

CellzDirect, Preferred
Inc. (a)(b) shares 2002 970,761 375,000 75,000 -- --
CollaGenex
Pharmaceuticals, Common
Inc. shares 2001 6,819 54,444 64,712 54,444 55,234
Endocare, Inc. Common 1996-
(b) shares 1999 492,929 1,416,252 261,252 1,416,252 4,419,110
Hemoxymed, Inc.
(formerly
Molecular
Geriatrics Common
Corporation)(a) shares 1993 15,528 125,000 854 125,000 2,123
LifeCell Common 1992-
Corporation shares 2002 551,060 1,866,336 1,658,690 1,263,574 796,907
Matrix
Pharmaceutical, Common 1992-
Inc. shares 2001 -- -- -- 258,829 464,092
Natus Medical, Common
Inc. shares 2002 16,225 84,484 64,738 -- --
Pharmadigm, Preferred 1993-
Inc. (a) (b) shares 2002 771,143 1,170,039 308,457 945,039 163,843
Pherin
Pharmaceuticals, Preferred
Inc. (a) shares 1991 200,000 200,000 106,000 200,000 106,000
Sanarus Medical, Preferred 2000-
Inc. (a) (b) shares 2001 807,508 1,335,000 697,400 1,335,000 697,400

STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------

Sanarus Medical, Bridge loan
Inc. (a) (b) warrants at
exercise
price TBD;
expiring
2006 2001 195 195 98 195 98
---------- ---------- ---------- ----------
8,770,424 3,399,906 8,634,008 8,444,622
---------- ---------- ---------- ----------

Venture Capital Limited Partnership Investments
- -----------------------------------------------
5.0% and 4.7% at December 31, 2002 and 2001, respectively
- ---------------------------------------------------------
Batterson,
Johnson and Ltd.
Wang Limited Partnership
Partnership (a) interests various $500,000 0 0 0 73,955
Columbine Ltd.
Venture Fund II, Partnership
L.P. (a) interests various $750,000 415,224 176,475 415,224 199,123
Delphi Ltd.
Ventures, L.P. Partnership
(a) interests various $1,000,000 652,842 120,633 652,842 243,009
Medical Science Ltd.
Partners, L.P. Partnership
(a) interests various $500,000 187,222 93,611 187,222 194,394
O,W&W Pacrim Ltd.
Investments Partnership
Limited (a) interests various 200 505 250 505 63,060

STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Trinity Ventures Ltd.
IV, L.P. (a) Partnership
interests various $125,008 23,453 11,727 23,453 23,394
---------- ---------- ---------- ----------
1,279,246 402,696 1,279,246 796,935
---------- ---------- ---------- ----------
Total equity investments 60.1% and 62.6% at
December 31, 2002 and 2001, respectively 14,941,698 4,882,170 13,334,652 10,555,484
---------- ---------- ---------- ----------

Notes Receivable, Net
- ---------------------
Avalon Vision Secured
Solutions, note, 16%,
Inc. due 2004 1999 $11,676 13,045 2,608 12,303 6,152
Sutmyn Secured
Storage note, 50%,
Corporation due on
(b) demand 2000 -- -- -- 4,836,805 0
Thermatrix Inc. Unsecured
(b) note, 12%,
due on
demand 2001 -- -- -- 516,940 206,776
---------- ---------- ---------- ----------
Total notes receivable 0.2% and 1.3% at
December 31, 2002 and 2001, respectively 13,045 2,608 5,366,048 212,928
---------- ---------- ---------- ----------
Total investment 60.3% and 63.9% at
December 31, 2002 and 2001, respectively $14,954,743 $ 4,884,778 $18,700,700 $10,768,412
========== ========== ========== ==========

STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Legends and footnotes:

- -- No investment held at end of period.
0 Investment active with a cost basis or fair value of zero.

(a) Equity security acquired in a private placement transaction; resale may be subject to certain
selling restrictions.
(b) Portfolio company is an affiliate of the Partnership; resale may be subject to certain
selling restrictions.

(1) Represents the total fair value of a particular industry segment as a percentage of partners'
capital at 12/31/02 and 12/31/01.
(2) The Partnership has no income-producing equity investments except for a convertible note
which includes accrued interest. The interest rate on such note is 8.25 percent.

The accompanying notes are an integral part of these financial statements.

STATEMENTS OF OPERATIONS
- ------------------------

For the Years Ended December 31,
----------------------------------
2002 2001 2000
---- ---- ----

Investment income:
Notes receivable interest $ 49,819 $ 60,873 $ 844,030
Short-term investment interest 66,134 244,962 314,227
Other operating income -- 3,975 --
--------- --------- ----------
Total investment income 115,953 309,810 1,158,257

Investment expenses:
Management fees 152,636 172,640 371,865
Individual General
Partners' compensation 64,500 64,545 46,129
Administrative and
investor services 1,401,601 758,411 696,006
Investment operations 255,646 179,822 1,414,932
Computer services 134,144 152,104 135,065
Professional fees 134,748 296,969 161,966
Interest expense -- 73,404 --
--------- --------- ----------
Total investment expenses 2,143,275 1,697,895 2,825,963
--------- --------- ----------
Net investment loss (2,027,322) (1,388,085) (1,667,706)
--------- --------- ----------
Net realized gain from
sales of equity investments 375,546 1,514,305 10,703,511
Realized gain from venture capital
limited partnership investments 133,884 324,536 587,735
Realized loss from investment
write-offs (6,313,008) (1,727,140) (2,392,941)
Realized gain from recovery of
investments previously
written off 459,375 -- --
Net realized loss on foreign
currency -- -- (63,370)
--------- --------- ----------
Net realized (loss) income (5,344,203) 111,701 8,834,935
--------- --------- ----------

STATEMENTS OF OPERATIONS (continued)
- -----------------------------------
For the Years Ended December 31,
----------------------------------
2002 2001 2000
---- ---- ----

(Increase) decrease in unrealized
depreciation:
Equity investments (7,280,360) 1,046,437 (20,273,430)
Notes receivable 5,142,683 (313,870) (4,839,250)
--------- --------- ----------
Net (increase) decrease in
unrealized depreciation (2,137,677) 732,567 (25,112,680)
--------- --------- ----------

Other income 774,298 -- --
--------- --------- ----------
Net decrease in partners'
capital resulting
from operations $(8,734,904) $ (543,817) $(17,945,451)
========= ========= ==========
Net decrease in partners'
capital resulting
from operations per Unit $ (54.05) $ (3.36) $ (94.91)
========= ========= ==========

The accompanying notes are an integral part of these financial statements.

STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------

For the years ended December 31, 2002, 2001 and 2000:

Limited General
Partners Partners Total
-------- -------- -----

Partners' capital,
January 1, 2000 $35,782,284 $ 2,433,912 $38,216,196

Net investment loss (1,426,266) (241,440) (1,667,706)
Net realized income 7,635,081 1,199,854 8,834,935
Net increase in
unrealized depreciation (21,393,871) (3,718,809) (25,112,680)
Tax distribution -- (2,862,928) (2,862,928)
---------- --------- ----------
Partners' capital,
December 31, 2000 20,597,228 (3,189,411) 17,407,817

Net investment loss (1,374,205) (13,880) (1,388,085)
Net realized income 110,584 1,117 111,701
Net decrease in
unrealized depreciation 725,242 7,325 732,567
---------- --------- ----------
Partners' capital,
December 31, 2001 20,058,849 (3,194,849) 16,864,000

Net investment loss (2,007,049) (20,273) (2,027,322)
Net realized loss (5,290,760) (53,443) (5,344,203)
Net increase in
unrealized depreciation (2,116,300) (21,377) (2,137,677)
Other income 766,555 7,743 774,298
---------- --------- ----------
Partners' capital,
December 31, 2002 $11,411,295 $(3,282,199) $ 8,129,096
========== ========= ==========

The accompanying notes are an integral part of these financial
statements.

STATEMENTS OF CASH FLOWS
- ------------------------

For The Years Ended December 31,
-----------------------------------
2002 2001 2000
------ ------ ------

Net decrease in partners' capital
resulting from operations $(8,734,904) $ (543,817) $(17,945,451)

Adjustments to reconcile net
decrease in partners' capital
resulting from operations to net
cash used by operating activities:
Net realized gain
from sales of equity
investments (375,546) (1,514,305) (10,703,511)
Realized gain from venture
capital limited partnership
investments (133,884) (324,536) (587,735)
Realized loss from
investment write-offs 6,313,008 1,727,140 2,392,941
Realized gain from recovery
of investments previously
written off (459,375) -- --
Net increase (decrease) in
unrealized depreciation:
Equity investments 7,280,360 (1,046,437) 20,273,430
Notes receivable (5,142,683) 313,870 4,839,250
Net realized loss on foreign
currency transaction -- -- 63,370
Increase in accrued interest on
notes receivable (2,318) (35,421) (841,208)
Increase in other receivable (774,298) -- --
Increase in prepaid
expenses (262,841) -- --
(Decrease) increase in accounts
payable and accrued expenses (44,129) 5,862 30,553
(Decrease) increase in due
to related parties (2,100) (267,693) 384,248
Other changes, net (365) 22,083 (24,499)
--------- ---------- ----------
Net cash used by operating
activities (2,339,075) (1,663,254) (2,118,612)
--------- ---------- ----------

STATEMENTS OF CASH FLOWS (continued)
- -----------------------------------
For The Years Ended December 31,
-----------------------------------
2002 2001 2000
------ ------ ------

Cash flows from investing
activities:
Notes receivable issued -- (500,000) (4,000,000)
Purchase of equity investments (2,996,463) (1,809,683) (2,014,052)
Repayments of notes receivable 250,000 333 8,482
Proceeds from recovery
of investments previously
written off 459,375 -- --
Proceeds from sales of equity
investments 644,775 2,402,744 16,867,191
Distributions from venture
capital limited partnerships 46,385 225,458 220,868
--------- ---------- ----------
Net cash (used) provided by
investing activities (1,595,928) 318,852 11,082,489
--------- ---------- ----------
Cash flows from financing
activities:
Distributions to Limited
and General Partners -- -- (2,862,928)
(Repayment of) proceeds from
short-term borrowings -- (3,000,000) 3,000,000
--------- ---------- ----------
Net cash (used) provided
by financing activities -- (3,000,000) 137,072
--------- ---------- ----------
Effect of exchange rate changes
on cash and cash equivalents -- -- (63,370)
--------- ---------- ----------
Net (decrease) increase in cash
and cash equivalents (3,935,003) (4,344,402) 9,037,579

Cash and cash equivalents
at beginning of year 6,253,950 10,598,352 1,560,773
--------- ---------- ----------
Cash and cash equivalents
at end of year $2,318,947 $ 6,253,950 $ 10,598,352
========= ========== ==========

The accompanying notes are an integral part of these financial
statements.

NOTES TO FINANCIAL STATEMENTS
- -----------------------------

1. Summary of Significant Accounting Policies
------------------------------------------

Organization
- ------------

Technology Funding Partners III, L.P., (the Partnership or the Registrant)
is a limited partnership organized under the laws of the State of Delaware
on December 4, 1986, to make venture capital investments in new and
developing companies. The Partnership elected to be treated as a business
development company under the Investment Company Act of 1940, as amended
(the Act), and operates as a non-diversified investment company, as defined
in the Act. The Managing General Partners are Technology Funding Ltd.
(TFL) and Technology Funding Inc. (TFI), a wholly owned subsidiary of TFL.
There are three Individual General Partners. The Individual General
Partners and a representative from TFL constitute the Management Committee,
which is responsible for the management and administration of the
Partnership.

For the period from December 5, 1986, through March 25, 1987, the
Partnership was inactive. The Partnership filed a registration statement
with the Securities and Exchange Commission on March 25, 1987, and
commenced selling Units of limited partnership interest (Units) in April
1987. On June 2, 1987, the minimum number of Units required to commence
Partnership operations (6,000) had been sold. The offering terminated with
160,000 Units sold on February 3, 1989. The Partnership's original
contributed capital was $40,040,054, consisting of $40,000,000 from Limited
Partners for 160,000 Units and $40,054 from General Partners. The General
Partners do not own any Units. The Partnership was scheduled to be
dissolved on December 31, 1996, but the 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 Management
Committee and approved by a majority of the Limited Partners. On October
25, 2000, the Management Committee voted to extend the life of the
Partnership to December 31, 2002. On November 8, 2002, the Limited
Partners approved an extension of the Partnership's term to December 31,
2004, and authorized the Partnership's Management Committee to extend the
Partnership for up to two one-year additional terms.

Preparation of Financial Statements and Use of Estimates
- --------------------------------------------------------

The accompanying financial statements have been prepared on the accrual
basis of accounting. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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 income and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates include the
estimate of fair value of investments, liabilities and contingencies.
Because of the inherent uncertainty of valuation, the estimated fair value
of investments may differ significantly from the values that would have
been used had a ready market for investments existed, and the differences
could be material.

Investments
- -----------

Investments are carried at fair value.

Equity Investments
------------------

The Management Committee has the authority to establish valuation
procedures and periodically apply such procedures to the Partnership's
investment portfolio. In fulfilling this responsibility, the Managing
General Partners under the direction of the Management Committee
periodically update and revise the valuation procedures used to determine
fair value in order to reflect new events, changing market conditions, more
experience with investee companies or additional information, any of which
may require the revision of previous estimating procedures.

Unrestricted publicly traded securities are valued at the closing sales
price or bid price that is available on a national securities exchange or
over-the-counter market. Valuation discounts of 5 percent to 50 percent
are applied to publicly traded securities subject to resale restrictions
resulting from Rule 144 or contractual lock-ups, such as those commonly
associated with underwriting agreements or knowledge of material non-public
information.

The fair value of all other investments is determined in good faith by the
Managing General Partners under the direction of the Management Committee
after consideration of available relevant information. There is no ready
market for the Partnership's investments in private companies or
unregistered securities of public companies. Fair value is generally
defined as the amount the Partnership could reasonably expect to receive
for an investment in an orderly disposition based on a current sale.
Significant factors considered in the estimation of fair value include the
inherent illiquidity of and lack of marketability associated with venture
capital investments in private companies or unregistered securities, the
investee company's enterprise value established in the last round of
venture financing, changes in market conditions since the last round of
venture financing or since the last reporting period, the value of a
minority interest in the investee company, contractual restrictions on
resale typical of venture financing instruments, the investee company's
financial position and ability to obtain any necessary additional
financing, the investee company's performance as compared to its business
plan, and the investee company's progress towards initial public offering.
The values determined for the Partnership's investments in these securities
are based upon available information at the time the good faith valuations
are made and do not necessarily represent the amount which might ultimately
be realized, which could be higher or lower than the reported fair value.

At December 31, 2002 and 2001, the investment portfolio included
investments totaling $1,991,752 and $3,211,993, respectively, whose fair
values were established in good faith by the Managing General Partners
under the direction of the Management Committee in the absence of readily
ascertainable market values. In addition, investments in publicly traded
securities which have been subjected to a discount for legal or contractual
restrictions as determined by the Management Committee amounted to $261,252
and $4,419,116 at December 31, 2002 and 2001, respectively. Because of the
inherent uncertainty in the valuation, the values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the differences could be material.

Venture capital limited partnership investments are valued based on the
fair value of the underlying investments. Limited partnership
distributions that are a return of capital reduce the cost basis of the
Partnership's investment. Distributions from limited partnership
cumulative earnings are reflected as realized gains by the Partnership.

In the case of an other-than-temporary decline in fair value below cost
basis, an appropriate reduction in the cost basis is recognized as a
realized loss with the new cost basis being adjusted to equal the fair
value of the investment. Cost basis adjustments are reflected as "Realized
loss from investment write-offs" or "Net realized loss from venture capital
limited partnership investments" on the Statements of Operations.

Sales of equity investments are recorded on the trade date. The basis on
which cost is determined in computing realized gains or losses is specific
identification.

Notes Receivable
- ----------------

The fair value of notes receivable is determined in good faith by the
Managing General Partners under the direction of the Management Committee.
Fair value is generally defined as the amount the Partnership could
reasonably expect to receive for the notes and accrued interest on the
valuation date. The values determined for the Partnership's notes
receivable are based upon available information at the time the good faith
valuations are made and do not necessarily represent the amount which might
ultimately be realized which could be higher or lower than the reported
fair value. When the Managing General Partners' assessment of fair value
indicates that future collectibility of interest or principal is in doubt,
notes are placed on non-accrual status.

Cash and Cash Equivalents
- -------------------------

Cash and cash equivalents are principally comprised of cash invested in
demand accounts and money market instruments and are stated at cost plus
accrued interest. The Partnership considers all money market and short-
term investments with an original maturity of three months or less to be
cash equivalents.

Net Decrease in Partners' Capital Resulting from Operations Per Unit
- --------------------------------------------------------------------

Net decrease in partners' capital resulting from operations per Unit is
calculated by dividing the weighted average number of Units outstanding of
160,000 for the years ended December 31, 2002, 2001 and 2000, into the
total net decrease in partners' capital resulting from operations allocated
to the Limited Partners. The Managing General Partners contributed 0.1
percent of total Limited Partner capital contributions and did not receive
any Partnership Units.

Provision for Income Taxes
- --------------------------

No provision for income taxes has been made by the Partnership as the
Partnership is not directly subject to taxation. The partners are to
report their respective shares of Partnership income or loss on their
individual tax returns.

The accompanying financial statements are prepared using accounting
principles generally accepted in the United States which may not equate to
tax accounting. The cost of investments on a tax basis at December 31,
2002 and 2001, was $16,102,424 and $13,844,276, respectively. At December
31, 2002 and 2001, gross unrealized depreciation on investments based on
cost for federal income tax purposes were as follows:

December 31, December 31,
2002 2001
------------ ------------

Unrealized appreciation $ 264,350 $ 4,117,797
Unrealized depreciation (11,481,996) (7,193,661)
---------- ----------
Net unrealized depreciation $(11,217,646) $(3,075,864)
========== ==========

New Accounting Pronouncement
- ----------------------------

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or
disposal activities, such as restructurings, involuntarily terminating
employees, and consolidating facilities initiated after December 31, 2002.
The implementation of SFAS No. 146 will not require the restatement of
previously issued financial statements. The Partnership has implemented
early adoption of SFAS No. 146 to all applicable costs associated with exit
or disposal activities occurring after December 31, 2002.

2. Related Party Transactions
--------------------------

Related party costs are included in costs and expenses shown on the
Statements of Operations. Related party costs in 2002, 2001 and 2000 were
as follows:

For the Years Ended December 31,
-----------------------------------
2002 2001 2000
------ ------ ------

Management fees $ 152,636 $172,640 $ 371,865
Individual General
Partners' compensation 64,500 64,545 46,129
Reimbursable operating expenses:
Administrative and investor
services 1,301,051 581,337 421,358
Investment operations 236,917 158,640 1,404,299
Computer services 134,144 152,104 135,065

Management fees are equal to one quarter of one percent of the fair value
of Partnership assets for each quarter. Management fees compensate the
Managing General Partners solely for General Partner Overhead (as defined
in the Partnership Agreement) incurred in supervising the operation and
management of the Partnership and the Partnership's investments.
Management fees due to the Managing General Partners were $10,745 and
$13,008 and were included in due to related parties at December 31, 2002
and 2001, respectively.

As compensation for their services, each of the Individual General Partners
receives $14,000 annually plus $1,500 for attendance at each meeting of the
Management Committee or committee thereof. The Individual General Partners
are reimbursed for all out-of-pocket expenses relating to attendance of the
meetings, committees or otherwise of the Management Committee. The
Individual General Partners each own eight Units.

The Partnership reimburses the Managing General Partners for operating
expenses incurred in connection with the business of the Partnership.
Reimbursable operating expenses include expenses (other than Organizational
and Offering and General Partner Overhead) such as investment operations,
administrative and investor services, and computer services. Amounts due to
related parties for such expenses totaled $36,866 and $36,703 at December
31, 2002 and 2001, respectively.

The Managing General Partners allocate operating expenses incurred in
connection with the business of the Partnership based on employee hours
incurred. In 2002 the Managing General Partners billed the Partnership
$63,389, $10,460 and $7,845 for operating expenses incurred during 2001,
2000 and prior years, respectively. In 2000, the Managing General Partners
billed the Partnership an additional $945,414 for investment management
expenses of prior years that were incurred by the General Partners but not
previously billed to the Partnership. Had the additional expenses been
billed in the years in which they were incurred, the investment expenses
for 2002, 2001 and 2000 would have been $2,061,581, $1,761,284 and
$1,891,009, respectively.

Under the terms of a computer service agreement, Technology Administrative
Management, a division of TFL, charges the Partnership for its share of
computer support costs. These amounts are included in computer services
expenses.

Retention bonuses were offered to and accepted by key employees of the
Managing General Partners in late 2002. The expense for these bonuses,
which were approved by the Individual General Partners during the September
2002 Management Committee meeting, was prepaid by the Partnership in
October and December 2002. The amount of prepaid operating expenses was
$272,793. The bonuses, incremented by annual salary increases, will be
paid to those individuals who are still full-time employees of the Managing
General Partners in April 2007. Upon the resignation of personnel no
adjustment to the retention bonus amount previously paid by the Partnership
to the Managing General Partners shall occur until a replacement person is
hired.

Officers of the Managing General Partners occasionally receive stock
options as compensation for serving on the Boards of Directors of portfolio
companies. It is the Managing General Partners' policy that all such
compensation be transferred to the investing partnerships. If the options
are non-transferable, they are not recorded as an asset of the Partnership.
Any profit from the exercise of such options will be transferred if and
when the options are exercised and the underlying stock is sold by the
officers. Any such profit is allocated amongst the Partnership and
affiliated partnerships based upon their proportionate investments in the
portfolio company. At December 31, 2002, the Partnership and affiliated
partnerships had an indirect interest in non-transferable Endocare, Inc.
and White Electronic Designs Corporation options with a fair value of
$28,875.

3. Allocation of Profits and Losses
--------------------------------

In accordance with the Partnership Agreement (see Note 1), net profits and
losses of the Partnership are allocated based on the beginning-of-year
partners' capital balances as follows:

(a) Profits:

(i) First, to those partners with deficit capital account
balances until such deficits have been eliminated; then

(ii) Second, to the partners as necessary to offset net decrease
in partners' capital resulting from operations previously
allocated under (b)(ii) below and sales commissions; then

(iii) Third, 75 percent to the Limited Partners as a group in
proportion to the number of Units held, 5 percent to the
Limited Partners in proportion to the Unit Months of each
Limited Partner, and 20 percent to the Managing General
Partners. Unit months are the number of half months a Unit
would be outstanding if held from the date the original holder
of such Unit was deemed admitted into the Partnership until
the termination of the offering of Units.

(b) Losses:

(i) First, to the partners as necessary to offset the net profit
previously allocated to the partners under (a)(iii) above; then

(ii) 99 percent to the Limited Partners and 1 percent to the Managing
General Partners.

Losses allocable to Limited Partners in excess of their capital account
balances will be allocated to the Managing General Partners. Net profits
thereafter, otherwise allocable to those Limited Partners, are allocated to
the Managing General Partners to the extent of such losses.

Losses from unaffiliated venture capital limited partnership investments
are allocated pursuant to section (b) above. Gains are allocated 99
percent to Limited Partners and 1 percent to the Managing General Partners.

In no event are the Managing General Partners allocated less than 1 percent
of the net realized profit or loss of the Partnership.

4. Equity Investments
------------------

All investments are valued at fair value as determined in good faith by the
Managing General Partners.

Marketable Equity Securities
- ----------------------------

At December 31, 2002 and 2001, marketable equity securities had aggregate
costs of $3,724,761 and $3,296,350, respectively, and aggregate fair values
of $2,226,470 and $2,127,440, respectively. The net unrealized losses at
December 31, 2001 and 2000, included gross gains of $75,249 and $283,368,
respectively.

Restricted Securities
- ---------------------

At December 31, 2002 and 2001, restricted securities had aggregate costs of
$11,216,937 and $10,038,302, respectively, and aggregate fair values of
$2,655,700 and $8,428,044, respectively, representing 33.2 percent and 50.0
percent, respectively, of the net assets of the Partnership.

Significant purchases, sales and write offs of equity investments during
2002 are as follows:

Acusphere, Inc.
- ---------------

In June 2002, the Partnership purchased 237,022 shares of Series J
Preferred stock of the company for $334,201.

American OBGYN, Inc.
- --------------------

The company filed for bankruptcy in February 2002. The Managing General
Partners believe there will be no proceeds from liquidation and in December
2002 the Partnership wrote off its entire investment in the company,
realizing a loss of $1,226,202.

CellzDirect, Inc.
- -----------------

In August 2002, the Partnership purchased 970,761 Series B preferred shares
of the company for $375,000.

KeyEye Communications, Inc.
- ---------------------------

In December 2002, the Partnership purchased 3,142,856 Common shares of the
company for $550,000.

LifeCell Corporation
- --------------------

In the second quarter of 2002, the Partnership purchased 200,000 Common
shares of the company for $602,762.

Matrix Pharmaceutical, Inc.
- ---------------------------

In January 2002, the Partnership sold its entire investment in the company
for proceeds of $640,807 and realized a gain of $381,978.

Pharmadigm, Inc.
- ----------------

In May 2002, the Partnership acquired 225,000 shares of Series F Preferred
stock of the company for $225,000.

Vencore Solutions, LLC
- ----------------------

In September 2002, the Partnership acquired 625,000 Series A Units of the
Limited Liability Company for $625,000. In addition, a warrant for 62,500
Series A Units was issued.

WorldRes.com, Inc.
- ------------------

In April 2002, the Partnership issued a convertible note for $284,500 to
the company with an interest rate equal to prime plus 4 percent. The note
and accrued interest are due in April 2003.

Venture Capital Limited Partnership Investments
- -----------------------------------------------

The Partnership received stock distributions of Natus Medical, Inc. and
Virage, Inc. with fair values totaling $87,499, all of which were recorded
as realized gains. The Partnership also recorded as realized gains cash
distributions of $46,385.

In the year ended December 31, 2002, the Partnership recorded a $394,239
decrease in fair value primarily as a result of the above distributions and
a net decrease in the fair value of the underlying investments of the
partnerships.

Other Equity Investments
- ------------------------

Other significant changes reflected in the Statements of Investments relate
to market value fluctuations for publicly-traded portfolio companies or
changes in the fair value of private companies as determined in accordance
with the policy described in Note 1 to the financial statements.

5. Net (Increase) Decrease in Unrealized Depreciation of Equity
-------------------------------------------------------------
Investments
-----------

In accordance with the accounting policy as stated in Note 1, the
Statements of Operations includes a line item entitled "Net (increase)
decrease in unrealized depreciation of equity investments." The table
below discloses details of the changes:

For the Years Ended December 31,
----------------------------------
2002 2001 2000
------ ------ ------

Unrealized depreciation
from cost of
marketable equity securities $ (1,498,291) $(1,168,910) $ (754,361)

Unrealized depreciation
from cost of
non-marketable equity securities (8,561,237) (1,610,258) (3,071,244)
---------- --------- ----------
Unrealized depreciation
from cost at end
of year $(10,059,528) (2,779,168) (3,825,605)

Unrealized (depreciation)
appreciation from cost
at beginning of year (2,779,168) (3,825,605) 16,447,825
---------- --------- ----------
Net (increase) decrease in
unrealized depreciation of
equity investments $ (7,280,360) $1,046,437 $(20,273,430)
========== ========= ==========

6. Notes Receivable
----------------

Activity from January 1 through December 31 consisted of:

2002 2001
------ ------

Balance, beginning of year $ 212,928 $ 9,779

Notes receivable issued -- 500,000
Notes receivable written off (5,086,806) --
Repayments of notes receivable (250,000) (333)
Change in accrued interest (16,197) 17,352
Net decrease (increase) in unrealized
depreciation of notes receivable 5,142,683 (313,870)
--------- -------
Balance, end of year $ 2,608 $212,928
========= =======

The interest rate on notes receivable at December 31, 2002, was 16 percent.
All notes and accrued interest are due in 2004.

In April 2002, the Partnership received a $250,000 payment on a $500,000
note receivable from Thermatrix Inc. Accrued interest of $46,356 was paid
in full. The remaining portion of the note, $250,000, was written off.
During the third quarter of 2002, the Partnership recovered from Thermatrix
Inc. $250,000 for the portion of the note written off.

In September 2002, notes receivable and accrued interest due from Sutmyn
Storage Corporation in the amount of $4,836,806 were written off. The fair
value of these notes was reduced to zero during 2000 and it has been
determined by the Managing General Partners that there will be no recovery
on the notes as the company has ceased operations.

7. Cash and Cash Equivalents
-------------------------

Cash and cash equivalents at December 31, 2002 and 2001, consisted of:

2002 2001
------ ------

Demand accounts $ 42,153 $ 573,206
Money-market accounts 2,276,794 5,680,744
--------- ---------
Total $2,318,947 $6,253,950
========= =========

8. Short-Term Borrowings
---------------------

In December 2000, the Partnership borrowed $3,000,000 from a commercial
financial institution. The Partnership pledged $3,000,000 in cash as
collateral for the note. The note and accrued interest were repaid on
March 31, 2001. Interest expense totaled $73,404.

9. Distributions
-------------

There were no distributions in 2002 or 2001. In the first quarter of 2000,
a tax distribution was declared and paid to the General Partners totaling
$1,238,366. In the second quarter of 2000, a tax distribution was declared
and paid to the General Partners totaling $1,624,562.

10. Commitments and Contingencies
-----------------------------

From time to time the Partnership becomes a party to financial instruments
with off-balance-sheet risk in the normal course of its business.
Generally, these instruments are commitments for future equity investment
fundings, equipment financing commitments, or accounts receivable lines of
credit that are outstanding but not currently fully utilized by a borrowing
company. As they do not represent current outstanding balances, these
unfunded commitments are not recognized in the financial statements. At
December 31, 2002, there were no such unfunded commitments.

In October 2000, Kanematsu Corporation, a creditor of one of the
Partnership's portfolio companies, initiated an arbitration proceeding
against the Partnership, two affiliated partnerships, and a fourth co-
investor. Kanematsu was seeking to recover $2,000,000, the purchase price
in a contract by which the Partnership and the other entities were alleged
to have agreed to purchase certain debt securities of the portfolio company
from Kanematsu. The Partnership and affiliated partnerships asserted
counterclaims against Kanematsu. On February 12, 2002, the Partnership,
affiliated partnerships and the co-investor were awarded $4,000,000 and all
of Kanematsu's claims were denied. The award is in full settlement of all
claims and counterclaims. The Partnership recognized revenue and a
receivable of $666,667 as of February 12, 2002, for its proportionate share
of the award. Kanematsu immediately filed a petition to vacate the award,
and on October 9, 2002, the United States District Court issued an order
confirming the arbitration award. Kanematsu appealed the order but in
early November 2002 paid a forbearance fee of $200,000 in exchange for an
option to settle all liabilities. On November 29, 2002, Kanematsu agreed
to settle for $3,999,999. A decision on the allocation of the proceeds
between the Partnership, affiliates and co-investor was reached in January
2003; however, a dispute of the legal fee has arisen. The Partnership
received $774,298 on February 13, 2003, which represents its proportionate
share of the settlement, less disputed legal fees, plus accrued interest.
The Partnership recognized the additional revenue and receivable of
$107,631 at December 31, 2002. Legal counsel for the Partnership is
actively seeking to resolve the fee dispute and recover the remaining
settlement proceeds for the Partnership. The Partnership is unable to
determine the amount of remaining settlement proceeds or disputed legal
fees as of December 31, 2002.

From time to time, the Partnership is subject to routine litigation
incidental to the business of the Partnership. Although there can be no
assurances as to the ultimate disposition of these matters and the
proceeding disclosed above, it is the opinion of the Managing General
Partners, based upon the information available at this time, that the
expected outcome of these matters, individually or in the aggregate, will
not have a material adverse effect on the results of operations and
financial condition of the Partnership.

11. Financial Highlights
--------------------

For The Years Ended December 31,
-----------------------------------
2002 2001 2000
------ ------ ------

(all amounts on a per Unit basis)
Net asset value,
beginning of period $84.34 $88.79 $183.78

Loss from investment
operations:
Net investment loss (7.75) (8.59) (8.92)
Net realized and unrealized
(loss) gain on investments (46.29) 5.23 (85.99)
----- ----- ------
Total from investment operations (54.05) (3.36) (94.91)
----- ----- ------
Net asset value, end of period $30.29 $85.43 $ 88.87
===== ===== ======

Total Return (64.08)% (3.79)% (51.64)%

Ratios to average net assets:

Net investment loss (13.53)% (9.86)% (6.54)%

Expenses 23.37% 12.18% 12.96%

Pursuant to the Partnership Agreement, net profit shall be allocated first
to those Partners with deficit capital account balances until such deficits
have been eliminated. The net asset values shown above assume the
Partnership is in liquidation. Upon liquidation, the General Partners
would contribute capital equal to the amount of the Limited Partners
deficit. As of December 31, 2002, the General Partners have a negative
capital balance of $3,282,199. Net asset value has been calculated in
accordance with this provision of the Partnership Agreement.

SIGNATURES
----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

TECHNOLOGY FUNDING PARTNERS III, L.P.

By: TECHNOLOGY FUNDING INC.
TECHNOLOGY FUNDING LTD.
Managing General Partners

Date: March 25, 2003 By: /s/Charles R. Kokesh
--------------------------------
Charles R. Kokesh
President, Chief Executive Officer
Chief Financial Officer and
Chairman of Technology Funding Inc.
and Managing General Partner of
Technology Funding Ltd.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:

Signature Capacity Date
--------- -------- ----

/s/Charles R. Kokesh President, Chief March 25, 2003
- ------------------------ Executive Officer,
Charles R. Kokesh Chief Financial Officer
and Chairman of
Technology Funding Inc.
and Managing General
Partner of Technology
Funding Ltd.

The above represents a majority of the Board of Directors of Technology
Funding Inc. and the General Partners of Technology Funding Ltd.
CERTIFICATIONS
--------------

I, Charles R. Kokesh, President, Chief Executive Officer, Chief Financial
Officer and Chairman of Technology Funding Inc. and Managing General
Partner of Technology Funding Ltd., certify that:

1. I have reviewed this annual report on Form 10-K of Technology Funding
Partners III, L.P.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to me by others within
the entity, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and
c) presented in this annual report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 25, 2003 By: /s/Charles R. Kokesh
--------------------------------
Charles R. Kokesh
President, Chief Executive
Officer, Chief Financial
Officer and Chairman of
Technology Funding Inc. and
Managing General Partner of
Technology Funding Ltd.

Technology Funding Partners III, L.P. 12:55 PM 03/25/03
(a Delaware limited partnership)

Page 28 of 50
Technology Funding Partners III, L.P.
(a Delaware limited partnership)