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

FORM 10-Q

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

For the quarterly period ended September 30, 2003

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 Blvd., 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 whether the registrant is an accelerated filer
(as defined in Rule 12B-2 of the Act). Yes No X
--- ---

No active market for the units of limited partnership interest ("Units")
exists, and therefore the market value of such Units cannot be
determined.

Forward-Looking Statements
- --------------------------

The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a safe harbor for forward-looking statements made by or on
behalf of the Partnership. The Partnership and its representatives may
from time to time make written or oral statements that are "forward-
looking," including statements contained in this report and other
filings with the Securities and Exchange Commission, and reports to the
Partnership's shareholders and news releases. All statements that
express expectations, estimates, forecasts and projections are forward-
looking statements within the meaning of the Act. In addition, other
written or oral statements, which constitute forward-looking statements,
may be made by or on behalf of the Partnership. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," "projects," "forecasts," "may," "should," variations of such
words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions,
which are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in or
suggested by such forward-looking statements. The Partnership
undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise.






I. FINANCIAL INFORMATION

Item 1. Financial Statements

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


(unaudited)
September 30, December 31,
2003 2002
------------- ------------

ASSETS

Equity investments (cost of
$15,176,709 and $14,941,698 for
September 30, 2003, and
December 31, 2002, respectively) $ 8,497,897 $ 4,882,170
Notes receivable (cost of
$13,898 and $13,045 for
September 30, 2003, and
December 31, 2002, respectively) 2,780 2,608
---------- ----------
Total investments 8,500,677 4,884,778

Cash and cash equivalents 1,457,253 2,318,947
Prepaid expenses 219,408 262,841
Other receivable 11,045 774,298
Other assets -- 3,265
Due from related parties 8,244 --
---------- ----------
Total assets $10,196,627 $ 8,244,129
========== ==========



BALANCE SHEETS (unaudited) (continued)
- --------------------------------------------

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses $ 52,469 $ 65,445
Due to related parties -- 47,611
Other liabilities 5,200 1,977
---------- ----------
Total liabilities 57,669 115,033

Commitments and contingencies
(See Note 9)

Partners' capital:
Limited Partners
(160,000 Units outstanding) 11,504,223 11,411,295
General Partners (1,365,265) (3,282,199)
---------- ----------
Total partners' capital 10,138,958 8,129,096
---------- ----------
Total liabilities
and partners' capital $10,196,627 $ 8,244,129
========== ==========





















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


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


Principal
Amount or September 30, 2003 December 31, 2002
Industry Shares at ------------------ -------------------
(1) Investment September Cost Fair Cost Fair
Company Position Date 30, 2003 Basis Value Basis Value
- ------------- -------- ---------- ---------- ----- ----- ----- -----

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

Communications
- --------------
7.8% and 5.4% at September 30, 2003, and December 31, 2002, respectively
- ------------------------------------------------------------------------
iVillage Inc. Common 1996-
shares 2000 240,375 990,716 533,632 990,716 225,953
WorldRes.com, Inc. Common 1997-
(a) (b) shares 2001 604,392 2,218,124 181,317 2,218,124 181,317
WorldRes.com, Inc. Convertible
(a) (b) note (2) 2002 $284,500 0 0 303,014 30,301
--------- --------- --------- ---------
3,208,840 714,949 3,511,854 437,571
--------- --------- --------- ---------
Environmental
- -------------
0.0% and 0.0% at September 30, 2003, and December 31, 2002, respectively
- ------------------------------------------------------------------------
Triangle
Biomedical Common
Sciences, Inc.(a) shares 1999 4,099 79,792 0 79,792 0


STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Triangle Common
Biomedical share
Sciences, Inc.(a) warrants at
$28.00;
expiring
2009 1999 4,099 4,099 0 4,099 0
--------- --------- --------- ---------
83,891 0 83,891 0
--------- --------- --------- ---------
High Tech/Financial
- -------------------
3.0% and 3.4% at September 30, 2003, and December 31, 2002, respectively
- ------------------------------------------------------------------------
VenCore Solutions, LLC
LLC (a)(b) units 2002 625,000 625,000 250,000 625,000 250,000

VenCore Solutions, LLC unit
LLC (a)(b) warrants
at $0.001;
expiring
2007 2002 62,500 0 24,975 0 24,975
---------- ---------- ---------- ----------
625,000 274,975 625,000 274,975
---------- ---------- ---------- ----------
Information Technology
- ----------------------
4.7% and 4.5% at September 30, 2003, and December 31, 2002, respectively
- ------------------------------------------------------------------------
KeyEye
Communications, Common
Inc. (a)(b) shares 2002 3,142,856 550,000 220,000 550,000 220,000


STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Virage, Inc. Common
shares 2002 1,022 1,188 1,104 1,188 716
White Electronic Common
Designs shares
Corporation 2000 19,125 120,095 205,594 120,095 146,306
--------- --------- --------- ---------
671,283 426,698 671,283 367,022
--------- --------- --------- ---------
Medical/Biotechnology
- ---------------------
63.4% and 41.8% at September 30, 2003, and December 31, 2002, respectively
- --------------------------------------------------------------------------
Acusphere, Inc. Preferred 1995-
(a) shares 2002 -- -- -- 1,536,176 97,350
Acusphere, Inc. Convertible
(a) note (2) 2003 -- -- -- -- --
Acusphere, Inc. Common
Shares 2003 167,871 1,840,251 1,645,136 -- --
Applied Molecular Common
Evolution, Inc. shares 2001 16,713 224,623 143,063 224,623 34,262
CareCentric Common
Solutions, Inc. shares 1999 47,836 382,875 38,288 382,875 31,093
CellzDirect, Preferred
Inc. (a)(b) shares 2002 970,761 375,000 150,000 375,000 75,000
CollaGenex
Pharmaceuticals, Common
Inc. shares 2001 6,819 54,444 73,304 54,444 64,712
Endocare, Inc. Common 1996-
(b) shares 1999 492,929 1,416,252 1,022,829 1,416,252 261,252


STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Hemoxymed, Inc.
(formerly
Molecular
Geriatrics Common
Corporation)(a) shares 1993 15,528 125,000 3,494 125,000 854
LifeCell Common 1992-
Corporation shares 2002 551,060 1,866,336 3,245,743 1,866,336 1,658,690
Natus Medical, Common
Inc. shares 2002 16,225 84,484 73,013 84,484 64,738
Pharmadigm, Preferred 1993-
Inc. (a) (b) shares 2002 771,143 1,170,039 38,557 1,170,039 308,457
Pherin
Pharmaceuticals, Preferred
Inc. (a) shares 1991 -- -- -- 200,000 106,000
Sanarus Medical, Preferred 2000-
Inc. (a) (b) shares 2001 807,508 1,335,000 278,960 1,335,000 697,400
Sanarus Medical, Convertible
Inc. (a) (b) note 2003 $422,776 433,950 86,790 -- --
Sanarus Medical, Bridge loan
Inc. (a) (b) warrants at
exercise
price TBD;
expiring
2006 2001 195 195 39 195 98
---------- ---------- ---------- ----------
9,308,449 6,799,216 8,770,424 3,399,906
---------- ---------- ---------- ----------


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

Venture Capital Limited Partnership Investments
- -----------------------------------------------
3.1% and 5.0% at September 30, 2003, and December 31, 2002, respectively
- ------------------------------------------------------------------------
Columbine Ltd.
Venture Fund II, Partnership
L.P. (a) interests various $750,000 415,224 176,475 415,224 176,475
Delphi Ltd.
Ventures, L.P. Partnership
(a) interests various $1,000,000 652,842 0 652,842 120,633
Medical Science Ltd.
Partners, L.P. Partnership
(a) interests various $500,000 187,222 93,611 187,222 93,611
O,W&W Pacrim Ltd.
Investments Partnership
Limited (a) interests various 200 500 250 505 250
Trinity Ventures Ltd.
IV, L.P. (a) Partnership
interests various $125,008 23,453 11,727 23,453 11,727
---------- ---------- ---------- ----------
1,279,241 282,063 1,279,246 402,696
---------- ---------- ---------- ----------
Total equity investments - 82.0% and 60.1% at
September 30, 2003, and December 31, 2002,
respectively 15,176,704 8,497,901 14,941,698 4,882,170
---------- ---------- ---------- ----------



STATEMENTS OF INVESTMENTS (continued)
- ------------------------------------
Notes Receivable, Net
- ---------------------
Avalon Vision Secured
Solutions, note, 16%,
Inc. due 2004 1999 $11,676 13,898 2,780 13,045 2,608
---------- ---------- ---------- ----------
Total notes receivable - 0.0% and 0.2% at
September 30, 2003, and December 31, 2002,
respectively 13,898 2,780 13,045 2,608
---------- ---------- ---------- ----------
Total investment - 81.5% and 60.3% at
September 30, 2003, and December 31, 2002
respectively $15,190,602 $ 8,500,681 $14,954,743 $ 4,884,778
========== ========== ========== ==========

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 09/30/03 and 12/31/02.
(2) The Partnership has no income-producing equity investments except for convertible notes which
include accrued interest. The interest rate on these notes during the quarter ended
September 30, 2003, ranged from 6 to 10 percent.


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



STATEMENTS OF OPERATIONS (unaudited)
- -----------------------------------


For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
2003 2002 2003 2002
------ ------ ------ ------

Investment income:
Notes receivable interest $ 20,648 $ 6,742 $ 42,520 $ 43,305
Short-term investment interest 1,215 13,964 11,144 55,368
--------- --------- --------- ---------
Total investment income 21,863 20,706 53,664 98,673

Investment expenses:
Management fees 22,983 35,270 62,655 120,396
Individual General Partners'
compensation 15,000 10,500 45,000 31,500
Administrative and investor services 225,092 197,521 1,054,307 1,093,078
Investment operations 55,611 41,196 274,447 203,889
Professional fees 23,038 17,107 138,181 97,322
Computer services 19,352 25,612 65,597 101,848
--------- --------- --------- ---------
Total investment expenses 361,076 327,206 1,640,187 1,648,033
--------- --------- --------- ---------
Net investment loss (339,213) (306,500) (1,586,523) (1,549,360)
--------- --------- --------- ---------


STATEMENTS OF OPERATIONS (unaudited) (continued)
- -----------------------------------------------
Net realized gain from sales
of equity investments -- -- -- 375,741
Realized loss from investment
write-offs -- (4,836,806) (200,000) (5,086,806)
Realized gains from venture capital
limited partnership investments 139,408 18,390 214,500 130,948
Realized gain from recovery of
investments previously written off -- 459,375 -- 459,375
--------- --------- --------- ---------
Net realized income (loss) 139,408 (4,359,041) 14,500 (4,120,742)
--------- --------- --------- ---------

Decrease (increase) in unrealized
depreciation:
Equity investments 1,446,789 (1,426,427) 3,380,716 (4,316,309)
Notes receivable (382) 4,836,571 (681) 5,146,591
--------- --------- --------- ---------
Net decrease (increase) in
unrealized depreciation 1,446,407 3,410,144 3,380,035 830,282
--------- --------- --------- ---------

Other income 8,020 -- 201,850 666,667
--------- --------- --------- ---------
Net increase (decrease) in
partners' capital resulting
from operations $1,254,622 $(1,255,397) $2,009,862 $(4,173,153)
========= ========= ========= =========
Net increase (decrease) in
partners' capital resulting
from operations per Unit $ .56 $ (7.77) $ .58 $ (25.82)
========= ========= ========= =========


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




STATEMENTS OF CASH FLOWS (unaudited)
- -----------------------------------


For the Nine Months
Ended September 30,
-------------------------
2003 2002
------ ------

Net increase (decrease) in partners'
capital resulting from operations $2,009,862 $(4,173,153)

Adjustments to reconcile net increase
(decrease) in partners' capital
resulting from operations to net
cash used by operating activities:
Net realized gain from sales of
equity investments -- (375,741)
Realized gains from venture capital
limited partnership investments (214,500) (130,948)
Realized gain from recovery of
investments previously written off -- (459,375)
Realized loss from investment
write-off 200,000 5,086,806
Net (decrease) increase in unrealized
depreciation of equity investments (3,380,716) 4,316,309
Net increase (decrease) in unrealized
depreciation of notes receivable 681 (5,146,591)
Decrease in prepaid expenses 43,433 --
Decrease (increase) in other
receivables 763,253 (666,667)
(Increase) decrease in accrued
interest on notes receivable (5,478) 3,704
Decrease in accounts payable
and accrued expenses (12,976) (51,515)
Decrease in due to
related parties (55,855) (24,340)
Other changes, net 6,488 (1,805)
--------- ---------
Net cash used by
operating activities (645,808) (1,623,316)
--------- ---------


STATEMENTS OF CASH FLOWS (unaudited) (continued)
- -----------------------------------------------

Cash flows from investing activities:
Proceeds from sales of
equity investments -- 644,775
Purchase of equity investments (714,886) (2,446,463)
Purchase of secured notes receivable 284,500 --
Proceeds from recovery on investments -- 459,375
Repayment of notes receivable -- 250,000
Distribution from venture capital
limited partnership investments 214,500 43,449
--------- ---------
Net cash used by investing
activities (215,886) (1,048,864)
--------- ---------

Net decrease in cash and
cash equivalents (861,694) (2,672,180)

Cash and cash equivalents at beginning
of year 2,318,947 6,253,950
--------- ---------
Cash and cash equivalents
at September 30 $1,457,253 $ 3,581,770
========= =========

















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




NOTES TO FINANCIAL STATEMENTS (unaudited)
- ----------------------------------------

1. Interim Financial Statements
----------------------------
The accompanying unaudited financial statements included herein have been
prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes which would be presented
were such financial statements prepared in accordance with generally
accepted accounting principles in the United States of America. These
statements should be read in conjunction with the Annual Report on Form
10-K for the year ended December 31, 2002. In the opinion of the
Managing General Partners, the accompanying interim financial statements
reflect all adjustments necessary for the fair presentation of the
financial position, results of operations, and cash flows for the interim
periods presented. Allocation of income and loss to Limited and General
Partners is based on cumulative income and loss. Adjustments, if any,
are reflected in the current quarter balances. The results of operations
for such interim periods are not necessarily indicative of results of
operations to be expected for the full year.

2. 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 of America, which may
not equate to tax accounting. The cost of investments on a tax basis at
September 30, 2003, and December 31, 2002, was $16,331,803 and
$16,102,424, respectively. At September 30, 2003, and December 31, 2002,
gross unrealized depreciation on investments based on cost for federal
income tax purposes was as follows:


September 30, 2003 December 31, 2002
------------------ -----------------

Unrealized appreciation $ 1,833,614 $ 264,350
Unrealized depreciation (10,610,521) (11,481 996)
----------- ----------
Net unrealized depreciation $ (7,831,126) $(11,217,646)
=========== ==========



3. Related Party Transactions
--------------------------

Related party costs are included in investment expenses shown on the
Statements of Operations. Related party expenses for the nine months
ended September 30, 2003 and 2002, were as follows:



2003 2002
--------- --------

Management fees $ 62,655 $ 120,396
Individual General Partners'
compensation 45,000 31,500
Operating expenses reimbursed to
related parties 1,343,261 1,210,063



Certain reimbursable expenses have been accrued based upon interim
estimates prepared by the Managing General Partners and are adjusted to
actual costs periodically. There was $19,813 due to related parties for
such expenses at September 30, 2003, compared to $36,866 due to related
parties at December 31, 2002.

Management fees due to the Managing General Partners were $11,569 at
September 30, 2003. At December 31, 2002, management fees of $10,745 were
due to the Managing General Partners. These were included in due to
related parties.

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 September 30, 2003, the
Partnership and affiliated partnerships had an indirect interest in non-
transferable Endocare, Inc., non-transferable Sanarus Medical, Inc. and
White Electronic Designs Corporation options with a fair value of
$39,214.

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. The
expense for the bonus is recognized ratably over the beneficial period,
October 2002 to April 2007. As of September 30, 2003, the Partnership
has recognized expense of $43,433. 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.

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

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

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

At September 30, 2003, and December 31, 2002, marketable equity
securities had aggregate costs of $3,724,761, and aggregate fair values
of $4,313,741 and $2,226,470, respectively. The net unrealized losses at
September 30, 2003, and December 31, 2002, included gross gains of
$1,566,387 and $75,249, respectively.

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

At September 30, 2003, and December 31, 2002, restricted securities had
aggregate costs of $11,451,948 and $11,216,937, respectively, and
aggregate fair values of $4,184,156 and $2,655,700, respectively,
representing 41.3 percent and 33.2 percent, respectively, of the net
assets of the Partnership.

Significant purchases, sales and write-offs of equity investments during
the nine months ended September 30, 2003, were as follows:

Acusphere, Inc.
- --------------
In April and June of 2003, the Partnership funded convertible secured
notes of $230,129 and $61,981, respectively. Both notes bear interest at
10 percent. See Note 5 for additional information on Acusphere.

Atherotech, Inc.
- ----------------

In September 2003, the Partnership guaranteed a $600,000 line of credit
for Atherotech, Inc. by depositing that amount in a segregated bank
account.

Pherin Pharmaceuticals, Inc.
- ---------------------------

The Partnership wrote off its entire investment of $200,000 as of March
31, 2003, after Pherin Pharmaceuticals, Inc. ceased domestic operations.
The Partnership is not expecting any return on its investment.

Sanarus Medical, Inc.
- --------------------

During May 2003, the Partnership funded a convertible unsecured note of
$422,776 to Sanarus Medical, Inc. The note bears interest at 6 percent
and matures in May 2004.

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

During the third quarter of 2003, WorldRes.com, Inc. repaid a convertible
note issued by the Partnership. The Partnership received $314,653, which
includes accrued interest on the note.

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

During the nine months ending September 30, 2003, the Partnership
received cash distributions of $214,500 which were recorded as realized
gains. The Partnership recorded a $120,637 decrease in fair value
primarily as a result of the above distributions.

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 included in the Partnership's December 31, 2002, Form 10-K.


5. Subsequent Events
-----------------

On October 8, 2003, subsequent to the end of the third quarter,
Acusphere, Inc., a private company in the biotechnology industry,
conducted an initial public offering. Prior to the offering, Acusphere
shares were subject to a reverse split, which converted the Partnership's
690,437 Preferred shares into 167,871 common shares. The offering priced
at $14 per share. The Partnership's Acusphere shares are subject to a
180-day lock-up period. The reverse stock split is reflected in the
Statement of Investments as of September 30, 2003.

On October 17, 2003, subsequent to the end of the third quarter, the
Partnership liquidated its entire investment in White Electronic Designs
Corporation, selling 19,125 shares $12.0999 per share for total gross
proceeds of $231,411 and a realized gain of $111,316.

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

Activity from January 1 through September 30 consisted of:



2003 2002
-------- --------

Balance at January 1 $2,608 $ 212,928

Repayments of notes receivable -- (250,000)
Write-off of notes receivable and
accrued interest -- (5,086,806)
Change in interest receivable 853 (16,185)
Net (increase) decrease in unrealized
depreciation of notes receivable (681) 5,146,591
----- ---------
Balance at September 30 $2,780 $ 6,528
===== =========


The interest rate on the note receivable at September 30, 2003, was 16
percent. The note is due in 2004.


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

Cash and cash equivalents at September 30, 2003, and December 31, 2002,
consisted of:


2003 2002
--------- ---------

Demand accounts $ 745,652 $ 42,153
Money market accounts 711,601 2,276,794
--------- ---------
$1,457,253 $2,318,947
========= =========


8. Other Receivables
-----------------
At June 30, 2003, other receivables consisted of an advance made to
Dakota Holdings, LLC (DHL) (formerly Dakota Heritage, LLC). On behalf of
DHL, the Partnership had advanced $325,835 to Dakota Arms, Inc. (DAI), a
wholly owned subsidiary of DHL. Originally, the Partnership, an
affiliated partnership and an outside party planned to invest $700,000,
$50,000 and $500,000, respectively, in DHL. Another affiliated
partnership bought the Partnership's receivable in August 2003 and repaid
the advance.

9. 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 September 30, 2003, the Partnership had
unfunded equity commitments of $0 and a line of credit guarantee of
$600,000 in Atherotech, Inc.

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 regarding the legal fees arose. The Partnership
received $774,298 on February 13, 2003, which represented 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. In March 2003, the law firm
remitted $193,830, the remaining amount of the award to the Partnership.

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.


10. Financial Highlights
--------------------


For The Nine Months
Ended September 30,
-------------------
2003 2002
------ ------

(all amounts on a per Unit basis)
Net asset value, beginning of period $54.25 $84.91

Loss from investment operations:
Net investment loss 0 (5.46)
Net realized and unrealized loss
on investments 0.58 (20.36)
----- -----
Total from investment operations 0.58 (25.82)
----- -----
Net asset value, end of period $54.83 $59.09
===== =====
Total return 1.07% (30.41)%

Ratios to average net assets:
Net investment loss 0% (7.59)%
Expenses 18.79% 14.31%



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 September 30, 2003 and 2002, the General Partners
have a negative capital balance of $1,365,265 and $3,236,581. Upon
liquidation, the General Partners would not be required to contribute
cash to the Partnership, as the net asset value is greater than the
General Partners' negative capital balance. Net asset value has been
calculated in accordance with this provision of the Partnership
Agreement.

Item 2. 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 included in the Partnership's Form 10-K for the year ended
December 31, 2002. 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.

During the nine months ended September 30, 2003, net cash used by
operating activities totaled $645,808. The Partnership paid management
fees of $61,831 to the Managing General Partners and reimbursed related
parties for investment expenses of $1,399,940. In addition, $45,000 was
paid to the Individual General Partners as compensation for their
services. Interest income and other income of $48,186 and $976,148 was
received, respectively. Other investment expenses of $163,371 were paid.

Cash and cash equivalents at September 30, 2003, were $1,457,253. Cash
reserves, interest income on short-term investments, and future proceeds
from equity investment sales are expected to be adequate to fund
Partnership operations and future investments through the next twelve
months.

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

Current quarter compared to corresponding quarter in the preceding year
- -----------------------------------------------------------------------

Net increase in partners' capital resulting from operations was
$1,254,622 for the quarter ended September 30, 2003, as compared to a net
decrease in partners' capital resulting from operations of $1,255,397 for
the quarter ended September 30, 2002.

Realized loss from investment write-offs totaled $4,836,806 during the
quarter ended September 30,2002, and related to notes and interest
receivable from Sutmyn Storage Corporation. There were no such write-offs
during the same period in 2003.

Net unrealized depreciation on notes receivable was $11,118 and $6,529 at
September 30, 2003 and September 30, 2002, respectively. During the
quarter ended September 30, 2003, the net increase in unrealized
depreciation of notes receivable was $681. During the quarter ended
September 30, 2002, the net decrease in unrealized depreciation of notes
receivable of $4,836,571 was primarily due to the write-off of notes
receivable from Sutmyn Storage Corporation.

Net unrealized depreciation on equity investments was $6,678,812 and
$8,125,601 at September 30, 2003 and 2002, respectively. During the
quarter ended September 30, 2003, the net decrease in unrealized
depreciation of equity investments of $1,446,789 was primarily
attributable to an increase in the publicly traded market price of a
company in the medical industry. During the quarter ended September 30,
2002, the net increase in unrealized depreciation of equity investments
of $1,426,427 was primarily attributable to a decrease in the publicly
traded price of Endocare, Inc., along with decreases in the fair values
of private portfolio companies in the medical/biotechnology and
communications industries.

During the quarter ended September 30, 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. During the
same quarter in 2003, there were no recoveries.

Investment expenses were $361,076 for the quarter ended September 30,
2003, compared to $327,206 for the same period in 2002. The increase was
primarily due to increased administrative services, investment monitoring
and professional fees.

During the quarter ended September 30, 2003, the Partnership recorded net
realized gains from venture capital limited partnership investments of
$139,408. During the same period in 2002, there were gains of $18,390.
The gains represented distributions from the Partnership's venture
capital limited partnership investments.

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


Current nine months compared to corresponding nine months in the
- ----------------------------------------------------------------
preceding year
- --------------

Net increase in partners' capital resulting from operations was
$2,009,862 for the nine months ended September 30, 2003, as compared to a
net decrease in partners' capital resulting from operations of $4,173,153
for the nine months ended September 30, 2002.

During the nine months ended September 30, 2003, the Partnership wrote
off its investment of $200,000 in Pherin Pharmaceuticals, Inc. During
the same period in 2002, realized loss from investment write-offs totaled
$5,086,806. The fair value of notes receivable and accrued interest due
from Sutmyn Storage Corporation in the amount of $4,836,806 was reduced
to zero during 2002. It had been determined by the Managing General
Partners that there would be no recovery on the notes after the company
ceased operations; therefore, the cost of these notes were written off.
The Partnership wrote off a $250,000 investment in a note receivable from
Thermatrix Inc. which was subsequently recovered and realized as a gain.

Net unrealized depreciation on equity investments was $6,678,812 and
$10,059,528 at September 30, 2003 and December 31, 2002, respectively.
During the nine months ended September 30, 2003, the net decrease in
unrealized depreciation of equity investments of $3,380,716 was primarily
the result of an increase in the publicly traded market price of a
company in the medical industry. During the nine months ended September
30, 2002, the net increase in unrealized depreciation of equity
investments of $4,316,309 was primarily attributable to a decrease in the
publicly traded price of Endocare, Inc., along with decreases in the fair
values of private portfolio companies in the medical/biotechnology and
communications industries.

Other income of $201,850 and $666,667 was recognized during the nine
months ended September 30, 2003 and 2002, respectively. This was the
result of a settlement between Kanematsu Corporation, a creditor of one
of the Partnership's portfolio companies, and the Partnership. See Note
9.

Net realized gain from sales of equity investments was $0 and $375,741
for the nine months ended September 30, 2003 and 2002, respectively. The
gain in 2002 resulted from the sales of Matrix Pharmaceutical, Inc.
common shares.

During the nine months ended September 30, 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.
During the same period in 2003, there were no recoveries.

Net unrealized depreciation on notes receivable was $11,118 and $10,437
at September 30, 2003 and December 31, 2002, respectively. During the
nine months ended September 30, 2003, the net increase in unrealized
depreciation of notes receivable was $681. During the nine months ended
September 30, 2002, the net decrease in unrealized depreciation of notes
receivable of $5,146,591 was primarily due to the write-off of notes
receivable from Sutmyn Storage Corporation.

Investment expenses were $1,640,187 for the nine months ended September
30, 2003, compared to $1,648,033 for the same period in 2002. The
decrease was primarily due to decreased management fees, partially offset
by increased professional fees.

During the nine months ended September 30, 2003, the Partnership recorded
net realized gains from venture capital limited partnership investments
of $214,500. During the same period in 2002, there were gains of
$130,948. The gains represented distributions from profits of venture
capital limited partnership investments.

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

Item 3. Procedures and Controls

The undersigned 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 other than changes needed to maintain
adequate separation of duties and responsibilities of personnel in the
ordinary course of business, and there were no corrective actions with
regard to significant deficiencies and material weaknesses.

CERTIFICATION
-------------

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 quarterly report on Form 10-Q of Technology
Funding Partners III, L.P.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 I 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 quarterly 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 quarterly report (the Evaluation Date); and
c) presented in this quarterly 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 quarterly 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: November 14, 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.



II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) A report on Form 8-K was filed by the Partnership during the
quarter ended March 31, 2003. Pursuant to Article 6 of the
Partnership Agreement for Technology Funding Partners III, An
Aggressive Growth Fund, L.P., the Partnership Agreement had been
amended. The corrected Amended and Restated Limited Partnership
Agreement is included in the 8-K filed on January 8, 2003.



SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) 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: November 14, 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.




CERTIFICATION
-------------

In connection with the Technology Funding Partners III, L.P. (the
Partnership) Quarterly Report on Form 10-Q for the period ending
September 30, 2003, as filed with the Securities and Exchange
Commission (the Report), 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, pursuant to 18 U.S.C. Section 1350, as added Section 906 of
the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section
15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in the Report fairly
presents, in all material respects, the financial condition
and results of operations of the Partnership as of and for the
period covered by the Report.


Date: November 14, 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.