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 quarterly period ended March 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _________________ Commission File Number: 0-20671 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. _____________________________________________________________________________ (Exact name of registrant as specified in its charter) Texas 75-2533518 _____________________________________________________________________________ (State or other jurisdiction (I.R.S. Employer I.D. No.) of incorporation or organization) 8080 North Central Expressway, Dallas, Texas 75206-1857 _____________________________________________________________________________ (Address of principal executive offices)(Zip Code) 214/891-8294 _____________________________________________________________________________ (Registrant's telephone number, including area code) 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 ----- ----- 4,142,942 shares of common stock outstanding at May 15, 2000. The Registrant's Registration Statement on Form N-2 was declared effective by the Securities and Exchange Commission on May 6, 1994. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Assets and Liabilities (Unaudited) Assets December 31, 1999 March 31, 2000 ----------------- -------------- Cash and cash equivalents $ 5,086,040 $13,230,600 Accounts receivable 224,283 179,732 Investments at fair value, cost of $34,457,935 and $36,180,473 41,346,302 68,173,271 Other assets 68,497 61,361 ----------- ----------- $46,725,122 $81,644,964 =========== =========== Liabilities and Net Assets Liabilities: Accounts payable $ 111,708 $ 2,188,410 Accounts payable - affiliate 213,390 1,985,181 Dividends payable 465,718 -0- ----------- ----------- 790,816 4,173,591 ----------- ----------- Net Assets: Common stock, $1 par value; 20,000,000 shares authorized; 4,342,942 issued, and 4,142,942 outstanding 4,342,942 4,342,942 Additional paid-in capital 36,258,896 36,258,896 Treasury stock at cost, 200,000 shares at December 31, 1999 and March 31, 2000 (1,665,220) (1,665,220) Undistributed net investment income 6,997,688 38,534,755 Net assets, equivalent to $11.09 and $18.70 per share on the shares outstanding on December 31, 1999 and March 31, 2000, respectively 45,934,306 77,471,373 ----------- ----------- $46,725,122 $81,644,964 =========== =========== Net asset value per share $ 11.09 $ 18.70 =========== =========== <FN> See accompanying notes to financial statements.</FN> RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Operations (Unaudited) Three Months Ended March 31, 1999 2000 ----------- ----------- Investment Income: Interest $ 494,545 $ 365,529 Dividends 236,164 29,874 Other investment income (9,328) 76,250 ---------- ----------- Total investment income 721,381 471,653 ---------- ----------- Expenses: Amortization 83,820 -0- Bank charges 5,330 8,734 Directors' fees 14,000 14,000 Legal and professional 28,315 63,893 Management fees 210,462 347,506 Taxes -0- (878) Other 40,389 50,292 ---------- ----------- Total expenses 382,316 483,547 ---------- ----------- Net investment income 339,065 (11,894) Realized gain on investments -0- 6,444,540 Unrealized gain (loss) on investments 6,084,720 25,104,421 ---------- ----------- Net increase (decrease) in net assets resulting from operations $6,423,785 $31,537,067 ========== =========== <FN> See accompanying notes to financial statements.</FN> RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Statement of Changes in Net Assets (Unaudited) Three Months Ended March 31, 1999 2000 ----------- ----------- Increase (decrease) in net assets resulting from operations Investment income - net $ 339,065 $ (11,894) Realized gain on investments -0- 6,444,540 Unrealized gain (loss) on investments 6,084,720 25,104,421 ----------- ----------- Net increase (decrease) in net assets resulting from operations 6,423,785 31,537,067 Distributions to shareholders (331,935) -0- Cost of shares repurchased (3,780) -0- ----------- ----------- Total increase (decrease) 6,088,070 31,537,067 Net assets Beginning of period 41,475,701 45,934,306 ----------- ----------- End of period $47,563,771 $77,471,373 =========== =========== <FN> See accompanying notes to financial statements. </FN> RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements March 31, 2000 1. Organization and Business Purpose Renaissance Capital Growth & Income Fund III, Inc. (the "Fund"), a Texas corporation, was formed on January 20, 1994. The Fund offered to sell shares in the Fund until closing of the offering on December 31, 1994. The Prospectus of the Fund required minimum aggregate capital contributions by shareholders of not less than $2,500,000 and allowed for maximum capital contributions of $100,000,000. The Fund seeks to achieve current income and capital appreciation potential by investing primarily in unregistered equity investments and convertible issues of small and medium size companies which are in need of capital and which Renaissance Capital Group, Inc. ("Investment Advisor") believes offers the opportunity for growth. The Fund is a non-diversified closed-end investment company and has elected to be treated as a business development company under the Investment Company Act of 1940, as amended ("1940 Act"). 2. Significant Accounting Policies A. Federal Income Taxes - The Fund has elected the special income tax treatment available to "regulated investment companies" under Subchapter M of the Internal Revenue Code ("IRC") in order to be relieved of federal income tax on that part of its net investment income and realized capital gains that it pays out to its shareholders. The Fund's policy is to comply with the requirements of the IRC that are applicable to regulated investment companies. Such requirements include, but are not limited to certain qualifying income tests, asset diversification tests and distribution of substantially all of the Fund's taxable investment income to its shareholders. It is the intent of management to distribute all of its taxable investment income and long term capital gains within the defined period under the IRC to qualify as a regulated investment company. Therefore, no federal income tax provision is included in the accompanying financial statements. B. Distributions to Shareholders - Dividends to shareholders are recorded on the ex-dividend date. The Fund declared no dividends during the quarter ended March 31, 2000. On April 7, 2000, the Fund declared a dividend of $1.54 per share payable June 9, 2000 to holders of record at May 26, 2000. The ex-dividend date is May 24, 2000. C. Management Estimates - The financial statements have been prepared in conformity with generally accepted accounting principles. The preparation of the accompanying financial statements requires estimates and assumptions made by management of the Fund as to the valuation of investments that effect the amounts and disclosures in the financial statements. Actual results could differ from these estimates. D. Financial Instruments - In accordance with the reporting requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the Company calculates the fair value of its financial instruments and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made. RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) March 31, 2000 3. Organization Expenses In connection with the offering of its shares, the Fund paid Renaissance Capital Group, Inc. (the "Investment Adviser") organizational expenses of $623,544. Such expenses are deferred and amortized on a straight-line basis over a five-year period. These expenses were fully amortized in a prior period. 4. Investment Advisory Agreement The Investment Advisor for the Fund is registered as an investment advisor under the Investment Advisors Act of 1940. Pursuant to an Investment Advisory Agreement, the Investment Advisor performs certain services, including certain management, investment advisory and administrative services necessary for the operation of the Fund. The Investment Advisor receives a fee equal to .4375% (1.75% annually) of the Net Assets each quarter. The Fund accrued a liability of $347,506 for such operational management fees performed during the quarter ended March 31, 2000. In addition, the Fund has agreed to pay the Investment Advisor an incentive fee equal to 20% of any net realized capital gains after allowance for any unrealized capital loss of the Fund. This management incentive fee is calculated on a quarterly basis. In the first quarter, the Fund realized capital gains of $8,055,674.79 on the sale of 2,846,154 shares of Simtek Corporation, and the redemption of the Optical Security Group, Inc. convertible debenture. The gain is shown on the accompanying statement of operations net of the $1,611,135 management incentive fee payable to the Investment Advisor. Finally, the Investment Advisor is reimbursed for administrative expenses paid by the Investment Advisor on behalf of the Fund. Such reimbursement was $17,180 for the quarter ending March 31, 2000, and is included in general and administrative expenses in the accompanying statement of operations. 5. Capital Share Transactions As of March 31, 2000 there were 20,000,000 shares of $1 par value capital stock authorized, 4,342,942 shares issued, 4,142,942 shares outstanding, and additional paid-in capital aggregating $38,936,619. There are no capital stock transactions during the current year. RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) March 31, 2000 6. Investments The Fund invests primarily in convertible securities and equity investments of companies that qualify as Eligible Portfolio Companies as defined in Section 2(a)(46) of the 1940 Act or in securities that otherwise qualify for investment as permitted in Section 55(a)(1) through (5). Under the provisions of the 1940 Act at least 70% of the Fund's assets, as defined under the 1940 Act, must be invested in Eligible Portfolio Companies. In the event the Fund has less than 70% of its assets in eligible portfolio investments, then it will be prohibited from making non-eligible investments until such time as the percentage of eligible investments again exceeds the 70% threshold. These investments are carried in the statements of assets and liabilities as of March 31, 2000 at fair value, as determined in good faith by the Investment Advisor. The convertible debt securities held by the Fund generally have maturities between five and seven years and are convertible into the common stock of the issuer at a set conversion price at the discretion of the Fund. The common stock underlying these securities is generally unregistered and thinly to moderately traded, but is not otherwise restricted. The Fund may register and sell such securities at any time with the Fund paying the costs of registration. Interest on the convertible securities are generally payable monthly. The convertible debt securities generally contain embedded call options giving the issuer the right to call the underlying issue. In these instances, the Fund has the right of redemption or conversion. The embedded call option will generally not vest until certain conditions are achieved by the issuer. Such conditions may require that minimum thresholds be met relating to underlying market prices, liquidity, and other factors. INVESTMENT VALUATION SUMMARY CONVERSION FAIR COST OR FACE VALUE VALUE Bentley Pharmaceuticals, Inc. Common Stock $ 1,536,029 $ 7,785,900 $ 7,708,040 CEREUS Technology Partners, Inc. Common Stock 512,500 1,819,375 1,660,212 Warrants to purchase 4,000 shares -0- 794,375 746,713 Communications World Intl., Inc. 8% Convertible Debenture 250,000 687,500 646,250 Warrants to purchase 100,000 shares 2,000 352,500 281,350 Dexterity Surgical, Inc. 9% Convertible Debenture 1,500,000 2,062,500 1,888,750 8% Convertible Preferred Stock 1,000,000 1,000,000 1,000,000 Common Stock 635,000 357,500 336,051 Display Technologies, Inc. 8.75% Convertible Debenture 1,750,000 1,750,000 1,750,000 5.25% Convertible Preferred Stock 500,000 500,000 500,000 Common Stock 1,049,741 915,798 906,640 Warrants to purchase 126,000 shares -0- -0- -0- RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) March 31, 2000 6. Investments (continued) INVESTMENT VALUATION SUMMARY CONVERSION FAIR COST OR FACE VALUE VALUE The Dwyer Group, Inc. Common Stock 1,966,631 1,940,625 1,921,219 eOriginal, Inc. 5% Convertible Preferred Stock, Series B-3 107,280 107,280 107,280 5% Convertible Preferred Stock, Series B-1 392,700 392,700 392,700 5% Convertible Preferred Stock, Series A 1,500,000 1,500,000 1,500,000 Warrants to purchase 659 shares 165 165 165 Fortune Natural Resources Corp. Common Stock 545,500 909,146 841,094 Warrants to purchase 200,000 shares -0- -0- -0- Grand Adventures Tour & Travel Publishing Corp. 10% Convertible Debenture 350,000 666,667 576,667 Common Stock 130,089 227,500 225,225 Integrated Security Systems, Inc. Promissory Notes 490,000 520,601 496,265 9% Convertible Debenture 2,084,101 2,254,170 2,133,955 9% Convertible Preferred Stock 150,000 133,605 133,605 Common Stock 215,899 233,517 231,182 Warrants to purchase 814,299 shares 3,750 20,071 19,092 Interscience Computer Corporation Common Stock 4,625,000 17,156,250 16,744,062 Warrants to purchase 500,000 shares -0- 500,000 500,000 JAKKS Pacific, Inc. Common Stock 3,324,126 12,644,670 12,518,223 Laserscope 8% Convertible Debenture 1,500,000 2,362,560 2,170,806 Medical Action Industries, Inc. Common Stock 555,392 580,000 574,200 Play by Play Toys & Novelties, Inc. 8% Convertible Debenture 2,500,000 2,500,000 2,500,000 Poore Brothers, Inc. 9% Convertible Debenture 859,047 1,610,713 1,514,070 Common Stock 1,104,123 2,010,580 1,839,945 Warrants to purchase 85,000 shares -0- 44,375 41,713 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements (Continued) March 31, 2000 6. Investments (continued) INVESTMENT VALUATION SUMMARY CONVERSION FAIR COST OR FACE VALUE VALUE RailAmerica, Inc. 6% Convertible Debenture 500,000 500,000 500,000 Warrants to purchase 15,000 shares -0- -0- -0- Simtek Corporation Common Stock 195,000 2,281,300 2,094,422 SiVault, Inc. Common Stock 350,000 350,000 350,000 ThermoView Industries, Inc. Common Stock 500,000 131,250 73,375 Voice It Worldwide, Inc. Investment 3,496,400 2,459,400 750,000 ----------- ----------- ---------- $36,180,473 $72,062,593 $68,173,271 <FN> Generally, pursuant to procedures established by the Investment Advisor, the fair value of each investment will be initially based upon its original cost to the Fund. Costs will be the primary factor used to determine fair value until significant developments affecting the investee company provide a basis for use in an appraisal valuation. The fair value of debt securities and preferred securities convertible into common stock is the sum of (a) the value of such securities without regard to the conversion feature, and (b) the value, if any, of the conversion feature. The fair value of debt securities without regard to conversion features is determined on the basis of the terms of the debt security, the interest yield and the financial condition of the issuer. The fair value of preferred securities without regard to conversion features is determined on the basis of the terms of the preferred security, its dividend, and its liquidation and redemption rights. The fair value of the conversion features of a security, if any, are based on fair values as of this date less an allowance, as appropriate, for costs of registration, if any, and selling expenses. Publicly traded securities, or securities that are convertible into publicly traded securities, are valued at the last sale price, or at the average closing bid and asked price, as of the valuation date. While these valuations are believed to represent fair value, these values do not necessarily reflect amounts which may be ultimately realized upon disposition of such securities. </FN> ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (1) Material Changes in Financial Condition The following portfolio transactions are noted for the quarter ended March 31, 2000 (portfolio companies are herein referred to as the "Company"): Bentley Pharmaceuticals, Inc. (BNT) In the first quarter ended March 31, 2000, the Company called all of its outstanding 12% Convertible Senior Subordinated Debentures due February 13, 2006. Upon notice of the call, the Fund had the option to convert its debentures into common stock of the Company at a rate of $2.50 per share or to have the debentures redeemed at a value equal to 105% of par plus accrued interest, which equaled $1,050 per $1,000 worth of debentures plus accrued interest. The Fund chose to convert all of its debentures, having a principal amount of $800,000, into 320,000 shares of common stock, increasing the Fund's total ownership of Bentley common stock to 865,100 shares. Renaissance US Growth and Income Trust PLC ("RUSGIT") also converted its remaining debentures in the Company into shares of common stock pursuant to the redemption provisions of the Convertible Debenture and Loan Agreements. CEREUS Technology Partners, Inc. (CEUS) In the first quarter of 2000, the Fund invested $512,500 into 102,500 shares of CEREUS common stock and also received warrants to purchase 102,500 shares of the Company's common stock. The common stock position is unregistered and restricted from transfer pursuant to Rule 144 of the Securities Act of 1933. The warrants are exercisable at $10.00 per share on or before February 2003 and are subject to a call provision allowing the Company to call the warrants at any time following the date of issuance if the Company's common stock is bid at a 100% premium to the exercised price of the warrant for twenty consecutive business days. The warrant call provision will not take effect until after one year from the February 2000 issuance date unless a registration statement covering the shares of common stock underlying the warrants is then in effect. The Fund does have piggyback registration rights with regard to both the common stock and the warrants. Also in the first quarter of 2000, RUSGIT purchased 102,500 shares of CEREUS common stock and 102,500 warrants to purchase the Company's common stock under the same terms and conditions as the Fund's investment. Dexterity Surgical, Inc. (DEXT) In the first quarter of 2000, the Fund had the conversion price on its convertible debenture reduced from $1.60 per share to $1.00 per share and also agreed to take payment of interest owing on the debentures in common stock of the Company at a rate of $1.00 per share. The total shares received for the interest was 135,000 shares, and represents interest the Company is obligated to pay from February 1, 2000 through January 31, 2001. RUSGIT also had the conversion price on its convertible debenture reduced from $1.60 to $1.00 per share and also agreed to take payment of interest in shares of the Company's common stock under the same terms and conditions as the Fund's agreement. eOriginal, Inc. In the first quarter of 2000, the Fund invested an additional $107,280 to purchase 447 shares of the Company's Series B-3 Cumulative Convertible Preferred Stock (the "Preferred"). The Preferred entitles the Fund to a 5% cumulative dividend as well as voting rights and a liquidation preference equal to 100% of the dollar amount invested by the Fund. The Preferred also contains anti-dilution provisions, provides for automatic conversion into the Company's common stock in the event of a qualified initial public offering, and may be redeemed by the Company at any time after December 31, 2000 in an amount equal to 125% of the Fund's liquidation preference. The Preferred is convertible into the Company's common stock at $240 per share. In addition to the Fund's investment in the Preferred, RUSGIT also invested an additional $107,040 to purchase 446 shares of the Company's Series B-3 Cumulative Convertible Preferred Stock. With the exception of the dollar amount invested, the investment was made under identical terms and conditions as the Fund's investment. Fortune Natural Resources Corporation (FPXA) In February 2000, the Fund agreed to convert all of its convertible debentures, having a cost basis of $350,000, into 1,061,728 shares of the Company's common stock. As additional consideration for the Fund's willingness to convert, it received one year's worth of future interest payments on the debentures paid in common stock of the Company at $0.75 per share, giving the Fund an additional 56,000 shares. Finally, the Fund agreed to convert interest that had accrued on the debentures in January 2000 into common stock of the Company at a rate of $0.75 per share giving the Fund an additional 4,666 shares of common stock. Also in February 2000, the Fund agreed to invest an additional $150,000 to purchase 200,000 shares of the Company's common stock at $0.75 per share and as additional consideration the Fund received warrants to purchase 200,000 shares of the Company's common stock on or before February 2003. Warrants on 100,000 shares are exercisable at $1.50 per share while warrants on the second tranche of shares are exercisable at $2.25 per share. These positions are all unregistered securities and are restricted from transfer pursuant to Rule 144 of the Securities Act of 1933. RUSGIT also participated in the debenture conversion and further invested an additional $150,000 to purchase 200,000 shares of the Company's common stock and 200,000 warrants. The conversion as well as the new investments were made under identical terms and conditions as the Fund's conversion and investments. Integrated Security Systems, Inc. (IZZI) In January 2000, the Fund agreed not to convert or receive scheduled principal repayments on the debenture obligations due from the Company for the period December 1999 through March 2000. RUSGIT also agreed not to convert or receive scheduled principal repayments on the debenture obligations of the Company from December 1999 through March 2000 under identical terms and conditions as the Fund's agreement. CaminoSoft Corporation (aka Interscience Computer Corp.) (IEIC) In the first quarter of 2000, the Fund exercised its 250,000 share warrant by paying the Company $125,000 in exchange for 250,000 shares of common stock. In February 2000, the Fund participated in a private placement by purchasing an additional 250,000 shares of the Company's common stock for $500,000. The shares are unregistered and are restricted from transfer pursuant to Rule 144 of the Securities Exchange Act of 1933. At December 31, 1999, RUSGIT did not have an investment in the Company. Subsequent to the year end, RUSGIT participated in the Company's February 2000 private placement by investing $1,000,000 to purchase 500,000 shares of the Company's common stock. With the exception of the amount invested, RUSGIT's investment was made under identical terms and conditions as the Fund's investment in the private placement. Laserscope (LSCP) Effective February 11, 2000, the Fund invested $1,000,000 in 8% Convertible Debentures of the Company, maturing February 11, 2007, and convertible into the Company's common stock at $1.25 per share. The debentures have mandatory monthly principal repayments beginning February 11, 2002 and continuing on the first day of each successive month thereafter prior to maturity, and are secured by substantially all of the assets of the Company. The debentures may be redeemed by the Company at 101% of par if certain price and volume thresholds are met, as defined, and other conditions are met relating to the market for the Company's shares including, but not limited to, a full registration of the underlying shares. The redemption right is subject to the Fund's right to convert the debentures into the Company's common stock. The debentures have standard anti-dilution provisions and also contain a one-time adjustment to the conversion price if the Company fails to meet its budgeted pretax income level for the year ending December 31, 2000, and the closing bid price of the common stock as defined is below the Fund's conversion price in effect at the time of the automatic reset. In addition to the Fund's investment in the Company, RUSGIT also invested $1,500,000 into the 8% Convertible Debentures of the Company, which investment was made under identical terms and conditions as the Fund's investment. Medical Action Industries, Inc. (MDCI) In the first quarter of 2000, the Fund purchased an additional 56,200 shares of the Company's common stock on the open market for $202,268, or $3.60 per share. RUSGIT also purchased an additional 56,200 shares of the Company's common stock on the open market in the first quarter of 2000 for $202,268, or $3.60 per share. Simtek Corporation (SRAM) In the first quarter of 2000, the Fund converted its entire $750,000 debenture position into 3,846,154 shares of the Company's common stock. Also in the first quarter, the Fund sold 2,846,154 shares of the Company's common stock pursuant to Rule 144 of the Securities Act of 1933 and realized proceeds of $8,565,675, representing a gain to the Fund before incentive fees of $8,010,675. RUSGIT also converted its entire debenture position into 3,846,154 shares of the Company's common stock in the first quarter of 2000, and also sold 2,846,154 shares in the open market realizing identical proceeds and gains as the Fund. Voice-It Worldwide Inc. (Liquidating) Effective January 19, 2000, the Bankruptcy Court approved a joint liquidation plan for the Company, which liquidation is proceeding. We cannot say when the liquidation and dissolution will be complete, but we expect it to occur sometime this year. We are also unable to quantify the amount of recovery to the Fund at this time, but we are following the matter closely and at this time we estimate the recovery to be at least $750,000, the fair value of the Voice It investments on the Fund's portfolio at March 31, 2000. We will continue to closely monitor the situation and reassess the value of the Fund's position as events warrant. (2) Material Changes in Operations Net investment income decreased $350,959 for the quarter ended March 31, 2000 in comparison to the three months ended March 31, 1999. This reported decrease is primarily attributable to a conversion of debt investments to common stock resulting in a decrease of current income, along with an increase in operating expenses resulting from appreciation in portfolio assets. During the first quarter, the Fund experienced $25,104,421 of unrealized gains resulting from an increase in the fair value of its investments. Pending investment in portfolio investments, funds are invested in temporary cash accounts and in government securities. At March 31, 2000, all of these funds were held either in a money market fund made up of U.S. Treasury obligations or in triple-A rated obligations backed by the full faith and credit of the U.S. Government. During the quarter ended March 31, 2000, the Registrant paid dividend distributions to shareholders in the amount of $497,307. On April 7, 2000, the Fund declared a dividend of $1.54 per share payable June 9, 2000 to holders of record at May 26, 2000. The ex-dividend date is May 24, 2000. (3) Year 2000 In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Company completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company expensed approximately $3,000 during 1999 in connection with remediating its systems. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Fund has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. May 15, 2000 /S/ -------------------------------------------------- Russell Cleveland, President and Chairman May 15, 2000 /S/ -------------------------------------------------- Barbe Butschek, Corp. Secretary and Treasurer