UNITED STATES

SECURITIES AND EXCHANGE COMMISSION ~~WASHINGTON,~~

Washington, D.C. 20549 ~~FORM~~

________________

Form 10-Q ~~[x]~~

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR ~~15(D)~~ 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For ~~quarterly~~the equarterly period ended ~~September~~June 30, ~~2003 [ ]~~ 2006

o TRANSITION REPORT PURSUANT TO SECTION 1213 OR ~~15(D)~~ 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~transition~~Transition period from ~~__________~~________ to ~~__________~~ ________ .

Commission ~~File Number:~~file number: 0-20671 ~~RENAISSANCE CAPITAL GROWTH~~

Renaissance Capital Growth & ~~INCOME FUND~~Income Fund III, ~~INC. --------------------------------------------------------- (Exact~~Inc.

(Exact name of registrant as specified in its charter) Texas 75-2533518 --------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 8080 North Central Expressway, Dallas, Texas 75206-1857 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) 214-891-8294 --------------------------------------------------------- (Registrant's

TX	75-2533518
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8080 N. Central Expressway, Suite 210, LB-59, Dallas, TX	75206
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area ~~code)~~ code: 214-891-8294

None

(Former name, former address and former fiscal year

if changed since last report)

___________________

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,~~reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ~~__x__~~o No ~~_____ 4,351,718~~þ.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer £Accelerated filer £Non-accelerated filer S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ.

As of September 30, 2006, the issuer had 4,463,967 shares of common stock ~~were outstanding at November 14, 2003. 1~~ ~~The Registrant's Registration Statement on Form N-2 was declared effective by the Securities and Exchange Commission on May 6, 1994. 2~~ outstanding.

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

INDEX

PART I. FINANCIAL INFORMATION	Page Number

Item 1. Financial Statements (Unaudited)	3

Statements of Assets and Liabilities as of June 30, 2006 and December 31, 2005	3

Schedules of Investments as of June 30, 2006 and December 31, 2005	4

Statements of Operations for the three months and six months ended June 30, 2006 and 2005	15

Statements of Change in Net Assets for the six months ended June 30, 2006 and 2005	17

Statements of Cash Flows for the six months ended June 30, 2006 and 2005	18

Notes to Financial Statements	19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3. Quantitative and Qualitative Disclosures About Market Risk	28

Item 4. Controls and Procedures	28


PART II. OTHER INFORMATION

Item 1. Legal Proceedings	29

Item 1A. Risk Factors	29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3. Defaults Upon Senior Securities	32

Item 4. Submission of Matters to a Vote of Security Holders	32

Item 5. Other Information	32

Item 6. Exhibits	32

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Renaissance Capital Growth & Income Fund III, Inc.

Statements of Assets and Liabilities December 31,2002 September 30,2003 (audited) (unaudited) Assets Cash and cash equivalents $10,968,001 $34,221,579 Investments at fair value, cost of $32,918,344, and $31,557,897 at December 31, 2002 and September 30, 2003, respectively (note 7) 39,459,243 57,847,681 Interest and dividends receivable, net of reserves 28,409 207,974 Prepaid expenses 40,068 68,852 ----------- ----------- $50,495,721 $92,346,086 =========== =========== Liabilities and Net Assets Liabilities: Due to broker (note 4) 9,001,163 26,942,033 Accounts payable 12,106 6,401 Accounts payable - affiliate (note 5) 223,386 1,183,322 ----------- ----------- 9,236,655 28,131,756 =========== =========== Net assets: Common stock, $1 par value; authorized 20,000,000 shares; 4,561,618 issued; 4,351,718 shares outstanding 4,561,618 4,561,618 Additional paid-in-capital 35,642,954 35,642,954 Treasury stock at cost, 209,900 shares at December 31, 2002, and at September 30, 2003 (1,734,966) (1,734,966) Accumulated deficit (3,751,440) (545,060) Net unrealized appreciation of investments 6,540,900 26,289,784 Net assets, equivalent to $9.48 and $14.76 ------------ ------------ per share on the shares outstanding at December 31, 2002, and September 30, 2003, respectively 41,259,066 64,214,330 ----------- ----------- $50,495,721 $92,346,086 =========== ===========

(Unaudited)

ASSETS

	June 30, 2006			December 31, 2005

Cash and cash equivalents	$	18,763,599		$	8,396,052
Investments at fair value, cost of $36,473,779 and $35,433,480 at June 30, 2006 and December 31, 2005, respectively		39,888,708			54,002,499
Interest and dividends receivable		129,892			48,226
Prepaid and other assets		19,245			101,598

	$	58,801,444		$	62,548,375

LIABILITIES AND NET ASSETS

Liabilities:
Due to broker (Note 3)	$	—		$	2,075,975
Accounts payable		77,445			86,782
Accounts payable - affiliate		2,578,408			2,050,989
Accounts payable - dividends		—			4,145,686

		2,655,853			8,359,432

Commitments and contingencies

Net assets:
Common stock, $1 par value; authorized 20,000,000 shares; 4,673,867 issued; 4,463,967 shares outstanding		4,673,867			4,673,867
Additional paid-in-capital		31,873,320			32,681,024
Treasury stock at cost, 209,900 shares		(1,734,967	)		(1,734,967	)
Distributable earnings		17,918,442			—
Net unrealized appreciation of investments		3,414,929			18,569,019

Net assets, equivalent to $12.58 and $12.14 per share at June 30, 2006 and December 31, 2005, respectively		56,145,591			54,188,943

	$	58,801,444		$	62,548,375

See accompanying notes ~~to financial statements.~~

Renaissance Capital Growth & Income Fund III, Inc.

Schedules of Investments ~~September 30, 2003~~

(unaudited) ------------------------------------------------ Interest Due Fair % of Net Rate Date Cost Value Assets Eligible Portfolio Investments - Convertible Debentures and Promissory Notes Business Process Outsourcing - Convertible debenture (1)(3) 12.00 08/31/03 $ 98,000 $ 100,001 0.16 Dexterity Surgical, Inc. - Convertible debenture (2) 9.00 12/19/04 1,316,282 1,066,282 1.66 EDT Learning Inc. - Convertible redeemable note (2) 12.00 03/29/12 500,000 500,000 0.78 Integrated Security Systems, Inc. - Promissory

	June 30, 2006
	Interest Rate			Due Date		Cost		Fair Value		% of Net Investments
Eligible Portfolio Investments - Convertible Debentures and Promissory Notes

CaminoSoft Corp. - Promissory note (4)		7.00	%		07/19/06	$	250,000	$	250,000		0.63	%

iLinc Communications, Inc. - Convertible promissory note (2)		12.00			03/29/12		500,000		500,000		1.25

Integrated Security Systems, Inc. - Promissory note (4)		8.00			09/30/06		525,000		525,000		1.32
Promissory note (4)		7.00			09/30/06		200,000		200,000		0.50
Promissory note (4)		8.00			09/30/06		175,000		175,000		0.44
Convertible promissory note (2)		8.00			12/14/08		500,000		500,000		1.25

Simtek Corporation - Convertible debenture (2)		7.50			06/28/09		1,000,000		1,340,909		3.36

						$	3,150,000	$	3,490,909		8.75	%

See accompanying notes (4) 8.00 09/05/03 525,000 525,000 0.82 Laserscope - Convertible debenture (2) 8.00 02/11/07 1,300,000 12,097,800 18.84 Simtek Corporation - Debt (2) 7.50 06/28/09 1,000,000 2,330,128 3.63 ----------- ----------- ----- $ 4,739,282 $16,619,211 25.88 ----------- ----------- -----

Renaissance Capital Growth & Income Fund III, Inc.

Schedules of Investments

(unaudited)

	June 30, 2006
	Interest Rate			Due Date		Cost		Fair Value		% of Net Investments
Other Portfolio Investments - Convertible Debentures and Promissory Notes

Integrated Security Systems, Inc. - Convertible debenture (4)		6.00	%		06/16/09	$	400,000	$	400,000		1.00	%

Pipeline Data, Inc. - Convertible debenture (2)		8.00			06/29/10		500,000		573,077		1.44

						$	900,000	$	973,077		2.44	%

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc.

Schedules of Investments ~~September 30, 2003~~ (continued)

(unaudited) ~~------------------------------------------------ Interest Due Fair %~~

	June 30, 2006
	Shares		Cost		Fair Value		% of Net Investments
Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities

CaminoSoft Corp. - Common stock (2)		3,539,414	$	5,275,000	$	1,415,766		3.55

eOriginal, Inc. -
Series A, preferred stock (1)(2)(3)		10,680		4,692,207		332,575		0.83
Series B, preferred stock (1)(2)(3)		25,646		620,329		798,616		2.00
Series C, preferred stock (1)(2)(3)		51,249		1,059,734		1,595,894		4.01
Series D, preferred stock (1)(2)(3)		16,057		500,000		500,015		1.25

Gaming & Entertainment Group - Common stock (2)		612,500		550,625		122,500		0.31

Gasco Energy, Inc. - Common stock		1,541,666		1,250,000		6,690,830		16.77

Global Axcess Corporation - Common stock (2)		953,333		1,261,667		524,333		1.31

Hemobiotech, Inc. - Common stock (2)		1,137,405		1,143,882		1,649,237		4.13

Integrated Security Systems, Inc. - Common stock (2)		31,071,164		5,891,757		6,214,233		15.58
Series D, preferred stock (2)		187,500		150,000		37,500		0.09

Inyx, Inc. - Common stock		300,000		300,000		780,000		1.96

PracticeXpert, Inc. - Common stock (2)		4,166,667		500,000		58,333		0.15

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc.

Schedules of ~~Net Rate Date Cost Value Assets Other Portfolio~~ Investments ~~- Convertible Debentures and Promissory Notes Interpool,~~(continued)

(unaudited)

	June 30, 2006
	Shares		Cost		Fair Value		% of Net Investments
Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities, continued

Simtek Corp. - Common stock (2)		4,687,257		1,199,294		1,382,741		3.47

Symbollon Pharmaceuticals, Inc. - Common stock (2)		250,000		250,000		387,500		0.97

Miscellaneous Securities				-		1,452,251		3.64

			$	24,644,495	$	23,942,324		60.02	%

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc. - Convertible debenture (2) 9.25 12/27/22 $ 375,000 $ 375,000 0.58 ----------- ----------- ----- $ 375,000 $ 375,000 0.58 ----------- ----------- -----

Schedules of Investments (continued)

(unaudited)

	June 30, 2006
	Shares		Cost		Fair Value		% of Net Investments
Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities

AdStar, Inc. - Common stock		269,231	$	350,000	$	261,154		0.65	%

Advance Nanotech, Inc. - Common stock (2)		170,796		330,000		174,212		0.44

Bovie Medical Corporation - Common stock (2)		500,000		907,845		3,400,000		8.52

Comtech Group, Inc. -
Common stock (2)		240,000		840,000		2,671,200		6.70
Common stock		60,000		346,019		667,800		1.67

Hemobiotech, Inc. - Common stock		62,595		140,235		90,763		0.23

i2 Telecom - Convertible Preferred (2)		625		618,750		39,063		0.10

Information Intellect - Common stock (1)(2)(3)		666,666		999,999		999,999		2.51

iLinc Communications, Inc. - Common stock		23,266		13,908		12,098		0.03

Medical Action Industries, Inc. - Common stock		20,100		237,209		444,009		1.11

Metasolv, Inc. - Common stock		100,000		210,838		282,000		0.71

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc.

Schedules of Investments (continued)

(unaudited)

	June 30, 2006
	Shares		Cost		Fair Value		% of Net Investments
Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities, continued

Precis, Inc. - Common stock (2)		800,000		1,998,894		1,320,000		3.31

US Home Systems, Inc. - Common stock		110,000		535,587		1,057,100		2.65

Vaso Active Pharmaceuticals, Inc. - Common stock		150,000		250,000		63,000		0.16

				7,779,284		11,482,398		28.79	%

			$	36,473,779	$	39,888,708		100.00	%

Allocation of Investments - Restricted Shares, Unrestricted Shares, and Other Securities

Restricted Securities (2)			$	23,417,714	$	22,310,604		55.93	%
Unrestricted Securities			$	3,633,796	$	10,348,754		25.95	%
Other Securities (5)			$	9,422,269	$	7,229,350		18.12	%

(1)Valued at fair value as determined by the Investment Adviser ~~(note 7)~~(Note 6).

(2)Restricted securities - securities that are not fully registered and freely tradable.

(3)Securities in a privately owned company.

(4)Securities that have no provision allowing conversion into a security for which there is a public market. (5) Included Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and securities for which there is no market. 5 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments September 30, 2003 (unaudited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities Bentley Pharmaceuticals, Inc. - Common stock 200,000 $ 250,000 $ 3,227,400 5.02 CaminoSoft Corp. - Common stock 1,750,000 4,000,000 762,300 1.19 Common stock (2) 708,333 875,000 242,967 0.38 CareerEngine Network, Inc. - Common stock (2) 125,000 250,000 19,325 0.03 eOriginal, Inc. - Series A, preferred stock (1)(3) 10,680 4,692,207 770,383 1.20 Series B, preferred stock (1)(3) 25,646 620,329 1,849,928 2.88 Series C, preferred stock (1)(3) 28,929 699,734 2,086,741 3.25 New Series C, preferred stock (1)(3) 12,709 205,000 205,000 0.32 Fortune Natural Resources Corp. - Common stock 1,262,394 500,500 374,931 0.58 Gasco Energy, Inc. - Common stock 750,000 639,105 423,225 0.66 6 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments September 30, 2003 (unaudited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities Integrated Security Systems, Inc. - Common stock (2) 24,173,966 $ 4,973,166 $ 7,903,235 12.31 Series D, preferred stock (2) 187,500 150,000 78,750 0.12 JAKKS Pacific, Inc. - Common stock 49,847 297,421 606,493 0.94 Laserscope - Common stock 160,000 200,000 1,861,200 2.90 Poore Brothers, Inc. - Common stock (2) 1,686,357 1,748,170 7,557,258 11.77 Simtek Corp. - Common stock 1,000,000 195,000 782,100 1.22 ThermoView Industries, Inc. - Common stock 234,951 563,060 109,323 0.17 Miscellaneous Securities 165 762,989 1.19 ----------- ----------- ----- $20,858,857 $29,623,548 46.13 ----------- ----------- ----- (1) Valued at fair value as determined by the Investment Adviser (note 7). (2) Restricted securities - securities that are not fully registered and freely tradable. (3) Securities in a privately owned company. (4) Securities that have no provision allowing conversion into a security for which there is a public market. (5) Included Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and securities for which there is no market. 7 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments September 30, 2003 (unaudited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities AirNet Systems, Inc. - Common stock 9,900 $ 42,075 $ 39,204 0.06 Bentley Pharmaceuticals, Inc. - Common stock 72,979 91,224 1,177,662 1.83 Capital Senior Living Corp. - Common stock 57,100 146,335 245,336 0.38 Dave & Busters, Inc. - Common stock 100,000 653,259 1,019,700 1.59 EDT Learning, Inc. - Common stock 48,266 27,033 28,670 0.04 Flamel Technologies, SA - Common stock 100,000 832,267 3,337,290 5.20 Franklin Covey - Common stock 204,326 287,858 258,922 0.40 Gasco Energy, Inc. - Common stock 250,000 250,000 141,075 0.22 I-Flow Corporation - Common stock 100,000 254,038 1,048,410 1.63 8 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments September 30, 2003 (unaudited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities Inet Technologies, Inc. - Common stock 96,600 $ 530,338 $ 1,226,984 1.91 Medical Action Industries, Inc. - Common stock 25,000 292,329 319,770 0.50 Precis, Inc. - Common stock 200,700 1,372,417 673,569 1.05 Stonepath Group, Inc. - Common stock (2) 200,000 270,000 429,400 0.67 US Home Systems, Inc. - Common stock 110,000 535,587 1,283,931 2.00 Miscellaneous Securities 0 0 0.00 ----------- ----------- ----- $ 5,584,760 $11,229,923 17.49 ----------- ----------- ----- $31,557,899 $57,847,682 90.09 =========== =========== ===== 9 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments September 30, 2003 (unaudited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Allocation of Investments - Restricted Shares, Unrestricted Shares, and Other Securities Restricted Securities (2) $12,757,618 $32,600,145 50.77 Unrestricted Securities 11,959,843 18,947,495 29.51 Other Securities (5) 6,840,435 6,300,042 9.81 (1) Valued at fair value as determined by the Investment Adviser (note 7). (2) Restricted securities - securities that are not fully registered and freely tradable. (3) Securities in a privately owned company. (4) Securities that have no provision allowing conversion into a security for which there is a public market. (5) Included Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and securities for which there is no market. 10 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments December 31, 2003 (audited) ------------------------------------------------ Interest Due Fair % of Net Rate Date Cost Value Assets Eligible Portfolio Investments - Convertible Debentures and Promissory Notes Active Link Communications, Inc. - Convertible bridge note (2) 12.00 09/30/03 $ 41,480 $ 41,789 0.10 Convertible note (2) 8.00 09/30/03 125,000 126,000 0.31 Convertible note (2) 8.00 09/30/03 250,000 252,000 0.61 Business Process Outsourcing - Convertible debenture (1)(3) 12.00 08/31/03 98,000 100,000 0.24 Dexterity Surgical, Inc. - Convertible debenture (2) 9.00 12/19/04 1,316,282 1,066,282 2.58 EDT Learning, Inc. - Convertible redeemable note (2) 12.00 03/29/12 500,000 500,000 1.21 eOriginal, Inc. - Promissory note (3) 12.00 12/31/02 1,139,683 1,139,683 2.76 Integrated Security Systems, Inc. - Promissory notes (4) 8.00 09/05/03 325,000 325,000 0.79 Laserscope - Convertible debenture (2) 8.00 02/11/07 1,500,000 5,026,000 12.18 Simtek Corporation - Convertible debenture (2) 7.50 06/28/09 1,000,000 1,000,000 2.42 ----------- ----------- ----- $ 6,295,445 $ 9,576,754 23.21 ----------- ----------- ----- 11 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments December 31, 2003 (audited) ------------------------------------------------ Interest Due Fair % of Net Rate Date Cost Value Assets Other Portfolio Investments - Convertible Debentures and Promissory Notes CareerEngine Network, Inc. - Convertible debenture (2) 12.00 03/31/10 $ 250,000 $ 250,000 0.61 Interpool, Inc. - Convertible debenture (2) 9.25 12/27/22 375,000 375,000 0.91 ----------- ----------- ----- $ 625,000 $ 625,000 1.51 ----------- ----------- ----- (1) Valued at fair value as determined by the Investment Adviser (note 7). (2) Restricted securities - securities that are not fully registered and freely tradeable. (3) Securities in a privately owned company. (4) Securities that have no provision allowing conversion into a security for which there is a public market. (5) Included Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and securities for which there is no market. 12 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments December 31, 2003 (audited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities Bentley Pharmaceuticals, Inc. - Common stock 400,000 $ 500,000 $ 3,187,800 7.73 CaminoSoft Corp. - Common stock 1,750,000 4,000,000 1,559,250 3.78 Common stock (2) 708,333 875,000 549,250 1.33 Dexterity Surgical, Inc. - Preferred stock - A (2) 500 500,000 0 0.00 Preferred stock - B (2) 500 500,000 0 0.00 Common stock (2) 260,000 635,000 0 0.00 eOriginal, Inc. - Series A, preferred stock (5) 6,000 1,500,000 794,000 1.92 Series B-1, preferred stock (5) 1,785 392,700 1,426,215 3.46 Series B-3, preferred stock (5) 447 107,280 357,153 0.87 Series C-1, preferred stock (5) 2,353 2,000,050 2,000,050 4.85 Fortune Natural Resources Corp. - Common stock 1,262,394 500,500 81,235 0.20 Gasco Energy, Inc. - Common stock (2) 250,000 250,000 112,150 0.27 Integrated Security Systems, Inc. - Common stock 393,259 215,899 93,438 0.23 Common stock - PIK (2) 104,787 28,319 23,640 0.06 Series D, preferred stock (2) 187,500 150,000 54,000 0.13 Series F, preferred stock (2) 2,714,945 542,989 612,492 1.48 Series G, preferred stock (2) 18,334,755 3,666,951 4,086,321 9.90 13 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments December 31, 2003 (audited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities JAKKS Pacific, Inc. - Common stock 59,847 $ 357,088 $ 798,078 1.93 Poore Brothers, Inc. - Common stock (2) 2,016,357 2,078,170 4,669,485 11.32 Simtek Corp. - Common stock (2) 1,000,000 195,000 150,400 0.36 ThermoView Industries, Inc. - Common stock 134,951 497,832 120,241 0.29 Miscellaneous Securities 2,165 462,349 1.12 ----------- ----------- ----- $19,494,943 $21,137,547 51.23 ----------- ----------- ----- (1) Valued at fair value as determined by the Investment Adviser (note 7). (2) Restricted securities - securities that are not fully registered and freely tradeable. (3) Securities in a privately owned company. (4) Securities that have no provision allowing conversion into a security for which there is a public market. (5) Included Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and securities for which there is no market. 14 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments December 31, 2003 (audited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities AirNet Systems, Inc. - Common stock (2) 75,000 $ 318,750 $ 296,860 0.72 Bentley Pharmaceuticals, Inc. - Common stock 259,979 535,168 2,071,902 5.02 Canterbury Consulting Group, Inc. - Common stock 200,000 193,473 51,480 0.12 Capital Senior Living Corp - Common stock 44,500 110,975 112,340 0.27 Creative Host Services, Inc. - Common stock 4,830 7,921 9,085 0.02 Daisytek International, Inc. - Common stock 49,600 507,639 389,395 0.94 Dave & Busters, Inc. - Common stock 100,000 653,259 856,350 2.08 Dwyer Group, Inc. - Common stock 675,000 1,966,632 2,559,397 6.20 EDT Learning, Inc. - Common stock 48,266 27,033 14,335 0.03 I-Flow Corporation - Common stock 100,000 254,038 154,440 0.37 15 Renaissance Capital Growth & Income Fund III, Inc. Schedules of Investments December 31, 2003 (audited) ----------------------------------------------- Fair % of Net Shares Cost Value Assets Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities Inet Technologies, Inc. - Common stock 75,000 $ 367,434 $ 452,925 1.10 Precis, Inc. - Common stock 100,700 1,025,047 550,305 1.33 US Home Systems, Inc. - Common stock 110,000 535,587 601,128 1.46 Miscellaneous Securities 0 0 0.00 ----------- ----------- ----- $ 6,502,956 $ 8,119,942 19.68 ----------- ----------- ----- $32,918,344 $39,459,243 95.64 =========== =========== ===== Allocation of Investments - Restricted Shares, Unrestricted Shares, and Other Securities Restricted Securities (2) $15,097,941 $19,191,669 46.52 Unrestricted Securities $12,255,525 $13,663,124 33.12 Other Securities (5) $ 5,564,878 $ 6,604,450 16.01 (1) Valued at fair value as determined by the Investment Adviser (note 7). (2) Restricted securities - securities that are not fully registered and freely tradeable. (3) Securities in a privately owned company. (4) Securities that have no provision allowing conversion into a security for which there is a public market.

(5) Includes Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and securities for which there is no market. 16

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc. ~~Statements~~

Schedules of Operations (Unaudited) Three Months Ended September 30, 2002 2003 ---- ---- Income: Interest ($ 10,405) $ 88,396 Dividend income 16,396 46,706 Commitment and other fees 20,000 2,423 ----------- ----------- 25,991 137,525 ----------- ----------- Expenses (note 5): General and administrative 84,886 71,164 Incentive fee 0 794,919 Interest expense 9,813 20,979 Legal and professional fees 28,784 21,879 Management fees 190,870 287,577 ----------- ----------- 314,353 1,196,518 ----------- ----------- Net investment income (loss) ( 288,362) ( 1,058,993) ----------- ----------- Realized and unrealized gain (loss) on investments: Net unrealized appreciation (depreciation) on investments ( 10,732,012) 11,248,447 Net realized gain on investments 0 3,974,597 ----------- ----------- Net gain on investments ( 10,732,012) 15,223,044 ----------- ----------- Net income ($11,020,374) $14,164,050 =========== =========== Net income per share (note 2(e)) ($ 2.53) $ 3.25 =========== =========== Investments (continued)

	December 31, 2005
	Interest Rate		Due Date		Cost		Fair Value		% of Net Investments
Eligible Portfolio Investments - Convertible Debentures and Promissory Notes

CaminoSoft Corp. - Promissory note (4)		7.00		07/19/06	$	250,000	$	250,000		0.46	%

iLinc Communications, Inc. - Convertible promissory note (2)		12.00		03/29/12		500,000		500,000		0.93

Integrated Security Systems, Inc. -
Promissory note (4)		8.00		09/30/06		525,000		525,000		0.97
Promissory note (4)		7.00		09/30/06		200,000		200,000		0.37
Promissory note (4)		8.00		09/30/06		175,000		175,000		0.33
Convertible promissory note (2)		8.00		12/14/08		500,000		400,000		0.74

Simtek Corporation - Convertible debenture		7.50		06/28/09		1,000,000		1,000,000		1.85

					$	3,150,000	$	3,050,000		5.65	%

See accompanying notes ~~to financial statements. 17~~

Renaissance Capital Growth & Income Fund III, Inc. ~~Statements~~

Schedules of Operations (Unaudited) Nine Months Ended September 30, 2002 2003 ---- ---- Income: Interest $ 175,700 $ 435,884 Dividend income 59,635 1,207,937 Commitment and other fees 20,000 3,975 ----------- ----------- 255,335 1,647,796 ----------- ----------- Expenses (note 5): General and administrative 331,496 264,344 Incentive fee 0 991,179 Interest expense 54,213 59,422 Legal and professional fees 194,074 102,393 Management fees 669,183 674,456 ----------- ----------- 1,248,966 2,091,794 ----------- ----------- Net investment income (loss) ( 993,631) ( 443,998) ----------- ----------- Realized and unrealized gain (loss) on investments: Net unrealized appreciation (depreciation) on investments ( 7,926,503) 19,748,883 Net realized gain (loss) on investments ( 3,424,391) 4,955,896 ----------- ----------- Net gain (loss) on investments ( 11,350,894) 24,704,779 ----------- ----------- Net income (loss) ($12,344,525) $24,260,781 =========== =========== Net income (loss) per share (note 2(e)) ($ 2.84) $ 5.57 =========== =========== Investments (continued)

	December 31, 2005
	Shares		Cost		Fair Value		% of Net Investments
Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities

CaminoSoft Corp. - Common stock		3,539,414	$	5,275,000	$	3,433,232		6.36

eOriginal, Inc. -
Series A, preferred stock (1)(2)(3)		10,680		4,692,207		332,575		0.62
Series B, preferred stock (1)(2)(3)		25,646		620,329		798,616		1.48
Series C, preferred stock (1)(2)(3)		51,249		1,059,734		1,595,894		2.96
Series D, preferred stock (1)(2)(3)		16,057		500,000		500,015		0.93

Gaming & Entertainment Group - Common stock (2)		612,500		550,625		79,625		0.15

Gasco Energy, Inc. - Common stock		1,541,667		1,250,000		10,067,086		18.64

Global Axcess Corporation - Common stock (2)		953,333		1,261,667		1,134,466		2.10

Hemobiotech, Inc. - Common stock (2)		549,165		520,347		1,180,705		2.19

Information Intellect - Common stock (1)(2)(3)		666,666		999,999		999,999		1.85

Integrated Security Systems, Inc. -
Common stock (2)		30,737,482		5,846,422		6,147,496		11.38
Series D, preferred stock (2)		187,500		150,000		45,000		0.08

See accompanying notes ~~to financial statements. 18~~

Renaissance Capital Growth & Income Fund III, Inc. ~~Statement~~

Schedules of Changes in Net Assets (Unaudited) Three Months Ended September 30, 2002 2003 ---- ---- From operations: Net investment income (loss) ($ 288,362) ($ 1,058,993) Net realized gain (loss) on investments 0 3,974,597 Increase (decrease) in unrealized appreciation on investments ( 10,732,012) 11,248,447 ----------- ----------- Net increase (decrease) in net assets resulting from operations ( 11,020,374) 14,164,051 ----------- ----------- From distributions to stockholders: Common dividends * 0 ( 435,172) ----------- ----------- Net decrease in net assets resulting from distributions 0 ( 435,172) ----------- ----------- Total increase (decrease) in net assets ( 11,020,374) 13,728,879 Net assets: Beginning of period 53,213,357 50,485,451 ----------- ----------- End of period $42,192,983 $64,214,330 =========== =========== * Source of distributions not determinable at September 30, 2003; will be characterized at year end. Investments (continued)

	December 31, 2005
	Shares		Cost		Fair Value		% of Net Investments
Eligible Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities, continued

Inyx, Inc. - Common stock (2)		300,000		300,000		564,000		1.04

Laserscope - Common stock		600,000		750,000		13,476,000		24.95

PracticeXpert, Inc. - Common stock (2)		4,166,667		500,000		108,333		0.20

Simtek Corp. -
Common stock		1,550,661		695,000		449,692		0.83
Common stock (2)		3,125,000		500,000		906,250		1.68

Miscellaneous Securities				-		1,960,473		3.63

			$	25,471,330	$	43,779,457		81.07	%

See accompanying notes ~~to financial statements. 19~~

Renaissance Capital Growth & Income Fund III, Inc. ~~Statement~~

Schedules of Changes in Net Assets (Unaudited) Nine Months Ended September 30, 2002 2003 ---- ---- From operations: Net investment income (loss) ($ 993,631) ($ 443,998) Net realized gain (loss) on investments ( 3,424,391) 4,955,896 Increase (decrease) in unrealized appreciation on investments ( 7,926,503) 19,748,882 ------------ ----------- Net increase (decrease) in net assets resulting from operations ( 12,344,525) 24,260,780 ----------- ----------- From distributions to stockholders: Common dividends * 0 ( 1,305,516) ----------- ----------- Net decrease in net assets resulting from distributions 0 ( 1,305,516) ----------- ----------- Total increase (decrease) in net assets ( 12,344,525) 22,955,264 Net assets: Beginning of period 54,537,508 41,259,066 ----------- ----------- End of period $42,192,983 $64,214,330 =========== =========== * Source of distributions not determinable at September 30, 2003; will be characterized at year end. Investments (continued)

	December 31, 2005
	Shares		Cost		Fair Value		% of Net Investments
Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities

AdStar, Inc. - Common stock (2)		269,231	$	350,000	$	600,385		1.11	%

Advance Nanotech, Inc. - Common stock (2)		165,000		330,000		341,550		0.63

Bovie Medical Corporation - Common stock (2)		500,000		904,545		1,490,000		2.76

Comtech Group, Inc. - Common stock (2)		300,000		1,186,019		1,863,000		3.45

i2 Telecom - Convertible Preferred (2)		625		618,750		50,781		0.10

iLinc Communications, Inc. - Common stock		23,266		13,908		6,282		0.01

Medical Action Industries, Inc. - Common stock		20,100		237,209		410,844		0.76

Metasolv, Inc. - Common stock		100,000		210,838		290,000		0.54

See accompanying notes ~~to financial statements. 20~~

Renaissance Capital Growth & Income Fund III, Inc. ~~Statement~~

Schedules of Cash Flows (unaudited) Three Months Ended September 30, 2002 2003 ---- ---- Cash flows from operation activities: Net income ($11,020,374) $14,164,050 Adjustments to reconcile net income to net cash providedInvestments (continued)

	December 31, 2005
	Shares		Cost		Fair Value		% of Net Investments
Other Portfolio Investments - Common Stock, Preferred Stock, and Miscellaneous Securities, continued

PhotoMedex, Inc. - Common stock		70,000		176,400		120,400		0.22

Precis, Inc. - Common stock		800,000		1,998,894		1,232,000		2.28

US Home Systems, Inc. - Common stock		110,000		535,587		701,800		1.30

Vaso Active Pharmaceuticals, Inc. - Common stock		150,000		250,000		66,000		0.12

				6,812,150		7,173,042		13.28	%

			$	35,433,480	$	54,002,499		100.00	%

Allocation of Investments - Restricted Shares, Unrestricted Shares, and Other Securities

Restricted Securities (2)			$	14,018,375	$	15,411,591		28.54	%
Unrestricted Securities			$	12,392,836	$	31,253,336		57.87	%
Other Securities (5)			$	9,022,269	$	7,337,572		13.59	%

(1)Valued at fair value as determined by (used in) operations: Net unrealized (appreciation) depreciation on investments 10,732,012 ( 11,248,447) Net realized (gain) loss on investments 0 ( 3,974,597) (Increase) decreasethe Investment Adviser (Note 6).

(2)Restricted securities - securities that are not fully registered and freely tradable.

(3)Securities in ~~interest~~a privately owned company.

(4)Securities that have no provision allowing conversion into a security for which there is a public market.

(5) Includes Miscellaneous Securities, securities of privately owned companies, securities with no conversion feature, and dividends receivable 78,431 286,082 (Increase) decrease in other receivables 0 110,381 (Increase) decrease in other assets ( 57,978) ( 65,975) Increase (decrease) in accounts payable 2,297 ( 15,231) Increase (decrease) in accounts payable - affiliate ( 49,297) 838,569 Increase (decrease) in other liabilities ( 2,863,895) ( 7,549,571) Purchase of investments ( 1,217,143) ( 1,595,640) Proceeds from sale of investments 0 8,534,289 Repayment of debentures and notes 9,880 0 ----------- ----------- Net cash provided by (used in) operating activities ( 4,386,067) ( 516,089) ----------- ----------- Cash flows from financing activities: Cash dividends 0 ( 435,172) ----------- ----------- Net cash used in financing activities 0 ( 435,172) ----------- ----------- Net increase (decrease) in cash and cash equivalents ( 4,386,067) ( 951,261) Cash and cash equivalents at beginning of year 21,162,267 35,172,840 ----------- ----------- Cash and cash equivalents at end of period $16,776,200 $34,221,579 =========== =========== Cash paid during the yearsecurities for ~~interest $ 9,813 $ 20,979 Cash paid during the year for income/excise tax $ 0 $ 0~~ which there is no market.

See accompanying notes ~~to financial statements. 21~~

Renaissance Capital Growth & Income Fund III, Inc. ~~Statement~~

Statements of Cash Flows (unaudited) Nine Months Ended September 30, 2002 2003 ---- ---- Cash flows from operation activities: Net income ($12,344,525) $24,260,780 Adjustments to reconcile net income to net cash provided by (used in) operations: Net unrealized (appreciation) depreciation on investments 7,926,503 ( 19,748,884) Net realized (gain) loss on investments 3,424,391 ( 4,955,896) (Increase) decrease in interest and dividends receivable 63,853 ( 179,564) (Increase) decrease in other receivables 0 0 (Increase) decrease in other assets ( 45,110) ( 28,784) Increase (decrease) in accounts payable 4,163 ( 5,705) Increase (decrease) in accounts payable - affiliate ( 42,589) 959,936 Increase (decrease) in other liabilities ( 8,694,343) 17,940,871 Purchase of investments ( 5,202,187) ( 5,271,906) Proceeds from sale of investments 3,941,141 11,565,790 Repayment of debentures and notes 618,977 22,456 ----------- ----------- Net cash provided by (used in) operating activities ( 10,349,726) 24,559,094 ----------- ----------- Cash flows from financing activities: Cash dividends 0 ( 1,305,516) ----------- ----------- Net cash used in financing activities 0 ( 1,305,516) ----------- ----------- Net increase (decrease) in cash and cash equivalents ( 10,349,726) 23,253,578 Cash and cash equivalents at beginning of year 27,125,926 10,968,001 ----------- ----------- Cash and cash equivalents at end of period $16,776,200 $34,221,579 =========== =========== Cash paid during the year for interest $ 54,214 $ 59,422 Cash paid during the year for income/excise tax $ 25,779 $ 1,671 Operations

(Unaudited)

	Three Months Ended June 30,
	2006			2005
Income:
Interest income	$	54,278		$	87,874
Dividend income		67,758			43,689
Other income		8,668			16,946

		130,704			148,509

Expenses:
General and administrative		111,017			27,524
Interest expense		32,378			29,143
Legal and professional fees		175,124			47,749
Management fee to affiliate		246,715			274,731

		565,234			379,147

Net investment loss		(434,530	)		(230,638	)

Realized and unrealized gain (loss) on investments:
Net change in unrealized appreciation of investments		(14,928,440	)		908,113
Net realized gain on investments		17,623,044			96,311

Net gain in investments		2,694,604			1,004,424

Net income	$	2,260,074		$	773,786

Net income per share	$	0.51		$	0.17

Weighted average shares outstanding		4,463,967			4,463,967

See accompanying notes ~~to financial statements. 22~~

Renaissance Capital Growth & Income Fund III, Inc. ~~Statement~~

Statements of Operations

(Unaudited)

	Six Months Ended June 30,
	2006			2005
Income:
Interest income	$	119,333		$	171,762
Dividend income		110,223			61,044
Other income		23,777			67,571

		253,333			300,377

Expenses:
General and administrative		172,240			101,186
Interest expense		60,188			39,021
Legal and professional fees		343,147			179,602
Management fee to affiliate		485,462			548,024

		1,061,037			867,833

Net investment loss		(807,704	)		(567,456	)

Realized and unrealized gain (loss) on investments:
Net change in unrealized appreciation of investments		(15,154,090	)		(16,351,876	)
Net realized gain on investments		18,811,236			4,189,394

Net gain (loss) in investments		3,657,146			(12,162,482	)

Net income (loss)	$	2,849,442		$	(12,729,938	)

Net income (loss) per share	$	0.64		$	(2.86	)

Weighted average shares outstanding		4,463,967			4,445,259

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc.

Statements of Changes in Net Assets

(Unaudited)

	Six Months Ended June 30,
	2006			2005
From operations:
Net investment loss	$	(807,704	)	$	(567,456	)
Net realized gain on investments		18,811,236			4,189,394
Net decrease in unrealized appreciation on investments		(15,154,090	)		(16,351,876	)

Net income (loss)		2,849,442			(12,729,938	)

From distributions to stockholders:
Common dividends from realized capital gains		(892,794	)		(892,794	)

From capital transactions:
Sale of common stock		--			1,561,383

Total increase (decrease) in net assets		1,956,648			(12,061,349	)

Net assets:
Beginning of period		54,188,943			74,582,499

End of period	$	56,145,591		$	62,521,150

See accompanying notes

Renaissance Capital Growth & Income Fund III, Inc.

Statements of Cash Flows (unaudited) Periods ended September 30, 2002 and 2003 Noncash investing and financing activities: During the quarter ended March 31, 2003, the Fund received common stock in settlement of amounts due from interest and dividends totaling $891,417. During the quarter ended June 30, 2003, the Fund received common stock in settlement of amounts due from interest totaling $1,994. During the quarter ended September 30, 2003, the Fund received common stock in settlement of amounts due from interest totaling $498,155. During the quarter ended March 31, 2002, the Fund received common stock in settlement of amounts due from interest and dividends totaling $9,397. During the quarter ended June 30, 2002, the Fund received common stock in settlement of amounts due from interest totaling $6,745. During the quarter ended September 30, 2002, the Fund received common stock in settlement of amounts due from interest totaling $6,740.

(Unaudited)

	Six Months Ended June 30,
	2006			2005
Cash flows from operating activities:
Net income (loss)	$	2,849,442		$	(12,729,938	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operation activities:
Net decrease in unrealized appreciation on investments		15,154,090			16,351,876
Net realized gain on investments		(18,811,236	)		(4,189,394	)
Increase in interest and dividends receivable		(81,666	)		(43,591	)
(Increase) decrease in prepaid and other assets		82,352			(187,668	)
Decrease in accounts payable		(9,337	)		(46,188	)
Increase in accounts payable-affiliate		527,419			239,612
Decrease in due to broker		(2,075,975	)		(24,869,650	)
Purchase of investments		(1,966,699	)		(2,466,284	)
Proceeds from sale of investments		19,737,637			7,303,699

Net cash provided by (used in) operating activities		15,406,027			(20,637,526	)

Cash flows from financing activities:
Cash dividends		(5,038,480	)		(12,947,053	)
Sale of common stock		--			1,561,383

Net cash used in financing activities		(5,038,480	)		(11,385,670	)

Net increase (decrease) in cash and cash equivalents		10,367,547			(32,023,196	)

Cash and cash equivalents at beginning of the period		8,396,052			37,278,871

Cash and cash equivalents at end of period	$	18,763,599		$	5,255,675

Cash paid during the period Interest	$	60,188		$	39,021

See accompanying notes ~~to financial statements. 23~~

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

Notes to Unaudited Financial Statements ~~September~~

June 30, ~~2003 (1)~~ 2006

Note 1 - Organization and Business Purpose

Renaissance Capital Growth & Income Fund III, Inc. (the ~~Fund)~~“Fund”), a Texas corporation, was formed on January 20, 1994. 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 RENN Capital Group, Inc. (the “Investment Advisor”), believes offer the opportunity for growth. The Fund is a non-diversified closed-end fund ~~that~~and has elected to be treated as a ~~Business Development Company~~business development company under the Investment Company Act of 1940, as amended ~~(1940 Act)~~(“1940 Act”). The Fund, a Texas corporation, was organized in 1994 and commenced operations in 1995. The investment objective of the Fund is to provide its shareholders with current income and long-term capital appreciation by investing primarily in privately-placed convertible and equity securities of emerging growth public companies (portfolio companies). The Fund's investment adviser is RENN Capital Group, Inc. (Investment Adviser). (2)

Note 2 - Summary of Significant Accounting Policies ~~(a)~~

Basis of Presentation

We have prepared the accompanying unaudited interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission, which reflect all adjustments which, in the opinion of management, are necessary to present fairly the results for the interim periods. We have omitted certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to those rules and regulations, although we believe that the disclosures we have made are adequate to make the information presented not misleading. You should read these unaudited interim financial statements in conjunction with our audited financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2005.

The results of operations for the interim periods are not necessarily indicative of the results we expect for the full year.

Valuation of Investments

Portfolio investments are stated at quoted market or fair value as determined by the Investment Adviser ~~(note 7)~~(Note 6). The securities held by the Fund are primarily unregistered and their value does not necessarily represent the amounts that may be realized from their immediate sale or disposition. ~~(b)~~

Other

The Fund records security transactions on the trade date. Dividend income is recorded on the ~~ex-dividend~~record date. Interest income is recorded as earned on the accrual basis. ~~(c)~~

Cash and Cash Equivalents

The Fund considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. 24 ~~RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements September 30, 2003 (d)~~

Federal Income Taxes

The Fund has elected the special income tax treatment available to ~~"regulated~~“regulated investment ~~companies" ("RIC"~~companies” (“RIC”) under Subchapter M of the Internal Revenue Code ~~(IRC)~~(“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~~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~~Fund’s taxable investment income to its shareholders. It is the intent of management to comply with all IRC requirements as they pertain to the RIC and to distribute all of the Fund’s taxable investment income and long-term capital gains within the defined period under the IRC to qualify as a RIC. Failure to qualify as a RIC would subject the Fund to federal income tax as if the Fund were an ordinary corporation, which could result in a substantial reduction in the ~~Fund's~~Fund’s net assets as well as the amount of income available for distribution to shareholders. ~~(e) Net Income per Share Net income per share is based on the weighted average~~

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

Notes to Unaudited Financial Statements

June 30, 2006

Note 2 - Summary of ~~shares outstanding of 4,351,718 during the period. (f)~~ Significant Accounting Policies, continued

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements. Actual results could differ from these estimates. ~~(3) Reclassifications Certain reclassifications of prior period amounts have been made in the statement of cash flows to conform to the current period presentation. (4)~~

Note 3 - Due to Broker

The Fund conducts business with ~~a broker~~various brokers for its investment activities. The clearing and depository operations for the investment activities are performed pursuant to agreements with ~~this broker.~~these brokers. Due to broker represents a margin loan payable to ~~the broker,~~one of these brokers, which is secured by investments in securities maintained with the ~~broker.~~lending broker as collateral for the margin loan. Cash and cash equivalents related to the margin loan payable are held by the lending broker as additional collateral for the margin loan. The Fund is subject to credit risk to the extent the ~~broker is~~brokers are unable 25 ~~RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements September 30, 2003~~ to deliver cash balances or securities, or clear security transactions on the ~~Fund's~~Fund’s behalf. The Investment Adviser actively monitors the ~~Fund's~~Fund’s exposure to ~~the broker~~these brokers and believes the likelihood of loss under those circumstances is remote. ~~(5)~~

Note 4 - Management and Incentive Fees

The Investment Adviser for the Fund is registered as an investment adviser under the Investment Advisers Act of 1940. Pursuant to an Investment Advisory Agreement (the ~~Agreement)~~“Agreement”), the Investment Adviser performs certain services, including certain management, investment advisory and administrative services necessary for the operation of the Fund. In addition, under the Agreement, the Investment Adviser is reimbursed by the Fund for certain directly allocable administrative expenses. A summary of fees and reimbursements paid by the Fund under the Agreement, the prospectus and the original offering document are as follows: o

The Investment Adviser receives a management fee equal to a quarterly rate of 0.4375% of the Fund’s net assets, as determined at the end of such quarter with each such payment to be due as of the last day of the calendar quarter. The Fund incurred $485,462 and $548,024 for management fees during the six months ended June 30, 2006 and 2005, respectively.

The Investment Adviser receives an incentive fee in an amount equal to 20% of the Fund’s cumulative realized capital gains in excess of cumulative realized capital losses of the Fund after allowance for any unrealized capital depreciation on the portfolio investments of the Fund at the end of the period being calculated less cumulative incentive fees previously accrued. Unrealized capital depreciation equals net unrealized capital loss on each class of security without netting net unrealized capital gains on other classes of securities. Because the incentive fee is calculated, accrued, and paid on an annual basis as of each year end and no probability or estimate of the ultimate fee can be ascertained (see note 8), no incentive fee was recorded during the six months ended June 30, 2006 and 2005.

The Investment Adviser was reimbursed by the Fund for administrative expenses paid by the Investment Adviser on behalf of the Fund. Such reimbursements were $11,215 and $90,824 during the six months ended June 30, 2006 and 2005, respectively, and are included in general and administrative expenses in the accompanying statements of operations.

As of ~~0.4375% (1.75% annually)~~June 30, 2006 and December 31, 2005, the Fund had an accounts payable of ~~the Fund's Net Assets, as determined at the end of such quarter with each such payment to be due as of the last day of the calendar quarter. The Fund incurred $287,577~~$2,578,408 and ~~$190,870 for such management fees during the quarters ended September 30, 2003, and September 30, 2002,~~$2,050,989, respectively, ~~and $674,456 and $669,183~~ for the ~~nine months ended September 30, 2003, and September 30, 2002, respectively. Amounts payable~~amount due for ~~such fees at September 30, 2003, and September 30, 2002, were $287,577 and $185,405, respectively, and are included in Accounts payable - affiliate on~~ the statements of assets and liabilities. o The Investment Adviser receives an incentive fee in an amount equal to 20% of the Fund's realized capital gains in excess of realized capital losses of the Fund after allowance for any unrealized capital losses in excess of unrealized capital gains on the portfolio investments of the Fund. The incentive fee is calculated, accrued, and paid on a quarterly basis. The Fund incurred $794,919 during the quarter ended September 30, 2003, for such incentive fees and $919,179 for the nine months ended September 30, 2003. The Fund did not incur any incentive fees for the quarter ended September 30, 2002, or for the nine months ended September 30, 2002. Amounts payable for such fees at September 30, 2003 were $794,919, which are included in Accounts payable - affiliate on the statements of assets and liabilities. o The Investment Adviser was reimbursed by the Fund for administrative expenses paid by the Investment Adviser on behalf of the Fund. Suchexpense reimbursements ~~were $12,493 and $19,129 during the quarters ended September 30, 2003, and September 30, 2002, respectively, and $73,065 26~~ above.

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

Notes to Unaudited Financial Statements ~~September~~

June 30, 2003 and $59,801 for the nine months ended September 30, 2003, and September 30, 2002, respectively. Such reimbursements are included in general and administrative expenses in the accompanying statements of operations. (6) 2006

Note 5 - Eligible Portfolio Companies and Investments ~~(a)~~

Eligible Portfolio ~~Companies.~~ Companies

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) ~~of the 1940 Act.~~. Under the provisions of the 1940 Act at least 70% of the ~~fund's~~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 invested in ~~eligible portfolio investments,~~Eligible Portfolio Investments, then it will be prohibited from making ~~non- eligible~~non-eligible investments until such time as the percentage of eligible investments again exceeds the 70% threshold. ~~(b) Investments.~~ The Fund was in compliance with these provisions at June 30, 2006.

Investments

Investments are carried in the statements of assets and liabilities ~~as of December 31, 2002, and September 30, 2003,~~ at fair value, as determined in good faith by the Investment Adviser. 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.~~Fund. The common stock underlying these securities is generally unregistered and thinly to moderately traded, but is not otherwise restricted. Generally, the Fund may register and sell such securities at any time with the Fund paying the costs of registration. Interest on convertible securities ~~are~~is 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~~or other factors. ~~(7) Valuation of Investments~~

On a quarterly basis, ~~Renaissance Group~~the Investment Adviser prepares a valuation of the assets of the Fund, subject to the approval of the Board of ~~Directors.~~Directors of the Fund. The valuation principles are ~~as follows: 27~~ described below.

·	The common stock of companies listed on an exchange, Nasdaq or in the over-the-counter market is valued at the closing price on the date of valuation.

The unlisted preferred stock of companies with common stock listed on an exchange, Nasdaq or in the over-the-counter market is valued at the closing price of the common stock into which the preferred stock is convertible on the date of valuation. If the preferred stock is redeemable, the preferred stock is valued at the greater of cost or market.

The unlisted in-the-money options or warrants of companies with the underlying common stock listed on an exchange, Nasdaq or in the over-the-counter market are valued at the positive difference between the closing price of the underlying common stock and the strike price of the warrant or option. An out-of-the money warrant or option has no intrinsic value; thus, we assign no value to it.

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

Notes to Unaudited Financial Statements ~~September~~

June 30, ~~2003 o Generally, the guiding principle for valuation is the application~~2006

Note 6 - Valuation of objective standards. The objective standards for determining market prices and applying valuation methodologies will govern in all situations except where a debt issuer is in default. o Generally, 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 and absent special circumstances will typically be equal to the lower of cost or 120% of the value of the underlying common stock. The fair value of the conversion features of a security, if any, are based on fair values of the derivative securities as of the relevant date less an allowance, as appropriate, for costs of registration, if any, and selling expenses. o Portfolio investments for which market quotations are readily available and which are freely transferable are valued as follows: (i) securities traded on a securities exchange or the Nasdaq or in the over-the-counter market are valued at the closing price on, or the last trading day prior to, the date of valuation, and (ii) securities traded in the over-the-counter market that do not have a closing price on, or the last trading day prior to, the date of valuation are valued at the average of the closing bid and ask price for the last trading day on, or prior to, the date of valuation. Securities for which market quotations are readily available but are restricted from free trading in the public securities markets (such as Rule 144 stock) are valued by discounting the value for the last trading day on, or prior to, the date of valuation to reflect the liquidity caused by such restriction, but taking into consideration the existence, or lack thereof, of any contractual right to have the securities registered and freed from such trading restrictions. o Because there is no independent and objective pricing authority (i.e. a public market) for investments in privately held entities, the latest sale of equity securities by the entity governs the value of the enterprise. This valuation method causes the Fund's initial investment in the private entity to be valued at cost. Thereafter, new issuances of equity or equity-linked securities by a portfolio company will be used to determine enterprise value as they will provide the most objective and independent basis for determining the worth of the issuer. 28 RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. Notes to Financial Statements September 30, 2003 There can be no assurance that stated market fair values for private equities will stay constant, or that future equity raises will value the portfolio company at levels equal to or greater than the prior equity financing for the issuer. As a result, the Fund's valuation of a privately held portfolio company may be subject to downward adjustment that would directly impact the Fund's net asset value and which could result in a substantial reduction in the fund's net assets. o Where a portfolio company is in default on a debt instrument held by the Fund, and no market exists for that instrument, the fair value for the investment is determined on the basis of appraisal procedures established in good faith by the Investment, Adviser. This type of fair value determination is based upon numerous factors such as the portfolio company's earnings and net worth, market prices for comparative investments (similar securities in the market place), the terms of the Fund's investment, and a detailed assessment of the portfolio company's future financial prospects. In the event of unsuccessful operations by a portfolio company, the appraisal may be based upon an estimated net realizable value when that investment is liquidated continued

Debt securities are valued at the greater of (i) cost or (ii) the market value of the underlying common stock into which the debt instrument is convertible. In cases where the debt instrument is in default or the company is in bankruptcy, the value will be (i) the value of the underlying common stock, (ii) the value of the collateral, if secured, or (iii) zero, if the common stock has no value and there is no collateral.

If there is no independent and objective pricing authority (i.e. a public market) for investments in privately held entities, the latest sale of equity securities to independent third parties by the entity governs the value of that enterprise. This valuation method causes the Fund’s initial investment in the private entity to be valued at cost. Thereafter, new issuances or offers of equity or equity-linked securities by the portfolio company to new investors will be used to determine enterprise value as they will provide the most objective and independent basis for determining the worth of the issuer. Where a private entity does not have an independent value established over an extended period of time, then the Investment Adviser will determine fair value on the basis of appraisal procedures established in good faith and approved by the Fund’s Board of Directors.

As of ~~September~~June 30, ~~2003,~~2006 and December 31, ~~2002,~~2005, the net unrealized appreciation associated with investments held by the Fund was ~~$26,289,784,~~$3,414,929 and ~~$6,540,900,~~$18,569,019, respectively. ~~(8)~~ As of June 30, 2006 and December 31, 2005, the Fund had gross unrealized gains of $15,045,446 and $28,008,507, respectively, and gross unrealized losses of $11,630,517 and $9,439,488, respectively.

Note 7 - Restricted Securities

As indicated on the ~~statement~~schedules of investments as of ~~September~~June 30, ~~2003,~~2006 and December 31, ~~2002,~~2005, the Fund holds investments in shares of common stock, the sale of which is restricted. These securities have been valued by the Investment Adviser after considering certain pertinent factors relevant to the individual securities ~~(note 7)~~(See Note 6). ~~(9) Purchase~~

Note 8 - Commitments and Contingencies

As disclosed in Note 4, the Fund is obligated to pay to the Investment Advisor an incentive fee equal to 20% of ~~Additional Shares In accordance with~~the Fund’s cumulative realized capital gains in excess of cumulative capital losses of the Fund ~~guidelines, certain shareholders reinvested their dividends~~after allowance for any capital depreciation on the portfolio investments of the Fund. As incentive fees on capital gains are not due to the Investment Advisor until the capital gains are realized, any obligations for incentive fees based on unrealized capital gains are not reflected in the ~~Fund. The Fund issued~~accompanying financial statements as there is no ~~shares during~~assurance that the ~~three months and nine months ended September 30, 2003, under~~unrealized gains as of the ~~dividend reinvestment plan. (10) Distributions to Shareholders During the three months ended September 30, 2003,~~end of any period will ultimately become realized. Had an incentive fee been accrued as a liability based on all unrealized capital gains, net assets of the Fund distributed $435,172, resulting in total distributions for the nine months ended September 30, 2003, amounting to $1,305,516. The final tax characteristics 29 would have been reduced by $5,509,555 as of December 31, 2005.

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.

Notes to Unaudited Financial Statements ~~September~~

June 30, ~~2003 of these distributions cannot be determined at this time. The Fund made no distributions to shareholders during the three and nine months ended September 30, 2002. (11)~~ 2006

Note 9 - Financial Highlights - unaudited

Selected per share data and ratios for each share of common stock outstanding throughout the ~~three~~six months ended ~~September~~June 30, ~~2002,~~2006 and ~~2003,~~2005 are as follows: ~~2002 2003 ---- ---- Net asset value, beginning~~

	2006			2005

Net asset value, beginning of period	$	12.14		$	16.71
Net investment loss		(.18	)		(.13	)
Net realized and unrealized gain on investments		.82			(2.72	)

Total return from investment operations		.64			(2.85	)

Capital share transactions		--			.35
Distributions		(.20	)		(.20	)

Net asset value, end of period		12.58			14.01

Per share market value, end of period	$	10.65		$	11.55

Portfolio turnover rate		3.98	%		3.89	%
Quarterly return (a)		(3.18	%)		(10.81	%)
Ratio to average net assets (b):
Net investment income (loss)		(1.47	%)		0.85	%
Expenses		1.93	%		1.31	%

(a)	Six month return (not annualized) was calculated by comparing the common stock price on the first day of the period to the common stock price on the last day of the period, in accordance with American Institute of Certified Public Account guidelines.

(b)	Average net assets have been computed based on quarterly valuations.

Item 2. Management’s Discussion and Analysis of ~~period $ 12.20 $ 11.60 Net investment income (loss) $( 0.07) $( 0.24) Net realized~~Financial Condition and unrealized gain on investments $( 2.46) $ 3.50 -------- -------- Total return from investment operations $( 2.53) $ 3.26 -------- -------- Distributions: $ 0.00 $ 0.10 -------- -------- Net asset value, endResults of period $ 9.67 $ 14.76 ======== ======== Per share market value, end of period $ 8.94 $ 11.44 Portfolio turnover rate (quarterly) 0.02% 2.96% Quarterly return (a) -10.61% 22.35% Ratio to average net assets (quarterly) (b): Net investment income (loss) - 0.60% - 2.20% Expenses, excluding incentive fees 0.66% 0.84% Expenses, including incentive fees 0.66% 2.49% (a) Quarterly return (not annualized) was calculated by comparing the common stock price on the first day of the period to the common stock price on the last day of the period. (b) Average net assets have been computed based on quarterly valuations. 30 (10) Financial Highlights (continued) Selected per share data and ratios for each share of common stock outstanding throughout the nine months ended September 30, 2002, and 2003, are as follows: 2002 2003 ---- ---- Net asset value, beginning of period $ 12.50 $ 9.48 Net investment income (loss) $( 0.23) $( 0.10) Net realized and unrealized gain on investments $( 2.60) $ 5.68 -------- -------- Total return from investment operations $( 2.83) $ 5.58 -------- -------- Distributions $ 0.00 $ 0.30 -------- -------- Net asset value, end of period $ 9.67 $ 14.76 ======== ======== Per share market value, end of period $ 8.94 $ 11.44 Portfolio turnover rate (nine months) 8.75% 10.34% Nine-month return (a) -13.30% 45.55% Ratio to average net assets (semi-annually) (b): Net investment income (loss) - 1.93% - 0.92% Expenses, excluding incentive fees 2.43% 2.29% Expenses, including incentive fees 2.43% 4.35% (a) Nine month return (not annualized) was calculated by comparing the common stock price on the first day of the period to the common stock price on the last day of the period. (b) Average net assets have been computed based on quarterly valuations. 31 ~~ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~ Operations.

Material Changes in Portfolio Investments

The following material portfolio transactions ~~are noted for~~occurred during the quarter ended ~~September~~June 30, ~~2003: Active Link Communications,~~2006:

Advanced Refractive Technologies, Inc. ~~(OTC:ACVE) In~~(formerly VisiJet) (OTCPK:ARFR): During the ~~third~~second quarter of ~~2003,~~2006, the Fund ~~wrote off its entire investment~~received $64,416 in proceeds from the ~~Company realizing a tax loss in~~sale of debt securities of the ~~amount of $396,023. Airnet Systems,~~company which had previously been written-off.

Hemobiotech, Inc. ~~(NYSE:ANS)~~ (OTCBB:HMBT): During the ~~third~~second quarter of ~~2003,~~2006, the Fund sold 40,100 shares of Airnet common stock in the open market realizing proceeds of $172,585, representing a gain of $2,161. At September 30, 2003, the Fund had 9,900 shares of ANS remaining having a basis of $42,075, or $4.25 per share. Bentley Pharmaceuticals, Inc. (AMEX:BNT) In the third quarter of 2003, the Fund sold 200,000 shares of common stock in the open market realizing proceeds of $2,723,911, representing a gain of $2,448,552. At September 30, 2003, the Fund owned 272,979 shares of Bentley common stock with a basis of $341,224 or $1.25 per share. Canterbury Consulting Group, Inc. (NASDAQ:CITI) In the third quarter of 2003, the Fund exited its position in the Company by selling 18,521 shares of Canterbury common stock in the open market realizing proceeds of $12,594, representing a loss of $112,822. CNE Group, Inc. (AMEX:CNE) During the third quarter of 2003, the Company exchanged its outstanding debenture for 125,000 shares of the Company's common stock. At September 30, 2003, the Fund owned 125,000 shares of the Company's common stock with a basis of $250,000 or $2.00 per share and warrants to purchase 62,500 shares of the Company's common stock with an exercise price of $6.00 per share. Dexterity Surgical, Inc. (OTC:DEXT) In the third quarter of 2003, the Fund sold 500 shares of Series A Preferred Stock, 500 shares of Series B Preferred Stock, and 260,000 shares of the Company's common stock for a total of $0.50, representing a loss of $1,634,999.50. At September 30, 2003, the Fund owned $1,316,282 of the Company's 9% Convertible Debentures. The Dwyer Group, Inc. (NASDAQ:DWYR) In the third quarter of 2003, the Fund sold all of its remaining 575,000 shares of Dwyer common stock in the open market realizing proceeds of $3,759,132, representing a gain of $2,131,662. eOriginal, Inc. (Private) During the third quarter of 2003, the Fund made a follow-on investment in eOriginal by purchasing 12,709 shares of the Company's Series C Convertible Preferred Stock for $205,000. In 32 addition to these shares, at September 30, 2003, the Fund owned 10,680 shares Series A Convertible Preferred stock having a basis of $4,692,207; 25,646 shares Series B Convertible Preferred Stock with a basis of $620,329; 28,929 shares Series C Convertible Preferred Stock with a basis of $699,734; and 2,302 warrants to purchase shares of common stock of the Company having a basis of $165. Each series of Preferred of the Company is convertible one for one into common stock of eOriginal Holdings, and the warrants have an exercise price of $0.01 per share. Franklin Covey Co. (NYSE:FC) During the quarter ended September 30, 2003, the Fund purchased a total of 204,326 shares of the Company's common stock in the open market for $$287,858 or $1.41 per share. This is a new investment for the Fund. Franklin Covey is a global leader in effectiveness training, productivity tools, and assessment services for organizations and individuals. GascoEnergy, Inc. (OTC:GASE) In the quarter ended September 30, 2003, the Fund purchased an additional 580,000 shares of the Company's common stock in the open market for $539,400, a cost of $0.93 per share. At September 30, 2003, the Fund owned a total of 750,000 common shares having a basis of $639,105, or $0.85 per share purchased in the open market ~~and 250,000~~52,595 shares ~~at $1.00 per share that were purchased in a private placement.~~ of common stock for $118,015.

Integrated Security Systems, Inc. ~~(OTC:~~ (OTCBB:IZZI): In the ~~third~~second quarter of ~~2003,~~2006, the Fund received 160,294 shares of common stock ~~of the Company~~ as payment in kind for interest on promissory notes held by the Fund. The Fund also purchased a 6% convertible debenture for $400,000.

Laserscope, Inc. (Nasdaq:LSCP): During the second quarter of 2006, the Fund sold 600,000 shares of the company’s common stock realizing proceeds of $18,371,129 representing a gain of $17,621,129.

Pipeline Data, Inc. (OTCBB:PPDA): During the second quarter of 2006, the Fund purchased a $500,000 8% ~~Promissory Notes~~convertible debenture and received warrants to purchase 150,000 shares of the company’s common stock at $1.40 per share.

Simtek Corporation (OTCBB:SRAM): In the quarter ended June 30, 2006, the Fund received warrants to purchase 17,175 shares of common stock at $0.33 per share as compensation for entering into a waiver to allow the company to extend the term of the debenture owned by the Fund. ~~In total,~~The Fund also received warrants to purchase 68,701 shares of common stock at $0.33 per share as compensation for signing a subordination agreement. Additionally, Robert Pearson, a vice president of the Fund, received ~~74,844~~11,596 shares of ~~IZZI having an imputed cost of $10,466, a rate of $0.14 per share,~~common stock as payment in kind for ~~interest on~~his service as a director of the ~~notes. The~~company. Mr. Pearson assigned those shares to the Fund.

Symbollon Pharmaceuticals, Inc. (OTCBB:SYMBA): In the quarter ended June 30, 2006, the Fund ~~also received 2,438,445~~purchased 250,000 shares of common stock ~~of the Company as payment in kind for dividends on the Series F~~ and G preferred stock, an imputed cost of $487,689, a rate of $0.20 per share. In addition, the Fund converted the Series F and G preferred stock into 21,049,750 shares of the Company's common stock, an imputed cost of $4,209,940, a rate of $0.20 per share. At September 30, 2003, the Fund owned the following: $525,000 in 8% Promissory Notes with no conversion feature; 24,173,966 shares of the Company's common stock with a basis of $4,973,166, or $0.21 per share; $150,000 in Series D Preferred convertible into common at a rate of $0.80 per share; warrants to purchase ~~364,299~~another 250,000 shares of the Company's common stock at $0.549 per share on or before March 8, 2004; warrants to purchase 312,500 shares of the Company's common stock at $0.80 per share on or before October 2, 2003; warrants to purchase 125,000 shares of the Company's common stock at $1.00 per share on or before October 11, 2004; warrants to purchase 2,625,000 shares of the Company's common stock at $0.20 per share with term dates ranging from September 2006 to June 2008; and options to purchase 41,034 shares of the Company's common stock having strike prices ranging between $0.21 and $0.49 per share and term dates ranging from May 2006 to August 2007. Subsequent to September 30, 2003, a warrant to purchase 312,500 shares of the Company's common stock at $0.80 per share was allowed to expire. 33 PooreBrothers, Inc. (Nasdaq:SNAK) During the third quarter of 2003, the Fund sold 330,000 shares of the Company's common stock realizing proceeds of $1,392,534, representing a gain of $1,062,534. At September 30, 2003, the Fund owned 1,686,357 shares of the Company's common stock having a basis of $1,748,170 or $1.04 per share and three tranches of options to purchase a total of 20,210 shares, having exercise prices ranging from $1.31 per share to $3.60 per share. ThermoView Industries, Inc. (AMEX:THV) During the quarter ended September 30, 2003, the Fund purchased an additional 100,000 shares of the Company's common stock in the open market for ~~$$65,228 or $0.65 per share. At September 30, 2003, the Fund owned a total of 234,951 shares of ThermoView common stock having a cost of $563,060 or $2.40 per share.~~ $250,000.

Results of Operations for the Three Months Ended ~~September~~June 30, ~~2003~~ 2006

For the quarter ended ~~September~~June 30, ~~2003,~~2006, the Fund had a net investment loss of ~~($1,058,993)~~$434,530 compared to a net investment loss of ~~($288,362) in~~$230,638 for the ~~third~~second quarter of ~~2002.~~2005. This ~~increase~~change was due in ~~net loss resulted~~part to a decrease in investment income from ~~increased expenses offset slightly by increased income in~~$148,509 for the ~~third~~second quarter of ~~2003 compared~~2005 to $130,704 for the comparable period of 2006. This decrease in investment income was partially attributable to fewer investment fees being earned in 2006. In addition, interest income decreased from $87,874 for the three months ended June 30, 2005, to $54,278 for the same period of ~~2002. Interest~~2006 as a result of debt investments being converted to equity or realized as losses in 2005. Dividend income ~~increased from a negative ($10,405)~~ for the ~~third quarter of 2002 to $88,396~~three-month period ended June 30, 2006, was $67,758 versus $43,689 for the same period in ~~2003, an increase~~2005 as a result of ~~949.55%. Dividend income~~higher balances in 2006 of short-term treasury investments that earn dividends.

Expenses increased ~~184.86% to $46,706 in~~from $379,147 for the quarter ended ~~September~~June 30, ~~2003, from $16,396~~2005 to $565,234 for the ~~same quarter in 2002. In the third~~second quarter of ~~2003, the Fund accrued $2,423 in income from commitment and other fees, compared to $20,000 in the third quarter 2002, a decrease of 87.89%.~~2006. General and administrative expenses ~~decreased 16.17% from $84,886 in~~increased for the ~~third~~second quarter of ~~2002~~2006 to ~~$71,164~~$111,017 from $27,524 for the second quarter of 2005 primarily due to increased travel, investor relations, printing, and insurance expenses in ~~the third quarter 2003.~~2006. Interest expense increased from ~~$9,813~~$29,143 for the second quarter of 2005 to $32,378 for the comparable period of 2006 as a result of higher margin balances and interest rates during the quarter ended June 30, 2006. Legal and professional fees increased from $47,749 for the second quarter of 2005 to $175,124 in the same period 2006 as a result of higher audit and consulting fees for the second quarter of 2006. These increased fees were a result of the Fund completing the 2003, 2004 and 2005 audits during 2006. Management fees decreased from $274,731 for the second quarter of 2005 to $246,715 for the second quarter of 2006 as a result of lower market values for portfolio investments at June 30, 2006.

Net change in unrealized appreciation of $908,113 for the quarter ended ~~September~~June 30, ~~2002,~~2005 decreased to ~~$20,979~~an unrealized change in appreciation of $14,928,440 for the quarter ended June 30, 2006 as a result of fluctuations in market values of securities at each quarter end and the realization of gains or losses upon disposition of investments (primarily Laserscope).

Realized gains increased from $96,311 for the quarter ended June 30, 2005 to $17,623,044 for the same period in ~~2003, an increase~~2006 as a result of ~~113.79%. Legal and professional expenses decreased 23.99%~~gains earned from ~~$28,784 in~~ the ~~third quarter~~sale of ~~2002 to $21,879 for the same quarter in 2003. Management fees increased from $190,870 in~~investments (primarily Laserscope) during the quarter ended ~~September~~June 30, 2002, to $287,577 for the same period in 2003, an increase of 50.67%, and incentive fees increased to $794,919 for the third quarter of 2003 compared to no incentive fees incurred in the third quarter of 2002. Net income for the third quarter of 2003 was $14,164,050 compared to a net loss of ($11,020,374) for the same period of 2002. This increase was primarily due to an increase from net unrealized depreciation on investments from ($10,732,012) in the third quarter of 2002 to net unrealized appreciation on investments in the amount of $11,248,447 in the third quarter of 2003. In addition, the fund realized net realized gains on investments in the amount of $3,974,597 in the third quarter of 2003 compared to no realized gains or losses in the same period of 2002. The realized gains in the third quarter of 2003 include $473,533 in bankruptcy proceeds from two companies formerly in the Fund's portfolio. 34 2006.

Results of Operations for the ~~Nine months~~Six Months Ended ~~September~~June 30, ~~2003~~ 2006

For the ~~nine~~six months ended ~~September~~June 30, ~~2003,~~2006, the Fund experienced a net investment loss in the amount of ~~($443,998),~~$807,704, compared to a net investment loss in the amount of ~~($993,631)~~$567,456 for the same ~~nine-month~~six-month period in ~~2002. Interest~~2005. This change was due in part to a decrease in investment income ~~increased~~ from ~~$175,700~~$300,377 for the ~~nine~~six months ended ~~September~~June 30, ~~2002,~~2005 to ~~$435,884~~$253,333 for the comparable period of 2006. This decrease in investment income was partially attributable to fewer investment fees being earned in 2006. In addition, interest income decreased from $171,762 for the six months ended June 30, 2005 to $119,333 for the same period of ~~2003, an increase of 148.08%.~~2006, primarily due to debt investments being converted to equity or realized as losses in 2005. Dividend income for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2003,~~2006 was ~~$1,207,937~~$110,223 versus ~~$59,635~~$61,044 for the same period in ~~2002. Other income decreased 80.13% to $3,975~~2005 as a result of higher balances in 2006 of short-term treasury investments that earn dividends.

Expenses increased from $867,833 for the ~~nine~~six months ended ~~September~~June 30, ~~2003, compared~~2005 to ~~$20,000 in the same period of 2002. General and administrative expenses decreased from $331,496 in the nine months ended September 30, 2002, to $264,344~~$1,061,037 for the same period in ~~2003. Legal~~2006. General and ~~professional~~administrative expenses ~~also decreased~~increased from ~~$194,074~~$101,186 in ~~2002 to $102,393 for~~ the ~~nine~~six months ended ~~September~~June 30, ~~2003. Interest expense increased only 9.61% from $54,213 for the nine- month period ending September 30, 2002,~~2005, to ~~$59,422~~$172,240 for the same period in ~~2003.~~2006, primarily due to higher investor relations, printing, and bank charge expenses in 2006. Interest expense increased from $39,021 for the six months ended June 30, 2005 to $60,188 for the comparable period of 2006 as a result of higher margin balances and interest rates during the six months ended June 30, 2006. Legal and professional fees also increased from $179,602 for the six months ended June 30, 2005 to $343,147 for the six months ended June 30, 2006 as a result of higher audit and consulting fees for the six months ended June 30, 2006. These increased fees were a result of the Fund completing the 2003, 2004 and 2005 audits during 2006. Management fees ~~were relatively constant with $669,183~~decreased from $548,024 for the ~~nine~~six months ended ~~September~~June 30, ~~2002, compared~~2005, to ~~$674,456~~$485,462 for the same period in ~~2003;~~2006, due to lower market values for portfolio investments at the quarter end on June 30, 2006.

Change in unrealized appreciation of $16,351,877 for the six months ended June 30, 2005, decreased to $15,154,090 for the six months ended June 30, 2006, as a result of fluctuations in market values of securities at each quarter end and ~~incentive fees~~the realization of gains or losses upon disposition of investments.

Realized gains increased from ~~zero in 2002 to $991,179~~$4,189,395 for the ~~nine~~six months ended ~~September~~June 30, ~~2003. Net income for the first nine months of 2003 was $24,260,781, compared~~2005 to ~~a net loss in the amount of ($12,344,525)~~$18,811,236 for the same period in 2006, as a result of ~~2002. In addition to~~gains earned from the ~~increases in income and decreases in expenses discussed previously, this increase was driven by an increase from net unrealized depreciation on~~sale of investments ~~of ($7,926,503) in~~(primarily Laserscope) during the ~~first nine~~six months of 2002 to net unrealized appreciation on investments of $19,748,883 for the same time period in 2003. In addition, in the first nine months of 2003, the Fund realized net gains on investments in the amount of $4,955,896, compared to a net realized loss on investments of ($3,424,391) in the same period of 2002. ended June 30, 2006.

Liquidity and Capital Resources

For the ~~three~~six months ended ~~September~~June 30, ~~2003,~~2006, net assets increased ~~27.19%~~ from ~~$50,485,451at~~$54,145,591 at December 31, 2005, to $56,145,591 at June 30, ~~2003, to $64,214,330, or $14.76 per share, at September 30, 2003.~~2006. This increase is primarily attributable to an increase in the ~~net unrealized appreciation~~cash distributable to shareholders from proceeds from the sale of investments, ~~from $15,041,337 at June 30, 2003, to $26,289,784 at September 30, 2003, combined with~~and a decrease in accounts payable-brokerage, due to the ~~accumulated deficit from ($3,025,492) at June 30, 2003, to ($545,060) at September 30, 2003.~~ repayment of a margin loan. This increase was partially offset by the net investment loss and increased expenses in the second quarter of 2006.

At the end of the ~~third~~second quarter of ~~2003,~~2006, the Fund had ~~net~~ cash and cash equivalents of ~~$7,279,546~~$18,763,599 versus ~~net~~ cash and cash equivalents of ~~$681,236~~$8,396,052 at December 31, 2005. This increase is primarily attributable to the receipt of proceeds from the sale of Laserscope common stock. The Fund’s interest and dividends receivable increased from $48,226 at December 31, 2005 to $129,892 at June 30, ~~2003,~~2006, due primarily to the accrual of expected proceeds from the sale of one of the securities of one of the Fund’s portfolio companies, Advanced Refractive Technologies, Inc.

Accounts payable decreased from $86,782 at December 31, 2005 to $77,445 at June 30, 2006 primarily due to an accumulation of cash from proceeds from sales of investments, combined with a smaller margin balance. Receivables, including interest, dividends, and brokerage, decreased from $604,436 at June 30 to $207,974 at September 30, 2003, due to accrued 35 ~~dividend and interest amounts that were paid~~expense payments made during the ~~quarter. Prepaid expenses increased from $2,877 at June 30, 2003 to $68,852 at September 30, 2003, due to the payment~~second quarter of ~~insurance. Accounts payable decreased 70.41% from $21,632 at June 30, 2003, to $6,401 at September 30, 2003. Accounts~~2006. Finally, accounts payable to affiliate increased from ~~$344,753~~$2,050,989 at December 31, 2006 to $2,578,408 at June 30, ~~2003, to $1,183,322 at September 30, 2003,~~2006, reflecting an ~~increase in~~accrual of first and second quarter management fee ~~due~~payable to ~~higher~~the Fund’s investment adviser.

During the six months ended June 30, 2006 the Fund paid $5,038,480 of dividends to shareholders of which $4,145,686 was capital gains dividend payable at December 31, 2005 and $892,794 of dividends declared and payable during the six months ended June 30, 2006.

The majority of the Fund’s investments in portfolio ~~values in~~companies are individually negotiated, non-registered for public trading, and are subject to legal and contractual investment restrictions. Accordingly, the ~~third quarter~~Fund’s portfolio investments are generally considered non-liquid. This lack of liquidity primarily affects the Fund’s ability to make new investments and ~~the increase in incentive fees accrued as a result of higher net gains on the sale of investments.~~ distributions to shareholders.

Pending investment in portfolio investments, funds are invested in temporary cash accounts and in government securities. Government securities used as cash equivalents will typically consist of U. S. Treasury securities or other U. S. Government and Agency obligations having slightly higher yields and maturity dates of three months or less. These investments qualify for investment as permitted in Section 55(a)(1) through (5) of the 1940 Act. ~~ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Contractual Obligations

The Fund has a contract for the purchase of services under which it will have future commitments: the investment advisory agreement, pursuant to which RENN Capital Group, Inc. has agreed to serve as the Fund’s investment adviser. Such agreement has contractual obligations with fees which are based on values of the portfolio investments which the Fund owns. For further information regarding the Fund’s obligations under the investment advisory agreement see Note 4 of the Financial Statements.

Because the Fund does not enter into other long-term debt obligations, capital lease obligations, operating lease obligations, or purchase obligations, a table of contractual obligations has not been presented.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Fund is subject to financial market risks, including changes in market interest rates as well as changes in marketable equity security prices. The Fund does not use derivative financial instruments to mitigate any of these risks. The return on the ~~Fund's~~Fund’s investments is generally not affected by foreign currency fluctuations.

A majority of the ~~Fund's~~Fund’s net assets consists of common stocks and warrants and options to purchase common stock in publicly traded companies. These investments are directly exposed to equity price risk, in that a percentage change in these equity prices would result in a similar percentage change in the fair value of these securities.

A lesser percentage of the ~~Fund's~~Fund’s net assets ~~consists~~consist of fixed rate convertible debentures and other debt instruments as well as convertible preferred securities. Since these instruments are generally priced at a fixed rate, changes in market interest rates do not directly impact interest income, although ~~changes in interest rates~~they could impact the ~~Fund's~~Fund’s yield on future investments in debt instruments. In addition, changes in market interest rates are not typically a significant factor in the ~~Fund's~~Fund’s determination of fair value of its debt instruments, as it is generally assumed they will be held to maturity, and their fair values are determined on the basis of the terms of the particular instrument and the financial condition of the issuer.

A small percentage of the ~~Fund's~~Fund’s net assets ~~consists~~consist of equity investments in private companies. The Fund would anticipate no impact on these ~~investment~~investments from modest changes in public market equity prices. However, should significant changes in market 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 proceeds realized on these investments. 36 ~~ITEM 4: DISCLOSURES AND PROCEDURES As required by SEC Rule 13a-15 promulgated under~~

Item 4. Controls and Procedures.

The Fund has in place systems relating to disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of ~~1934, as amended (the "Exchange Act), within 90 days prior to the filing date of this report, the Fund carried out an evaluation of~~1934). Our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of the Fund's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Fund's management, including the Fund's President and Chief Executive Officer and the Fund's Chief Financial Officer. Based upon that evaluation, the Fund's President and Chief Executive Officer and the Fund's Chief Financial Officer concluded that the Fund'sthese disclosure controls and procedures ~~are effective. Subsequent to~~as of the ~~date~~end of our quarter ended June 30, 2006 in connection with the ~~Fund carried out its evaluation, there have been~~preparation of this report. They concluded that the controls and procedures were effective and adequate at that time. There were no significant changes in the ~~Fund's~~Fund’s internal ~~controls~~control over financial reporting during the first quarter of fiscal 2006 that have materially affected, or are reasonably likely to materially affect the Fund’s control over financial reporting.

PART II

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

You should carefully consider the risks described below and all other information contained in this quarterly report on Form 10-Q, including our financial statements and the related notes thereto before making a decision to purchase our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. If that happens, the trading price of our common stock could decline, and you may lose all or part of your investment.

Failure to Meet Listing Standards. It is uncertain whether our common stock will meet the requirements for listing on Nasdaq, or any other ~~factors~~stock exchange or quotation service.

In July 2004, due to our inability to complete our audit and file our Form 10-K for the year ended December 31, 2003 in a timely manner, the Fund’s common stock was delisted from Nasdaq. As we become current with the delinquent filings, we will attempt to relist with Nasdaq or a national stock exchange, but there is no certainty that we will be able to do so.

Our Growth is Dependent on Investing in Quality Transactions. Sustaining growth depends on our ability to identify, evaluate, finance, and invest in companies that meet our investment criteria. Accomplishing such results on a cost-effective basis is a function of our marketing capabilities and skillful management of the investment process. Failure to achieve future growth could have a material adverse effect on our business, financial condition, and results of operations.

Failure to Invest Capital Effectively May Decrease Our Stock Price. If we fail to invest our capital effectively, our return on equity may be decreased, which could reduce the price of the shares of our common stock.

Highly Competitive Market for Investments. We compete with a number of private equity funds, other investment entities and individuals for investment opportunities. Some of these competitors are substantially larger and have greater financial resources, and some are subject to different and frequently less stringent regulation. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time and there can be no assurance that we will be able to identify and make investments that satisfy our objectives.

Lack of Publicly Available Information on Certain Portfolio Companies. Some of the securities in our portfolio are issued by privately held companies. There is generally little or no publicly available information about such companies, and we must rely on the diligence of our management to obtain the information necessary for our decision to invest. There can be no assurance that such diligence efforts will uncover all material information necessary to make fully informed investment decisions.

Dependence on Key Management. Selecting, structuring and closing our investments depends upon the diligence and skill of our management, which is responsible for identifying, evaluating, negotiating, monitoring and disposing of our investments. Our management's capabilities will significantly impact our results of operations. If we lose any member of our management team and he/she cannot be promptly replaced with an equally capable team member, our results of operations could be significantly impacted.

Failure to Deploy Capital may Lower Returns. Our failure to successfully deploy sufficient capital may reduce our return on equity.

Results May Fluctuate. Our operating results may fluctuate materially due to a number of factors including, among others, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our portfolio companies’ markets, the ability to find and close suitable investments, and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Uncertain Value of Certain Restricted Securities. Our net asset value is based on the values assigned to the various investments in our portfolio, determined in good faith by our board of directors. Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, our fair value determinations may differ materially from the values which would be applicable to unrestricted securities having a public market.

Illiquid Securities May Adversely Affect Our Business. Our portfolio contains securities which are subject to restrictions on sale because they were acquired from issuers in "private placement" transactions or because we are deemed to be an affiliate of the issuer. Unless an exemption from the registration requirements of the Securities Act of 1933 is available, we will not be able to sell these securities publicly without the expense and time required to register the securities under applicable federal and state securities laws. In addition, contractual or practical limitations may restrict our ability to liquidate our securities in portfolio companies, because we may own a relatively large percentage of the issuer's outstanding securities. Sales may also be limited by unfavorable market conditions. The illiquidity of our investments may preclude or delay the disposition of such securities, which may make it difficult for us to obtain cash equal to the value at which we record our investments.

Regulated Industry. Publicly traded investment funds are highly regulated. Changes in securities laws or regulations governing our operations or our failure to comply with those laws or regulations may adversely affect ~~internal controls. Disclosure controls~~our business.

Failure to Qualify for Favorable Tax Treatment. We may not qualify for conduit tax treatment as a Regulated Investment Company ("RIC") if we are unable to comply with the requirements of Subchapter M of the Internal Revenue Code. If we fail to satisfy such requirements and ~~procedures~~cease to qualify for conduit tax treatment, we will be subject to federal taxes on our net investment income. The loss of this pass-through tax treatment could have a material adverse effect on the total return, if any, obtainable from an investment in our common stock.

Highly Leveraged Portfolio Companies. Some of our portfolio companies could incur substantial indebtedness in relation to their overall capital base. Such indebtedness often has a term that will require the balance of the loan to be refinanced when it matures. If portfolio companies cannot generate adequate cash flow to meet the principal and interest payments on their indebtedness, the value of our investments could be reduced or eliminated through foreclosure on the portfolio company's assets or by the portfolio company's reorganization or bankruptcy.

Our Common Stock Often Trades at a Discount. Our common stock often trades at a discount from net asset value. Our common stock is traded over-the-counter in the pink sheets. Stockholders desiring liquidity may sell their shares at current market value, which has often been below net asset value. Shares of closed-end investment companies frequently trade at discounts from net asset value, which is a risk separate and distinct from the risk that a fund's performance will cause its net asset value to decrease.

Nature of Investment in Our Common Stock. Our stock is intended for investors seeking long-term capital appreciation. Our investments in portfolio securities generally require some time to reach maturity, and such investments generally are ~~controls~~illiquid. An investment in our shares should not be considered a complete investment program. Each prospective purchaser should take into account his or her investment objectives as well as his or her other investments when considering the purchase of our shares.

Our Stock Price May Fluctuate Significantly. The market price of our common stock may fluctuate significantly. The market price and marketability of shares of our common stock may from time to time be significantly affected by numerous factors, including our investment results, market conditions, and other ~~procedures~~influences and events over which we have no control and that ~~are designed~~may not be directly related to ensure that information required to be disclosed in Fund reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Fund reports filed under the Exchange Act is accumulated and communicated to management, including the Fund's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. 37 PART II ITEM 1. LEGAL PROCEEDINGS. Not applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31-1 Certification of Russell Cleveland, President and CEO 31-2 Certification of Barbe Butschek, Chief Financial Officer 32-1 Certification of Russell Cleveland, President and CEO 32-2 Certification of Barbe Butschek, Chief Financial Officer (b) Reports on Form 8-K us.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None 38

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Submission of Matters to a Vote of Security Holders

None

Item 5.

Other Information

None

Item 6.

Exhibits

31.1

Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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 hereunto duly authorized.

RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC. ~~November 14, 2003 /S/~~

/s/ Russell Cleveland November 3, 2006

Russell Cleveland, President and ~~CEO (Principal~~Chief Executive Officer

(Principal Executive Officer) ~~November 14, 2003 /S/~~

/s/ Barbe Butschek November 3, 2006

Barbe Butschek, Chief Financial Officer ~~(Principal~~

(Principal Financial Officer) 39 EXHIBIT 31-1 CERTIFICATION I, Russell Cleveland, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Renaissance Capital Growth & Income Fund III, Inc.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officers and I are 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, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and to the audit committee of the registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the issuer'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 1 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. The registrant's other certifying officers and I have indicated in this 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 our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /S/ Russell Cleveland Russell Cleveland President and CEO November 14, 2003 2 EXHIBIT 31-2 CERTIFICATION I, Barbe Butschek, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Renaissance Capital Growth & Income Fund III, Inc.; 2. Based on my knowledge, this report does not contain any untrue statements 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officers and I are 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, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and to the audit committee of the registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the issuer'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 1 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. The registrant's other certifying officers and I have indicated in this 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 our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /S/ Barbe Butschek Barbe Butschek Chief Financial Officer November 14, 2003 2 EXHIBIT 32-1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. section 1350, the undersigned officer of Renaissance Capital Growth & Income Fund III, Inc. (the "Company"), hereby certifies, to such officer's knowledge, that theFund's Quarterly Report on Form 10-Q for the period ended September 30, 2003 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theFund. Dated: November 14, 2003 /S/ Russell Cleveland Russell Cleveland President & CEO 1 EXHIBIT 32-2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. section 1350, the undersigned officer of Renaissance Capital Growth & Income Fund III, Inc. (the "Company"), hereby certifies, to such officer's knowledge, that theFund's Quarterly Report on Form 10-Q for the period ended September 30, 2003 (the "Report"), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theFund. Dated: November 14, 2003 /S/ Barbe Butschek Barbe Butschek Chief Financial Officer 2