EXHIBIT A
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                   ANNUAL REPORT PAINEWEBBER R&D PARTNERS III

To Our Limited Partners:

PaineWebber R&D Partners III, L.P. (the "Partnership" or "R&D Partners III") was
formed in 1991 to engage primarily in product development projects with
technology and biotechnology companies. As of December 31, 2002, the Partnership
has two remaining development investments: Alkermes Clinical Partners, L.P.
("ACP") and Cephalon Clinical Partners, L.P. ("CCP"). These investments were
made in 1992 to fund the development and clinical trials of specific
pharmaceuticals. If the trials prove successful, the program sponsor has the
option to purchase the partnership investment made by R&D Partners III for an
initial payment and royalty rights over a specific time period. Depending on the
outcome of such trials, R&D Partners III may explore options available so it may
move towards termination while preserving the rights of the Partners to any
potential returns from its investments.

The general partner of ACP reports that its development agreement with ALZA
Corporation was terminated in December, 2002 and that Alkermes will not commit
additional funds for the development of Cereport. The general partner is in the
process of examining the options available to ACP including attempting to sell
the technology or terminating ACP.

The general partner of CCP has agreed to provide Myotrophin for a study
co-sponsored by physicians and the ALS Association which is scheduled to begin
enrollment in January 2003 and last for two years. In exchange, Cephalon will
have the right to use any clinical data generated by the study in support of FDA
approval of its pending New Drug Application.

Since its inception in 1991, R&D Partners III has distributed cash of $14,830
for every $10,000 investment in the Partnership through December 31, 2002. The
last distribution was made in June 2000. Future distributions will depend upon
the outcome of the program investments and the liquidation of securities held by
the Partnership after payment of Partnership expenses. In addition to potential
returns from the product development programs and equity investments, investors
have received warrants from R&D Partners III allowing investors to purchase the
common stock of certain sponsor companies at predetermined prices. During the
warrant exercise period, the value of all distributed warrants ranged from $980,
as valued based on the respective dates of distribution, to $11,555 at peak, per
$10,000 investment in R&D Partners III.

The Partnership continues to hold 461,091 shares of Genzyme Molecular Oncology
("GZMO") and 285,700 shares of Repligen Corporation ("RGEN"). As of December 31,
2002, the closing price per GZMO share was $1.75 and the price per RGEN share
was $3.04. The Partnership intends to liquidate such these shares in accordance
with the General Partner's assessment of market conditions and other factors.

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The following sections contain information only on those product development
programs and investments that are currently active and their format has been
revised to reduce production expenses. The information contained in these
sections has been obtained from public and other sources believed by the
Partnership to be accurate, although the Partnership has not verified such
information. Therefore, neither the Partnership, its General Partner, nor their
affiliates can assume any responsibility for the accuracy of such information.
Please refer to prior annual reports for information pertaining to the
Partnership's terminated or concluded investments.

Included is the 2003 Customer Privacy Policy for the Partnership. Please note
that the Partnership does not disclose personal client information to
unaffiliated third parties in such a manner that would require an "opt-out"
provision.

Thank you for your continued interest in R&D Partners III.

Sincerely,




Eileen McLaughlin
Vice President
PaineWebber Development

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                            PRODUCT PORTFOLIO STATUS

                                 ALKERMES, INC.

COMPANY
Alkermes is a leader in the development of products based on sophisticated drug
delivery systems. Alkermes' diversified technology portfolio currently consists
of four proprietary delivery systems: (1) ProLease(R) and Medisorb(R) injectable
sustained-release systems; (2) RingCap(R) and Dose Sipping oral delivery
technologies; (3) AIR(TM) pulmonary delivery systems and; (4) Cereport(R)
(formerly known as RMP-7(TM)) blood brain barrier permeabilizer. In addition,
the company manufactures and supplies a wide range of standard and
custom-developed pharmaceutical-grade, bioabsorbable PLG polymers.

PROGRAM
R&D Partners III committed $6.0 million to Alkermes Clinical Partners L.P.
("ACP"), a $46.0 million limited partnership formed to complete the development
and human clinical trials of Cereport(TM) (formerly known as RMP-7). Cereport is
designed to

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improve the passage into the brain of pharmaceutical compounds by transiently
increasing the permeability of the blood-brain barrier.

In 1997, Alkermes entered into an agreement with ALZA Corporation ("ALZA")
relating to the development and commercialization of Cereport. ALZA made a $10
million payment to Alkermes to fund clinical development of Cereport. In return,
ALZA received the option to acquire exclusive worldwide commercialization rights
to Cereport. This agreement was terminated in December, 2002.

Alkermes reports that, of the two remaining Phase II clinical trials being
conducted by the pediatrics branch of the National Cancer Institute, one has
been discontinued and the other is expected to wind down in the near future.
Based on the difficulties encountered in the development of Cereport and the
termination of the agreement with ALZA, Alkermes reports they have decided not
to commit additional funds to the development of Cereport at this time. The
general partner of ACP is in the process of examining the various options
available to ACP given these events, which could include attempting to sell the
technology or terminating ACP. We will provide additional information on this
matter as it is available.

WARRANT
R&D Partners III distributed the Alkermes warrant to limited partners in October
1995. Investors received a warrant to purchase 40 shares of Alkermes common
stock per $10,000 investment in R&D Partners III with an exercise price of $5.00
per share through March 31, 2000. During the warrant exercise period, the
available gain from the distributed Alkermes warrant ranged from $60 at
distribution to $7,680 per $10,000 investment in R&D III. R&D Partners III held
warrant to purchase 7,293 shares at an exercise price of $5.00 per share which
it exercised in March 2000. The Partnership sold the underlying shares for an
average net sales price of $188.20 per share and distributed net proceeds in
June 2000.


                                 CEPHALON, INC.

COMPANY
Cephalon is an international biopharmaceutical company dedicated to the
discovery, development and marketing of products to treat sleep disorders,
neurological and psychiatric disorders, cancer and pain. Their research and
development efforts focus primarily on two therapeutic areas: neurodegenerative
disorders and cancers.

PROGRAM
R&D Partners III committed $6.0 million to Cephalon Clinical Partners, L.P., a
$45.0 million limited partnership organized with a goal to develop and derive
income from the sale or license of Myotrophin(R) (mecasermin) Injection, a
recombinant form of human insulin-like growth factor-I (IGF-I), being developed
as a potential treatment for amyotrophic lateral sclerosis (ALS or Lou Gehrig's
disease) and certain peripheral neuropathies. ALS is a fatal disorder of the
nervous system characterized by the

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chronic, progressive degeneration of motor neurons, which leads to muscle
weakness, muscle atrophy and, eventually, to the patient's death. IGF-I is a
neurotrophic factor which has been identified as promoting the survival of
neurons.

The status of the U.S. regulatory approval of the Myotrophin Injection
application for the treatment of ALS continues to remain uncertain. As
previously reported, in May 1998, the FDA issued a letter stating that the New
Drug Application (NDA) was "potentially approvable," under certain conditions.
Cephalon does not believe those conditions can be met without conducting an
additional Phase III clinical study, and Cephalon said they have no plans to
conduct such a study at this time. However, during 2002, Cephalon reached an
agreement with certain physicians who have obtained governmental and
non-governmental funding to be used to conduct such a study. These physicians
have informed Cephalon that they expect to commence the study in early 2003.
Cephalon has agreed to allow reference to their Investigational New Drug
Application and has agreed to supply Myotrophin in quantities sufficient to
conduct the study in exchange for the right to use any clinical data generated
by the study in support of FDA approval of their pending NDA. Even if an
additional study is concluded, the results will not be available for several
years and may not be sufficient to obtain regulatory approval to market the
product. Additional information regarding this study can be found in the
Research section of the ALS Association webside at WWW.ALSA.ORG.


WARRANT
R&D Partners III distributed the Cephalon warrant to the limited partners in
January 1994. Investors received a warrant to purchase 100 shares of Cephalon
common stock per $10,000 investment in R&D Partners III, with an exercise price
of $11.32 per share until August 1997, and $13.82 per share from September 1997
until expiration on August 31, 1999. During the warrant exercise period, the
value of the Cephalon warrant ranged from $618 at distribution to $3,018 per
$10,000 investment in R&D Partners III.


                               EQUITY INVESTMENTS


                           GENZYME MOLECULAR ONCOLOGY

R&D Partners III funded $5.0 million to a development program utilizing
PharmaGenics Inc.'s ("PGI") proprietary combinatorial chemistry procedure to
discover novel therapeutics and made an equity investment in the amount of $1.0
million for 480,242 shares of PGI Series C Convertible Preferred stock. In 1997,
PGI was acquired by Genzyme Corporation in exchange for approximately four
million shares of Genzyme Molecular Oncology ("GZMO"), a Genzyme private
tracking stock. R&D Partners III's total investment in PGI preferred shares were
converted into 713,091 restricted shares of GZMO. In November, 1998, the GZMO
shares commenced trading on the NASDAQ National Market. During the first quarter
of 2000, the Partnership liquidated 252,000 shares of GZMO for net proceeds of
$8.9 million, for an average sale price of $35.59 per

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share. Proceeds of the GZMO shares were included in the distribution made on
June 14, 2000. The Partnership currently holds 461,091 common shares of GZMO.
The price per share as of December 31, 2002 was $1.75.

GZMO is working to develop a new generation of cancer products focusing on
cancer vaccines and angiogenesis inhibitors through the integration of its
genomics, gene and cell therapy, small-molecule drug discovery and protein
therapeutic capabilities.


                              REPLIGEN CORPORATION

Repligen Corporation is a biopharmaceutical company engaged in the development
of new drugs for pediatric developmental disorders including autism, immune and
metabolic disorders. Repligen has a speciality pharmaceuticals business
comprised of rProtein A and SecreFlo, the profits from which will be used to
maintain the financial stability of its proprietary products.

R&D Partners III committed $6.0 million to Repligen Clinical Partners ("RCP"), a
$45 million limited partnership formed to fund further clinical development of
recombinant Platelet Factor-4 ("rPF4"). rPF4 was being developed to reverse the
effects of heparin, a drug commonly used in patients undergoing heart surgery
and in other situations to prevent the formation of blood clots. In 1996,
Repligen terminated the research funding program with rPF4 and returned the
rights to rPF4 to RCP. The limited partners of RCP voted to terminate the
partnership in October 2000.

R&D Partners III received a warrant to purchase 133,000 shares of Repligen
common stock at an exercise price of $2.50 per share and a warrant to purchase
252,700 shares at an exercise price of $3.50 per share. In 2000, R&D Partners
III exercised all 385,700 warrants for an aggregate exercise price of
$1,216,950. The Partnership sold 100,000 shares in March, 2000 at an average net
price per share of $15.84. The Partnership continues to hold 285,700 shares
which will be liquidated subject to market and other conditions. As of December
31, 2002, the market value of Repligen was $3.04 per share.