##### Table of Contents





SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-Q

(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended July 31, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from  to

Commission
file number 000-29665

EXCELSIOR VENTURE PARTNERS III, LLC

(Exact Name of Registrant as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 13-4102528                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|225 High Ridge Road, Stamford, CT                              |  | 06905                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

Registrants Telephone Number, Including Area Code (203) 352-4400





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), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the Registrant is a large accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large filer in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer   ̈                    Accelerated file   ̈                    Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12,13 or 15(d) of the
Securities Exchange Act subsequent to the distribution of securities under a plan confirmed by a court.    Yes   ̈    No   ̈









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##### Table of Contents

EXCELSIOR VENTURE PARTNERS III, LLC

Excelsior Venture Partners III, LLCs (the Companys) prospects, including the prospects of its underlying investments, are subject
to certain uncertainties and risks. This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the federal securities laws that also involve substantial uncertainties and risks. The future results of the
Company and its underlying investments may differ materially from its historical results and actual results could differ materially from those projected in forward-looking statements as a result of certain risk factors. Readers should pay particular
attention to the considerations described in the section of this report entitled Managements Discussion and Analysis of Financial Conditions and Results of Operations. Readers should also carefully review the risk factors
described in the other documents the Company files, or has filed, from time to time with the Securities and Exchange Commission.



|         |  |                                                                                               |  |         
|-------- |  | --------------------------------------------------------------------------------------------- |  | --------
|         |  | INDEX                                                                                         |  | PAGE NO.
|PART I.  |  | FINANCIAL INFORMATION                                                                         |  |         
|         |  |                                                                                              
|Item 1.  |  | Financial Statements                                                                          |  | 1       
|         |  |                                                                                              
|         |  | Portfolio of Investments at July 31, 2008 and October 31, 2007                                |  | 1       
|         |  |                                                                                              
|         |  | Statements of Assets and Liabilities at July 31, 2008 and October 31, 2007                    |  | 5       
|         |  |                                                                                              
|         |  | Statements of Operations for the nine months ended July 31, 2008 and July 31, 2007            |  | 6       
|         |  |                                                                                              
|         |  | Statements of Operations for the three months ended July 31, 2008 and July 31, 2007           |  | 7       
|         |  |                                                                                              
|         |  | Statements of Changes in Net Assets for the nine months ended July 31, 2008 and July 31, 2007 |  | 8       
|         |  |                                                                                              
|         |  | Statements of Cash Flows for the nine months ended July 31, 2008 and July 31, 2007            |  | 9       
|         |  |                                                                                              
|         |  | Financial Highlights for the nine months ended July 31, 2008 and July 31, 2007                |  | 10      
|         |  |                                                                                              
|         |  | Notes to Financial Statements                                                                 |  | 11      
|         |  |                                                                                              
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations         |  | 21      
|         |  |                                                                                              
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                    |  | 23      
|         |  |                                                                                              
|Item 4.  |  | Controls and Procedures                                                                       |  | 24      
|         |  |                                                                                              
|PART II. |  | OTHER INFORMATION                                                                             |  | 25      
|         |  |                                                                                              
|Item 1.  |  | Legal Proceedings                                                                             |  | 25      
|         |  |                                                                                              
|Item 2.  |  | Changes in Securities and Use of Proceeds                                                     |  | 25      
|         |  |                                                                                              
|Item 3.  |  | Defaults Upon Senior Securities                                                               |  | 25      
|         |  |                                                                                              
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                           |  | 25      
|         |  |                                                                                              
|Item 5.  |  | Other Information                                                                             |  | 25      
|         |  |                                                                                              
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                              |  | 25      



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments July 31, 2008 (Unaudited)



|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|---------------------- |  | --------------------------------------------------- |  | ------------------ |  | ---------- |  | ------------------ |  | ----------------- | -
|PrincipalAmount/Shares |  |                                                     |  | AcquisitionDate ## |  | Cost       |  | Fair Value(Note 1) |  | % of NetAssets*** |  
|                       |  | PUBLIC COMPANIES #                                  |  |                    |  |            |  |                    |  |                   |  
|                       |  | Common Stocks                                       |  |                    |  |            |  |                    |  |                   |  
|                       |  | Life Sciences                                       |  |                    |  |            |  |                    |  |                   |  
|31,542                 |  | Genoptix, Inc. (GXDX)                               |  | 07/03-05/05        |  | 94,989     |  | 919,449            |  | 1.46              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | TOTAL COMMON STOCK - PUBLIC COMPANIES               |  |                    |  | 94,989     |  | 919,449            |  | 1.46              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | PRIVATE COMPANIES **                                |  |                    |  |            |  |                    |  |                   |  
|                       |  | Common Stocks #                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Optical @                                           |  |                    |  |            |  |                    |  |                   |  
|6,025,312              |  | OpVista, Inc.                                       |  | 06/06-12/07        |  | 13,649,206 |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | TOTAL COMMON STOCK - PRIVATE COMPANIES              |  |                    |  | 13,649,206 |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Preferred Stocks #                                  |  |                    |  |            |  |                    |  |                   |  
|                       |  | Enterprise Software                                 |  |                    |  |            |  |                    |  |                   |  
|4,542,763              |  | SOA Software, Inc., Series F Junior *               |  | 05/08              |  | 5,681,135  |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  |                                                     |  |                    |  | 5,681,135  |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Life Sciences                                       |  |                    |  |            |  |                    |  |                   |  
|1,999,999              |  | Archemix Corporation, Series A                      |  | 08/02 - 11/03      |  | 1,999,999  |  | 2,499,999          |  | 3.97              | %
|700,000                |  | Archemix Corporation, Series B                      |  | 03/04 - 12/05      |  | 700,000    |  | 875,000            |  | 1.39              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  |                                                     |  |                    |  | 2,699,999  |  | 3,374,999          |  | 5.36              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Medical Technology @                                |  |                    |  |            |  |                    |  |                   |  
|4,166,667              |  | Tensys Medical, Inc., Series C                      |  | 03/02              |  | 5,000,000  |  |                   |  | 0.00              | %
|1,187,500              |  | Tensys Medical, Inc., Series D                      |  | 05/04              |  | 1,425,000  |  |                   |  | 0.00              | %
|318,845                |  | Tensys Medical, Inc., Series E                      |  | 07/06 - 12/07      |  | 382,623    |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  |                                                     |  |                    |  | 6,807,623  |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Optical @                                           |  |                    |  |            |  |                    |  |                   |  
|1,088,532              |  | OpVista, Inc., Series AA                            |  | 06/06 - 01/07      |  | 966,605    |  | 551,817            |  | 0.88              | %
|83,001                 |  | OpVista, Inc., Series BB                            |  | 03/07 - 04/07      |  | 94,426     |  | 44,075             |  | 0.07              | %
|3,418,748              |  | OpVista, Inc., Series CC                            |  | 12/07              |  | 683,075    |  | 1,025,624          |  | 1.63              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  |                                                     |  |                    |  | 1,744,106  |  | 1,621,516          |  | 2.58              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Wireless @                                          |  |                    |  |            |  |                    |  |                   |  
|4,433,333              |  | Ethertronics, Inc. Series B                         |  | 06/01 - 05/04      |  | 6,650,000  |  | 6,650,000          |  | 10.57             | %
|1,697,957              |  | Ethertronics, Inc. Series C                         |  | 05/05 - 04/07      |  | 2,546,936  |  | 2,546,936          |  | 4.05              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  |                                                     |  |                    |  | 9,196,936  |  | 9,196,936          |  | 14.62             | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | TOTAL PREFERRED STOCKS - PRIVATE COMPANIES          |  |                    |  | 26,129,799 |  | 14,193,451         |  | 22.56             | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Warrants #, @                                       |  |                    |  |            |  |                    |  |                   |  
|                       |  | Wireless                                            |  |                    |  |            |  |                    |  |                   |  
|271,247                |  | Ethertronics, Inc. Series C (expiration date 01/09) |  | 05/05 - 07/06      |  |           |  |                   |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | Optical                                             |  |                    |  |            |  |                    |  |                   |  
|675,313                |  | OpVista, Inc., Series CC (expiration date 10/12)    |  | 10/07              |  | 675        |  | 675                |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | TOTAL WARRANTS                                      |  |                    |  | 675        |  | 675                |  | 0.00              | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  
|                       |  | TOTAL - PRIVATE COMPANIES                           |  |                    |  | 39,779,680 |  | 14,194,126         |  | 22.56             | %
|                       |  |                                                     |  |                    |  |            |  |                    |  |                   |  

The accompanying notes are an integral part of these Financial Statements.



1



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments July 31, 2008 (Unaudited)



|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|-------------- | - |  | ------------------------------------------------------------ |  | ------------------ |  | ---------- |  | ------------------ | ---------- | ------------------ | ------ | -
|PercentOwned & |   |  |                                                              |  | AcquisitionDate ## |  | Cost       |  | Fair Value(Note 1) |            | % of NetAssets *** |       
|               |   |  | PRIVATE INVESTMENT FUNDS **, #                               |  |                    |  |            |  |                    |            |                    |        |  
|0.37           | % |  | Advanced Technology Ventures VII, L.P.                       |  | 08/01-07/08        |  | 1,852,904  |  |                    | 2,007,214  |                    | 3.19   | %
|1.55           | % |  | Burrill Life Sciences Capital Fund                           |  | 12/02-05/08        |  | 2,077,902  |  |                    | 1,760,175  |                    | 2.80   | %
|1.34           | % |  | CHL Medical Partners II, L.P.                                |  | 01/02-03/08        |  | 1,541,857  |  |                    | 1,635,364  |                    | 2.60   | %
|1.02           | % |  | CMEA Ventures VI, L.P. (Note 9)                              |  | 12/03-06/08        |  | 2,133,017  |  |                    | 4,154,109  |                    | 6.60   | %
|0.35           | % |  | Morgenthaler Partners VII, L.P.                              |  | 07/01-10/07        |  | 1,733,167  |  |                    | 1,664,042  |                    | 2.64   | %
|0.57           | % |  | Prospect Venture Partners II, L.P.                           |  | 06/01-03/08        |  | 1,414,275  |  |                    | 1,704,793  |                    | 2.71   | %
|0.97           | % |  | Sevin Rosen Fund IX, L.P.                                    |  | 10/04-07/08        |  | 1,596,609  |  |                    | 1,681,259  |                    | 2.67   | %
|2.36           | % |  | Tallwood II, L.P.                                            |  | 12/02-05/08        |  | 2,740,443  |  |                    | 2,362,292  |                    | 3.76   | %
|1.64           | % |  | Valhalla Partners, L.P.                                      |  | 10/03-07/08        |  | 2,074,835  |  |                    | 2,363,363  |                    | 3.76   | %
|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|               |   |  | TOTAL PRIVATE INVESTMENT FUNDS                               |  |                    |  | 17,165,009 |  |                    | 19,332,611 |                    | 30.73  | %
|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|               |   |  |                                                              |  |                   
|Shares         |   |  |                                                              |  |                    |  |            |  |                    |            |                    |       
|               |   |  | INVESTMENT COMPANIES                                         |  |                    |  |            |  |                    |            |                    |        |  
|984,128        |   |  | Dreyfus Government Cash Management Fund Institutional Shares |  |                    |  | 984,128    |  |                    | 984,128    |                    | 1.56   | %
|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|               |   |  | TOTAL INVESTMENTS                                            |  |                    |  | 58,023,806 |  |                    | 35,430,314 |                    | 56.31  | %
|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|               |   |  | OTHER ASSETS & LIABILITIES (NET)                             |  |                    |  |            |  |                    | 27,489,432 |                    | 43.69  | %
|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|               |   |  | NET ASSETS                                                   |  |                    |  |            |  | $                  | 62,919,746 |                    | 100.00 | %
|               |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  



|* | LogicLibrary, Inc. merged with SOA Software, Inc. on May 1, 2008. Shares of 4,542,763 include 4,088,487 held by the Company and 454,276 held in escrow for
the benefit of the Company.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|** | Restricted as to public resale and illiquid securities. Total cost of restricted and illiquid securities at July 31, 2008 was $56,944,689. Total fair value
of restricted and illiquid securities owned at July 31, 2008 was $33,526,737 or 53.29% of net assets.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | Based on fair value.
|--- | --------------------



|@ | At July 31, 2008, the Company owned 5% or more of the companys outstanding shares thereby making the company an affiliate as defined by the Investment
Company Act of 1940, as amended, (the Investment Company Act). Total fair value of affiliated securities owned at July 31, 2008 (including investments in controlled affiliates) was $10,819,127 or 17.20% of Net Assets.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|# | Non-income producing securities.
|- | --------------------------------



|## | Disclosure is for restricted securities only.
|-- | ---------------------------------------------



|& | Represents fair value of the Funds investment as a percentage of Underlying Funds total capital.
|- | --------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these Financial Statements.



2



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##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2007 (Audited)



|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|---------------------- |  | ---------------------------------------------------- |  | ------------------ |  | ---------- |  | ------------------ |  | ------------------ | -
|PrincipalAmount/Shares |  |                                                      |  | AcquisitionDate ## |  | Cost       |  | Fair Value(Note 1) |  | % of NetAssets *** |  
|                       |  | MONEY MARKET INSTRUMENTS                             |  |                    |  |            |  |                    |  |                    |  
|10,385,000             |  | Federal Home Loan Bank Discount Note 4.40%, 11/01/07 |  |                    |  | 10,383,731 |  | 10,383,731         |  | 14.35              | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | PUBLIC COMPANIES #                                   |  |                    |  |            |  |                    |  |                    |  
|                       |  | Common Stocks                                        |  |                    |  |            |  |                    |  |                    |  
|                       |  | Wireless                                             |  |                    |  |            |  |                    |  |                    |  
|5,338                  |  | Citrix Systems, Inc. (CTXS)                          |  |                    |  | 226,011    |  | 229,481            |  | 0.32               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Capital Equipment                                    |  |                    |  |            |  |                    |  |                    |  
|12,059                 |  | Acme Packet, Inc. (APKT)                             |  |                    |  | 160,803    |  | 173,168            |  | 0.24               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Life Sciences **                                     |  |                    |  |            |  |                    |  |                    |  
|714,870                |  | Genoptix, Inc. (GXDX)                                |  | 07/03-05/05        |  | 3,124,453  |  | 10,594,373         |  | 14.64              | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | TOTAL - PUBLIC COMPANIES COMMON STOCK                |  |                    |  | 3,511,267  |  | 10,997,022         |  | 15.20              | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | PRIVATE COMPANIES **                                 |  |                    |  |            |  |                    |  |                    |  
|                       |  | Common Stocks #                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Capital Equipment @                                  |  |                    |  |            |  |                    |  |                    |  
|157,396                |  | MIDAS Vision Systems, Inc.                           |  | 03/03              |  | 4,000,000  |  |                   |  | 0.00               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Optical @                                            |  |                    |  |            |  |                    |  |                    |  
|1,079,541              |  | OpVista, Inc.                                        |  | 06/06              |  | 9,184,030  |  | 1,184,567          |  | 1.64               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | TOTAL COMMON STOCKS - PRIVATE COMPANIES              |  |                    |  | 13,184,030 |  | 1,184,567          |  | 1.64               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Preferred Stocks #                                   |  |                    |  |            |  |                    |  |                    |  
|                       |  | Capital Equipment @                                  |  |                    |  |            |  |                    |  |                    |  
|933,593                |  | MIDAS Vision Systems, Inc., Series A-1               |  | 03/03              |  | 1,054,960  |  |                   |  | 0.00               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Enterprise Software @                                |  |                    |  |            |  |                    |  |                    |  
|8,751,782              |  | LogicLibrary, Inc., Series A                         |  | 01/02-09/07        |  | 4,001,492  |  | 4,001,492          |  | 5.53               | %
|3,080,464              |  | LogicLibrary, Inc., Series A-1                       |  | 08/03 - 05/04      |  | 1,408,450  |  | 1,408,450          |  | 1.95               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  |                                                      |  |                    |  | 5,409,942  |  | 5,409,942          |  | 7.48               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Life Sciences                                        |  |                    |  |            |  |                    |  |                    |  
|1,999,999              |  | Archemix Corporation, Series A                       |  | 08/02 - 11/03      |  | 1,999,999  |  | 2,999,999          |  | 4.15               | %
|700,000                |  | Archemix Corporation, Series B                       |  | 03/04 - 12/05      |  | 700,000    |  | 1,050,001          |  | 1.45               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  |                                                      |  |                    |  | 2,699,999  |  | 4,050,000          |  | 5.60               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Medical Technology @                                 |  |                    |  |            |  |                    |  |                    |  
|4,166,667              |  | Tensys Medical, Inc., Series C                       |  | 03/02              |  | 5,000,000  |  | 534,026            |  | 0.74               | %
|1,187,500              |  | Tensys Medical, Inc., Series D                       |  | 05/04              |  | 1,425,000  |  | 152,197            |  | 0.21               | %
|96,629                 |  | Tensys Medical, Inc., Series E                       |  | 07/06 - 04/07      |  | 115,954    |  | 347,865            |  | 0.48               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  |                                                      |  |                    |  | 6,540,954  |  | 1,034,088          |  | 1.43               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Optical @                                            |  |                    |  |            |  |                    |  |                    |  
|5,683,906              |  | OpVista, Inc., Series AA                             |  | 06/06 - 01/07      |  | 5,034,407  |  | 6,236,892          |  | 8.62               | %
|433,400                |  | OpVista, Inc., Series BB                             |  | 03/07 - 04/07      |  | 491,800    |  | 491,800            |  | 0.68               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  |                                                      |  |                    |  | 5,526,207  |  | 6,728,692          |  | 9.30               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | Wireless @                                           |  |                    |  |            |  |                    |  |                    |  
|4,433,333              |  | Ethertronics, Inc. Series B                          |  | 06/01 - 05/04      |  | 6,650,000  |  | 6,650,000          |  | 9.19               | %
|1,697,957              |  | Ethertronics, Inc. Series C                          |  | 05/05 - 04/07      |  | 2,546,936  |  | 2,546,937          |  | 3.52               | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  |                                                      |  |                    |  | 9,196,936  |  | 9,196,937          |  | 12.71              | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  
|                       |  | TOTAL PREFERRED STOCKS                               |  |                    |  | 30,428,998 |  | 26,419,659         |  | 36.52              | %
|                       |  |                                                      |  |                    |  |            |  |                    |  |                    |  

The accompanying notes are an integral part of these Financial Statements.



3



---

##### Table of Contents

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2007 (Audited)



|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|---------------------- | - |  | ------------------------------------------------------------ |  | ------------------ |  | ---------- |  | ------------------ | ---------- | ------------------ | ------ | -
|PrincipalAmount/Shares |   |  |                                                              |  | AcquisitionDate ## |  | Cost       |  | Fair Value(Note 1) |            | % of NetAssets *** |       
|                       |   |  | PRIVATE COMPANIES** - (continued)                            |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | Notes @                                                      |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | Optical                                                      |  |                    |  |            |  |                    |            |                    |        |  
|237,321                |   |  | NanoOpto Corp, 10% Bridge Note, in default                   |  | 03/07              |  | 237,321    |  |                    | 160,000    |                    | 0.22   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | Optical @                                                    |  |                    |  |            |  |                    |            |                    |        |  
|675,989                |   |  | OpVista, Inc., 8% Bridge Note, April 2008, #                 |  | 10/07              |  | 675,989    |  |                    | 1,351,978  |                    | 1.87   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | TOTAL NOTES                                                  |  |                    |  | 913,310    |  |                    | 1,511,978  |                    | 2.09   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | Warrants #, @                                                |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | Wireless                                                     |  |                    |  |            |  |                    |            |                    |        |  
|271,247                |   |  | Ethertronics, Inc. Series C (expiration date 01/09)          |  | 05/05 - 07/06      |  |           |  |                    |           |                    | 0.00   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | Optical @                                                    |  |                    |  |            |  |                    |            |                    |        |  
|675,313                |   |  | OpVista, Inc., Series CC (expiration date 10/12)             |  |                    |  |           |  |                    |           |                    | 0.00   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | TOTAL WARRANTS                                               |  |                    |  |           |  |                    |           |                    | 0.00   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | TOTAL - PRIVATE COMPANIES                                    |  |                    |  | 44,526,338 |  |                    | 29,116,204 |                    | 40.25  | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  |                                                              |  |                   
|PercentOwned           |   |  |                                                              |  |                    |  |            |  |                    |            |                    |       
|                       |   |  | PRIVATE INVESTMENT FUNDS **, #                               |  |                    |  |            |  |                    |            |                    |        |  
|0.39                   | % |  | Advanced Technology Ventures VII, L.P.                       |  | 08/01-09/07        |  | 1,650,405  |  |                    | 1,986,022  |                    | 2.75   | %
|1.58                   | % |  | Burrill Life Sciences Capital Fund                           |  | 12/02-10/07        |  | 1,920,303  |  |                    | 1,722,901  |                    | 2.38   | %
|1.35                   | % |  | CHL Medical Partners II, L.P.                                |  | 01/02-10/07        |  | 1,326,857  |  |                    | 1,432,494  |                    | 1.98   | %
|1.04                   | % |  | CMEA Ventures VI, L.P.                                       |  | 12/03-06/07        |  | 1,563,017  |  |                    | 2,114,538  |                    | 2.92   | %
|0.36                   | % |  | Morgenthaler Partners VII, L.P.                              |  | 07/01-10/07        |  | 1,749,476  |  |                    | 1,697,580  |                    | 2.35   | %
|0.58                   | % |  | Prospect Venture Partners II, L.P.                           |  | 06/01-05/07        |  | 1,561,766  |  |                    | 2,194,662  |                    | 3.03   | %
|0.98                   | % |  | Sevin Rosen Fund IX, L.P.                                    |  | 10/04-08/07        |  | 1,528,989  |  |                    | 1,734,616  |                    | 2.40   | %
|2.36                   | % |  | Tallwood II, L.P.                                            |  | 12/02-08/07        |  | 2,290,443  |  |                    | 1,683,388  |                    | 2.33   | %
|1.70                   | % |  | Valhalla Partners, L.P.                                      |  | 10/03-07/07        |  | 1,967,875  |  |                    | 1,990,649  |                    | 2.75   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | TOTAL PRIVATE INVESTMENT FUNDS                               |  |                    |  | 15,559,131 |  |                    | 16,556,850 |                    | 22.89  | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  |                                                              |  |                   
|Shares                 |   |  |                                                              |  |                    |  |            |  |                    |            |                    |       
|                       |   |  | INVESTMENT COMPANIES                                         |  |                    |  |            |  |                    |            |                    |        |  
|984,128                |   |  | Dreyfus Government Cash Management Fund Institutional Shares |  |                    |  | 984,128    |  |                    | 984,128    |                    | 1.36   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | TOTAL INVESTMENTS                                            |  |                    |  | 74,964,595 |  |                    | 68,037,935 |                    | 94.05  | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | OTHER ASSETS & LIABILITIES (NET)                             |  |                    |  |            |  |                    | 4,304,264  |                    | 5.95   | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  
|                       |   |  | NET ASSETS                                                   |  |                    |  |            |  | $                  | 72,342,199 |                    | 100.00 | %
|                       |   |  |                                                              |  |                    |  |            |  |                    |            |                    |        |  



|** | Restricted as to public resale and illiquid securities. Total cost of restricted and illiquid securities at October 31, 2007 was $63,209,922. Total fair
value of restricted and illiquid securities owned at October 31, 2007 was $56,267,427 or 77.78% of net assets.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|# | Non-income producing securities.
|- | --------------------------------



|@ | At October 31, 2007, the Company owned 5% or more of the companys outstanding shares thereby making the company an affiliate as defined by the
Investment Company Act. Total fair value of affiliated securities owned at October 31, 2007 (including investments in controlled affiliates) was $25,066,204 or 34.64% of Net Assets
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|## | Disclosure is required for restricted securities only.
|-- | ------------------------------------------------------



|*** | Based on fair value.
|--- | --------------------

The
accompanying notes are an integral part of these Financial Statements.



4



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Assets and Liabilities



|                                                                                                |  |                          |             |   |                           |   |            |  
|----------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ------------------------- | - | ---------- | -
|                                                                                                |  | July 31, 2008(Unaudited) |             |   | October 31, 2007(Audited) |  
|ASSETS:                                                                                         |  |                          |             |   |                           |   |            |  
|Unaffiliated Issuers at fair value (Cost $26,625,260 and $33,138,256 respectively)              |  | $                        | 24,611,187  |   |                           | $ | 42,971,731 |  
|Non-Controlled Affiliated Issuers at fair value (Cost $31,398,546 and $41,826,339 respectively) |  |                          | 10,819,127  |   |                           |   | 25,066,204 |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|Investments, at fair value (Cost $58,023,806 and $74,964,595 respectively) (Note 2)             |  |                          | 35,430,314  |   |                           |   | 68,037,935 |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|Cash and cash equivalents (Note 2)                                                              |  |                          | 21,130,822  |   |                           |   | 26,240     |  
|Restricted cash (Note 2)                                                                        |  |                          | 2,986,779   |   |                           |   | 2,672,393  |  
|Receivables from sale of investments                                                            |  |                          | 3,939,128   |   |                           |   | 2,275,482  |  
|Interest receivable                                                                             |  |                          | 13,695      |   |                           |   | 4,019      |  
|Prepaid insurance                                                                               |  |                          | 7,046       |   |                           |   |           |  
|Other assets                                                                                    |  |                          |            |   |                           |   | 1,945      |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|Total Assets                                                                                    |  |                          | 63,507,784  |   |                           |   | 73,018,014 |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|LIABILITIES:                                                                                    |  |                          |             |   |                           |   |            |  
|Management fees payable (Note 3)                                                                |  |                          | 158,150     |   |                           |   | 182,802    |  
|Professional fees payable                                                                       |  |                          | 171,414     |   |                           |   | 153,475    |  
|Deferred income (Note 2)                                                                        |  |                          | 203,277     |   |                           |   | 258,809    |  
|Administration fees payable (Note 3)                                                            |  |                          | 19,167      |   |                           |   | 28,750     |  
|Board of Managers fees payable (Note 3)                                                        |  |                          | 11,000      |   |                           |   | 19,500     |  
|Custody fees payable (Note 3)                                                                   |  |                          | 8,942       |   |                           |   | 17,002     |  
|Other payables                                                                                  |  |                          | 16,088      |   |                           |   | 15,477     |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|Total Liabilities                                                                               |  |                          | 588,038     |   |                           |   | 675,815    |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|NET ASSETS                                                                                      |  | $                        | 62,919,746  |   |                           | $ | 72,342,199 |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|NET ASSETS consist of:                                                                          |  |                          |             |   |                           |   |            |  
|Members Capital(1)                                                                             |  | $                        | 85,513,238  |   |                           | $ | 79,268,859 |  
|Accumulated unrealized (depreciation) on investments                                            |  |                          | (22,593,492 | ) |                           |   | (6,926,660 | )
|                                                                                                |  |                          |             |   |                           |   |            |  
|Total Net Assets                                                                                |  | $                        | 62,919,746  |   |                           | $ | 72,342,199 |  
|                                                                                                |  |                          |             |   |                           |   |            |  
|Units of Membership Interest Outstanding(Unlimited number of no par value units authorized)     |  |                          | 295,210     |   |                           |   | 295,210    |  
|NET ASSET VALUE PER UNIT                                                                        |  | $                        | 213.14      |   |                           | $ | 245.05     |  
|                                                                                                |  |                          |             |   |                           |   |            |  



|(1) | Members Capital includes the accumulated net investment (loss), accumulated realized losses, contributions from and distributions to Members.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these Financial Statements.



5



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                    |  |                            |             |   |      |   |            |  
|------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                    |  | Nine Months Ended July 31, |            
|                                                                    |  | 2008                       |             |   | 2007 |  
|INVESTMENT INCOME:                                                  |  |                            |             |   |      |   |            |  
|Interest income/(loss) from unaffiliated investments(1)             |  | $                          | 218,090     |   |      | $ | (7,538     | )
|Interest income from affiliated investments                         |  |                            | 9,518       |   |      |   | 484,578    |  
|Dividend income from unaffiliated investments                       |  |                            | 23,321      |   |      |   | 38,997     |  
|                                                                    |  |                            |             |   |      |   |            |  
|Total Investment Income                                             |  |                            | 250,929     |   |      |   | 516,037    |  
|                                                                    |  |                            |             |   |      |   |            |  
|EXPENSES:                                                           |  |                            |             |   |      |   |            |  
|Management Investment Adviser fees (Note 3)                         |  |                            | 495,945     |   |      |   | 509,020    |  
|Professional fees                                                   |  |                            | 311,402     |   |      |   | 287,621    |  
|Administration fees (Note 3)                                        |  |                            | 86,250      |   |      |   | 86,250     |  
|Board of Managers fees (Note 3)                                    |  |                            | 67,500      |   |      |   | 66,000     |  
|Custodian fees (Note 3)                                             |  |                            | 21,034      |   |      |   | 22,500     |  
|Insurance expense                                                   |  |                            | 19,111      |   |      |   | 23,459     |  
|Miscellaneous expenses                                              |  |                            | 30,279      |   |      |   | 23,488     |  
|                                                                    |  |                            |             |   |      |   |            |  
|Total Expenses                                                      |  |                            | 1,031,521   |   |      |   | 1,018,338  |  
|                                                                    |  |                            |             |   |      |   |            |  
|NET INVESTMENT (LOSS)                                               |  |                            | (780,592    | ) |      |   | (502,301   | )
|                                                                    |  |                            |             |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:(Note 2)     |  |                            |             |   |      |   |            |  
|Net realized (loss) on affiliated investments                       |  |                            | (5,143,365  | ) |      |   | (4,377,728 | )
|Net realized gain on unaffiliated investments                       |  |                            | 15,884,672  |   |      |   | 405,658    |  
|Net realized gain from payments by affiliates (Note 3)              |  |                            | 268,999     |   |      |   |           |  
|Net change in unrealized (depreciation)/appreciation on investments |  |                            | (15,666,832 | ) |      |   | 882,127    |  
|                                                                    |  |                            |             |   |      |   |            |  
|NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS                   |  |                            | (4,656,526  | ) |      |   | (3,089,943 | )
|                                                                    |  |                            |             |   |      |   |            |  
|NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS              |  | $                          | (5,437,118  | ) |      | $ | (3,592,244 | )
|                                                                    |  |                            |             |   |      |   |            |  



|(1) | Includes interest from short-term investments.
|--- | ----------------------------------------------

The
accompanying notes are an integral part of these Financial Statements.



6



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                |  |                             |             |   |      |   |            |  
|--------------------------------------------------------------- |  | --------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                |  | Three Months Ended July 31, |            
|                                                                |  | 2008                        |             |   | 2007 |  
|INVESTMENT INCOME:                                              |  |                             |             |   |      |   |            |  
|Interest income from unaffiliated investments(1)                |  | $                           | 34,577      |   |      | $ | 123,558    |  
|Dividend income from unaffiliated investments                   |  |                             | 5,490       |   |      |   | 12,402     |  
|                                                                |  |                             |             |   |      |   |            |  
|Total Investment Income                                         |  |                             | 40,067      |   |      |   | 135,960    |  
|                                                                |  |                             |             |   |      |   |            |  
|EXPENSES:                                                       |  |                             |             |   |      |   |            |  
|Management Investment Adviser fees (Note 3)                     |  |                             | 158,150     |   |      |   | 160,975    |  
|Professional fees                                               |  |                             | 138,514     |   |      |   | 77,682     |  
|Administration fees (Note 3)                                    |  |                             | 28,750      |   |      |   | 28,750     |  
|Board of Managers fees (Note 3)                                |  |                             | 21,500      |   |      |   | 22,000     |  
|Custodian fees (Note 3)                                         |  |                             | 6,401       |   |      |   | 7,500      |  
|Insurance expense                                               |  |                             | 6,647       |   |      |   | 7,906      |  
|Miscellaneous expenses                                          |  |                             | 7,924       |   |      |   | 8,488      |  
|                                                                |  |                             |             |   |      |   |            |  
|Total Expenses                                                  |  |                             | 367,886     |   |      |   | 313,301    |  
|                                                                |  |                             |             |   |      |   |            |  
|NET INVESTMENT (LOSS)                                           |  |                             | (327,819    | ) |      |   | (177,341   | )
|                                                                |  |                             |             |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:(Note 2) |  |                             |             |   |      |   |            |  
|Net realized (loss) on affiliated investments                   |  |                             | (117,008    | ) |      |   | (258,809   | )
|Net realized gain on unaffiliated investments                   |  |                             | 13,521,982  |   |      |   | 396,333    |  
|Net realized gain from payments by affiliates (Note 3)          |  |                             | 268,999     |   |      |   |           |  
|Net change in unrealized (depreciation) on investments          |  |                             | (10,673,963 | ) |      |   | (2,859,433 | )
|                                                                |  |                             |             |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS          |  |                             | 3,000,010   |   |      |   | (2,721,909 | )
|                                                                |  |                             |             |   |      |   |            |  
|NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |  | $                           | 2,672,191   |   |      | $ | (2,899,250 | )
|                                                                |  |                             |             |   |      |   |            |  



|(1) | Includes interest from short-term investments.
|--- | ----------------------------------------------

The
accompanying notes are an integral part of these Financial Statements.



7



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Changes in Net Assets (Unaudited)



|                                                                    |  |                            |             |   |      |   |             |  
|------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                    |  | Nine Months Ended July 31, |            
|                                                                    |  | 2008                       |             |   | 2007 |  
|OPERATIONS:                                                         |  |                            |             |   |      |   |             |  
|Net investment (loss)                                               |  | $                          | (780,592    | ) |      | $ | (502,301    | )
|Net realized gain/(loss) on investments                             |  |                            | 11,010,306  |   |      |   | (3,972,070  | )
|Net change in unrealized (depreciation)/appreciation on investments |  |                            | (15,666,832 | ) |      |   | 882,127     |  
|                                                                    |  |                            |             |   |      |   |             |  
|Net (decrease) in net assets resulting from operations              |  |                            | (5,437,118  | ) |      |   | (3,592,244  | )
|                                                                    |  |                            |             |   |      |   |             |  
|DISTRIBUTION TO MEMBERS:                                            |  |                            |             |   |      |   |             |  
|Distribution to Members                                             |  |                            | (3,985,335  | ) |      |   | (8,265,880  | )
|                                                                    |  |                            |             |   |      |   |             |  
|Total Distributions                                                 |  |                            | (3,985,335  | ) |      |   | (8,265,880  | )
|                                                                    |  |                            |             |   |      |   |             |  
|Net (decrease) in Net Assets                                        |  |                            | (9,422,453  | ) |      |   | (11,858,124 | )
|                                                                    |  |                            |             |   |      |   |             |  
|NET ASSETS:                                                         |  |                            |             |   |      |   |             |  
|Beginning of period                                                 |  |                            | 72,342,199  |   |      |   | 75,562,092  |  
|                                                                    |  |                            |             |   |      |   |             |  
|End of period                                                       |  | $                          | 62,919,746  |   |      | $ | 63,703,968  |  
|                                                                    |  |                            |             |   |      |   |             |  

The accompanying notes are an integral part of these Financial Statements.



8



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##### Table of Contents

Excelsior Venture Partners III, LLC

Statements of Cash Flows (Unaudited)



|                                                                                                                                       |  |                            |             |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                                                                                       |  | Nine Months Ended July 31, |            
|                                                                                                                                       |  | 2008                       |             |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                                  |  |                            |             |   |      |   |            |  
|Net (decrease) in net assets resulting from operations                                                                                 |  | $                          | (5,437,118  | ) |      | $ | (3,592,244 | )
|Adjustments to reconcile net increase/(decrease) in net assets resulting from operations to net cash provided by operating
activities: |  |                            |             |   |      |   |            |  
|Net change in unrealized depreciation/(appreciation) on investments                                                                    |  |                            | 15,666,832  |   |      |   | (882,127   | )
|Purchase of investments                                                                                                                |  |                            | (3,037,411  | ) |      |   | (5,507,172 | )
|Proceeds received from the sale of investments and distributions received from private investment funds                                |  |                            | 20,606,720  |   |      |   | 14,976,791 |  
|Net realized loss on investments                                                                                                       |  |                            | (11,010,306 | ) |      |   | 3,972,070  |  
|Proceeds from short-term investments maturing, net                                                                                     |  |                            | 10,383,731  |   |      |   | 3,614,699  |  
|(Increase) in restricted cash                                                                                                          |  |                            | (314,386    | ) |      |   | (2,672,394 | )
|(Increase) in receivables from sale of investments                                                                                     |  |                            | (1,663,646  | ) |      |   | (1,897,928 | )
|(Increase)/decrease in interest receivable                                                                                             |  |                            | (9,676      | ) |      |   | 20,665     |  
|(Increase) in receivable from affiliates                                                                                               |  |                            |            |   |      |   | (4,242     | )
|(Increase) in prepaid insurance                                                                                                        |  |                            | (7,046      | ) |      |   | (7,460     | )
|(Decrease)/increase in deferred income                                                                                                 |  |                            | (55,532     | ) |      |   | 258,809    |  
|(Decrease) in management fee payable                                                                                                   |  |                            | (24,652     | ) |      |   | (29,483    | )
|Increase in professional fee payable                                                                                                   |  |                            | 17,939      |   |      |   | 41,185     |  
|(Decrease) in Board of Managers fees payable                                                                                          |  |                            | (8,500      | ) |      |   | (6,000     | )
|(Decrease) in administration fees payable                                                                                              |  |                            | (9,583      | ) |      |   | (23,017    | )
|(Decrease) in custody fees payable                                                                                                     |  |                            | (8,060      | ) |      |   |           |  
|Increase in other payables                                                                                                             |  |                            | 611         |   |      |   | 3,365      |  
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|Net cash provided by operating activities                                                                                              |  |                            | 25,089,917  |   |      |   | 8,265,517  |  
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|CASH FLOWS FOR FINANCING ACTIVITIES                                                                                                    |  |                            |             |   |      |   |            |  
|Cash distributions to Members                                                                                                          |  |                            | (3,985,335  | ) |      |   | (8,265,880 | )
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|Net cash (used in) financing activities                                                                                                |  |                            | (3,985,335  | ) |      |   | (8,265,880 | )
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|Net increase/(decrease) in cash                                                                                                        |  |                            | 21,104,582  |   |      |   | (363       | )
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|Cash and cash equivalents at beginning of period                                                                                       |  |                            | 26,240      |   |      |   | 2,934      |  
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|Cash and cash equivalents at end of period                                                                                             |  | $                          | 21,130,822  |   |      | $ | 2,571      |  
|                                                                                                                                       |  |                            |             |   |      |   |            |  
|SUPPLEMENTAL INFORMATION                                                                                                               |  |                            |             |   |      |   |            |  
|Non-cash distributions received from private investment funds                                                                          |  | $                          | 563,864     |   |      | $ | 171,233    |  
|                                                                                                                                       |  |                            |             |   |      |   |            |  

The accompanying notes are an integral part of these Financial Statements.



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##### Table of Contents

Excelsior Venture Partners III, LLC

Financial Highlights (Unaudited)



|                                                              |  |                            |  |        
|------------------------------------------------------------- |  | -------------------------- |  | -------
|                                                              |  | Nine Months Ended July 31,
|                                                              |  | 2008                       |  | 2007   
|Per Unit Operating Performance: (1)                           |  |                            |  |        
|NET ASSET VALUE, BEGINNING OF PERIOD                          |  | $245.05                    |  | $255.96
|INCOME FROM INVESTMENT OPERATIONS:                            |  |                            |  |        
|Net investment (loss)                                         |  | (2.64)                     |  | (1.70) 
|Net realized and unrealized (loss) on investment transactions |  | (15.77)                    |  | (10.47)
|                                                              |  |                            |  |        
|Net (decrease) in net assets resulting from operations        |  | (18.41)                    |  | (12.17)
|                                                              |  |                            |  |        
|Total Distributions to Members                                |  | (13.50)                    |  | (28.00)
|                                                              |  |                            |  |        
|NET ASSET VALUE, END OF PERIOD                                |  | $213.14                    |  | $215.79
|                                                              |  |                            |  |        
|TOTAL NET ASSET VALUE RETURN (2), (5)                         |  | (7.27)%                    |  | (5.04)%
|RATIOS AND SUPPLEMENTAL DATA (3)                              |  |                            |  |        
|Net Assets, End of Period (000s)                             |  | $62,920                    |  | $63,704
|Ratios to Average Net Assets: (4)                             |  |                            |  |        
|Gross Expenses                                                |  | 1.98 %                     |  | 1.92 % 
|Net Expenses                                                  |  | 1.98 %                     |  | 1.92 % 
|Net Investment (loss)                                         |  | (1.50)%                    |  | (0.95)%
|Portfolio Turnover Rate (5), (6)                              |  | 6.18 %                     |  | 9.94 % 



|(1) | Selected data for a unit of membership interest outstanding throughout each period.
|--- | -----------------------------------------------------------------------------------



|(2) | Total investment value return based on per unit net asset value reflects the effects of changes in net asset value based on the performance of the Company during
the period, and assumes dividends and distributions, if any, were reinvested. The Companys units were issued in a private placement and are not traded. Therefore, the market value of total investment return is not presented. In the nine months
ended July 31, 2008, 0.40% of the Companys total net asset value consists of a voluntary reimbursement by BACA for a net realized gain from payments by affiliates. Excluding this item, total net asset value return would have been (7.67)%.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Income and expense ratios do not reflect the Companys proportionate share of net investment income/(loss) and expenses, including any performance-based
fees, of the Private Investment Funds. The Private Investment Funds expense ratios have been obtained from audited financials for the period ended December 31, 2007 but are unaudited information in these Financial Statements. The Private
Investment Funds expense ratios excluding incentive carried interest, incentive carried interest and expenses plus incentive carried interest range from 0.34% to 3.14%, 1.46% to 4.31% and 2.34% to 7.45%, respectively. The Private Investment Funds
management fees range from 2.00% to 2.50% on committed capital during the initial investment period and typically decrease over time as the Private Investment Funds seek to exit investments. The Private Investment Funds incentive fees range from 20%
to 25% of profit generated by the Private Investment Funds.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Annualized for a period less than a year.
|--- | -----------------------------------------



|(5) | Not annualized for a period less than a year.
|--- | ---------------------------------------------



|(6) | Distributions from Private Investment Funds are included in the portfolio turnover rate.
|--- | ----------------------------------------------------------------------------------------

The accompanying notes are an integral part of these Financial Statements.



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##### Table of Contents

EXCELSIOR VENTURE PARTNERS III, LLC

NOTES TO FINANCIAL STATEMENTS

July 31, 2008

Note 1  Organization

Excelsior Venture Partners III, LLC (the Company) is a non-diversified, closed-end management investment company which has elected to be treated as a business development company or
BDC under the Investment Company Act of 1940, as amended (the Investment Company Act). The Company was established as a Delaware limited liability company on February 18, 2000. The Company commenced operations on
April 5, 2001. The duration of the Company is ten years (subject to two 2-year extensions) from the final subscription closing which occurred on May 11, 2001, at which time the affairs of the Company will be wound up and its assets
distributed pro rata to members as soon as is practicable.

As a BDC, the Company must be primarily engaged in the business
of furnishing capital and making available managerial assistance to companies that generally do not have ready access to capital through conventional financial channels. The Companys investment objective is to achieve long-term capital
appreciation primarily by investing in domestic venture capital and other private companies and, to a lesser extent, domestic and international private funds, negotiated private investments in public companies and international direct investments
that the Investment Adviser (as defined below) believes offer significant long-term capital appreciation potential. Venture capital and private investment companies are companies in which the equity is closely held by company founders, management
and/or a limited number of institutional investors. The Company does not have the right to demand that such equity securities be registered.

Note 2
 Significant Accounting Policies

Costs incurred in connection with the initial offering of units totaled
$1,468,218. Each members pro rata share of these costs was deducted from his, her or its initial capital contribution.

The following is a summary of the Companys significant accounting policies. Such policies are in conformity with U.S. generally accepted accounting principles for investment companies and are consistently followed in the preparation
of the financial statements. U.S. generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these
estimates.

The interim financial data as of July 31, 2008 and for the nine and three months ended July 31, 2008
and July 31, 2007 is unaudited; however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods.

A. Cash and Cash Equivalents:

Cash and cash equivalents consist of deposits with PNC Bank, N.A. All highly liquid investments are listed separately on the Portfolio of Investments.

B. Restricted Cash:

Restricted cash, if any, consisted of proceeds from the sales of investments held by counterparties as collateral for certain contingent claims for a specified period of time.



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Note 2  Significant Accounting Policies (continued)

C. Investment Valuation:

The Company values portfolio securities quarterly and at such other times as, in the Companys Board of Managers (the Board or Board of Managers) view, circumstances warrant.
Securities for which market quotations are readily available generally will be valued at the last sale price on the date of valuation or, if no sale occurred, at the mean of the latest bid and ask prices; provided that, as to such securities that
may have legal, contractual or practical restrictions on transfer, a discount of 10% to 40% from the public market price will be applied.

Securities for which no public market exists and other assets will be valued at fair value as determined in good faith by the Investment Adviser or a committee of the Board of Managers or both under the supervision of
the Board of Managers pursuant to certain valuation procedures summarized below. Securities having remaining maturities of 60 days or less from the date of purchase are valued at amortized cost.

The value for securities for which no public market exists is difficult to determine. Generally, such investments will be
valued on a going concern basis without giving effect to any disposition costs. There is a range of values that is reasonable for such investments at any particular time. Initially, direct investments are valued based upon their original
cost until developments provide a sufficient basis for use of a valuation other than cost. Upon the occurrence of developments providing a sufficient basis for a change in valuation, direct investments will be valued by the private
market or appraisal methods of valuation. The private market method shall only be used with respect to reliable third party transactions by sophisticated, independent investors. The appraisal method shall be based upon such factors
affecting the investee company such as earnings, net worth, reliable private sale prices of the investee companys securities, the market prices for similar securities of comparable companies, an assessment of the investee companys future
prospects or, if appropriate, liquidation value. The values for the investments referred to in this paragraph will be estimated regularly by the Investment Adviser or a committee of the Board under the supervision of the Board of Managers and, in
any event, not less frequently than quarterly. However, there can be no assurance that such value will represent the return that might ultimately be realized by the Company from the investments.

The valuation of the Companys Private Investment Funds is based upon its pro-rata share of the value of the net
assets of the Private Investment Fund as determined by such Private Investment Fund, in accordance with its partnership agreement, constitutional or other documents governing such valuation, on the valuation date. If such valuation with respect to
the Companys investments in Private Investment Funds is not available by reason of timing or other event on the valuation date, or is deemed to be unreliable by the Investment Adviser, the Investment Adviser, under supervision of the Board of
Managers, shall determine such value based on its judgment of fair value on the appropriate date, less applicable charges, if any.

At July 31, 2008 and October 31, 2007, market quotations were not readily available for the Companys portfolio of securities valued at $33,526,737 or 53.29% of net assets and $56,267,427 or 77.78% of
net assets, respectively. Such securities were valued by the Investment Adviser, under the supervision of the Board of Managers. Because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that
would have been used had a ready market for the securities existed, and the differences could be material.



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Note 2  Significant Accounting Policies (continued)

D. Security transactions and investment income:

Private and Public Companies

Security transactions are recorded on a
trade date basis. Realized gains and losses on investments sold are recorded on the basis of identified cost. Interest income, adjusted for amortization of premiums and discounts on fixed income investments, is earned from settlement date and is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend date.

Private Investment Funds

Distributions from a Private Investment Fund are recorded as a return of capital and serve to reduce the cost basis of the
Private Investment Fund. Distributions received in excess of the cost basis are recognized as realized gains. Distributions are recorded when they are received from the Private Investment Fund.

E. Income taxes:

Under current law and based on certain assumptions and representations, the Company intends to be treated as a partnership for federal, state and local income tax purposes. By reason of this treatment, the Company
will itself not be subject to income tax. Rather, each member, in computing income tax, will include his, her or its allocable share of Company items of income, gain, loss, deduction and expense.

The cost of the Private Investment Funds for federal tax purposes is based on amounts reported to the Company on Schedule
K-1 from the Private Investment Funds. As of July 31, 2008, the Company has not received information to determine the tax cost of the Private Investment Funds. At December 31, 2007 and December 31, 2006, the Private Investment Funds
had a cost basis for tax purposes of $14,367,291 and $12,465,650, respectively. Based on values of the Private Investment Funds as of July 31, 2008, and after adjustment for purchases and sales between December 31, 2007 and July 31,
2008, this results in net unrealized appreciation for tax purposes on the Private Investment Funds of $4,045,593. The cost basis for federal tax purposes of the Companys other investments at July 31, 2008 is $42,858,798, and those
investments had net depreciation on a tax basis at July 31, 2008 of $26,761,095. The cost basis for federal tax purposes of the Companys other investments at October 31, 2007, was $61,405,464, and those investments had net
depreciation on a tax basis at October 31, 2007 of $9,924,379.

F. Deferred income:

Deferred income represents certain amounts not received by the Company until a subsequent period due to contingencies
relating to the sale of an investment. As of July 31, 2008, there was approximately $203,277 of proceeds not released from an escrow account relating to a prior year transaction. These proceeds are subject to certain claims. As such, it is
subject to certain risks and is merely an estimate of the potential claim against the escrow account. The end result of the legal matter may result in a claim against the escrow account greater than the current accrual or it may result in a claim
amount smaller than the current estimate and those differences can be material.



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Note 3  Investment Advisory Fee, Administration Fee and Related Party Transactions

Bank of America Capital Advisors LLC (BACA or the Investment Adviser), which has its principal offices at 100
Federal Street, Boston, MA 02110, serves as the investment adviser to the Company. BACA is a Delaware limited liability company which is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The Investment
Adviser is an indirect wholly-owned subsidiary of, and controlled by, Bank of America Corporation (Bank of America), a bank holding and a financial holding company which has its principal executive offices at 101 North Tryon Street,
Charlotte, North Carolina 28255.

Prior to May 29, 2008, the Companys investment adviser was UST Advisers, Inc.
(USTA). On May 29, 2008, BACA assumed the responsibilities of the investment adviser to the Company as a result of a transfer (the Transfer) of USTAs rights and obligations under the New Advisory Agreement (as
defined below) between the Company and USTA dated July 1, 2007. The Transfer was approved by the Companys Board of Managers on March 11, 2008. This change was a product of corporate mergers resulting from the acquisition by Bank of
America of U.S. Trust Corporation in July 2007. The Transfer of the New Advisory Agreement from USTA to BACA did not change (i) the way the Company is managed, including the level of services provided, (ii) the team of investment
professionals providing services to the Company, or (iii) the management and incentive fees the Company pays.

USTA, a
Delaware corporation and registered investment adviser, has been an indirect wholly-owned subsidiary of, and controlled by, Bank of America, since July 1, 2007. Prior to that, USTA was an indirect subsidiary of U.S. Trust Corporation
(U.S. Trust Corp.), a registered financial holding company, which, in turn, was a wholly-owned subsidiary of The Charles Schwab Corporation (Schwab).

USTA assumed the duties of the investment adviser from the previous investment adviser to the Company, U.S. Trust Company, N.A. (UST-NA), which was acting through its registered
investment advisory division, U.S. Trust Asset Management Division, on December 16, 2005. UST-NA has served as the investment adviser to the Company pursuant to an Investment Advisory Agreement (the Agreement). Under the Agreement
for the services provided, the Investment Adviser is entitled to receive a management fee at an annual rate equal to 2.00% of the Companys end of the quarter net assets through the fifth anniversary of the first closing date of April 5,
2001, and 1.00% of net assets thereafter.

Prior to March 31, 2006 and pursuant to a sub-advisory agreement among the
Company, UST-NA, and United States Trust Company of New York (U.S. Trust NY), U.S. Trust NY served as the investment subadviser to the Company and received an investment management fee from UST-NA and USTA.

On March 31, 2006, U.S. Trust NY converted into a national bank named United States Trust Company, National Association (U.S.
Trust) and UST-NA merged into U.S. Trust, with U.S. Trust as the surviving entity. After the merger, U.S Trust, acting through its registered investment advisory division, U.S. Trust-New York Asset Management Division (the Investment
Sub-Adviser), was serving as investment sub-adviser to the Company pursuant to an investment sub-advisory agreement.

On July 1, 2007, U.S. Trust Corp. and its subsidiaries, including USTA and the Investment Sub-Adviser, were acquired by Bank of America (the Sale). USTA continued to serve as the Investment Adviser to the Company after the
Sale (until May 29, 2008, as indicated above) pursuant to a new investment advisory agreement with the Company (the New Advisory Agreement) that was approved at a special meeting of members of the Company held on March 15, 2007
and was identical in all material respects except for the term and the date of effectiveness to the Agreement. The Investment Sub-Adviser ceased to serve as the investment sub-adviser to the Company after the Sale.

On February 22, 2008, U.S. Trust merged into Bank of America, N.A. (BANA), an indirect wholly-owned subsidiary of Bank
of America.

As of July 31, 2008 and October 31, 2007, $158,150 and $182,802, respectively, were payable to the
Investment Adviser and USTA, respectively.



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Note 3  Investment Advisory Fee, Administration Fee and Related Party Transactions (continued)

On July 31, 2008, the Company received $268,999 from BACA as a reimbursement for fees associated with the sale of Genoptix, Inc.
During the period, the Company through its own internal controls identified a potential violation of the Investment Company Act involving the sale of Genoptix, Inc. through an affiliate of USTA. BACA and its affiliate believe that the sale of
Genoptix, Inc. in the initial public offering and secondary offering was at arms-length. However, to ensure the Company and its investors are not detrimented and in its fiduciary capacity as the Investment Adviser, BACA decided to reimburse the
Company for the fees paid to its affiliate.

In addition to the management fee, the Investment Adviser is entitled to
allocations and distributions equal to the Incentive Carried Interest. The Incentive Carried Interest is an amount equal to 20% of the excess, if any, of the Companys cumulative realized capital gains on Direct Investments, over the sum of
(a) cumulative realized capital losses on investments of any type (b) cumulative gross unrealized capital depreciation on investments of any type and (c) cumulative net expenses. Direct Investments means Company investments in
domestic and foreign companies in which the equity is closely held by company founders, management, and/or a limited number of institutional investors and negotiated private investments in public companies. As of July 31, 2008 and
October 31, 2007, there was no Incentive Carried Interest earned by the Investment Adviser.

Pursuant to an
Administration, Accounting and Investor Services Agreement, the Company retains PNC Global Investment Servicing (PNC GIS) (formerly known as PFPC Inc.), a majority-owned subsidiary of The PNC Financial Services Group, as administrator,
accounting and investor services agent. In addition, PFPC Trust Company serves as the Companys custodian. In consideration for its services, the Company (i) pays PNC GIS a variable fee between 0.105% and 0.07%, based on average quarterly
net assets, payable monthly, subject to a minimum quarterly fee of approximately $30,000, (ii) pays annual fees of approximately $36,667 for taxation services and (iii) reimburses PNC GIS for out-of-pocket expenses.

Charles Schwab & Co., Inc. (the Distributor), the principal subsidiary of Schwab, served as the Companys
distributor for the offering of units. The former Investment Adviser paid the Distributor from its own assets an amount equal to 0.02% of the total of all subscriptions received in the offering. The Investment Adviser or an affiliate paid the
Distributor an on-going fee for the sale of units and the provision of ongoing investor services in an amount equal to the annual rate of 0.45% of the average quarterly net asset value of all outstanding units held by investors introduced to the
Company by the Distributor through the fifth anniversary of the final subscription closing date and at the annual rate of 0.22% thereafter, subject to elimination upon all such fees totaling 6.5% of the gross proceeds received by the Company from
the offering.

Each member of the Board of Managers receives $10,000 as an annual retainer and the Chairman of the Board
receives an additional $1,000 annual retainer. Also, each member of the Board receives $2,000 per quarterly meeting attended. In addition, each Board member receives $500 per quarterly telephonic meeting and $500 for any other telephonic special
meeting. For each audit committee meeting attended, Board members receive $1,500, while the Chairman of the Audit Committee receives an additional $1,000 retainer. Each member of the Board is reimbursed for expenses incurred for attending meetings.
No person who is an officer, manager or employee of Bank of America, or its subsidiaries, who serves as an officer, manager or employee of the Company, receives any compensation from the Company.

As of July 31, 2008 and October 31, 2007, Excelsior Venture Investors III, LLC had an investment in the Company of $39,943,520
and $45,925,203, respectively. This represents an ownership interest of 63.48% in the Company as of both dates.



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##### Table of Contents

Note 4  Purchases and Sales of Securities

Excluding short-term investments, the Companys purchases and proceeds from sales of securities for the nine months ended
July 31, 2008 and July 31, 2007 were as follows:



|                           |  |               |  |             
|-------------------------- |  | ------------- |  | ------------
|Nine Months Ended July 31, |  | Purchases ($) |  | Proceeds ($)
|2008                       |  | 3,037,411     |  | 20,606,720  
|2007                       |  | 5,507,172     |  | 14,976,791  

Note 5  Commitments

As of July 31, 2008, the Company had unfunded investment commitments to Private Investment Funds totaling $3,928,672. The Company also had commitments from its investors of $148.8 million,
of which $2.7 million remains uncalled.



|                                       |  |            |            |                    |   |          
|-------------------------------------- |  | ---------- | ---------- | ------------------ | - | ---------
|Private Investment Funds               |  | Commitment |            | UnfundedCommitment
|Advanced Technology Ventures VII, L.P. |  | $          | 2,700,000  |                    | $ | 189,000  
|Burrill Life Sciences Capital Fund     |  |            | 3,000,000  |                    |   | 731,349  
|CHL Medical Partners II, L.P.          |  |            | 2,000,000  |                    |   | 99,960   
|CMEA Ventures VI, L.P.                 |  |            | 3,000,000  |                    |   | 810,000  
|Morgenthaler Partners VII, L.P.        |  |            | 3,000,000  |                    |   | 300,000  
|Prospect Venture Partners II, L.P.     |  |            | 3,000,000  |                    |   | 435,000  
|Sevin Rosen Fund IX, L.P.              |  |            | 3,000,000  |                    |   | 780,000  
|Tallwood II, L.P.                      |  |            | 3,000,000  |                    |   | 150,000  
|Valhalla Partners, L.P.                |  |            | 3,000,000  |                    |   | 433,363  
|                                       |  |            |            |                    |   |          
|Total                                  |  | $          | 25,700,000 |                    | $ | 3,928,672
|                                       |  |            |            |                    |   |          



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##### Table of Contents

Note 6  Transactions with Affiliated Companies

An affiliated company is a company in which the Company has ownership of more than 5% of the voting securities. The Company did not
receive dividends from affiliated companies during the nine months ended July 31, 2008 and October 31, 2007. Transactions with companies, which are or were affiliates, were as follows:



|                                                 |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           
|------------------------------------------------ |  | ---------------------------------------------- |  | ------------------------- | ---------- | ------------------------------- | - | ---------- | ----------------------------------------------- |  | ---------------- | ------ | ------------------- | - | ----- | ------------------------------------------- | - | ------------------------------- | - |  | --------- |  | - | ----------
|                                                 |  |                                                |  |                           |            |                                 |   |            | For Nine Months Ended July 31, 2008 (Unaudited)
|Name of Investment                               |  | Shares/PrincipalAmount Held atOctober 31, 2007 |  | October 31,2007 FairValue |            | Purchases/ConversionAcquisition |   |            | SalesProceeds/Conversion                        |  | InterestReceived |        | RealizedGain/(Loss) |   |       | Shares/PrincipalAmount Held atJuly 31, 2008 |   | July 31, 2008Fair Value(Note 1)
|Controlled Affiliates                            |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           
|Pilot Software Inc., Series A Preferred          |  |                                               |  |                           |           |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   | 75,463                          |   |  |          |  |   |          
|                                                 |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           
|Total Controlled Affiliates                      |  |                                                |  | $                         |           |                                 | $ |           |                                                 |  | $                |       |                     | $ |      |                                             | $ | 75,463                          |   |  |           |  | $ |          
|Non-Controlled Affiliates                        |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           
|Ethertronics, Inc., Series B Preferred           |  | 4,433,333                                      |  |                           | 6,650,000  |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 4,433,333 |  |   | 6,650,000 
|Ethertronics, Inc., Series C Warrants            |  | 271,247                                        |  |                           |           |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 271,247   |  |   |          
|Ethertronics, Inc., Series C Preferred           |  | 1,697,957                                      |  |                           | 2,546,937  |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 1,697,957 |  |   | 2,546,936 
|LogicLibrary, Inc., Series A Preferred           |  | 8,751,782                                      |  |                           | 4,001,492  |                                 |   | (4,087,685 | )                                               |  |                  |       |                     |   | 1,758 |                                             |   |                                |   |  |          |  |   |          
|LogicLibrary, Inc., Series A-1 Preferred         |  | 3,080,464                                      |  |                           | 1,408,450  |                                 |   | (1,408,450 | )                                               |  |                  |        |                     |   |      |                                             |   |                                |   |  |          |  |   |          
|MIDAS Vision Systems, Inc., Series A-1 Preferred |  | 933,593                                        |  |                           |           |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   | (1,054,960                      | ) |  |          |  |   |          
|MIDAS Vision Systems, Inc., Common Stock         |  | 157,396                                        |  |                           |           |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   | (4,000,000                      | ) |  |          |  |   |          
|NanoOpto Corp., Bridge Note                      |  | 237,321                                        |  |                           | 160,000    |                                 |   |           |                                                 |  |                  | 93,384 |                     |   |      |                                             |   | (143,937                        | ) |  |          |  |   |          
|OpVista, Inc., Series AA Preferred               |  | 5,683,906                                      |  |                           | 6,236,892  |                                 |   | (4,067,801 | )                                               |  |                  |       |                     |   |      |                                             |   |                                |   |  | 1,088,532 |  |   | 551,817   
|OpVista, Inc., Common Stock                      |  | 1,079,541                                      |  |                           | 1,184,567  |                                 |   | 4,465,175  |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 6,025,312 |  |   |          
|OpVista, Inc., Series BB Convertible Preferred   |  | 433,400                                        |  |                           | 491,800    |                                 |   | (397,374   | )                                               |  |                  |       |                     |   |      |                                             |   |                                |   |  | 83,001    |  |   | 44,075    
|OpVista, Inc., Series CC Convertible Preferred   |  |                                               |  |                           |           |                                 |   | 683,075    |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 3,418,748 |  |   | 1,025,624 
|OpVista, Inc., Bridge Note                       |  | 675,989                                        |  |                           | 1,351,978  |                                 |   | (683,075   | )                                               |  |                  |       |                     |   | 7,760 |                                             |   |                                |   |  |          |  |   |          
|OpVista, Inc., Series CC Warrants                |  | 675,313                                        |  |                           |           |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 675,313   |  |   | 675       
|Silverback Systems, Inc., Escrow                 |  |                                               |  |                           |           |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   | (19,931                         | ) |  |          |  |   |          
|Tensys Medical, Inc., Series C Preferred         |  | 4,166,667                                      |  |                           | 534,026    |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 4,166,667 |  |   |          
|Tensys Medical, Inc., Series D Preferred         |  | 1,187,500                                      |  |                           | 152,197    |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 1,187,500 |  |   |          
|Tensys Medical, Inc., Series E Preferred         |  | 96,629                                         |  |                           | 347,865    |                                 |   |           |                                                 |  |                  |       |                     |   |      |                                             |   |                                |   |  | 318,845   |  |   |          
|                                                 |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           
|Total Non-Controlled Affiliates                  |  |                                                |  | $                         | 25,066,204 |                                 | $ | (5,496,135 | )                                               |  | $                | 93,384 |                     | $ | 9,518 |                                             | $ | (5,218,828                      | ) |  |           |  | $ | 10,819,127
|                                                 |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           
|Total Non-Controlled and Controlled Affiliates   |  |                                                |  | $                         | 25,066,204 |                                 | $ | (5,496,135 | )                                               |  | $                | 93,384 |                     | $ | 9,518 |                                             | $ | (5,143,365                      | ) |  |           |  | $ | 10,819,127
|                                                 |  |                                                |  |                           |            |                                 |   |            |                                                 |  |                  |        |                     |   |       |                                             |   |                                 |   |  |           |  |   |           



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|                                                 |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           
|------------------------------------------------ |  | ---------------------------------------------- |  | ------------------------- | ---------- | ------------------------------- | - | -------- | --------------------------------------------- |  | - | ---------------- | - | ------------------- | - | ------ | ---------------------------------------------- | - | ---------------------------------- | - |  | - | --------- |  | - | ----------
|                                                 |  |                                                |  |                           |            |                                 |   |          | For the Year Ended October 31, 2007 (Audited)
|Name of Investment                               |  | Shares/PrincipalAmount Held atOctober 31, 2006 |  | October 31,2006 FairValue |            | Purchases/ConversionAcquisition |   |          | SalesProceeds/Conversion                      |  |   | InterestReceived |   | RealizedGain/(Loss) |   |        | Shares/PrincipalAmount Held atOctober 31, 2007 |   | October 31, 2007Fair Value(Note 1)
|Controlled Affiliates                            |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           
|Pilot Software Inc., Series A Preferred          |  | 46,362,656                                     |  | $                         | 8,110,096  |                                 | $ |         |                                               |  | $ | 9,942,786        |   |                     | $ |       |                                                | $ | 1,573,881                          |   |  | $ |          |  | $ |          
|Pilot Software Inc., Bridge Note, 9%             |  | 1,404,600                                      |  |                           | 1,404,600  |                                 |   |         |                                               |  |   | 2,864,704        |   |                     |   | 36,712 |                                                |   | 1,403,907                          |   |  |   |          |  |   |          
|Cydelity Inc., Series A Preferred                |  | 19,995,000                                     |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (3,999,000                         | ) |  |   |          |  |   |          
|Cydelity Inc., Series A-1 Preferred              |  | 19,702,277                                     |  |                           | 3,940,456  |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (3,940,455                         | ) |  |   |          |  |   |          
|Cydelity Inc., Series A-2 Preferred              |  | 25,535,051                                     |  |                           | 2,500,009  |                                 |   |         |                                               |  |   | 1,001,681        |   |                     |   |       |                                                |   | (1,498,327                         | ) |  |   |          |  |   |          
|Cydelity Inc., Common Stock                      |  | 1,000,000                                      |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (1,000                             | ) |  |   |          |  |   |          
|                                                 |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           
|Total Controlled Affiliates                      |  |                                                |  | $                         | 15,955,161 |                                 | $ |         |                                               |  | $ | 13,809,171       |   |                     | $ | 36,712 |                                                | $ | (6,460,994                         | ) |  |   |           |  | $ |          
|Non-Controlled Affiliates                        |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           
|Chips & Systems, Inc., Series A Preferred        |  | 7,000,000                                      |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (3,500,000                         | ) |  |   |          |  |   |          
|Chips & Systems, Inc. Bridge Note                |  | 1,441,133                                      |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (1,441,133                         | ) |  |   |          |  |   |          
|Ethertronics, Inc., Series B Preferred           |  | 4,433,333                                      |  |                           | 6,650,000  |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 4,433,333 |  |   | 6,650,000 
|Ethertronics, Inc., Series B Warrants            |  | 281,667                                        |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|Ethertronics, Inc., Series C Warrants            |  | 214,073                                        |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 271,247   |  |   |          
|Ethertronics, Inc., Series C Preferred           |  | 1,316,793                                      |  |                           | 1,975,190  |                                 |   | 571,746  |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 1,697,957 |  |   | 2,546,937 
|Genoptix, Inc., Series 1-A Preferred             |  | 942,481                                        |  |                           | 950,822    |                                 |   | (950,822 | )                                             |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|Genoptix, Inc., Series 1-B Preferred             |  | 1,403,696                                      |  |                           | 950,822    |                                 |   | (950,822 | )                                             |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|Genoptix, Inc., Common Stock                     |  | 46,860                                         |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|Genoptix, Inc., Series 1-C Preferred             |  | 620,580                                        |  |                           | 554,178    |                                 |   | (554,178 | )                                             |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|Genoptix, Inc., Series 1-D Preferred             |  | 728,413                                        |  |                           | 461,815    |                                 |   | (461,815 | )                                             |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|LightConnect, Inc., Series C Preferred           |  |                                               |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | 168,484                            |   |  |   |          |  |   |          
|LogicLibrary, Inc., Series A Preferred           |  | 7,762,821                                      |  |                           | 3,549,296  |                                 |   | 452,196  |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 8,751,782 |  |   | 4,001,492 
|LogicLibrary, Inc., Series A-1 Preferred         |  | 3,080,464                                      |  |                           | 1,408,450  |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 3,080,464 |  |   | 1,408,450 
|MIDAS Vision Systems, Inc., Series A-1 Preferred |  | 933,593                                        |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 933,593   |  |   |          
|MIDAS Vision Systems, Inc., Common Stock         |  | 157,396                                        |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 157,396   |  |   |          
|NanoOpto Corp., Series A-1 Preferred             |  | 956,234                                        |  |                           | 840,912    |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (2,231,212                         | ) |  |   |          |  |   |          
|NanoOpto Corp., Series B Preferred               |  | 3,023,399                                      |  |                           | 1,286,155  |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (1,286,154                         | ) |  |   |          |  |   |          
|NanoOpto Corp., Series C Preferred               |  | 1,682,470                                      |  |                           | 733,389    |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (733,389                           | ) |  |   |          |  |   |          
|NanoOpto Corp., Series C Warrants                |  | 229,410                                        |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   |          |  |   |          
|NanoOpto Corp., Series D Preferred               |  | 1,234,263                                      |  |                           | 382,622    |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (382,622                           | ) |  |   |          |  |   |          
|NanoOpto Corp., Bridge Note                      |  |                                               |  |                           |           |                                 |   | 237,321  |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 237,321   |  |   | 160,000   
|OpVista, Inc., Series AA Preferred               |  | 5,089,790                                      |  |                           | 5,367,967  |                                 |   | 526,227  |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 5,683,906 |  |   | 6,236,892 
|OpVista, Inc., Common Stock                      |  | 1,079,541                                      |  |                           | 1,138,542  |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 1,079,541 |  |   | 1,184,567 
|OpVista, Inc., Series BB Convertible Preferred   |  |                                               |  |                           |           |                                 |   | 491,800  |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 433,400   |  |   | 491,800   
|OpVista, Inc., Bridge Note                       |  |                                               |  |                           |           |                                 |   | 675,989  |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 675,989   |  |   | 1,351,978 
|OpVista, Inc., Series CC Warrants                |  |                                               |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 675,313   |  |   |          
|Silverback Systems, Inc., Common                 |  | 40,026                                         |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (4,759,081                         | ) |  |   |          |  |   |          
|Silverback Systems, Inc., Series B               |  | 559,993                                        |  |                           | 1,600,000  |                                 |   |         |                                               |  |   | 749,976          |   |                     |   |       |                                                |   | (750,805                           | ) |  |   |          |  |   |          
|Silverback Systems, Inc., Series A-2 Preferred   |  | 772,503                                        |  |                           |           |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   | (2,070,310                         | ) |  |   |          |  |   |          
|Tensys Medical, Inc., Series C Preferred         |  | 4,166,667                                      |  |                           | 1,887,160  |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 4,166,667 |  |   | 534,026   
|Tensys Medical, Inc., Series D Preferred         |  | 1,187,500                                      |  |                           | 537,840    |                                 |   |         |                                               |  |   |                 |   |                     |   |       |                                                |   |                                   |   |  |   | 1,187,500 |  |   | 152,197   
|Tensys Medical, Inc., Series E Preferred         |  |                                               |  |                           |           |                                 |   |         |                                               |  |   | 115,954          |   |                     |   |       |                                                |   |                                   |   |  |   | 96,629    |  |   | 347,865   
|Tensys Medical, Inc., Bridge Note                |  | 52,017                                         |  |                           | 52,017     |                                 |   | 59,039   |                                               |  |   | (115,954         | ) |                     |   | 4,898  |                                                |   |                                   |   |  |   |          |  |   |          
|                                                 |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           
|Total Non-Controlled Affiliates                  |  |                                                |  | $                         | 30,327,177 |                                 | $ | 96,681   |                                               |  | $ | 749,976          |   |                     | $ | 4,898  |                                                | $ | (16,986,222                        | ) |  |   |           |  | $ | 25,066,204
|                                                 |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           
|Total Non -Controlled and Controlled Affiliates  |  |                                                |  | $                         | 46,282,338 |                                 | $ | 96,681   |                                               |  | $ | 14,559,147       |   |                     | $ | 41,610 |                                                | $ | (23,447,216                        | ) |  |   |           |  | $ | 25,066,204
|                                                 |  |                                                |  |                           |            |                                 |   |          |                                               |  |   |                  |   |                     |   |        |                                                |   |                                    |   |  |   |           |  |   |           



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Note 7  Pending Litigation

The former Investment Adviser, certain of its affiliates, including U.S. Trust, and others were named in four shareholder class action lawsuits and two derivative actions which allege that the
former Investment Adviser, certain of its affiliates and others allowed certain parties to engage in illegal and improper mutual fund trading practices, which allegedly caused financial injury to the shareholders of certain mutual funds managed by
the former Investment Adviser. Each seeks unspecified monetary damages and related equitable relief.

The class and
derivative actions described above were transferred to the United States District Court for the District of Maryland for coordinated and consolidated pre-trial proceedings. In November 2005, the Maryland court dismissed many of the plaintiffs
claims in both the class action and derivative lawsuits. Several affiliates of the former Investment Adviser and individual defendants have also been dismissed. Plaintiffs claims under Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, as amended, and under Section 36(b) and 48(a) of the Investment Company Act, however, have not been dismissed.

While the ultimate outcome of these matters cannot be predicted with any certainty at this time, based on currently available information and consultation with counsel, BANA believes that the likelihood is remote that the pending litigation
will materially affect the Investment Advisers ability to provide investment management services to the Company. Neither the Investment Adviser nor the Company is a party to the lawsuits described above.

Note 8  Guarantees

In the
normal course of business, the Company enters into contracts that provide general indemnifications. The Companys maximum exposure under these agreements is dependent on future claims that may be made against the Company, and therefore cannot
be established; however, based on experience, the risk of loss from such claims is considered remote.

Note 9  Disclosure regarding Private
Investment Funds over 5% of Net Assets

CMEA Ventures VI, L.P. represents 6.60% of Net Assets at July 31, 2008. The
investment objective of CMEA Ventures VI, L.P. is to invest in and assist new and emerging growth-oriented business that are involved in the areas of life science technology, human healthcare and high technology companies in order to achieve net
rates of return on invested capital in the top quartile of venture capital funds of the same vintage year. CMEA Ventures VI, L.P. does not provide liquidity to its partners in the form of redemptions and explicitly states that no partner can
withdraw its capital or profits. Liquidity is provided at the general partners discretion in the form of distributions in either cash or marketable securities. Additionally, the general partner of CMEA Ventures VI, L.P. may approve transfers;
however, it is at its sole discretion.

Note 10  New Accounting Pronouncements

Effective November 1, 2007, the Company adopted the Financial Accounting Standards Board (FASB) interpretation
No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of preparing the Companys tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority.
Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company has evaluated the application of FIN 48 and has determined that it does not have a
material impact on the Companys financial statements. There are neither tax liabilities nor deferred tax assets relating to uncertain income tax positions taken or expected to be taken on the tax return for the year ended December 31,
2007. The statute of limitations on the Companys U.S. Federal tax returns remains open for the years ended December 31, 2005 through December 31, 2007. The statute of limitations on the Companys state and local tax returns may
remain open for an additional year depending upon the jurisdiction.



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##### Table of Contents

Note 10  New Accounting Pronouncements (continued)

FASB issued Statement No. 157 in September 2006, Fair Value Measurements, which is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. This statement provides enhanced guidance for using fair value to measure assets and liabilities. It clarifies fair value, establishes a
framework for measuring fair value in generally accepted accounting principles (GAAP) and expands disclosures about fair value measurements. The standard applies whenever other standards require (or permit) assets or liabilities to be
measured at fair value. The standard does not expand the use of fair value in any new circumstances. The Company is reviewing the statement and its impact on the financial statements.

FASB issued Statement No. 159 (SFAS 159) in February 2007, The Fair Value Option for Financial Assets and
Financial Liabilities, which is effective for Financial Statements issued for fiscal year beginning after November 15, 2007. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value,
with changes in fair value recognized in earnings. The Company is reviewing the statement and its impact on the financial statements.

Note 11 
Subsequent Events

Deferred income from the sale of investments has been increased from the period ending April 30,
2008 through July 31, 2008 due to a claim against the escrow account that occurred during the period. These escrowed monies have not been paid to the Company at August 29, 2008, which is the month in which the release was expected to
occur. Hence, the provision for any claim against the escrow, is merely an estimate at July 31, 2008. The claims may result in a loss greater or less than the current estimate and those differences could be material relative to the estimate.

The remaining Genoptix, Inc. shares were sold subsequent to the period ending July 31, 2008. The sale generated
proceeds of $981,610, net of commissions and selling costs. Additionally, the stock sales receivable of $3,939,128 as of July 31, 2008 was settled in August 2008.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. For the Nine and Three months ended July 31, 2008 as Compared to the Similar
Periods in 2007
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Realized and Unrealized Gains and Losses from Portfolio Investments

For the nine months ended July 31, 2008 and 2007, the Company had a net realized gain/(loss) on security transactions of $11,010,306
and ($3,972,070), respectively. The realized gain of $11,010,306 for the nine months ended July 31, 2008 is comprised of gains from the Companys partial sale of Genoptix, Inc. and the Companys sale of Pilot Software Inc., which
resulted in a realized gain of $16,361,537 and $75,463, respectively. This gain was partially offset by the realized losses from the Companys write off of Midas Vision Systems, Inc. and NanoOpto Corporation, which resulted in a realized loss
of ($5,054,960) and ($143,937), respectively. All other remaining direct investments and Private Investment Funds resulted in a net realized loss of ($227,797). The net realized (loss) for the nine months ended July 31, 2007 was principally the
result of the Companys sale of Silverback Systems, Inc, which resulted in a realized loss of ($7,580,196). This loss was partially offset by a realized gain of $3,033,984 from the Companys sale of Pilot Software Inc. All other remaining
direct investments and Private Investment Funds resulted in a net realized gain of $574,142 for the period ended July 31, 2007.

For the nine months ended July 31, 2008 and 2007, the Company had a net change in unrealized (depreciation)/appreciation on investments of ($15,666,832) and $882,127, respectively. The net change in unrealized
(depreciation) for the nine months ended July 31, 2008 was principally the combination of: i) the unrealized loss on OpVista, Inc. of ($7,650,806); ii) an unrealized loss on SOA Software, Inc. in the amount of ($5,681,135); iii) reversal of
unrealized gains due to the sale of Genoptix, Inc. of ($6,645,429); and iv) an unrealized loss of ($1,300,748) on Tensys Medical, Inc. This unrealized loss was partially offset by: the reversal of unrealized losses due to write off of Midas Vision
Systems, Inc. of $5,054,960 and the appreciation of CMEA Ventures VI, L.P. of $1,469,571. The remaining direct investments and Private Investment Funds resulted in a net unrealized loss of ($913,245). The net change in unrealized appreciation for
the nine months ended July 31, 2007 was principally the combination of: i) the sale of Silverback Systems Inc. which resulted in a reversal in unrealized depreciation of $6,730,172 due to the reclassification from an unrealized loss to realized
loss; ii) a decrease of ($4,840,466) due to the write-down of Cydelity, Inc., a private company investment; iii) an increase of $1,012,291 due to the write-up of OpVista Inc.; and iv) a decrease of ($3,320,399) due to a write-down of NanoOpto
Corporation ; v) an increase of $1,350,001 due to a write-up of Archemix Corporation; vi) a decrease of ($1,521,144) due to a write-down on Tensys Medical, Inc.; and vii) an increase of $1,469,065 due to a write-up of Genoptix, Inc. The remaining
change was a result of changes in the private investment funds and public stocks.

For the three months ended July 31,
2008 and 2007, the Company had a net realized gain on security transactions of $13,673,973 and $137,524, respectively. The net realized gain for the three-month period ended July 31, 2008 was principally the result of the Companys partial
sale of Genoptix, Inc. of $13,792,926. For the three months ended July 31, 2007, the net realized gain was principally the result of a net gain distribution of $396,333 from the Private Investment Funds, that was offset by a contingent loss
accrual relating to the Pilot Software, Inc. sale of ($258,809).

For the three months ended July 31, 2008 and 2007,
the Company had a net change in unrealized (depreciation) on investments of ($10,673,963) and ($2,859,433), respectively. The net change in unrealized depreciation for the three months ended July 31, 2008 was principally the combination of: i)
the reclassification from unrealized appreciation to realized gain of Genoptix, Inc. of ($11,801,901); ii) the write-down of SOA Software, Inc. of ($185,000); and iii) the appreciation of CMEA Ventures VI, L.P. of $1,072,957, an overall increase in
the valuation of the Companys Private Investment Funds in the amount of $239,981. The net change in unrealized depreciation for the period ended July 31, 2007 was principally the result of the combination of: i) an increase of $1,350,001
and $1,469,065 due to write-ups on Archemix Corporation and Genoptix, Inc., respectively and ii) a decrease of ($3,320,399), ($1,521,144), and ($618,000) due to write-downs of NanoOpto Corporation, Tensys Medical, Inc., and Cydelity, Inc.,
respectively. The remaining change was a result of changes in the Private Investment Funds and public stocks.



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Investment Income and Expenses

For the nine months ended July 31, 2008, the Company had investment income of $250,929, primarily from investments in short-term securities, and net operating expenses of $1,031,521,
resulting in a net investment loss of ($780,592). In comparison, for the similar period ended July 31, 2007, the Company had investment income of $516,037, primarily from investments in short-term securities, and net operating expenses of
$1,018,338, resulting in a net investment loss of ($502,301). The decrease in investment income for the nine months ended July 31, 2008 is primarily due to decreases in interest income due to declines in short-term interest rates. For the nine
months ended July 31, 2008, expenses increased due to higher professional fees charged to the Company.

For the three
months ended July 31, 2008, the Company had investment income of $40,067 and net operating expenses of $367,886 resulting in a net investment loss of ($327,819). In comparison, for the similar period ended July 31, 2007, the Company had
investment income of $135,960 and net operating expenses of $313,301, resulting in a net investment loss of ($177,341). The decrease in net investment income for the three months ended July 31, 2008 was a result of a decrease in short-term
interest income. The increase in operating expenses was primarily due to higher professional fees charged to the Company.

For the nine months ended July 31, 2008 and 2007, the Investment Adviser earned $495,945 and $509,020 in management fees, respectively. For the three months ended July 31, 2008 and 2007, the Investment Adviser earned $158,150 and
$160,975 in management fees, respectively. Management fees recorded during the periods ended July 31, 2008 and July 31, 2007 are at an annual rate of 1.00% of net assets. The decrease in management fees coincides with the overall decreases
in net asset over the comparable periods.

Net Assets

The Companys net assets were $62,919,746, or a net asset value per unit of $213.14, at July 31, 2008. This represents a decrease of $9,422,453, or $31.91 per unit, from net assets of $72,342,199, or $245.05
per unit, at October 31, 2007. The net decrease resulted principally from a net decrease in net assets from operations of $5,437,188, or $18.41 per unit, and distributions to members of $3,985,335, or $13.50 per unit.

Liquidity and Capital Resources

The
Company focuses its investments in the securities of privately-held venture capital companies, and to a lesser extent in venture capital, buyout and other private equity funds managed by third parties. The Company may offer managerial assistance to
certain of such privately-held venture capital companies. The Company invests its available cash in short-term investments of marketable securities pending follow-on investments in portfolio companies and distribution to investors.

At July 31, 2008, the Company held $21,130,822 in cash and cash equivalents and $984,128 short-term investments, as compared to
$26,240 in cash and cash equivalents and $11,367,859 in short-term investments, at October 31, 2007. The overall increase in cash and short-term investments was primarily due to cash received from the sale of Genoptix, Inc. At July 31,
2008, the Company did not invest in any short-term notes. The Company funded additional capital per its commitments to its Private Investment Funds in the amount of $2,467,188 for the nine months ended July 31, 2008. In connection with the
Companys total commitments to private funds in the amount of $25,700,000 since inception, the Company, through July 31, 2008, has contributed $21,771,328 or 84.71% of the total capital committed to nine Private Investment Funds. During
the nine months ended July 31, 2008, the Company also participated in follow-on financing rounds for several of its private companies totaling $570,223.

The Company believes that its liquidity and capital resources are adequate to satisfy its operational needs as well as the continuation of its investment program.



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Application of Critical Accounting Policies

Under the supervision of the Valuation and Audit Committees of the Companys Board of Managers, consisting of the Managers, who are
not interested persons, as defined in Section 2(a)(19) of the Investment Company Act (the Independent Managers), of the Company, the Investment Adviser makes certain critical accounting estimates with respect to the
valuation of private portfolio investments. These estimates could have a material impact on the presentation of the Companys financial condition because in total, they currently represent 53.29% of the Companys net assets. For the
private investments held at July 31, 2008, changes to these estimates and realizations resulted in a $5.6 million decrease in net asset value from October 31, 2007.

The value for securities for which no public market exists is difficult to determine. Generally speaking, such investments will be valued on a going concern basis without giving
effect to any disposition costs. There is a range of values that is reasonable for such investments at any particular time. Because of the inherent uncertainty of valuation, the estimated values may differ significantly from the values that would
have been used had a ready market for the securities existed, and the differences could be material.

Initially, direct
private company investments are valued based upon their original cost until developments provide a sufficient basis for use of a valuation other than cost. Upon the occurrence of developments providing a sufficient basis for a change in valuation,
direct private company investments will be valued by the private market or appraisal methods of valuation. The private market method shall only be used with respect to reliable third party transactions by sophisticated,
independent investors. The appraisal method shall be based upon such factors affecting the company such as earnings, net worth, reliable private sale prices of the companys securities, the market prices for similar securities of comparable
companies, an assessment of the companys future prospects or, if appropriate, liquidation value. The values for the investments referred to in this paragraph will be estimated regularly by the Investment Adviser or a committee of the Board of
Managers, or both, under the supervision of the Board, and, in any event, not less frequently than quarterly. However, there can be no assurance that such value will represent the return that might ultimately be realized by the Company from the
investments.

The valuation of the Companys private funds is based upon its pro-rata share of the value of the assets
of a private fund as determined by such private fund, in accordance with its partnership agreement, constitutional or other documents governing such valuation, on the valuation date. If such valuation with respect to the Companys investments
in private funds is not available by reason of timing or other event on the valuation date, or deemed to be unreliable by the Investment Adviser, the Investment Adviser, under supervision of the Board, shall determine such value based on its
judgment of fair value on the appropriate date, less applicable charges, if any.

The Investment Adviser also makes
estimates regarding discounts on market prices of publicly traded securities where appropriate. For securities which have legal, contractual or practical restrictions on transfer, a discount of 10% to 40% from the public market price will be
applied.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

Equity Price Risk

The Company anticipates that a majority of its investment portfolio will consist of
securities in private companies and Private Investment Funds. As of July 31, 2008, 53.29% of the Companys net assets are not publicly traded. These investments are recorded at fair value as determined by the Investment Adviser in
accordance with valuation guidelines adopted by the Board of Managers. This method of valuation does not result in increases or decreases in the fair value of these securities in response to changes in market prices. Thus, these securities are not
subject to equity price risk normally associated with public equity markets, except that to the extent that the Private Investment Funds hold underlying public securities, the Company is indirectly exposed to equity price risk associated with the
public markets. At July 31, 2008 and July 31, 2007, the Company was not subject to equity price risk normally associated with public equity markets, except for Genoptix, Inc. and to the extent that the Private Investment Funds that the
Company has invested in hold, from time to time, interests in securities which may be publicly traded.



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|Item 4. | Controls and Procedures.
|------- | ------------------------

(a)
Evaluation of Disclosure Controls and Procedures. As of July 31, 2008 (the end of the period covered by this report), the Companys principal executive officers and principal financial officer evaluated the effectiveness of the
Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have concluded that, based on such evaluation, the Companys disclosure controls and procedures were adequate and effective to
ensure that material information relating to the Company was made known to them by others within those entities.

(b)
Changes in Internal Controls. There were no significant changes in the Companys internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were
there any significant deficiencies or material weaknesses in the Companys internal controls over financial reporting. Accordingly, no corrective actions were required or undertaken.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

None.



|Item 2. | Changes in Securities and Use of Proceeds.
|------- | ------------------------------------------

None.



|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 and Reports on Form 8-K.
|------- | ---------------------------------



|(a) | Exhibits.
|--- | ---------



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|31.2 |  | Certification of Treasurer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.              
|     | 
|32   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                           



|(b) | Reports on Form 8-K.
|--- | --------------------

On May 30, 2008, the
Company filed a Current Report on Form 8-K to report under Item 8.01 certain disclosures.

On July 16, 2008, the Company filed a
Current Report on Form 8-K to report under Item 5.02 certain disclosures.



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SIGNATURES

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



|                         |  |                                     |  |     |  |                                       |  | 
|------------------------ |  | ----------------------------------- |  | --- |  | ------------------------------------- |  | 
|                         |  | EXCELSIOR VENTURE PARTNERS III, LLC
|                         |  |                                     | 
|Date: September 15, 2008 |  |                                     |  | By: |  | /s/    James D. Bowden               
|                         |  |                                     |  |     |  | James D. Bowden                      
|                         |  |                                     |  |     |  | President and Chief Executive Officer
|                         |  |                                     | 
|Date: September 15, 2008 |  |                                     |  | By: |  | /s/    Steven L. Suss                
|                         |  |                                     |  |     |  | Steven L. Suss                       
|                         |  |                                     |  |     |  | Treasurer and Chief Financial Officer