---



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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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 April 30, 2005



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



114
West 47th Street, New York, NY 10036-1532

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 an accelerated filer (as defined by Rule 12b-2 of the Act).    Yes ̈No  x



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EXCELSIOR VENTURE PARTNERS III, LLC



This Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking
forward in time are included in this Form 10-Q pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause Excelsior Venture
Partners III, LLCs (the Companys) actual results to differ from future performance suggested herein.



|         |  |                                                                                                       |  |         
|-------- |  | ----------------------------------------------------------------------------------------------------- |  | --------
|         |  | INDEX                                                                                                 |  | PAGE NO.
|         |  |                                                                                                      
|PART I.  |  | FINANCIAL INFORMATION                                                                                 |  |         
|         |  |                                                                                                      
|Item 1.  |  | Financial Statements                                                                                  |  | 1       
|         |  |                                                                                                      
|         |  | Portfolios of Investments as of April 30, 2005 and October 31, 2004                                   |  | 2       
|         |  |                                                                                                      
|         |  | Statements of Assets and Liabilities at April 30, 2005 and October 31, 2004                           |  | 9       
|         |  |                                                                                                      
|         |  | Statements of Operations for the six-month periods ended April 30, 2005 and April 30, 2004            |  | 10      
|         |  |                                                                                                      
|         |  | Statements of Operations for the three-month periods ended April 30, 2005 and April 30, 2004          |  | 11      
|         |  |                                                                                                      
|         |  | Statements of Changes in Net Assets for the six-month periods ended April 30, 2005 and April 30, 2004 |  | 12      
|         |  |                                                                                                      
|         |  | Statements of Cash Flows for the six-month periods ended April 30, 2005 and April 30, 2004            |  | 13      
|         |  |                                                                                                      
|         |  | Financial Highlights for the six-month periods ended April 30, 2005 and April 30, 2004                |  | 14      
|         |  |                                                                                                      
|         |  | Notes to Financial Statements                                                                         |  | 15      
|         |  |                                                                                                      
|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                                                                                     |  |         
|         |  |                                                                                                      
|Item 1.  |  | Legal Proceedings                                                                                     |  | 24      
|         |  |                                                                                                      
|Item 2.  |  | Changes in Securities and Use of Proceeds                                                             |  | 24      
|         |  |                                                                                                      
|Item 3.  |  | Defaults Upon Senior Securities                                                                       |  | 24      
|         |  |                                                                                                      
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                   |  | 24      
|         |  |                                                                                                      
|Item 5.  |  | Other Information                                                                                     |  | 24      
|         |  |                                                                                                      
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                      |  | 24      





---

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------



Excelsior Venture Partners III, LLC

Portfolio of Investments
(Unaudited)



|                                 |  |                |             |                      |        |  
|-------------------------------- |  | -------------- | ----------- | -------------------- | ------ | -
|                                 |  | April 30, 2005 |            
|                                 |  | Value          |             | Percent of NetAssets |       
|PORTFOLIO STRUCTURE              |  |                |             |                      |        |  
|SHORT-TERM INVESTMENTS:          |  |                |             |                      |        |  
|MONEY MARKET INSTRUMENTS         |  | $              | 29,989,072  |                      | 28.62  | %
|INVESTMENT COMPANIES             |  |                | 1,808,874   |                      | 1.73   | %
|PRIVATE COMPANIES                |  |                | 58,850,495  |                      | 56.17  | %
|PUBLIC COMPANIES                 |  |                | 6,196,003   |                      | 5.91   | %
|PRIVATE INVESTMENT FUNDS         |  |                | 7,244,592   |                      | 6.91   | %
|                                 |  |                |             |                      |        |  
|TOTAL INVESTMENTS                |  |                | 104,089,036 |                      | 99.34  | %
|OTHER ASSETS & LIABILITIES (NET) |  |                | 689,601     |                      | 0.66   | %
|                                 |  |                |             |                      |        |  
|NET ASSETS                       |  | $              | 104,778,637 |                      | 100.00 | %
|                                 |  |                |             |                      |        |  



Excelsior Venture Partners III, LLC

Portfolio of Investments



|                                 |  |                  |             |                      |        |  
|-------------------------------- |  | ---------------- | ----------- | -------------------- | ------ | -
|                                 |  | October 31, 2004 |            
|                                 |  | Value            |             | Percent of NetAssets |       
|PORTFOLIO STRUCTURE              |  |                  |             |                      |        |  
|SHORT-TERM INVESTMENTS:          |  |                  |             |                      |        |  
|MONEY MARKET INSTRUMENTS         |  | $                | 44,139,985  |                      | 38.03  | %
|INVESTMENT COMPANIES             |  |                  | 1,386,211   |                      | 1.19   | %
|PRIVATE COMPANIES                |  |                  | 60,065,508  |                      | 51.75  | %
|PUBLIC COMPANIES                 |  |                  | 4,682,927   |                      | 4.03   | %
|PRIVATE INVESTMENT FUNDS         |  |                  | 5,456,505   |                      | 4.70   | %
|                                 |  |                  |             |                      |        |  
|TOTAL INVESTMENTS                |  |                  | 115,731,136 |                      | 99.70  | %
|OTHER ASSETS & LIABILITIES (NET) |  |                  | 348,297     |                      | 0.30   | %
|                                 |  |                  |             |                      |        |  
|NET ASSETS                       |  | $                | 116,079,433 |                      | 100.00 | %
|                                 |  |                  |             |                      |        |  



Notes to Financial
Statements are an integral part of these Financial Statements.



1



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Excelsior Venture Partners III, LLC

Portfolio of Investments April 30, 2005 (Unaudited)



|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|---------------------- | --------------------------------------- |  | ------------------------------------------------------------------------- | ------------------- | ------------------------------- | -------------- | - | ----------
|PrincipalAmount/Shares |                                         |  |                                                                           | Acquisition Date ## |                                 | Value (Note 1)
|                       | TOTAL MONEY MARKET INSTRUMENTS  28.62% |  |                                                                           |                     |                                 |               
|$                      | 5,000,000                               |  | Royal Bank of Scotland Commercial Paper, 2.75%, 5/2/05 (Cost $4,999,236)  |                     |                                 |                | $ | 4,999,236 
|                       | 10,000,000                              |  | Federal Farm Credit Bureau Discount Note, 2.65%, 5/3/05 (Cost $9,997,634) |                     |                                 |                |   | 9,997,634 
|                       | 5,000,000                               |  | Du Pont Commercial Paper, 2.75%, 5/5/05 (Cost $4,998,091)                 |                     |                                 |                |   | 4,998,091 
|                       | 5,000,000                               |  | Morgan Stanley Commercial Paper, 2.80%, 5/5/05 (Cost $4,998,056)          |                     |                                 |                |   | 4,998,056 
|                       | 5,000,000                               |  | UBS Financial Commercial Paper, 2.84%, 5/10/05 (Cost $4,996,055)          |                     |                                 |                |   | 4,996,055 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         |  | TOTAL MONEY MARKET INSTRUMENTS (COST $29,989,072)                         |                     |                                 |                |   | 29,989,072
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         | 
|                       | PUBLIC COMPANIES  5.91%                |  |                                                                           |                     |                                 |               
|                       | Common Stocks  5.91%                   |  |                                                                           |                     |                                 |               
|                       | Life Sciences  5.91%                   |  |                                                                           |                     |                                 |               
|                       | 485,961                                 |  | Adeza Biomedical Corp.                                                    |                     | 09/01                           |                |   | 6,196,003 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         |  | (Nasdaq: ADZA)                                                            |                     |                                 |                |   |           
|                       |                                         |  | TOTAL COMMON STOCKS (Cost $3,000,000)                                     |                     |                                 |                |   | 6,196,003 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         | 
|                       | PRIVATE COMPANIES **, #, @  56.17%     |  |                                                                           |                     |                                 |               
|                       | Common Stocks  0.00%                   |  |                                                                           |                     |                                 |               
|                       | Capital Equipment  0.00%               |  |                                                                           |                     |                                 |               
|                       | 157,396                                 |  | MIDAS Vision Systems, Inc.                                                |                     | 03/03                           |                |   |          
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Life Sciences  0.00%                   |  |                                                                           |                     |                                 |               
|                       | 46,860                                  |  | Genoptix, Inc.                                                            |                     | 07/03                           |                |   |          
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         |  | TOTAL COMMON STOCKS (Cost $4,000,000)                                     |                     |                                 |                |   |          
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Preferred Stocks  50.42%               |  |                                                                           |                     |                                 |               
|                       | Capital Equipment  0.00%               |  |                                                                           |                     |                                 |               
|                       | 933,593                                 |  | MIDAS Vision Systems, Inc., Series A-1                                    |                     | 03/03                           |                |   |          
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Enterprise Software  11.36%            |  |                                                                           |                     |                                 |               
|                       | 19,995,000                              |  | ***Datanautics, Inc. Series A Preferred                                   |                     | 01/04                           |                |   | 4,000,000 
|                       | 8,532,883                               |  | LogicLibrary, Inc., Series A                                              |                     | 01/02, 08/03,05/04, 12/04, 2/05 |                |   | 3,901,408 
|                       | 20,000,000                              |  | ***Pilot Software Inc., Series A                                          |                     | 05/02 & 04/03                   |                |   | 4,000,000 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         |  |                                                                           |                     |                                 |                |   | 11,901,408
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Information Services  0.00%            |  |                                                                           |                     |                                 |               
|                       | 4,425                                   |  | Cenquest, Inc., Series 2                                                  |                     | 7/01                            |                |   |          
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Life Sciences  4.20%                   |  |                                                                           |                     |                                 |               
|                       | 1,999,999                               |  | Archemix Corporation, Inc., Series A                                      |                     | 08/02, 01/03, 11/03             |                |   | 1,999,999 
|                       | 466,666                                 |  | Archemix Corporation, Inc., Series B                                      |                     | 03/04 & 09/04                   |                |   | 466,666   
|                       | 942,481                                 |  | Genoptix, Inc., Series B-1                                                |                     | 12/01                           |                |   | 501,400   
|                       | 1,403,696                               |  | Genoptix, Inc., Series B-2                                                |                     | 07/03, 09/03, 12/03             |                |   | 877,450   
|                       | 620,580                                 |  | Genoptix, Inc., Series C                                                  |                     | 08/04 & 01/05                   |                |   | 554,178   
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         |  |                                                                           |                     |                                 |                |   | 4,399,693 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Medical Technology  6.13%              |  |                                                                           |                     |                                 |               
|                       | 4,166,667                               |  | Tensys Medical, Inc., Series C                                            |                     | 03/02                           |                |   | 5,000,000 
|                       | 1,187,500                               |  | Tensys Medical, Inc., Series D                                            |                     | 05/04                           |                |   | 1,425,000 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       |                                         |  |                                                                           |                     |                                 |                |   | 6,425,000 
|                       |                                         |  |                                                                           |                     |                                 |                |   |           
|                       | Optical  13.08%                        |  |                                                                           |                     |                                 |               
|                       | 4,330,504                               |  | LightConnect, Inc., Series B                                              |                     | 07/01                           |                |   | 5,000,000 
|                       | 12,292,441                              |  | LightConnect, Inc., Series C                                              |                     | 12/02                           |                |   | 992,000   
|                       | 956,234                                 |  | NanoOpto Corporation, Series A-1                                          |                     | 10/01& 03/02                    |                |   |          
|                       | 3,023,399                               |  | NanoOpto Corporation, Series B                                            |                     | 09/03, 11/03,01/04, 07/04       |                |   | 1,655,119 



2



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Excelsior Venture Partners III, LLC

Portfolio of Investments April 30, 2005 (Unaudited)  (continued)



|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|------------------------------------- | -------------------------------------- | - |  | --------------------------------------------- | ------------------- | ------------------------------- | -------------- | - | ----------
|PrincipalAmount/Shares/ Percent Owned |                                        |   |  |                                               | Acquisition Date ## |                                 | Value (Note 1)
|                                      | 5,333,333                              |   |  | OpVista, Inc., Series B                       |                     | 07/01                           |                | $ |          
|                                      | 12,671,059                             |   |  | OpVista, Inc., Series C                       |                     | 09/03                           |                |   | 5,000,000 
|                                      | 102,040                                |   |  | OpVista, Inc., Series D                       |                     | 11/04                           |                |   | 1,058,000 
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      |                                        |   |  |                                               |                     |                                 |                |   | 13,705,119
|                                      | Semiconductor  9.30%                  |   |  |                                               |                     |                                
|                                      | 7,000,000                              |   |  | Chips & Systems, Inc., Series A               |                     | 03/04                           |                |   |          
|                                      | 2,211,898                              |   |  | Silverback Systems, Inc., Series B-1          |                     | 02/02                           |                |   | 450,052   
|                                      | 34,364,257                             |   |  | Silverback Systems, Inc., Series C            |                     | 03/03, 09/03, 04/04             |                |   | 4,298,896 
|                                      | 3,096,551                              |   |  | Virtual Silicon Technology, Inc., Series C    |                     | 12/01                           |                |   | 5,000,000 
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      |                                        |   |  |                                               |                     |                                 |                |   | 9.748,948 
|                                      | Wireless  6.35%                       |   |  |                                               |                     |                                
|                                      | 4,433,333                              |   |  | Ethertronics, Inc., Series B                  |                     | 06/01, 09/02, 07/03,05/04       |                |   | 6,650,001 
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      |                                        |   |  | TOTAL PREFERRED STOCKS (Cost $65,128,657)     |                     |                                 |                |   | 52,830,169
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | Notes  5.75%                          |   |  |                                               |                     |                                
|                                      |                                        |  
|                                      | Enterprise Software  3.28%            |   |  |                                               |                     |                                
|$                                     | 1,433,178                              |   |  | ***Datanautics, Inc., Bridge Note             |                     | 12/04, 01/05,02/05, 03/05,04/05 |                |   | 1,433,178 
|                                      | 2,000,000                              |   |  | ***Pilot Software, Inc., Bridge Note          |                     | 08/04, 09/04,10/04, 11/04,12/04 |                |   | 2,000,000 
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | Semiconductor1.54 %                   |   |  |                                               |                     |                                
|                                      | 281,580                                |   |  | Virtual Silicon Technology, Inc., Bridge Note |                     | 10/04, 12/04,02/05              |                |   | 281,580   
|                                      | 1,441,133                              |   |  | Chips & Systems, Inc., Bridge Note            |                     | 11/04, 01/05,02/05              |                |   |          
|                                      | 1,333,400                              |   |  | Silverback Systems, Inc., Bridge Note         |                     | 01/05, 04/05                    |                |   | 1,333,400 
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | Wireless 0.24 %                       |   |  |                                               |                     |                                
|                                      | 250,000                                |   |  | Ethertronics, Inc., Bridge Note               |                     | 01/05                           |                |   | 250,000   
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | Optical 0.69 %                        |   |  |                                               |                     |                                
|                                      | 722,101                                |   |  | NanoOpto Corp., Bridge Note                   |                     | 12/04                           |                |   | 722,101   
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      |                                        |   |  | TOTAL NOTES (Cost $7,461,392)                 |                     |                                 |                |   | 6,020,259 
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | Warrants  0.00%                       |   |  |                                               |                     |                                
|                                      | Semiconductor  0.00%                  |   |  |                                               |                     |                                
|                                      | 67                                     |   |  | Silverback Systems, Inc., Warrant             |                     | 04/05                           |                |   | 67        
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | Wireless  0.00%                       |   |  |                                               |                     |                                
|                                      | 100,000                                |   |  | Ethertronics, Inc.                            |                     | 09/02                           |                |   |          
|                                      | 115,000                                |   |  | Ethertronics, Inc.                            |                     | 07/03                           |                |   |          
|                                      | 66,667                                 |   |  | Ethertronics, Inc.                            |                     | 08/03                           |                |   |          
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      |                                        |   |  | TOTAL WARRANTS (Cost $67)                     |                     |                                 |                |   | 67        
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      |                                        |   |  | TOTAL  PRIVATE COMPANIES (Cost $76,590,116)  |                     |                                 |                |   | 58,850,495
|                                      |                                        |   |  |                                               |                     |                                 |                |   |           
|                                      | PRIVATE INVESTMENT FUNDS **, #  6.91% |   |  |                                               |                     |                                
|                                      | 0.39                                   | % |  | Advanced Technology Ventures VII, LP          |                     | 08/01-04/05                     |                |   | 845,375   
|                                      | 1.21                                   | % |  | Burrill Life Sciences Capital Fund            |                     | 12/02-12/04                     |                |   | 1,014,860 
|                                      | 1.35                                   | % |  | CHL Medical Partners II, LP                   |                     | 01/02-11/04                     |                |   | 581,496   
|                                      | 4.94                                   | % |  | CMEA Ventures Partners, LP                    |                     | 12/03-01/05                     |                |   | 257,781   
|                                      | 0.36                                   | % |  | Morgenthaler Partners VII, LP                 |                     | 07/01-01/05                     |                |   | 1,341,285 
|                                      | 0.59                                   | % |  | Prospect Venture Partners II, LP              |                     | 06/01-03/05                     |                |   | 1,393,042 
|                                      | 0.90                                   | % |  | Sevin Rosen Fund VI, LP                       |                     | 10/04-01/05                     |                |   | 282,093   
|                                      | 2.36                                   | % |  | Tallwood II, LP                               |                     | 12/02-04/05                     |                |   | 977,028   



3



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Excelsior Venture Partners III, LLC

Portfolio of Investments April 30, 2005 (Unaudited)  (continued)



|                                               |   |  |                                                                                |   |                     |  |                |          
|---------------------------------------------- | - |  | ------------------------------------------------------------------------------ | - | ------------------- |  | -------------- | ---------
|PrincipalAmount/Shares/ Percent Owned          |   |  |                                                                                |   | Acquisition Date ## |  | Value (Note 1)
|1.75                                           | % |  | Valhalla Partners II, LP                                                       |   | 10/03-03/05         |  | $              | 551,632  
|                                               |   |  |                                                                                |   |                     |  |                |          
|                                               |   |  | TOTAL  PRIVATE INVESTMENT FUNDS (Cost $8,564,582)                             |   |                     |  |                | 7,244,592
|                                               |   |  |                                                                                |   |                     |  |                |          
|                                               |   | 
|INVESTMENT COMPANIES  1.73%                   |   |  |                                                                                |   |                    
|1,808,874                                      |   |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $1,808,874) |   |                     |  |                | 1,808,874
|                                               |   |  |                                                                                |   |                     |  |                |          
|                                               |   | 
|TOTAL INVESTMENTS (Cost $119,952,644)  99.34% |   |  |                                                                                |   | 104,089,036        
|                                               |   | 
|OTHER ASSETS & LIABILITIES (NET)  0.66%       |   |  |                                                                                |   | 689,601            
|                                               |   |  |                                                                                |   |                     |  |                |          
|                                               |   | 
|NET ASSETS  100.00%                           |   |  |                                                                                | $ | 104,778,637        
|                                               |   |  |                                                                                |   |                     |  |                |          

---

|** | Restricted as to public resale.
|-- | -------------------------------



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



|## | Required disclosure for restricted securities only.
|-- | ---------------------------------------------------



|@ | At April 30, 2005 the Company owned 5% or more of the companys outstanding voting shares thereby making the company an affiliate as defined by the Investment Company Act of
1940. Total value of affiliated securities owned at April 30, 2005 was $47,417,317.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | At April 30, 2005, the Company owned 25% or more of the companys outstanding voting shares thereby making the company a controlled affiliate as defined by the Investment
Company Act of 1940. Total value of controlled affiliated securities owned at April 30, 2005 was $11,433,178.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Notes to Financial Statements are an integral part of these Financial Statements.



4



---

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004



|                        |                                     |  |                                                                     |                 |       |                |   |           
|----------------------- | ----------------------------------- |  | ------------------------------------------------------------------- | --------------- | ----- | -------------- | - | ----------
|Principal Amount/Shares |                                     |  |                                                                     | AcquisitionDate |       | Value (Note 1)
|                        | MONEY MARKET INSTRUMENTS  38.03%   |  |                                                                     |                 |       |               
|$                       | 3,000,000                           |  | UBS Financial Commercial Paper 1.75%, 11/01/04                      |                 |       |                | $ | 2,999,854 
|                        | 3,000,000                           |  | Morgan Stanley Commercial Paper 1.79%, 11/02/04                     |                 |       |                |   | 2,999,702 
|                        | 4,000,000                           |  | Federal Home Loan Mortgage Corp. Discount Note 1.75%, 11/02/04      |                 |       |                |   | 3,999,611 
|                        | 6,000,000                           |  | Federal Home Loan Mortgage Corp. Discount Note 1.715%, 11/02/04     |                 |       |                |   | 5,999,428 
|                        | 3,000,000                           |  | Danske Bank Commercial Paper 1.76%, 11/03/04                        |                 |       |                |   | 2,999,560 
|                        | 3,000,000                           |  | Du Pont Commercial Paper 1.75%, 11/03/04                            |                 |       |                |   | 2,999,563 
|                        | 9,900,000                           |  | Federal Home Loan Bank Discount Note 1.70%, 11/04/04                |                 |       |                |   | 9,898,130 
|                        | 3,750,000                           |  | Caterpillar Finance Commercial Paper 1.73%, 11/10/04                |                 |       |                |   | 3,748,198 
|                        | 8,500,000                           |  | Federal National Mortgage Association Discount Note 1.72%, 11/10/04 |                 |       |                |   | 8,495,939 
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     |  |                                                                    
|                        |                                     |  | TOTAL MONEY MARKET INSTRUMENTS (Cost $44,139,985)                   |                 |       |                |   | 44,139,985
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     | 
|                        | PUBLIC COMPANIES **, #  4.03%      |  |                                                                     |                 |       |               
|                        | Common Stocks  4.03%               |  |                                                                     |                 |       |               
|                        | Consumer Products  2.56%           |  |                                                                     |                 |       |               
|                        | 428,572                             |  | Senomyx, Inc.                                                       |                 | 06/04 |                |   | 2,976,005 
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     | 
|                        | Semiconductor  1.47%               |  |                                                                     |                 |       |               
|                        | 384,615                             |  | Netlogic Microsystems Inc.                                          |                 | 07/04 |                |   | 1,706,922 
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     |  |                                                                    
|                        |                                     |  | TOTAL PUBLIC COMPANIES (Cost $6,500,000)                            |                 |       |                |   | 4,682,927 
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     | 
|                        | PRIVATE COMPANIES **, #, @  51.75% |  |                                                                     |                 |       |               
|                        |                                     | 
|                        | Common Stocks  0.00%               |  |                                                                     |                 |       |               
|                        | Capital Equipment  0.00%           |  |                                                                     |                 |       |               
|                        | 157,396                             |  | MIDAS Vision Systems, Inc.                                          |                 | 03/03 |                |   |          
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     | 
|                        | Life Sciences  0.00%               |  |                                                                     |                 |       |               
|                        | 46,860                              |  | Genoptix, Inc.                                                      |                 | 07/03 |                |   |          
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     | 
|                        | Semiconductor  0.00%               |  |                                                                     |                 |       |               
|                        | 708,955                             |  | Monterey Design Systems, Inc.                                       |                 | 06/03 |                |   |          
|                        |                                     |  |                                                                     |                 |       |                |   |           
|                        |                                     |  |                                                                    
|                        |                                     |  | TOTAL COMMON STOCKS (Cost $8,750,000)                               |                 |       |                |   |          
|                        |                                     |  |                                                                     |                 |       |                |   |           



Notes to financial
statements are an integral part of these financial statements.



5



---

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004 - (continued)



|           |  |                                          |  |                           |  |                |           
|---------- |  | ---------------------------------------- |  | ------------------------- |  | -------------- | ----------
|Shares     |  |                                          |  | AcquisitionDate           |  | Value (Note 1)
|           |  | PRIVATE COMPANIES **, #, @  (continued) |  |                           |  |                |           
|           |  | Preferred Stocks  51.03%                |  |                           |  |                |           
|           |  | Capital Equipment  0.00%                |  |                           |  |                |           
|933,593    |  | MIDAS Vision Systems, Inc., Series A-1   |  | 03/03                     |  | $              |          
|           |  |                                          |  |                           |  |                |           
|           |  | Enterprise Software  9.83%              |  |                           |  |                |           
|19,995,000 |  | ***Datanautics, Inc., Series A Preferred |  | 01/04                     |  |                | 4,000,000 
|7,454,720  |  | LogicLibrary, Inc., Series A             |  | 01/02, 08/03, 05/04       |  |                | 3,408,450 
|20,000,000 |  | ***Pilot Software Inc., Series A         |  | 05/02 & 04/03             |  |                | 4,000,000 
|           |  |                                          |  |                           |  |                |           
|           |  |                                          |  |                           |  |                | 11,408,450
|           |  |                                          |  |                           |  |                |           
|           |  | Information Services  0.00%             |  |                           |  |                |           
|4,425      |  | Cenquest, Inc., Series 2                 |  | 07/01                     |  |                |          
|           |  |                                          |  |                           |  |                |           
|           |  | Life Sciences  7.10%                    |  |                           |  |                |           
|647,948    |  | Adeza Biomedical Corporation, Series 5   |  | 09/01                     |  |                | 3,000,000 
|1,999,999  |  | Archemix Corporation, Series A           |  | 08/02, 01/03, 11/03       |  |                | 1,999,999 
|466,666    |  | Archemix Corporation, Series B           |  | 03/04 & 09/04             |  |                | 466,666   
|942,481    |  | Genoptix, Inc., Series B-1               |  | 12/01                     |  |                | 1,253,500 
|1,403,696  |  | Genoptix, Inc., Series B-2               |  | 07/03, 09/03, 12/03       |  |                | 1,250,000 
|310,290    |  | Genoptix, Inc., Series C                 |  | 08/04                     |  |                | 277,089   
|           |  |                                          |  |                           |  |                |           
|           |  |                                          |  |                           |  |                | 8,247,254 
|           |  |                                          |  |                           |  |                |           
|           |  | Medical Technology  5.54%               |  |                           |  |                |           
|4,166,667  |  | Tensys Medical, Inc., Series C           |  | 03/02                     |  |                | 5,000,000 
|1,187,500  |  | Tensys Medical, Inc., Series D           |  | 05/04                     |  |                | 1,425,000 
|           |  |                                          |  |                           |  |                |           
|           |  |                                          |  |                           |  |                | 6,425,000 
|           |  |                                          |  |                           |  |                |           
|           |  | Optical  10.90%                         |  |                           |  |                |           
|4,330,504  |  | LightConnect, Inc., Series B             |  | 07/01                     |  |                | 5,000,000 
|12,292,441 |  | LightConnect, Inc., Series C             |  | 12/02                     |  |                | 992,000   
|956,234    |  | NanoOpto Corporation, Series A-1         |  | 10/01 & 3/02              |  |                |          
|3,023,399  |  | NanoOpto Corporation, Series B           |  | 09/03, 11/03,01/04, 07/04 |  |                | 1,655,118 
|5,333,333  |  | OpVista, Inc., Series B                  |  | 07/01                     |  |                |          
|12,671,059 |  | OpVista, Inc., Series C                  |  | 09/03                     |  |                | 5,000,000 
|           |  |                                          |  |                           |  |                |           
|           |  |                                          |  |                           |  |                | 12,647,118
|           |  |                                          |  |                           |  |                |           



Notes to Financial
Statements are an integral part of these Financial Statements.



6



---

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004 - (continued)



|                       |            |  |                                                             |                 |                           |                |   |           
|---------------------- | ---------- |  | ----------------------------------------------------------- | --------------- | ------------------------- | -------------- | - | ----------
|PrincipalAmount/Shares |            |  |                                                             | AcquisitionDate |                           | Value (Note 1)
|                       |            |  | PRIVATE COMPANIES **, #, @  (continued)                    |                 |                           |                |   |           
|                       |            |  | Preferred Stocks  (continued)                              |                 |                           |                |   |           
|                       |            |  | Semiconductor  11.93%                                      |                 |                           |                |   |           
|                       | 7,000,000  |  | Chips & Systems, Inc., Series A                             |                 | 03/04                     |                | $ | 3,500,000 
|                       | 3,333,333  |  | Monterey Design Systems, Inc., Series 2                     |                 | 06/03                     |                |   | 600,000   
|                       | 2,211,898  |  | Silverback Systems, Inc., Series B-1                        |                 | 02/02                     |                |   | 450,052   
|                       | 34,364,257 |  | Silverback Systems, Inc., Series C                          |                 | 03/03, 09/03, 04/04       |                |   | 4,298,896 
|                       | 3,096,551  |  | Virtual Silicon Technology, Inc., Series C                  |                 | 12/01                     |                |   | 5,000,000 
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  |                                                             |                 |                           |                |   | 13,848,948
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  | Wireless  5.73%                                            |                 |                           |                |   |           
|                       | 4,433,333  |  | Ethertronics, Inc., Series B                                |                 | 06/01, 09/02, 07/03,05/04 |                |   | 6,650,000 
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  | TOTAL PREFERRED STOCKS (Cost $69,300,611)                   |                 |                           |                |   | 59,226,770
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  | Notes  0.72%                                               |                 |                           |                |   |           
|                       |            |  | Enterprise Software  0.65%                                 |                 |                           |                |   |           
|$                      | 750,000    |  | ***Pilot Software Inc., Bridge Note, 9%, 04/22/05           |                 | 08/04 & 09/04, 10/04      |                |   | 750,000   
|                       |            |  | Semiconductor  0.07%                                       |                 |                           |                |   |           
|$                      | 88,738     |  | Virtual Silicon Technology, Inc., Bridge Note, 6%, 04/22/05 |                 | 10/04                     |                |   | 88,738    
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  | TOTAL NOTES (Cost $838,738)                                 |                 |                           |                |   | 838,738   
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  | Warrants  0.00%                                            |                 |                           |                |   |           
|                       |            |  | Wireless  0.00%                                            |                 |                           |                |   |           
|                       | 100,000    |  | Ethertronics, Inc.                                          |                 | 09/02                     |                |   |          
|                       | 115,000    |  | Ethertronics, Inc.                                          |                 | 07/03                     |                |   |          
|                       | 66,667     |  | Ethertronics, Inc.                                          |                 | 08/03                     |                |   |          
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  |                                                             |                 |                           |                |   |          
|                       |            |  | TOTAL WARRANTS (Cost $0)                                    |                 |                           |                |   |          
|                       |            |  |                                                             |                 |                           |                |   |           
|                       |            |  | TOTAL  PRIVATE COMPANIES (Cost $78,889,349)                |                 |                           |                |   | 60,065,508
|                       |            |  |                                                             |                 |                           |                |   |           



Notes to Financial
Statements are an integral part of these Financial Statements.



7



---

Excelsior Venture Partners III, LLC

Portfolio of Investments October 31, 2004 - (continued)



|                                       |  |                                                                                |  |                 |  |                |            
|-------------------------------------- |  | ------------------------------------------------------------------------------ |  | --------------- |  | -------------- | -----------
|Percent Owned                          |  |                                                                                |  | AcquisitionDate |  | Value (Note 1)
|PRIVATE INVESTMENT FUNDS **, #  4.70% |  |                                                                                |  |                 | 
|0.40 %                                 |  | Advanced Technology Ventures VII, L.P.                                         |  | 08/01-04/04     |  | $              | 715,058    
|1.44 %                                 |  | Burrill Life Sciences Capital Fund                                             |  | 12/02-08/04     |  |                | 829,098    
|1.35 %                                 |  | CHL Medical Partners II, L.P.                                                  |  | 01/02-02/04     |  |                | 482,377    
|1.04 %                                 |  | CMEA Ventures, L.P.                                                            |  | 12/03-04/04     |  |                | 121,020    
|0.36 %                                 |  | Morgenthaler Partners VII, L.P.                                                |  | 07/01-07/04     |  |                | 1,076,400  
|0.58 %                                 |  | Prospect Venture Partners II, L.P.                                             |  | 06/01-09/04     |  |                | 1,325,462  
|0.90 %                                 |  | Sevin Rosen Fund VI, L.P.                                                      |  | 10/04           |  |                | 90,000     
|2.36 %                                 |  | Tallwood II, L.P.                                                              |  | 12/02-09/04     |  |                | 597,891    
|1.70 %                                 |  | Valhalla Partners, L.P.                                                        |  | 10/03-09/04     |  |                | 219,199    
|                                       |  |                                                                                |  |                 |  |                |            
|                                       |  | TOTAL  PRIVATE INVESTMENT FUNDS (Cost $6,614,318)                             |  |                 |  |                | 5,456,505  
|                                       |  |                                                                                |  |                 |  |                |            
|                                       |  |                                                                                | 
|Shares                                 |  |                                                                                |  |                 |  |               
|INVESTMENT COMPANIES  1.19%           |  |                                                                                |  |                 | 
|1,386,211                              |  | Dreyfus Government Cash Management Fund Institutional Shares (Cost $1,386,211) |  |                 |  |                | 1,386,211  
|                                       |  |                                                                                |  |                 |  |                |            
|                                       |  | TOTAL INVESTMENTS (Cost $137,529,863) 
99.70%                                 |  |                 |  |                | 115,731,136
|                                       |  | OTHER ASSETS &
LIABILITIES (NET)  0.30%                                       |  |                 |  |                | 348,297    
|                                       |  |                                                                                |  |                 |  |                |            
|                                       |  | NET ASSETS  100.00%                                                           |  |                 |  | $              | 116,079,433
|                                       |  |                                                                                |  |                 |  |                |            



|** | Restricted as to public resale. Acquired between June 1, 2001 and October 31, 2004. Total cost of restricted securities at October 31, 2004 aggregated $92,003,667. Total value of
restricted securities owned at October 31, 2004 was $70,204,940 or 60.48% of net assets.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|@ | At October 31, 2004, the Company owned 5% or more of the companys outstanding voting shares thereby making the company an affiliate as defined by the Investment Company Act of
1940. Total value of affiliated securities owned at October 31, 2004 was $51,315,508.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|*** | At October 31, 2004, the Company owned 25% or more of the companys outstanding voting shares or a controlling interest thereby making the company a controlled affiliate as
defined by the Investment Company Act of 1940. Total value of controlled affiliated securities owned at October 31, 2004 was $8,750,000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Notes to Financial Statements are an integral part of these Financial Statements.



8



---

Excelsior Venture Partners III, LLC

Statements of Assets and Liabilities



|                                                                                                           |  |                           |             |   |                  |   |             |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                           |  | April 30, 2005(Unaudited) |             |   | October 31, 2004 |  
|ASSETS:                                                                                                    |  |                           |             |   |                  |   |             |  
|Investments in unaffiliated issuers at value (Cost $43,362,528 and $52,140,514, respectively)              |  | $                         | 45,238,541  |   |                  | $ | 55,665,628  |  
|Investments in controlled affiliated issuers at value (Cost $11,433,178 and $8,750,000, respectively)      |  |                           | 11,433,178  |   |                  |   | 8,750,000   |  
|Investments in non controlled affiliated issuers at value (Cost $65,156,938 and $76,639,349, respectively) |  |                           | 47,417,317  |   |                  |   | 51,315,508  |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|Investments, at value (Cost $119,952,644 and $137,529,863, respectively) (Note 1)                          |  |                           | 104,089,036 |   |                  |   | 115,731,136 |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|Cash                                                                                                       |  |                           | 68,868      |   |                  |   |            |  
|Interest receivable                                                                                        |  |                           | 118,851     |   |                  |   | 10,575      |  
|Other receivables                                                                                          |  |                           | 1,097,365   |   |                  |   | 1,243,730   |  
|Prepaid insurance                                                                                          |  |                           | 33,462      |   |                  |   | 3,791       |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|Total Assets                                                                                               |  |                           | 105,407,582 |   |                  |   | 116,989,232 |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|LIABILITIES:                                                                                               |  |                           |             |   |                  |   |             |  
|Management fees payable (Note 2)                                                                           |  |                           | 510,975     |   |                  |   | 583,569     |  
|Administration fees payable (Note 2)                                                                       |  |                           | 61,033      |   |                  |   | 50,936      |  
|Professional fees payable                                                                                  |  |                           | 25,000      |   |                  |   | 184,559     |  
|Board of Managers fees payable (Note 2)                                                                    |  |                           | 23,753      |   |                  |   | 68,000      |  
|Other payables                                                                                             |  |                           | 8,184       |   |                  |   | 22,735      |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|Total Liabilities                                                                                          |  |                           | 628,945     |   |                  |   | 909,799     |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|NET ASSETS                                                                                                 |  | $                         | 104,778,637 |   |                  | $ | 116,079,433 |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|NET ASSETS consist of:                                                                                     |  |                           |             |   |                  |   |             |  
|Paid-in capital                                                                                            |  | $                         | 120,642,245 |   |                  | $ | 137,878,170 |  
|Unrealized depreciation on investments                                                                     |  |                           | (15,863,608 | ) |                  |   | (21,798,737 | )
|                                                                                                           |  |                           |             |   |                  |   |             |  
|Total Net Assets                                                                                           |  | $                         | 104,778,637 |   |                  | $ | 116,079,433 |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|Units of Membership Interest Outstanding (Unlimited number of no par value units authorized)               |  |                           | 295,210     |   |                  |   | 295,210     |  
|                                                                                                           |  |                           |             |   |                  |   |             |  
|NET ASSET VALUE PER UNIT                                                                                   |  | $                         | 354.93      |   |                  | $ | 393.21      |  
|                                                                                                           |  |                           |             |   |                  |   |             |  



Notes to Financial
Statements are an integral part of these Financial Statements.



9



---

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                 |  |                            |            |   |      |   |            |  
|---------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                 |  | Six Months Ended April 30, |           
|                                                                 |  | 2005                       |            |   | 2004 |  
|INVESTMENT INCOME:                                               |  |                            |            |   |      |   |            |  
|Interest income from unaffiliated investments                    |  | $                          | 478,457    |   |      | $ | 233,663    |  
|Interest income from affiliated investments                      |  |                            | 108,629    |   |      |   | 6,729      |  
|Dividend income                                                  |  |                            | 14,734     |   |      |   | 2,347      |  
|                                                                 |  |                            |            |   |      |   |            |  
|Total Income                                                     |  |                            | 601,820    |   |      |   | 242,739    |  
|                                                                 |  |                            |            |   |      |   |            |  
|EXPENSES:                                                        |  |                            |            |   |      |   |            |  
|Management fees (Note 2)                                         |  |                            | 1,128,008  |   |      |   | 1,200,959  |  
|Professional fees                                                |  |                            | 125,138    |   |      |   | 69,634     |  
|Administration fees (Note 2)                                     |  |                            | 70,776     |   |      |   | 69,463     |  
|Insurance Expense                                                |  |                            | 31,987     |   |      |   | 39,677     |  
|Board of Managers fees (Note 2)                                  |  |                            | 29,753     |   |      |   | 29,877     |  
|Custodian fees                                                   |  |                            | 9,567      |   |      |   | 10,870     |  
|Miscellaneous fees                                               |  |                            | 7,934      |   |      |   | 7,967      |  
|                                                                 |  |                            |            |   |      |   |            |  
|Total Expenses                                                   |  |                            | 1,403,163  |   |      |   | 1,428,447  |  
|                                                                 |  |                            |            |   |      |   |            |  
|NET INVESTMENT LOSS                                              |  |                            | (801,343   | ) |      |   | (1,185,708 | )
|                                                                 |  |                            |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 1) |  |                            |            |   |      |   |            |  
|Net realized gain on investments on unaffiliated investments     |  |                            | 1,587,218  |   |      |   |           |  
|Net realized loss on investments on affiliated investments       |  |                            | (7,146,254 | ) |      |   |           |  
|Net change in unrealized (depreciation) on investments           |  |                            | 5,935,119  |   |      |   | (1,078,382 | )
|                                                                 |  |                            |            |   |      |   |            |  
|NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS           |  |                            | 376,083    |   |      |   | (1,078,382 | )
|                                                                 |  |                            |            |   |      |   |            |  
|NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS             |  | $                          | (425,260   | ) |      | $ | (2,264,090 | )
|                                                                 |  |                            |            |   |      |   |            |  



Notes to Financial
Statements are an integral part of these Financial Statements.



10



---

Excelsior Venture Partners III, LLC

Statements of Operations (Unaudited)



|                                                                    |  |                              |            |   |      |   |          |  
|------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | -------- | -
|                                                                    |  | Three Months Ended April 30, |           
|                                                                    |  | 2005                         |            |   | 2004 |  
|INVESTMENT INCOME:                                                  |  |                              |            |   |      |   |          |  
|Interest income from unaffiliated investments                       |  | $                            | 290,907    |   |      | $ | 111,528  |  
|Interest income from affiliated investments                         |  |                              | 65,323     |   |      |   |         |  
|Dividend income                                                     |  |                              | 7,511      |   |      |   | 1,152    |  
|                                                                    |  |                              |            |   |      |   |          |  
|Total Income                                                        |  |                              | 363,741    |   |      |   | 112,680  |  
|                                                                    |  |                              |            |   |      |   |          |  
|EXPENSES:                                                           |  |                              |            |   |      |   |          |  
|Management fees (Note 2)                                            |  |                              | 510,975    |   |      |   | 591,117  |  
|Professional fees                                                   |  |                              | 86,574     |   |      |   | 34,346   |  
|Administration fees (Note 2)                                        |  |                              | 36,881     |   |      |   | 34,122   |  
|Insurance Expense                                                   |  |                              | 17,896     |   |      |   | 19,561   |  
|Board of Managers fees (Note 2)                                     |  |                              | 14,630     |   |      |   | 14,753   |  
|Custodian fees                                                      |  |                              | 5,030      |   |      |   | 5,234    |  
|Miscellaneous fees                                                  |  |                              | 3,902      |   |      |   | 3,934    |  
|                                                                    |  |                              |            |   |      |   |          |  
|Total Expenses                                                      |  |                              | 675,888    |   |      |   | 703,067  |  
|                                                                    |  |                              |            |   |      |   |          |  
|NET INVESTMENT LOSS                                                 |  |                              | (312,147   | ) |      |   | (590,387 | )
|                                                                    |  |                              |            |   |      |   |          |  
|NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS: (Note 1)           |  |                              |            |   |      |   |          |  
|Net realized loss on investments on affiliated investments          |  |                              | (7,145,795 | ) |      |   |         |  
|Net change in unrealized appreciation/(depreciation) on investments |  |                              | 592,509    |   |      |   | (189,992 | )
|                                                                    |  |                              |            |   |      |   |          |  
|NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS                     |  |                              | (6,553,286 | ) |      |   | (189,992 | )
|                                                                    |  |                              |            |   |      |   |          |  
|NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS                |  | $                            | (6,865,433 | ) |      | $ | (780,379 | )
|                                                                    |  |                              |            |   |      |   |          |  



Notes to Financial
Statements are an integral part of these Financial Statements.



11



---

Excelsior Venture Partners III, LLC

Statements of Changes in Net Assets (Unaudited)



|                                                                  |  |                            |             |   |      |   |             |  
|----------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                  |  | Six Months Ended April 30, |            
|                                                                  |  | 2005                       |             |   | 2004 |  
|OPERATIONS:                                                       |  |                            |             |   |      |   |             |  
|Net investment loss                                               |  | $                          | (801,343    | ) |      | $ | (1,185,708  | )
|Net realized loss on investments                                  |  |                            | (5,559,036  | ) |      |   |            |  
|Net change in unrealized appreciation/depreciation on investments |  |                            | 5,935,119   |   |      |   | (1,078,382  | )
|                                                                  |  |                            |             |   |      |   |             |  
|Net decrease in net assets resulting from operations              |  |                            | (425,260    | ) |      |   | (2,264,090  | )
|                                                                  |  |                            |             |   |      |   |             |  
|DISTRIBUTIONS TO SHAREHOLDERS:                                    |  |                            |             |   |      |   |             |  
|Distributions                                                     |  |                            | (10,875,536 | ) |      |   |            |  
|                                                                  |  |                            |             |   |      |   |             |  
|NET DECREASE IN NET ASSETS                                        |  |                            | (11,300,796 | ) |      |   | (2,264,090  | )
|NET ASSETS:                                                       |  |                            |             |   |      |   |             |  
|Beginning of period                                               |  |                            | 116,079,433 |   |      |   | 122,457,853 |  
|                                                                  |  |                            |             |   |      |   |             |  
|End of period                                                     |  | $                          | 104,778,637 |   |      | $ | 120,193,763 |  
|                                                                  |  |                            |             |   |      |   |             |  



Notes to Financial
Statements are an integral part of these Financial Statements.



12



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Excelsior Venture Partners III, LLC

Statements of Cash Flows (Unaudited)



|                                                                                                                              |  |                            |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                              |  | Six Months Ended April 30, |            
|                                                                                                                              |  | 2005                       |             |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                         |  |                            |             |   |      |   |             |  
|Net decrease in net assets resulting from operations.                                                                         |  | $                          | (425,260    | ) |      | $ | (2,264,090  | )
|Adjustments to reconcile net (decrease) in net assets from operations to net cash provided by/(used in) operating activities: |  |                            |             |   |      |   |             |  
|Net change in unrealized depreciation on investments                                                                          |  |                            | (5,935,119  | ) |      |   | 1,078,382   |  
|Purchase of investments                                                                                                       |  |                            | (10,544,504 | ) |      |   | (10,494,037 | )
|Proceeds received from the sale of investments and distributions received from private investment funds                       |  |                            | 8,834,437   |   |      |   | 79,022      |  
|Sale of short-term investments - net                                                                                          |  |                            | 13,728,250  |   |      |   | 8,497,818   |  
|Net realized loss on investments                                                                                              |  |                            | 5,559,036   |   |      |   |            |  
|(Increase)/Decrease in interest receivable                                                                                    |  |                            | (108,276    | ) |      |   | 27          |  
|Decrease in other receivable                                                                                                  |  |                            | 146,365     |   |      |   |            |  
|Increase in prepaid insurance                                                                                                 |  |                            | (29,671     | ) |      |   | (40,729     | )
|Decrease in management fee payable                                                                                            |  |                            | (72,594     | ) |      |   | (26,205     | )
|Decrease in Board of Managers fees payable                                                                                    |  |                            | (44,247     | ) |      |   | (30,123     | )
|(Decrease)/Increase in other expenses payable                                                                                 |  |                            | (164,013    | ) |      |   | 41,438      |  
|                                                                                                                              |  |                            |             |   |      |   |             |  
|Net cash provided by/(used in) operating activities                                                                           |  |                            | 10,944,404  |   |      |   | (3,158,497  | )
|                                                                                                                              |  |                            |             |   |      |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                         |  |                            |             |   |      |   |             |  
|Cash Distributions to Unitholders                                                                                             |  |                            | (10,875,536 | ) |      |   |            |  
|                                                                                                                              |  |                            |             |   |      |   |             |  
|Net Cash Used in Financing Activities                                                                                         |  |                            | (10,875,536 | ) |      |   |            |  
|                                                                                                                              |  |                            |             |   |      |   |             |  
|Net increase/(decrease) in cash                                                                                               |  |                            | 68,868      |   |      |   | (3,158,497  | )
|                                                                                                                              |  |                            |             |   |      |   |             |  
|Cash at beginning of period                                                                                                   |  |                            |            |   |      |   | 3,738,154   |  
|                                                                                                                              |  |                            |             |   |      |   |             |  
|Cash at end of period                                                                                                         |  | $                          | 68,868      |   |      | $ | 579,657     |  
|                                                                                                                              |  |                            |             |   |      |   |             |  



Notes to Financial
Statements are an integral part of these Financial Statements.



13



---

Excelsior Venture Partners III, LLC

Financial Highlights (Unaudited)



Per Unit Operating Performance: (1)



|                                                            |  |                            |         |    |      |   |         |   
|----------------------------------------------------------- |  | -------------------------- | ------- | -- | ---- | - | ------- | --
|                                                            |  | Six Months Ended April 30, |        
|                                                            |  | 2005                       |         |    | 2004 |  
|NET ASSET VALUE, BEGINNING OF PERIOD                        |  | $                          | 393.21  |    |      | $ | 414.82  |   
|INCOME FROM INVESTMENT OPERATIONS:                          |  |                            |         |    |      |   |         |   
|Net investment loss                                         |  |                            | (2.71   | )  |      |   | (4.02   | ) 
|Net realized and unrealized loss on investment transactions |  |                            | 1.27    |    |      |   | (3.65   | ) 
|                                                            |  |                            |         |    |      |   |         |   
|Total from investment operations                            |  |                            | (1.44   | )  |      |   | (7.67   | ) 
|                                                            |  |                            |         |    |      |   |         |   
|FINANCING ACTIVITIES:                                       |  |                            |         |    |      |   |         |   
|Distribution to Members                                     |  |                            | (36.84  | )  |      |   |        |   
|                                                            |  |                            |         |    |      |   |         |   
|NET DECREASE IN NET ASSETS:                                 |  |                            | (38.28  | )  |      |   | (7.67   | ) 
|                                                            |  |                            |         |    |      |   |         |   
|NET ASSET VALUE, END OF PERIOD                              |  | $                          | 354.93  |    |      | $ | 407.15  |   
|                                                            |  |                            |         |    |      |   |         |   
|TOTAL NET ASSET VALUE RETURN(3), (4)                        |  |                            | (0.37   | )% |      |   | (1.85   | )%
|RATIOS AND SUPPLEMENTAL DATA:                               |  |                            |         |    |      |   |         |   
|Net assets, end of period (000s)                           |  | $                          | 104,779 |    |      | $ | 120,194 |   
|Ratios to average net assets: (2)                           |  |                            |         |    |      |   |         |   
|Net expenses                                                |  |                            | 2.45    | %  |      |   | 2.36    | % 
|Net investment loss                                         |  |                            | (1.40   | )% |      |   | (1.96   | )%
|Portfolio Turnover Rate (3)                                 |  |                            | 12.11   | %  |      |   | 0.11    | % 



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



|(2) | Annualized
|--- | ----------



|(3) | Not annualized
|--- | --------------



|(4) | Total investment 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 total investment return is not presented
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Notes to Financial Statements are an integral part of these Financial
Statements.



14



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EXCELSIOR VENTURE PARTNERS III, LLC



NOTES TO FINANCIAL STATEMENTS



April 30, 2005
(Unaudited)



Note 1  Significant Accounting Policies



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 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 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.



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 financial statements reflect all adjustments (consisting only of normal
recurring adjustments) that are, in the opinion of management, necessary for the fair statement of the results for the interim period. The results of operations for the interim periods are not necessarily indicative of results for the entire year.



The following is a summary of the Companys significant
accounting policies. Such policies are in conformity with generally accepted accounting principles for investment companies and are consistently followed in the preparation of the financial statements. Generally accepted accounting principles in the
United States 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. Certain amounts in the prior period financial
statements have been reclassified to conform to the current periods financial statements.



A. Investment Valuation:



The Company values portfolio securities quarterly and at such other times as, in the 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 (as defined below) 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 of Managers 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.



15



---

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 are 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 April 30, 2005 and October 31, 2004, market quotations were not readily available for securities valued
at $66,095,087 or 63.08% of net assets and $65,522,013 or 56.45% 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.



B. Security transactions and investment income:



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.



C. 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 April 30, 2005 and October 31, 2004, the Company had not received information to determine the tax cost of the private investment funds as of those dates. The cost basis for federal tax purposes of the Companys
other investments at April 30, 2005 was $111,388,062, and those investments had net depreciation on a tax basis at April 30, 2005 of $14,543,618, consisting of gross appreciation of $17,549,460 and gross depreciation of $32,093,078. The cost basis
for federal tax purposes of the Companys other investments at October 31, 2004 was $130,915,545, and those investments had net depreciation on a tax basis at October 31, 2004 of $20,640,914, consisting of gross appreciation of $8,311,832 and
gross depreciation of $28,952,746.



D. Dividends to members:



The Company will distribute all cash that
the Investment Adviser does not expect to use in the operation of the Company. Due to the nature of the Companys investments, investors should not expect distributions of cash or property during the first several years of the Companys
operations.



Note 2  Investment Advisory Fee, Administration Fee and
Related Party Transactions



Prior to June 1, 2003, and
pursuant to an Investment Advisory Agreement (the Agreement), U.S. Trust Company served during the reporting period as the Investment Adviser to the Company pursuant to an Investment Advisory Agreement with the Company. 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 average quarterly net assets through the fifth anniversary of the first closing date of April
5, 2001, and 1.00% of net assets thereafter. Prior to June 1, 2003, and pursuant to sub-advisory agreements among the Company, U.S. Trust Company, United States Trust Company of New York (U.S. Trust NY) and U.S. Trust Company, N.A., U.S.
Trust NY and U.S. Trust Company, N.A. served as the investment sub-advisers to the Company and received an investment management fee from the Investment Adviser. As of April 30, 2005 and October 31, 2004, $510,975 and $583,569 were payable to the
Investment Adviser.



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 Companys cumulative realized



16



---

capital gains on Direct Investments, net of cumulative realized capital losses and current net unrealized capital depreciation on all of the Companys
investments and cumulative net expenses of the Company. 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. The Incentive Carried Interest will be determined annually as of the end of each calendar year. For the six month periods ended April 30, 2005 and April 30, 2004, there was no
Incentive Carried interest earned by the Investment Adviser.



U.S. Trust NY is a New York state-chartered bank and trust company and a member of the Federal Reserve System. Effective June 1, 2003, U.S. Trust Company merged into U.S. Trust Company, N.A., a nationally chartered bank. Pursuant to an
assumption agreement dated June 1, 2003, U.S. Trust Company, N.A. assumed the duties and obligations of U.S. Trust Company under the Agreement. As a result, U.S. Trust Company, N.A., acting through its registered investment advisory division, U.S.
Trust Company, N.A. Asset Management Division, now serves as Investment Adviser to the Company with U.S. Trust NY, acting through its registered investment advisory division, U.S. TrustNew York Asset Management Division, serving as a
sub-investment adviser. The merger had no impact on the management or operations of the investment advisory functions performed for the Company, and did not constitute a change in control. U.S. Trust NY and U.S. Trust Company, N.A. are each a
wholly-owned subsidiary of U.S. Trust Corporation, a registered bank holding company. U.S. Trust Corporation is a wholly-owned subsidiary of The Charles Schwab Corporation (Schwab).



Pursuant to an Administration, Accounting and Investor Services Agreement,
the Company retains PFPC Inc. (PFPC), 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 PFPC 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 $15,000 for taxation services and (iii) reimburses PFPC 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 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 will pay 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 $7,000 annually, $2,000 per
meeting attended and is reimbursed for expenses incurred for attending meetings. No person who is an officer, manager or employee of U.S. Trust Corporation, or its subsidiaries, who serves as an officer, manager or employee of the Company receives
any compensation from the Company.



As of April 30, 2005 and
October 31, 2004, Excelsior Venture Investors III, LLC had an investment in the Company of $66,516,919 and $73,691,035, respectively. This represents an ownership interest of 63.48% in the Company as of both dates.



On November 23, 2004, the Company engaged Deloitte & Touche LLP
(D&T) as the Companys Registered Public Accounting Firm for the fiscal year ended October 31, 2004, replacing Ernst & Young LLP (E&Y), the Companys prior independent public accountants. E&Y was
terminated by the Company on October 28, 2004 as a result of concerns regarding their independence at the time of issuance of their report on the Companys October 31, 2003 financial statements. These concerns are the result of certain real
estate consulting services performed by E&Y on a contingent fee basis for Charles Schwab & Co., Inc., an affiliate of the Companys Investment Adviser.



On December 16, 2004, Charles Schwab Corporation (Schwab) entered into an agreement with the Company and other
funds managed by the Investment Adviser whereby Schwab will fund a reserve account to be held by the Investment Adviser or its affiliate. This reserve account was established so that the Company and other funds managed by the Investment Adviser will
be able to draw upon it to pay in full all costs incurred related to the termination of E&Y. This agreement was executed in order to ensure that these costs related to the termination of E&Y are not borne by the Company, the other funds
managed by the Investment Adviser or their respective shareholders. Schwab is an affiliate of the Companys Investment Adviser. In consideration of the funding of the reserve account, the Company and the other funds managed by the Investment
Adviser subrogated all of their claims, causes of action and rights against E&Y for payment of these expenses to Schwab.



17



---

Note 3   Purchases and Sales of Securities



Excluding short-term investments, the Companys purchases and sales of
securities for the six-month periods ended April 30, 2005, and April 30, 2004 were as follows:



|                                  |  |               |  |             
|--------------------------------- |  | ------------- |  | ------------
|Six-Month Periods Ended April 30, |  | Purchases ($) |  | Proceeds ($)
|2005                              |  | 10,544,504    |  | 8,834,437   
|2004                              |  | 10,494,037    |  | 79,022      



Note 4
  Commitments



As of April 30, 2005, the
Company had outstanding investment commitments totaling $16,881,592.



Note 5
  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 dividend income from affiliated companies during the six months ended April 30, 2005 and 2004 and
the year ended October 31, 2004. Transactions with companies, which are or were affiliates, were as follows:



|                                                     |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  
|---------------------------------------------------- |  | --------------------------------- |  | --------------------- | ---------- | --------------------------------------- | - | ------------------------ |  | ----------------- | - | -------------------- | - | ------ | ------------------------------ | - | ---------------------------- | - |  | ---------- |  | - | ---------- | -
|                                                     |  |                                   |  |                       |            | For the Six Months Ended April 30, 2005 |   |                          | 
|Name of Investment                                   |  | Shares/ParHeld at October 31,2004 |  | October 31,2004 Value |            | Purchases /ConversionAcquisitions       |   | Sale/Conversion Proceeds |  | Interest Received |   | Realized Gain (Loss) |   |        | Shares/ParHeld atApril 30,2005 |   | April 30, 2005Value (Note 1) |  
|Controlled Affiliates                                |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  
|Pilot Software Inc., Series A Preferred              |  | 20,000,000                        |  | $                     | 4,000,000  |                                         | $ |                         |  | $                 |  |                      | $ |       |                                | $ |                             |   |  | 20,000,000 |  | $ | 4,000,000  |  
|Pilot Software Inc., Bridge Note, 9%                 |  | 750,000                           |  |                       | 750,000    |                                         |   | 1,250,000                |  |                   |  |                      |   | 77,178 |                                |   |                             |   |  | 2,000,000  |  |   | 2,000,000  |  
|Datanautics Inc., Series A Preferred                 |  | 19,995,000                        |  |                       | 4,000,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 19,995,000 |  |   | 4,000,000  |  
|Datanautics Inc., Bridge Note                        |  |                                  |  |                       |           |                                         |   | 1,433,178                |  |                   |  |                      |   | 7,704  |                                |   |                             |   |  | 1,433,178  |  |   | 1,433,178  |  
|                                                     |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  
|Total Controlled Affiliates                          |  |                                   |  | $                     | 8,750,000  |                                         | $ | 2,683,178                |  | $                 |  |                      |   | 84,882 |                                | $ |                             |   |  |            |  | $ | 11,433,178 |  
|                                                     |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  
|                                                     |  |                                   |  |                      
|                                                     |  |                                   |  |                       |            | For the Six Months Ended April 30, 2005 |   |                          | 
|Name of Investment                                   |  | Shares/ParHeld at October 31,2004 |  | October 31,2004 Value |            | Purchases /ConversionAcquisitions       |   | Sale/Conversion Proceeds |  | Interest Received |   | Realized Gain (Loss) |   |        | Shares/ParHeld atApril 30,2005 |   | April 30, 2005Value (Note 1) |  
|Non Controlled Affiliates                            |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  
|Adeza Biomedical Corp., Series 5 Preferred           |  | 647,948                           |  | $                     | 3,000,000  |                                         | $ |                         |  | $                 |  |                      | $ |       |                                | $ |                             |   |  | 485,961    |  | $ | 6,196,003  | *
|Archemix Corporation, Series A Preferred             |  | 1,999,999                         |  |                       | 1,999,999  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 1,999,999  |  |   | 1,999,999  |  
|Archemix Corporation, Series B Preferred             |  | 466,666                           |  |                       | 466,666    |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 466,666    |  |   | 466,666    |  
|Cenqest, Inc., Series 2 Preferred                    |  | 4,425                             |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 4,425      |  |   |           |  
|Chips & Systems, Inc. Series A Preferred             |  | 7,000,000                         |  |                       | 3,500,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 7,000,000  |  |   |           |  
|Chips & Systems, Inc. Bridge Note                    |  |                                  |  |                       |           |                                         |   | 1,441,133                |  |                   |  |                      |   | 2,440  |                                |   |                             |   |  | 1,441,133  |  |   |           |  
|Ethertronics Inc., Series B Preferred                |  | 4,433,333                         |  |                       | 6,650,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 4,433,333  |  |   | 6,650,001  |  
|Ethertronics Inc., Warrant                           |  | 281,667                           |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 281,667    |  |   |           |  
|Ethertronics Inc., Bridge Note                       |  |                                  |  |                       |           |                                         |   | 250,000                  |  |                   |  |                      |   | 5,206  |                                |   |                             |   |  | 250,000    |  |   | 250,000    |  
|Genoptix, Inc., Series B-1 Preferred                 |  | 942,481                           |  |                       | 1,253,500  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 942,481    |  |   | 501,400    |  
|Genoptix, Inc., Series B-2 Preferred                 |  | 1,403,696                         |  |                       | 1,250,000  |                                         |   | 277,089                  |  |                   |  |                      |   |       |                                |   |                             |   |  | 1,403,696  |  |   | 877,450    |  
|Genoptix, Inc., Common Stock                         |  | 46,860                            |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 46,860     |  |   |           |  
|Genoptix, Inc., Series C Preferred                   |  | 310,290                           |  |                       | 277,089    |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 620,580    |  |   | 554,178    |  
|LightConnect, Inc., Series B Preferred               |  | 4,330,504                         |  |                       | 5,000,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 4,330,504  |  |   | 5,000,000  |  
|LightConnect, Inc., Series C Preferred               |  | 12,292,441                        |  |                       | 992,000    |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 12,292,441 |  |   | 992,000    |  
|LogicLibrary, Inc., Series A Preferred               |  | 7,454,720                         |  |                       | 3,408,450  |                                         |   | 492,958                  |  |                   |  |                      |   |       |                                |   |                             |   |  | 8,532,883  |  |   | 3,901,408  |  
|MIDAS Vision Systems, Inc., Series A-1 Preferred     |  | 933,593                           |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 933,593    |  |   |           |  
|MIDAS Vision Systems, Inc., Common Stock             |  | 157,396                           |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 157,396    |  |   |           |  
|Monterey Design Systems, Inc., Common Stock          |  | 708,955                           |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  |           |  |   |           |  
|Monterey Design Systems, Inc., Series 2 Preferred    |  | 3,333,333                         |  |                       | 600,000    |                                         |   |                         |  |                   |  |                      |   |       |                                |   | (7,146,254                   | ) |  |           |  |   |           |  
|NanoOpto Corp., Series A-1 Preferred                 |  | 956,234                           |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 956,234    |  |   |           |  
|NanoOpto Corp., Series B Preferred                   |  | 3,023,399                         |  |                       | 1,655,119  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 3,023,399  |  |   | 1,655,119  |  
|NanoOpto Corp., Bridge Note                          |  |                                  |  |                       |           |                                         |   | 722,101                  |  |                   |  |                      |   |       |                                |   |                             |   |  | 722,101    |  |   | 722,101    |  
|OpVista, Inc., Series B Preferred                    |  | 5,333,333                         |  |                       |           |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 5,333,333  |  |   |           |  
|OpVista, Inc., Series C Preferred                    |  | 12,671,059                        |  |                       | 5,000,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 12,671,059 |  |   | 5,000,000  |  
|OpVista, Inc., Series D Preferred                    |  |                                  |  |                       |           |                                         |   | 1,058,000                |  |                   |  |                      |   |       |                                |   |                             |   |  | 102,404    |  |   | 1,058,000  |  
|Silverback Systems, Inc., Series B-1 Preferred       |  | 2,211,898                         |  |                       | 450,051    |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 2,211,898  |  |   | 450,052    |  
|Silverback Systems, Inc., Series C Preferred         |  | 34,364,257                        |  |                       | 4,298,896  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 34,364,257 |  |   | 4,298,896  |  
|Silverback Systems, Inc., Bridge Note                |  |                                  |  |                       |           |                                         |   | 1,333,400                |  |                   |  |                      |   | 10,137 |                                |   |                             |   |  | 1,333,400  |  |   | 1,333,400  |  
|Silverback Systems, Inc., Warrant                    |  |                                  |  |                       |           |                                         |   | 67                       |  |                   |  |                      |   |       |                                |   |                             |   |  | 67         |  |   | 67         |  
|Tensys Medical, Inc., Series C Preferred             |  | 4,166,667                         |  |                       | 5,000,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 4,166,667  |  |   | 5,000,000  |  
|Tensys Medical, Inc., Series D Preferred             |  | 1,187,500                         |  |                       | 1,425,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 1,187,500  |  |   | 1,425,000  |  
|Virtual Silicon Technology, Inc., Series C Preferred |  | 3,096,551                         |  |                       | 5,000,000  |                                         |   |                         |  |                   |  |                      |   |       |                                |   |                             |   |  | 3,096,551  |  |   | 5,000,000  |  
|Virtual Silicon Technology, Inc., Bridge Note        |  | 88,738                            |  |                       | 88,738     |                                         |   | 192,842                  |  |                   |  |                      |   | 5,964  |                                |   |                             |   |  | 281,580    |  |   | 281,580    |  
|                                                     |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  
|Total Non Controlled Affiliates                      |  |                                   |  | $                     | 51,315,508 |                                         | $ | 5,767,590                |  | $                 |  |                      | $ | 23,747 |                                | $ | (7,146,254                   | ) |  |            |  | $ | 53,613,320 |  
|                                                     |  |                                   |  |                       |            |                                         |   |                          |  |                   |   |                      |   |        |                                |   |                              |   |  |            |  |   |            |  



|* | Security was not an affiliate as of April 30, 2005 and so is not denoted as such on the April 30, 2005 Portfolio of Investments or included in the cost and market value of
affiliated issuers on the April 30, 2005 statement of assets and liabilities.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



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|                                                     |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           
|---------------------------------------------------- |  | --------------------------------- |  | --------------------- | ---------- | ----------------------------------- | - | ------------------------ |  | - | ----------------- | - | -------------------- | - | ----- | -------------------------------- | - | ------------------------------ | - |  | ---------- |  | - | ----------
|                                                     |  |                                   |  |                       |            | For the Year Ended October 31, 2004 |   |                         
|Name of Investment                                   |  | Shares/ParHeld at October 31,2003 |  | October 31,2003 Value |            | Purchases /ConversionAcquisitions   |   | Sale/Conversion Proceeds |  |   | Interest Received |   | Realized Gain (Loss) |   |       | Shares/ParHeld atOctober 31,2004 |   | October 31,2004 Value (Note 1)
|Controlled Affiliates                                |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           
|Pilot Software Inc., Series A Preferred              |  | 20,000,000                        |  | $                     | 4,000,000  |                                     | $ |                         |  | $ |                  |   |                      | $ |      |                                  | $ |                               |   |  | 20,000,000 |  | $ | 4,000,000 
|Pilot Software Inc., Bridge Note, 9%                 |  |                                  |  |                       |           |                                     |   | 750,000                  |  |   |                  |   |                      |   | 9,062 |                                  |   |                               |   |  | 750,000    |  |   | 750,000   
|Datanautics Inc., Series A Preferred                 |  |                                  |  |                       |           |                                     |   | 4,000,000                |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 19,995,000 |  |   | 4,000,000 
|Datanautics Inc., Promissory Note 3%                 |  | 4,000,000                         |  |                       | 4,000,000  |                                     |   |                         |  | $ | (4,000,000        | ) |                      |   |      |                                  |   |                               |   |  |           |  |   |          
|                                                     |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           
|Total Controlled Affiliates                          |  |                                   |  | $                     | 8,000,000  |                                     | $ | 4,750,000                |  | $ | (4,000,000        | ) |                      | $ | 9,062 |                                  | $ |                               |   |  |            |  | $ | 8,750,000 
|                                                     |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           
|                                                     |  |                                   |  |                      
|                                                     |  |                                   |  |                       |            | For the Year Ended October 31, 2004 |   |                         
|Name of Investment                                   |  | Shares/ParHeld at October 31,2003 |  | October 31,2003 Value |            | Purchases /ConversionAcquisitions   |   | Sale/Conversion Proceeds |  |   | Interest Received |   | Realized Gain (Loss) |   |       | Shares/ParHeld atOctober 31,2004 |   | October 31,2004 Value (Note 1)
|Non Controlled Affiliates                            |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           
|Adeza Biomedical Corp., Series 5 Preferred           |  | 647,948                           |  | $                     | 3,000,000  |                                     | $ |                         |  | $ |                  |   |                      | $ |      |                                  | $ |                               |   |  | 647,948    |  | $ | 3,000,000 
|Ancile Pharmaceuticals, Inc. Series D Preferred      |  | 2,419,355                         |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   | (3,000,000                     | ) |  |           |  |   |          
|Ancile Pharmaceuticals, Inc. Bridge Note 6%          |  | 850,000                           |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   | (850,000                       | ) |  |           |  |   |          
|Ancile Pharmaceuticals, Inc. Warrants                |  | 2                                 |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  |           |  |   |          
|Archemix Corporation, Series A Preferred             |  | 1,314,285                         |  |                       | 1,314,285  |                                     |   | 685,714                  |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 1,999,999  |  |   | 1,999,999 
|Archemix Corporation, Series B Preferred             |  |                                  |  |                       |           |                                     |   | 466,666                  |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 466,666    |  |   | 466,666   
|Cenqest, Inc., Series 2 Preferred                    |  | 4,425                             |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 4,425      |  |   |          
|Chips & Systems, Inc. Series A Preferred             |  |                                  |  |                       |           |                                     |   | 3,500,000                |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 7,000,000  |  |   | 3,500,000 
|Ethertronics Inc., Series B Preferred                |  | 3,766,666                         |  |                       | 5,650,000  |                                     |   | 1,000,000                |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 4,433,333  |  |   | 6,650,000 
|Ethertronics Inc., Warrant                           |  | 281,667                           |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 281,667    |  |   |          
|Genoptix, Inc., Series B-1 Preferred                 |  | 942,481                           |  |                       | 1,253,500  |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 942,481    |  |   | 1,253,500 
|Genoptix, Inc., Series B-2 Preferred                 |  | 826,823                           |  |                       | 734,851    |                                     |   | 515,148                  |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 1,403,696  |  |   | 1,250,000 
|Genoptix, Inc., Series C Preferred                   |  |                                  |  |                       |           |                                     |   | 277,089                  |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 310,290    |  |   | 277,089   
|Genoptix, Inc., Common Stock                         |  | 46,860                            |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 46,860     |  |   |          
|Gyration, Inc., Series C-2 Preferred                 |  | 1,523,810                         |  |                       | 4,000,000  |                                     |   |                         |  |   | (5,290,579        | ) |                      |   |      |                                  |   | 1,290,579                      |   |  |           |  |   |          
|Gyration, Inc., Bridge Note 12%                      |  |                                  |  |                       |           |                                     |   | 2,797,200                |  |   | (2,797,200        | ) |                      |   | 6,658 |                                  |   |                               |   |  |           |  |   |          
|Gyration, Inc., Warrant                              |  |                                  |  |                       |           |                                     |   | 2,800                    |  |   | (2,800            | ) |                      |   |      |                                  |   |                               |   |  |           |  |   |          
|LightConnect, Inc., Series B Preferred               |  | 4,330,504                         |  |                       | 948,563    |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 4,330,504  |  |   | 5,000,000 
|LightConnect, Inc., Series C Preferred               |  | 12,292,441                        |  |                       | 992,000    |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 12,292,441 |  |   | 992,000   
|LogicLibrary, Inc., Series A Preferred               |  | 5,914,488                         |  |                       | 2,704,226  |                                     |   | 704,225                  |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 7,454,720  |  |   | 3,408,450 
|MIDAS Vision Systems, Inc., Series A-1 Preferred     |  | 933,593                           |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 933,593    |  |   |          
|MIDAS Vision Systems, Inc., Common Stock             |  | 157,396                           |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 157,396    |  |   |          
|Monterey Design Systems, Inc., Common Stock          |  | 708,955                           |  |                       |           |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 708,955    |  |   |          
|Monterey Design Systems, Inc., Series 2 Preferred    |  | 3,333,333                         |  |                       | 5,400,000  |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 3,333,333  |  |   | 600,000   
|NanoOpto Corp., Series A-1 Preferred                 |  | 956,234                           |  |                       | 604,259    |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 956,234    |  |   |          
|NanoOpto Corp., Series B Preferred                   |  | 558,295                           |  |                       | 888,244    |                                     |   | 1,048,656                |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 3,023,399  |  |   | 1,655,119 
|OpVista, Inc., Series B Preferred                    |  | 5,333,333                         |  |                       | 1,500,000  |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 5,333,333  |  |   |          
|OpVista, Inc., Series C Preferred                    |  | 12,671,059                        |  |                       | 5,000,000  |                                     |   |                         |  |   |                  |   |                      |   | 71    |                                  |   |                               |   |  | 12,671,059 |  |   | 5,000,000 
|Silverback Systems, Inc., Series B-1 Preferred       |  | 2,211,898                         |  |                       | 450,052    |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 2,211,898  |  |   | 450,051   
|Silverback Systems, Inc., Series C Preferred         |  | 30,927,835                        |  |                       | 3,965,564  |                                     |   | 333,333                  |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 34,364,257 |  |   | 4,298,896 
|Tensys Medical, Inc., Series C Preferred             |  | 4,166,667                         |  |                       | 5,000,000  |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 4,166,667  |  |   | 5,000,000 
|Tensys Medical, Inc., Series D Preferred             |  |                                  |  |                       |           |                                     |   | 1,425,000                |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 1,187,500  |  |   | 1,425,000 
|Virtual Silicon Technology, Inc., Series C Preferred |  | 3,096,551                         |  |                       | 5,000,000  |                                     |   |                         |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 3,096,551  |  |   | 5,000,000 
|Virtual Silicon Technology, Inc., Bridge Note        |  |                                  |  |                       |           |                                     |   | 88,738                   |  |   |                  |   |                      |   |      |                                  |   |                               |   |  | 88,738     |  |   | 88,738    
|                                                     |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           
|Total Non Controlled Affiliates                      |  |                                   |  | $                     | 48,405,544 |                                     | $ | 12,844,569               |  | $ | (8,090,579        | ) |                      | $ | 6,729 |                                  | $ | (2,559,421                     | ) |  |            |  | $ | 51,315,508
|                                                     |  |                                   |  |                       |            |                                     |   |                          |  |   |                   |   |                      |   |       |                                  |   |                                |   |  |            |  |   |           



19



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Note 6  Pending Litigation



The Investment Adviser was contacted in September, 2003 by the Office of the New York State Attorney General (the
NYAG), and the Securities and Exchange Commission (the SEC) and later by the Attorney General of the State of West Virginia in connection with their investigations of practices in the mutual fund industry identified as
market timing and late trading of mutual fund shares (the Investigations). The Investment Adviser has been providing full cooperation with respect to these Investigations and continues to review the facts and
circumstances relevant to the Investigations. As disclosed previously by the Investment Adviser, these Investigations have been focusing on circumstances in which a small number of parties were permitted to engage in short-term trading of certain
mutual funds managed by the Investment Advisor. The short-term trading activities permitted under these arrangements have been terminated and the Investment Adviser has strengthened its policies and procedures to deter frequent trading.



The Investment Adviser, and certain of its affiliates, has also been named
in five class action lawsuits which allege that the 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 Investment Advisor. Each seeks unspecified monetary damages and related equitable relief. The Investment Adviser and certain affiliates have also been named in two derivative actions alleging
breach of fiduciary duty in relation to allegedly illegal and improper mutual fund trading practices.



The class and derivative actions described above have been transferred to the United States District Court for the District of Maryland for coordinated
and consolidated pre-trial proceedings. The Maryland court is expected to hear oral argument on the defendants motions to dismiss in mid-June, 2005. The defendants will not be required to answer the complaints until such motions have been
decided. In addition, the Maryland court ruled in March 2005 that discovery with respect to all claims in the consolidated actions should be stayed until the court has ruled on the pending motions to dismiss the consolidated complaints.



While the ultimate outcome of these matters cannot be predicted with any
certainty at this time, based on currently available information, the Investment Adviser believes that the pending Investigations and private lawsuits are not likely to materially affect the Investment Advisers ability to provide investment
management services to the Company. The Company is not a subject of the Investigations or party to the lawsuits described above.



Note 7  Guarantees



In the normal course of business, the Company enters into contractual agreements that provide general indemnifications against losses, costs, claims and
liabilities arising from the performance of individual obligations under such agreements. The Company has had no prior claims or payments pursuant to such agreements. The Companys individual maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the Company expects the risk of loss to be remote.



20



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------



Six-month and Three-month Periods Ended April 30, 2005 as Compared to the Similar Periods in 2004



Realized and Unrealized Gains and Losses from Portfolio Investments



For the six-month periods ended April 30, 2005 and 2004, the Company had a
net realized loss on security transactions of ($5,559,036) and $0, respectively. For the six-month periods ended April 30, 2005 and 2004, the Company had a net change in unrealized depreciation on investments of $5,935,119 and ($1,078,382),
respectively. The realized loss for the period ended April 30, 2005 was principally the result of the Companys sale of Monterey Design Systems during the period. The net change in unrealized depreciation for the period ended April 30, 2005 was
principally the combination of: i) the sale of Monterey Design Systems, a private company investment, which resulted in a decrease in unrealized depreciation of approximately $7,150,000 due to the reclassification from unrealized depreciation to
realized loss, ii) the sale of Netlogic Microsystems common shares, a public company investment, which resulted in an decrease in unrealized depreciation of $3,293,078, iii) the sale of Senomyx common shares, a public company investment, which
resulted in an increase in unrealized depreciation of $1,476,005, iv) an increase in the value of Adeza Biomedical common shares, a public company investment, by $3,196,003, v) an increase of $4,941,133 due to the write-off of Chips & Systems, a
private company investment, and vi) an increase of $1,124,649 due to the write-down of Genoptix, a private company investment. The net change in unrealized depreciation for the period ended April 30, 2004 was principally the result of an $886,041
write-down taken on NanoOpto Corporation, a private company investment, as well as a decline in the overall value of the Companys private investment funds.



For the three-month periods ended April 30, 2005 and 2004, the Company had a net realized loss on security transactions of
($7,145,795) and $0, respectively. For the three-month periods ended April 30, 2005 and 2004, the Company had a net change in unrealized depreciation on investments of $592,509 and ($189,992), respectively. The realized loss for the period ended
April 30, 2005 was principally the result of the Companys sale of Monterey Design Systems during the period. The net change in unrealized depreciation for the period ended April 30, 2005 was principally the combination of: i) the sale of
Monterey Design Systems, a private company investment, which resulted in an decrease in unrealized depreciation of approximately $7,150,000 due to the reclassification from unrealized depreciation to realized loss ii) an increase due to the decrease
in value of Adeza Biomedical common shares, a public company investment, by $367,629, iii) an increase of $4,941,133 due to the write-off of Chips & Systems, a private company investment, and iv) an increase of $1,124,649 due to the write-down
of Genoptix, a private company investment. The net change in unrealized depreciation for the period ended April 30, 2004 was principally the result of a decline in the overall value of the Companys private investment funds.



Investment Income and Expenses



For the six-month period ended April 30, 2005, the Company had investment
income of $601,820 and operating expenses of $1,403,163, resulting in a net investment loss of ($801,343). In comparison, for the similar period ended April 30, 2004, the Company had investment income of $242,739 and operating expenses of
$1,428,447, resulting in a net investment loss of ($1,185,708). The increase in net investment income resulted from the increase in short-term investments as the Company has liquidated several of its private/public company investments. The Company
continues its investment program in venture capital companies and private equity funds. The decrease in operating expenses was due primarily to a decline in management fees as a result of reduced net assets under management during the period.



For the three-month period ended April 30, 2005, the Company
had investment income of $363,741 and operating expenses of $675,888, resulting in a net investment loss of ($312,147). In comparison, for the similar period ended April 30, 2004, the Company had investment income of $112,680 and operating expenses
of $703,067, resulting in a net investment loss of ($590,387). The increase in net investment income resulted from the increase in short-term investments as the Company has liquidated several of its private/public company investments. The decrease
in operating expenses was due primarily to a decline in management fees as a result of reduced net assets during the period.



21



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U.S. Trust Company, N.A., acting through its registered investment advisory division, U.S. Trust Company,
N.A. Asset Management Division (the Investment Adviser), and United States Trust Company of New York, acting through its registered investment advisory division, U.S. TrustNew York Asset Management Division (the Investment
Sub-Adviser and together with U.S. Trust Company, N.A., the Investment Advisers), provide investment management and administrative services required for the operation of the Company. The term Investment Adviser includes, where
applicable, U.S. Trust Company, the entity that merged into U.S. Trust Company, N.A. on June 1, 2003 as described in Note 2 to Item 1 above. In consideration of the services rendered by the Investment Advisers, the Company pays a management fee
based upon a percentage of the net assets of the Company invested or committed to be invested in certain types of investments and an incentive fee based in part on a percentage of realized capital gains of the Company as described in Note 2 to Item
1 above. Such fee is determined and payable quarterly.



For the
six-month periods ended April 30, 2005 and 2004, the Investment Advisers earned $1,128,008 and $1,200,959 in management fees, respectively. Management fees declined over the period ended April 30, 2005 due to the decline in net assets under
management. For the three-month periods ended April 30, 2005 and 2004, the Investment Advisers earned $510,975 and $591,117 in management fees, respectively. Management fees recorded during the period ended April 31, 2005 decreased over the period
ended April 30, 2004 due to a decline in net assets under management.



Net
Assets



At April 30, 2005, the Companys net assets
were $104,778,637, or a net asset value per unit of membership interest of $354.93. This represents a decrease of $11,300,796, or net asset value per unit of membership interest of $38.28, from net assets of $116,079,433, or a net asset value per
unit of membership interest of $393.21 at October 31, 2004. The decrease resulted principally from a distribution to members of $10,875,536 or $36.84 paid on April 22, 2005.



Liquidity and Capital Resources



The Company will focus 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 distribution to investors.



At April 30,
2005, the Company held $68,868 in cash and $31,797,946 in short-term investments as compared to $0 held in cash and $45,526,196 in short-term investments at October 31, 2004. The decrease in short-term investments from October 31, 2004 was due to
new and follow-on investments in private companies, capital calls to private investment funds, and a distribution paid to members of $10,875,536. The Company, during this period funded additional capital per its commitments to all of its private
investment funds. In connection with the Companys total commitments to private funds in the amount of $25,700,000 since inception, the Company, through April 30, 2005, has contributed $8,818,408 or 34.3% of the total capital committed thus
far. During the six-month period ended April 30, 2005, the Company also participated in follow-on financing rounds for several of its private companies totaling $8,450,767.



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.



Application of Critical Accounting
Policies



Under the supervision of the Companys
Valuation and Audit Committees, consisting of 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 63.1% of the Companys net assets. For the private investments held at April 30, 2005, changes to these estimates, i.e.
changes in the valuations of these private investments, resulted in a $6.3 million change in net asset value from October 31, 2004.



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.



22



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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, both 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 funds is based upon the 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 are 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.



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,
currently representing 63.1% of net assets, which are not publicly traded. These investments are recorded at fair value as determined by the Investment Advisers 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. Nevertheless, the Company is exposed to equity price risk through its
investments in the equity securities of one public company, Adeza Biomedical Corporation (NASDAQ: ADZA). During the six-month period ended April 30, 2005, this company successfully completed an initial public offering of common stock. At April 30,
2005, this publicly traded equity security was valued at $6,196,003, which was the closing market price at that date, representing 5.9% of the Companys net assets. Thus, there is exposure to equity price risk, estimated as the potential loss
in fair value due to a hypothetical 10% decrease in quoted market prices, representing a decrease in the value of these securities of $619,600. At October 31, 2004, the Company was exposed to equity price risk through its investments in the equity
securities of two public companies, NetLogic Microsystems, Inc. (NASDAQ: NETL), and Senomyx, Inc. (NASDAQ: SNMX). At October 31, 2004, these publicly traded equity securities were valued at $4,682,927, and a 30% discount to the closing market price
at that date, representing 4.0% of the Companys net assets. Thus, there is exposure to equity price risk, estimated as the potential loss in fair value due to a hypothetical 10% decrease in quoted market prices, representing a decrease in the
value of these securities of $468,293.



23



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



(a) Evaluation of Disclosure Controls and Procedures. As of April 30, 2005 (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 changes in the Companys
internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Companys last fiscal quarter that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.



|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.
|--- | --------------------



| | (1) | On November 2, 2004, the Company filed a Current Report on Form 8-K to report under Item 4.01 a change in the Companys certifying accountant.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | On November 4, 2004, the Company filed a Current Report on Form 8-K/A to report under Items 4.01 and 9.01 that the Company filed as an Exhibit the response of Ernst & Young LLP
to the disclosures made in the report on Form 8-K filed by the Company on November 2, 2004.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | On November 29, 2004, the Company filed a Current Report on Form 8-K to report under Item 4.01 that Deloitte & Touche LLP was the Companys certifying accountant.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



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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: June 14, 2005 |  |  |  | By:                                 |  | /s/ Douglas A. Lindgren 
|                    |  |  |  |                                     |  |                          |  | Douglas A. Lindgren          
|                    |  |  |  |                                     |  |                          |  | Chief Executive Officer      
|                    |  |  | 
|Date: June 14, 2005 |  |  |  | By:                                 |  | /s/ Robert F. Aufenanger
|                    |  |  |  |                                     |  |                          |  | Robert F. Aufenanger         
|                    |  |  |  |                                     |  |                          |  | Treasurer                    
|                    |  |  |  |                                     |  |                          |  | (Principal Financial Officer)